<PAGE> 1
As filed with the Securities and Exchange Commission on May 1, 1998
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. 24 and/or [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 25
(Check appropriate box or boxes)
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.
If appropriate, check the following box:
- ----------------------------------------
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered...............Shares of Beneficial Interest
<PAGE> 2
THE KENT FUNDS
CROSS REFERENCE SHEET
Pursuant to 495(a) under the Securities Act of 1933.
<TABLE>
<CAPTION>
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 Not applicable
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
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KENT FUNDS
PROSPECTUS
MAY 1, 1998
KENT GROWTH AND INCOME FUND
KENT INDEX EQUITY FUND
KENT SMALL COMPANY GROWTH FUND
KENT INTERNATIONAL GROWTH FUND
KENT INCOME FUND
KENT INTERMEDIATE BOND FUND
KENT SHORT TERM BOND FUND
KENT TAX-FREE INCOME FUND
KENT INTERMEDIATE TAX-FREE FUND
KENT MICHIGAN MUNICIPAL BOND FUND
KENT LIMITED TERM TAX-FREE FUND
KENT MONEY MARKET FUND
KENT GOVERNMENT MONEY MARKET FUND
KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
[LOGO]
KENT FUNDS
- -------------------------------------------------------------------------------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
HIGHLIGHTS
What are the key facts regarding the Funds?................. 2
FINANCIAL INFORMATION
What are the Funds' fees and expenses?...................... 4
FINANCIAL HIGHLIGHTS........................................ 8
FUND CHOICES
What Funds are offered?..................................... 36
What instruments do the Funds invest in?.................... 40
What are the risks of investing in the Funds?............... 44
PERFORMANCE
How is the Funds' performance calculated?................... 46
Where can I obtain performance data?........................ 46
EXPENSE INFORMATION
What are the Funds' expenses?............................... 47
PURCHASES OF SHARES
Who may want to invest in the Funds?........................ 48
When can I purchase shares?................................. 48
What is the minimum required investment?.................... 48
How can I purchase shares?.................................. 49
What price do I pay for shares?............................. 51
REDEMPTIONS (SALES) OF SHARES
When can I redeem shares?................................... 51
How can I redeem shares?.................................... 51
What price do I receive for shares?......................... 52
When will I receive redemption money?....................... 52
STRUCTURE AND MANAGEMENT OF THE FUNDS
How are the Funds structured?............................... 53
Who manages and services the Funds?......................... 53
What are my rights as a Fund shareholder?................... 54
DIVIDENDS, DISTRIBUTIONS AND TAXES
When will I receive distributions from the Funds?........... 55
How will distributions be made?............................. 55
What are the tax implications of my investments in the
Funds?.................................................... 55
ADDITIONAL INFORMATION
Where do I get additional information about my account and
the Funds?................................................ 56
</TABLE>
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 THE FUNDS INVOLVES RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. LYON STREET ASSET MANAGEMENT COMPANY, A WHOLLY-OWNED
SUBSIDIARY OF OLD KENT BANK, RECEIVES FEES FROM THE FUNDS FOR ADVISORY SERVICES.
<PAGE> 5
KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
1-800-633-KENT (5368)
Prospectus dated May 1, 1998
THIS PROSPECTUS DESCRIBES THE FOLLOWING FUNDS (THE "FUNDS") OFFERED BY THE KENT
FUNDS (THE "TRUST"):
KENT GROWTH AND INCOME FUND seeks long-term capital growth with current income
as a secondary objective by principally investing 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").
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").
KENT SMALL COMPANY GROWTH FUND seeks long-term capital appreciation by
principally investing in companies whose securities are traded in the U.S.
securities markets and whose market capitalizations are less than $1 billion.
KENT INTERNATIONAL GROWTH FUND seeks long-term capital appreciation by
principally investing in equity securities of issuers located in at least three
foreign countries.
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.
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.
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.
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.
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.
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.
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.
KENT MONEY MARKET FUND seeks current income while preserving capital and
maintaining liquidity.
KENT GOVERNMENT MONEY MARKET FUND seeks current income from short-term United
States Government securities while preserving capital and maintaining liquidity.
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 you should know before investing.
Please read and retain this Prospectus for future reference. The Trust has filed
a Statement of Additional Information ("SAI") dated May 1, 1998 with the
Securities and Exchange Commission (the "Commission"), which, as supplemented
from time to time, is incorporated by reference into this Prospectus. The
Commission maintains a World Wide Web site (http://www.sec.gov) that contains
the SAI and other information regarding issuers, such as the Trust, that file
electronically with the Commission. For a free copy of the SAI, or for other
information about the Funds, write to the address or call the telephone number
listed above.
AN INVESTMENT IN THE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT AND WHILE EACH MONEY MARKET FUND INTENDS TO MAINTAIN A STABLE
NET ASSET VALUE PER SHARE OF $1.00, THERE IS NO ASSURANCE THAT THEY WILL BE ABLE
TO DO SO. 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 SUCH FUND MAY ENTAIL MORE RISKS THAN AN INVESTMENT IN ANOTHER TYPE
OF MONEY MARKET FUND.
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.
<PAGE> 6
HIGHLIGHTS
----------------------------------------------------------------------------
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: What types of funds are offered by the Trust?
A: 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 each of the fourteen Funds that are offered by the
Trust: the Growth and Income Fund, Index Equity Fund, Small Company Growth Fund
and International Growth Fund (the "Equity Funds"); the Income Fund,
Intermediate Bond Fund and Short Term Bond Fund (the "Bond Funds"); the Tax-
Free Income Fund, Intermediate Tax-Free Fund, Michigan Municipal Bond Fund and
Limited Term Tax-Free Fund (the "Municipal Bond Funds"); and the Money Market
Fund, Government Money Market Fund and Michigan Municipal Money Market Fund (the
"Money Market Funds"). For a detailed description of the Funds, see "Fund
Choices -- What Funds are Offered?"
Q: Who advises the Funds?
A: The Funds are managed by Lyon Street Asset Management Company ("Lyon
Street"), a wholly-owned subsidiary of Old Kent Bank ("Old Kent"), which, in
turn, is a wholly-owned subsidiary of Old Kent Financial Corporation ("OKFC").
OKFC is a financial services company with total assets as of December 31, 1997
of approximately $13.8 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. 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 (i) the Money Market Funds, which declare dividends daily and pay
them monthly and (ii) the International Growth Fund, which declares and pays
dividends 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 Fund in which the investor has an existing
account. In addition, the Trust offers traditional IRAs, Roth IRAs and Education
IRAs, which can be established by contacting the Trust's Distributor. The Trust
also offers an
2
<PAGE> 7
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. With respect to the Equity, Bond and Municipal Bond Funds, the net
asset value ("NAV") of Fund shares will fluctuate with changes in the market
value of each Fund's portfolio securities. With respect to the Money Market
Funds, each Fund seeks to maintain a stable net asset value per share of $1.00,
although there is no assurance that they will be able to do so.
The Equity Funds will invest principally in common stocks, which have
historically presented greater potential for capital appreciation than fixed
income securities, but do not provide the same protection of capital or
assurance of income. 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. In addition, the International Growth Fund and, to a lesser extent,
certain other Funds will 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 market value of fixed income securities, which will constitute substantially
all of the investments of the Bond, Municipal Bond and Money Market Funds, 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 value of some fixed income securities (such as
collateralized mortgage obligations, "stripped" securities and structured notes)
may be more volatile than other types of securities. The performance of the
Michigan Municipal Bond Fund and Michigan Municipal Money Market Fund will be
closely tied to the economic and political conditions in the State of Michigan.
For a complete description of the risks associated with each Fund, see "Fund
Choices -- What Instruments do the Funds Invest In?" and " -- What are the Risks
of Investing in the Funds?"
3
<PAGE> 8
FINANCIAL INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' FEES AND EXPENSES?
The purpose of the following tables 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.
EQUITY FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
GROWTH AND INDEX EQUITY SMALL COMPANY INTERNATIONAL
INCOME FUND FUND GROWTH FUND GROWTH 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 Purchases None None None None None None None None
- --------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)(1)
- --------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.27% 0.27% 0.70% 0.70% 0.75% 0.75%
(after fee waivers)(2)
- --------------------------------------------------------------------------------------------------------
12b-1 Fees(3) 0.25% None 0.25% None 0.25% None 0.25% None
- --------------------------------------------------------------------------------------------------------
Other Expenses 0.22% 0.22% 0.16% 0.16% 0.23% 0.23% 0.30% 0.30%
(after fee waivers)(2)
- --------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.17% 0.92% 0.68% 0.43% 1.18% 0.93% 1.30% 1.05%
(after fee waivers)(2)
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1997. 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) In the case of the Growth and Income Fund, Small Company Growth Fund and
International Growth Fund, a voluntary waiver of a portion of such Funds'
administration fee has been reflected. Absent such waiver, Other Expenses and
Total Fund Operating Expenses would be 0.23% and 1.18%, respectively, for the
Investment Shares of the Growth and Income Fund, 0.23% and 0.93%, respectively,
for the Institutional Shares of the Growth and Income Fund, 0.24% and 1.19%,
respectively, for the Investment Shares of the Small Company Growth Fund, 0.24%
and 0.94%, respectively, for the Institutional Shares of the Small Company
Growth Fund, 0.31% and 1.31%, respectively, for the Investment Shares of the
International Growth Fund, and 0.31% and 1.06%, respectively, for the
Institutional Shares of the International Growth Fund. In the case of the Index
Equity Fund, voluntary waivers of a portion of such Fund's investment advisory
fee and administration fee have been reflected. Absent such waivers, Management
Fees, Other Expenses and Total Fund Operating Expenses would be 0.30%, 0.24% and
0.79%, respectively, for such Fund's Investment Shares and 0.30%, 0.24% and
0.54%, respectively, for such Fund's Institutional Shares.
(3) 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>
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GROWTH AND INDEX EQUITY SMALL COMPANY INTERNATIONAL
INCOME FUND FUND GROWTH FUND GROWTH 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 After Purchase $12 $9 $7 $4 $12 $9 $13 $11
- --------------------------------------------------------------------------------------------------------
Three Years After Purchase $37 $29 $22 $14 $37 $30 $41 $33
- --------------------------------------------------------------------------------------------------------
Five Years After Purchase $64 $51 $38 $24 $65 $51 $71 $58
- --------------------------------------------------------------------------------------------------------
Ten Years After Purchase $142 $113 $85 $54 $143 $114 $157 $128
- --------------------------------------------------------------------------------------------------------
</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.
4
<PAGE> 9
BOND FUNDS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
INTERMEDIATE SHORT TERM
INCOME FUND BOND FUND BOND 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
(as a percentage of average net assets)(1)
- ---------------------------------------------------------------------------------------------------------
Management Fees 0.60% 0.60% 0.55% 0.55% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------
12b-1 Fees 0.25% None 0.25% None 0.15% None
(after fee waivers)(2, 3)
- ---------------------------------------------------------------------------------------------------------
Other Expenses 0.22% 0.22% 0.20% 0.20% 0.23% 0.22%
(after fee waivers)(3)
- ---------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.07% 0.82% 1.00% 0.75% 0.88% 0.72%
(after fee waivers)(3)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1997. 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 Income Fund and Intermediate Bond Fund, a voluntary
waiver of a portion of such Funds' administration fee has been reflected. Absent
such waiver, Other Expenses and Total Fund Operating Expenses would be 0.23% and
1.08%, respectively, for the Investment Shares of the Income Fund, 0.23% and
0.83%, respectively, for the Institutional Shares of the Income Fund, 0.21% and
1.01%, respectively, for the Investment Shares of the Intermediate Bond Fund,
and 0.21% and 0.76%, respectively, for the Institutional Shares of the
Intermediate Bond Fund. In the case of the Short Term Bond Fund, voluntary
waivers of a portion of such Fund's 12b-1 fee for the Investment Shares and
administration fee have been reflected. Absent such waivers, 12b-1 Fees, Other
Expenses and Total Fund Operating Expenses would be 0.25%, 0.24% and 0.99%,
respectively, for such Fund's Investment Shares and Other Expenses and Total
Fund Operating Expenses would be 0.23% and 0.73%, respectively, for such Fund's
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>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
INTERMEDIATE SHORT TERM
INCOME FUND BOND FUND BOND 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 After Purchase $11 $8 $10 $8 $9 $7
- ---------------------------------------------------------------------------------------------------------
Three Years After Purchase $34 $26 $32 $24 $28 $23
- ---------------------------------------------------------------------------------------------------------
Five Years After Purchase $59 $46 $55 $42 $49 $40
- ---------------------------------------------------------------------------------------------------------
Ten Years After Purchase $131 $101 $122 $93 $108 $89
- ---------------------------------------------------------------------------------------------------------
</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> 10
MUNICIPAL BOND FUNDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE MICHIGAN MUNICIPAL LIMITED TERM
INCOME FUND TAX-FREE FUND BOND FUND TAX-FREE 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 Purchases None None None None None None None None
- -----------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)(1)
- -----------------------------------------------------------------------------------------------------------
Management Fees 0.55% 0.55% 0.50% 0.50% 0.45% 0.45% 0.45% 0.45%
- -----------------------------------------------------------------------------------------------------------
12b-1 Fees 0.25% None 0.25% None 0.15% None 0.15% None
(after fee waivers)(2, 3)
- -----------------------------------------------------------------------------------------------------------
Other Expenses 0.24% 0.24% 0.22% 0.22% 0.24% 0.24% 0.33% 0.31%
(after fee waivers)(3)
- -----------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.04% 0.79% 0.97% 0.72% 0.84% 0.69% 0.93% 0.76%
(after fee waivers)(3)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1997. 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 Tax-Free Income Fund and Intermediate Tax-Free Fund, a
voluntary waiver of a portion of such Funds' administration fee has been
reflected. Absent such waiver, Other Expenses and Total Fund Operating Expenses
would be 0.25% and 1.05%, respectively, for the Investment Shares of the
Tax-Free Income Fund, 0.25% and 0.80%, respectively, for the Institutional
Shares of the Tax-Free Income Fund, 0.23% and 0.98%, respectively, for the
Investment Shares of the Intermediate Tax-Free Fund, and 0.23% and 0.73%,
respectively, for the Institutional Shares of the Intermediate Tax-Free Fund. In
the case of the Michigan Municipal Bond Fund and Limited Term Tax-Free Fund,
voluntary waivers of a portion of such Funds' 12b-1 fee for the Investment
Shares and administration fee have been reflected. Absent such waivers, 12b-1
Fees, Other Expenses and Total Fund Operating Expenses would be 0.25%, 0.25% and
0.95%, respectively, for the Investment Shares of the Michigan Municipal Bond
Fund and 0.25%, 0.34% and 1.04%, respectively, for the Investment Shares of the
Limited Term Tax-Free Fund, and Other Expenses and Total Fund Operating Expenses
would be 0.25% and 0.70%, respectively, for the Institutional Shares of the
Michigan Municipal Bond Fund and 0.32% and 0.77%, respectively, for the
Institutional Shares of the Limited Term Tax-Free 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>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TAX-FREE INTERMEDIATE MICHIGAN MUNICIPAL LIMITED TERM
INCOME FUND TAX-FREE FUND BOND FUND TAX-FREE 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 After Purchase $11 $8 $10 $7 $9 $7 $9 $8
- -----------------------------------------------------------------------------------------------------------
Three Years After Purchase $33 $25 $31 $23 $27 $22 $30 $24
- -----------------------------------------------------------------------------------------------------------
Five Years After Purchase $57 $44 $54 $40 $47 $38 $51 $42
- -----------------------------------------------------------------------------------------------------------
Ten Years After Purchase $127 $98 $119 $89 $104 $86 $114 $94
- -----------------------------------------------------------------------------------------------------------
</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.
6
<PAGE> 11
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
MONEY MARKET GOVERNMENT MONEY MICHIGAN MUNICIPAL
FUND MARKET FUND MONEY MARKET 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
(as a percentage of average net assets)(1)
- -------------------------------------------------------------------------------------------------------------
Management Fees 0.40% 0.40% 0.20% 0.20% 0.40% 0.40%
(after fee waivers)(2)
- -------------------------------------------------------------------------------------------------------------
12b-1 Fees None None None None None None
- -------------------------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12% 0.15% 0.15% 0.12% 0.12%
(after fee waivers)(2)
- -------------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.52% 0.52% 0.35% 0.35% 0.52% 0.52%
(after fee waivers)(2)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The expense ratios for the Money Market Fund and Michigan Municipal Money
Market Fund are based on amounts incurred for the fiscal year ended December 31,
1997. The expense ratios for the Government Money Market Fund are estimates for
the fiscal year ending December 31, 1998, after giving effect to waivers of
certain expenses. Sweep, trustee, agency, custody and certain other fees charged
by Old Kent and its affiliates to their customers who own shares of the Funds
are not reflected in the fee table.
(2) In the case of the Money Market Fund and Michigan Municipal Money Market
Fund, a voluntary waiver of a portion of such Funds' administration fee has been
reflected. Absent such waiver, Other Expenses and Total Fund Operating Expenses
would be 0.22% and 0.62%, respectively, for each class of the Money Market Fund
and 0.23% and 0.63%, respectively, for each class of the Michigan Municipal
Money Market Fund. In the case of the Government Money Market Fund, voluntary
waivers of a portion of such Fund's investment advisory fee and administration
fee have been reflected. Absent such waivers, Management Fees, Other Expenses
and Total Fund Operating Expenses would be 0.40%, 0.29% and 0.69%, respectively,
for each class of the Government Money Market 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>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
MONEY MARKET GOVERNMENT MONEY MICHIGAN MUNICIPAL
FUND MARKET FUND MONEY MARKET 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 After Purchase $5 $5 $4 $4 $5 $5
- -------------------------------------------------------------------------------------------------------------
Three Years After Purchase $17 $17 $11 $11 $17 $17
- -------------------------------------------------------------------------------------------------------------
Five Years After Purchase $29 $29 $20 $20 $29 $29
- -------------------------------------------------------------------------------------------------------------
Ten Years After Purchase $65 $65 $44 $44 $65 $65
- -------------------------------------------------------------------------------------------------------------
</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.
7
<PAGE> 12
FINANCIAL HIGHLIGHTS
The Financial Highlights presented below have been audited by KPMG Peat Marwick
LLP, independent auditors, whose report on the financial statements of the Funds
containing the Financial Highlights for each of the five years in the period
ended December 31, 1997 has been incorporated by reference into the Funds' 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,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.81 $13.19 $10.46 $10.87 $10.29 $10.23
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.21 0.26 0.30 0.32 0.27 **
Net realized and unrealized gains (losses) on
investments and futures contracts 3.02 2.15 3.26 (0.27) 0.93 0.06
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Operations: 3.23 2.41 3.56 0.05 1.20 0.06
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.21) (0.26) (0.30) (0.31) (0.23) --
In excess of net investment income -- (0.02) -- ** (0.05) --
Net realized gains on investments and futures
contracts (1.39) (1.51) (0.53) (0.15) (0.20) --
In excess of net realized gains -- -- -- -- (0.14) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (1.60) (1.79) (0.83) (0.46) (0.62) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 1.63 0.62 2.73 (0.41) 0.58 0.06
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD 15.44 $13.81 $13.19 $10.46 $10.87 $10.29
============================================================================================================================
TOTAL RETURN(2) 23.89% 19.14% 34.61% 0.50% 11.81% 0.59%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $35,343 $15,063 $11,079 $8,005 $4,607 $ 102
Ratios to average net assets:
Ratio of expenses 1.17% 1.09% 1.18% 0.98% 1.22% 0.33%++
Ratio of net investment income (loss) 1.31% 1.77% 2.48% 3.03% 2.43% (0.88)%+
Ratio of expenses* 1.18% 1.09% *** *** *** ***
Ratio of net investment income (loss)* 1.30% 1.77% *** *** *** ***
Portfolio turnover rate(3) 88% 39% 58% 28% 54% 0%
Average commission rate paid(4) $ 0.0571 $0.0539 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/or reimbursements.
(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) 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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
8
<PAGE> 13
GROWTH AND INCOME FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.90 $ 13.25 $ 10.50 $ 10.91 $ 10.31 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.25 0.30 0.33 0.31 0.27 0.06
Net realized and unrealized gains
(losses) on investments and
futures contracts 3.04 2.16 3.28 (0.26) 0.95 0.31
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 3.29 2.46 3.61 0.05 1.22 0.37
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.25) (0.30) (0.33) (0.31) (0.27) (0.06)
In excess of net investment income -- -- -- ** (0.01) **
Net realized gains on investments and
futures contracts (1.39) (1.51) (0.53) (0.15) (0.34) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (1.64) (1.81) (0.86) (0.46) (0.62) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 1.65 0.65 2.75 (0.41) 0.60 0.31
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.55 $ 13.90 $ 13.25 $ 10.50 $ 10.91 $ 10.31
===========================================================================================================================
TOTAL RETURN 24.14% 19.47% 34.91% 0.51% 11.98% 3.68%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $697,973 $500,857 $401,371 $308,825 $180,864 $76,449
Ratios to average net assets:
Ratio of expenses 0.92% 0.95% 0.94% 0.98% 1.03% 0.19%++
Ratio of net investment income 1.61% 2.18% 2.73% 3.04% 2.61% 3.51%+
Ratio of expenses* 0.93% 0.95% *** *** *** ***
Ratio of net investment income* 1.60% 2.18% *** *** *** ***
Portfolio turnover rate(2) 88% 39% 58% 28% 54% 0%
Average commission rate paid(3) $ 0.0571 $ 0.0539 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/or reimbursements.
(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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
9
<PAGE> 14
INDEX EQUITY FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.72 $12.57 $10.70 $11.07 $10.44 $10.28
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.20 0.22 0.23 0.26 0.22 **
Net realized and unrealized gains
(losses) on investments
and futures contracts 4.51 2.48 3.44 (0.17) 0.72 0.16
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 4.71 2.70 3.67 0.09 0.94 0.16
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.20) (0.22) (0.23) (0.26) (0.20) --
In excess of net investment income (0.01) (0.01) -- -- (0.03) --
Net realized gains on investments and
futures contracts (0.06) (0.32) (1.57) (0.20) (0.06) --
In excess of net realized gains (0.01) -- -- -- (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.28) (0.55) (1.80) (0.46) (0.31) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 4.43 2.15 1.87 (0.37) 0.63 0.16
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.15 $14.72 $12.57 $10.70 $11.07 $10.44
===========================================================================================================================
TOTAL RETURN(2) 32.24% 21.92% 35.81% 0.75% 9.09% 1.56%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $27,992 $9,925 $6,612 $4,736 $3,776 $ 89
Ratios to average net assets:
Ratio of expenses 0.68% 0.74% 0.80% 0.60% 0.86% 0.12%++
Ratio of net investment income 1.20% 1.67% 1.86% 2.30% 2.04% 1.03%+
Ratio of expenses* 0.79% 0.84% 0.81% 0.60% 0.86% 0.12%++
Ratio of net investment income* 1.09% 1.57% 1.85% 2.30% 2.04% 1.03%+
Portfolio turnover rate(3) 1% 2% 3% 50% 1% 0%
Average commission rate paid(4) $ 0.0508 $0.0496 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 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) 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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
10
<PAGE> 15
INDEX EQUITY FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.71 $12.56 $10.68 $11.04 $10.41 $10.00
Income from Investment Operations:
Net investment income 0.25 0.26 0.26 0.25 0.23 0.05
Net realized and unrealized gains
(losses)
on investments and futures contracts 4.50 2.47 3.44 (0.15) 0.71 0.41
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 4.75 2.73 3.70 0.10 0.94 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.25) (0.26) (0.25) (0.26) (0.23) (0.05)
In excess of net investment income -- -- -- -- ** **
Net realized gains on investments and
futures contracts (0.05) (0.28) (1.57) (0.20) (0.08) --
In excess of net realized gains (0.02) (0.04) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.32) (0.58) (1.82) (0.46) (0.31) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 4.43 2.15 1.88 (0.36) 0.63 0.41
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.14 $14.71 $12.56 $10.68 $11.04 $10.41
=================================================================================================================================
TOTAL RETURN 32.55% 22.18% 36.23% 0.86% 9.11% 4.55%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $590,241 $243,438 $183,877 $245,550 $233,451 $153,431
Ratios to average net assets:
Ratio of expenses 0.43% 0.49% 0.56% 0.58% 0.65% 0.13%++
Ratio of net investment income 1.44% 1.91% 2.14% 2.32% 2.18% 2.65%+
Ratio of expenses* 0.54% 0.59% 0.56% 0.58% 0.65% 0.13%++
Ratio of net investment income* 1.33% 1.81% 2.14% 2.32% 2.18% 2.65%+
Portfolio turnover rate(2) 1% 2% 3% 50% 1% 0%
Average commission rate paid(3) $0.0508 $0.0496 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
11
<PAGE> 16
SMALL COMPANY GROWTH FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.61 $ 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 investments and futures
contracts 4.19 2.54 2.64 (0.11) 1.74 0.21
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment
Operations: 4.19 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 (0.04) (0.01) -- (0.01) (0.03) --
Net realized gains on investments and
futures contracts (1.43) (0.72) (0.81) (0.41) (0.10) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (1.47) (0.81) (0.88) (0.50) (0.19) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 2.72 1.80 1.83 (0.51) 1.63 0.21
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.33 $15.61 $ 13.81 $11.98 $12.49 $ 10.86
===========================================================================================================================
TOTAL RETURN(2) 27.71% 19.16% 23.47% (0.08)% 16.84% 1.97%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $22,784 $14,436 $10,955 $8,433 $5,345 $ 84
Ratios to average net assets:
Ratio of expenses 1.18% 1.21% 1.20% 0.98% 1.25% 0.27%++
Ratio of net investment income (loss) (0.01)% 0.53% 0.59% 0.79% 0.59% (1.50)%+
Ratio of expenses* 1.19% 1.21% *** *** *** ***
Ratio of net investment income (loss)* (0.02)% 0.53% *** *** *** ***
Portfolio turnover rate(3) 32% 16% 30% 20% 14% 1%
Average commission rate paid(4) $ 0.0447 $ 0.0481 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/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.
(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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
12
<PAGE> 17
SMALL COMPANY GROWTH FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.65 $ 13.82 $ 11.99 $ 12.50 $ 10.85 $ 10.00
Income from Investment Operations:
Net investment income 0.04 0.12 0.10 0.10 0.08 0.02
Net realized and unrealized gains
(losses) on investments and futures
contracts 4.19 2.55 2.64 (0.10) 1.76 0.86
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 4.23 2.67 2.74 -- 1.84 0.88
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.04) (0.12) (0.10) (0.09) (0.08) (0.02)
In excess of net investment income (0.02) -- -- (0.01) (0.01) (0.01)
Net realized gains on investments and
futures contracts (1.43) (0.72) (0.81) (0.41) (0.10) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (1.49) (0.84) (0.91) (0.51) (0.19) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 2.74 1.83 1.83 (0.51) 1.65 0.85
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.39 $ 15.65 $ 13.82 $ 11.99 $ 12.50 $ 10.85
===========================================================================================================================
TOTAL RETURN 27.94% 19.56% 23.75% (0.06)% 17.04% 8.75%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $719,998 $544,081 $450,072 $304,179 $252,401 $95,999
Ratios to average net assets:
Ratio of expenses 0.93% 0.96% 0.97% 0.98% 1.06% 0.18%++
Ratio of net investment income 0.24% 0.78% 0.83% 0.79% 0.74% 1.35%+
Ratio of expenses* 0.94% 0.96% ** ** ** **
Ratio of net investment income* 0.23% 0.78% ** ** ** **
Portfolio turnover rate(2) 32% 16% 30% 20% 14% 1%
Average commission rate paid(3) $ 0.0447 $ 0.0481 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
** During the period, there were no waivers and/or reimbursements.
(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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
13
<PAGE> 18
INTERNATIONAL GROWTH FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.69 $ 14.13 $13.00 $12.81 $10.03 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.08 0.12 0.14 0.14 0.13 **
Net realized and unrealized gains on
investments and foreign currency 0.25 0.66 1.50 0.56 2.85 0.03
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.33 0.78 1.64 0.70 2.98 0.03
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.06) (0.08) (0.09) (0.07) (0.02) --
In excess of net investment income (0.09) -- (0.11) (0.03) (0.09) --
Net realized gains on investments and
foreign currency (0.07) (0.14) (0.31) (0.41) (0.05) --
In excess of net realized gains (0.01) -- -- -- (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.23) (0.22) (0.51) (0.51) (0.20) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.10 0.56 1.13 0.19 2.78 0.03
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.79 $ 14.69 $14.13 $13.00 $12.81 $10.03
===========================================================================================================================
TOTAL RETURN(2) 2.25% 5.57% 12.86% 5.51% 29.67% 0.30%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 9,780 $ 8,799 $7,548 $6,539 $3,202 $ 15
Ratios to average net assets:
Ratio of expenses 1.30% 1.34% 1.40% 1.25% 1.43% 0.20%++
Ratio of net investment income (loss) 0.53% 0.74% 1.11% 0.81% 0.32% (1.34)%+
Ratio of expenses* 1.31% 1.34% *** *** *** ***
Ratio of net investment income (loss)* 0.52% 0.74% *** *** *** ***
Portfolio turnover rate(3) 3% 13% 6% 20% 5% 0%
Average commission rate paid(4) $0.0148 $0.0219 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/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.
(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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
14
<PAGE> 19
INTERNATIONAL GROWTH FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.75 $ 14.18 $ 13.06 $ 12.84 $ 10.01 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.11 0.13 0.13 0.12 0.09 **
Net realized and unrealized gains on
investments and foreign currency 0.26 0.70 1.54 0.61 2.95 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.37 0.83 1.67 0.73 3.04 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.09) (0.10) (0.13) (0.07) (0.08) --
In excess of net investment income (0.06) (0.02) (0.11) (0.03) (0.04) (0.01)
Net realized gains on investments and
foreign currency (0.07) (0.13) (0.31) (0.41) (0.08) --
In excess of net realized gains (0.01) (0.01) -- -- (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.23) (0.26) (0.55) (0.51) (0.21) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.14 0.57 1.12 0.22 2.83 0.01
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.89 $ 14.75 $ 14.18 $ 13.06 $ 12.84 $ 10.01
===========================================================================================================================
TOTAL RETURN 2.54% 5.87% 13.00% 5.73% 30.32% 0.20%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $492,598 $387,799 $286,545 $178,186 $157,716 $81,105
Ratios to average net assets:
Ratio of expenses 1.05% 1.09% 1.17% 1.22% 1.33% 0.14%++
Ratio of net investment income (loss) 0.80% 0.97% 1.35% 0.87% 0.86% (0.28)%+
Ratio of expenses* 1.06% 1.09% *** *** *** ***
Ratio of net investment income (loss)* 0.79% 0.97% *** *** *** ***
Portfolio turnover rate(2) 3% 13% 6% 20% 5% 0%
Average commission rate paid(3) $ 0.0148 $ 0.0219 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/or reimbursements.
(1) The Investment Class date of initial public investment was 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 the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for periods prior to 1996.
15
<PAGE> 20
[THIS PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 21
INCOME FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------- -------------------------------------
1997 1996 1995(1) 1997 1996 1995(2)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.16 $10.82 $10.00 $ 10.16 $ 10.84 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment income 0.63 0.66 0.52 0.68 0.66 0.55
Net realized and unrealized
gains (losses) on investments 0.35 (0.56) 0.91 0.34 (0.56) 0.92
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.98 0.10 1.43 1.02 0.10 1.47
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions
from:
Net investment income (0.65) (0.64) (0.52) (0.68) (0.65) (0.54)
In excess of net investment
income -- (0.09) -- -- (0.10) --
Net realized gain on investments (0.20) (0.03) (0.09) (0.20) (0.03) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and
Distributions: (0.85) (0.76) (0.61) (0.88) (0.78) (0.63)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.13 (0.66) 0.82 0.14 (0.68) 0.84
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.29 $10.16 $10.82 $ 10.30 $ 10.16 $ 10.84
===========================================================================================================================
TOTAL RETURN(3) 10.19% 1.16% 14.63%++ 10.55% 1.19% 15.05%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, End of period
(000's) $5,611 $2,722 $1,961 $229,778 $240,060 $126,056
Ratios to average net assets:
Ratio of expenses 1.07% 1.08% 1.14%+ 0.82% 0.83% 0.91%+
Ratio of net investment income 6.38% 6.31% 6.40%+ 6.65% 6.57% 6.65%+
Ratio of expenses* 1.08% 1.08% ** 0.83% 0.83% **
Ratio of net investment income* 6.37% 6.31% ** 6.64% 6.57% **
Portfolio turnover rate(4) 84% 102% 50% 84% 102% 50%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
** During the period, there were no waivers and/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.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
17
<PAGE> 22
INTERMEDIATE BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.78 $10.14 $ 9.32 $10.19 $10.03 $ 9.98
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment
Operations:
Net investment income 0.57 0.58 0.61 0.57 0.47 0.03
Net realized and unrealized gains
(losses) on investments 0.15 (0.32) 0.82 (0.87) 0.34 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment
Operations: 0.72 0.26 1.43 (0.30) 0.81 0.05
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.57) (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 Dividends and Distributions: (0.57) (0.62) (0.61) (0.57) (0.65) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.15 (0.36) 0.82 (0.87) 0.16 0.05
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.93 $9.78 $10.14 $9.32 $10.19 $10.03
===========================================================================================================================
TOTAL RETURN(2) 7.62% 2.76% 15.76% (3.01)% 8.19% 0.50%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $6,972 $7,327 $6,862 $9,196 $4,966 $ 174
Ratios to average net assets:
Ratio of expenses 1.00% 1.02% 1.01% 0.81% 1.13% 0.16%++
Ratio of net investment income 5.79% 5.92% 6.24% 5.94% 4.75% 4.94%+
Ratio of expenses* 1.01% 1.03% ** ** ** **
Ratio of net investment income* 5.78% 5.91% ** ** ** **
Portfolio turnover rate(3) 114% 135% 166% 124% 126% 1%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
** During the period, there were no waivers and/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.
(3) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
18
<PAGE> 23
INTERMEDIATE BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 10.12 $ 9.29 $ 10.18 $ 10.00 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment
Operations:
Net investment income 0.59 0.60 0.65 0.56 0.51 0.08
Net realized and unrealized gains
(losses) on investments 0.14 (0.32) 0.81 (0.88) 0.32 **
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment
Operations: 0.73 0.28 1.46 (0.32) 0.83 0.08
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.59) (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 Dividends and Distributions: (0.59) (0.64) (0.63) (0.57) (0.65) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.14 (0.36) 0.83 (0.89) 0.18 --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.90 $ 9.76 $ 10.12 $ 9.29 $ 10.18 $ 10.00
===========================================================================================================================
TOTAL RETURN 7.80% 3.01% 16.18% (3.19)% 8.42% 0.83%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 762,740 $769,395 $854,801 $ 977,865 $ 434,264 $203,129
Ratios to average net assets:
Ratio of expenses 0.75% 0.77% 0.77% 0.80% 0.85% 0.15%++
Ratio of net investment income 6.03% 6.18% 6.50% 6.03% 5.03% 5.32%+
Ratio of expenses* 0.76% 0.78% *** *** *** ***
Ratio of net investment income* 6.02% 6.17% *** *** *** ***
Portfolio turnover rate(2) 114% 135% 166% 124% 126% 1%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/or reimbursements.
(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.
19
<PAGE> 24
SHORT TERM BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $ 9.95 $ 9.52 $ 9.91 $10.02 $ 9.99
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.57 0.59 0.52 0.47 0.38 0.02
Net realized and unrealized gains
(losses) on investments 0.02 (0.20) 0.44 (0.37) (0.08) 0.01
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.59 0.39 0.96 0.10 0.30 0.03
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.59) (0.54) (0.53) (0.48) (0.41) --
In excess of net investment income -- (0.06) -- (0.01) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.59) (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 $ 9.74 $ 9.95 $ 9.52 $ 9.91 $10.02
===========================================================================================================================
TOTAL RETURN(2) 6.26% 4.06% 10.30% 1.01% 3.04% 0.30%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $7,433 $1,667 $1,634 $1,649 $1,427 $ 111
Ratios to average net assets:
Ratio of expenses 0.88% 0.85% 0.91% 0.74% 1.24% 0.12%++
Ratio of net investment income 5.75% 6.02% 5.40% 4.79% 3.91% 3.31%+
Ratio of expenses* 0.99% 0.96% ** ** ** **
Ratio of net investment income* 5.64% 5.91% ** ** ** **
Portfolio turnover rate(3) 89% 32% 75% 56% 50% 5%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
** During the period, there were no waivers and/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.
(3) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
20
<PAGE> 25
SHORT TERM BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.75 $ 9.96 $ 9.52 $ 9.91 $ 9.99 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.61 0.61 0.55 0.48 0.42 0.07
Net realized and unrealized gains
(losses) on investments -- (0.21) 0.43 (0.38) (0.09) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.61 0.40 0.98 0.10 0.33 0.06
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.61) (0.61) (0.54) (0.49) (0.41) (0.07)
In excess of net investment income -- -- -- ** -- **
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.61) (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 $ 9.75 $ 9.96 $ 9.52 $ 9.91 $ 9.99
===========================================================================================================================
TOTAL RETURN 6.42% 4.22% 10.53% 1.03% 3.36% 0.53%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $139,739 $235,430 $310,680 $176,765 $255,892 $186,124
Ratios to average net assets:
Ratio of expenses 0.72% 0.70% 0.77% 0.73% 0.81% 0.14%++
Ratio of net investment income 6.04% 6.17% 5.60% 4.75% 4.24% 4.05%+
Ratio of expenses* 0.73% 0.70% *** *** *** ***
Ratio of net investment income* 6.03% 6.17% *** *** *** ***
Portfolio turnover rate(2) 89% 32% 75% 56% 50% 5%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
*** During the period, there were no waivers and/or reimbursements.
(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.
21
<PAGE> 26
[THIS PAGE INTENTIONALLY LEFT BLANK]
22
<PAGE> 27
TAX-FREE INCOME FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------- ---------------------------------------
1997 1996 1995(1) 1997 1996 1995(2)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.29 $10.52 $10.00 $ 10.27 $ 10.49 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment income 0.42 0.41 0.31 0.45 0.46 0.36
Net realized and unrealized
gains (losses) on investments
and futures contracts 0.42 (0.05) 0.51 0.41 (0.06) 0.49
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.84 0.36 0.82 0.86 0.40 0.85
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions
from:
Net investment income (0.42) (0.43) (0.30) (0.45) (0.46) (0.36)
In excess of net investment
income (0.01) -- -- -- -- --
Net realized gains on
investments and futures
contracts (0.03) (0.12) -- (0.03) (0.16) --
In excess of net realized gains -- (0.04) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and
Distributions: (0.46) (0.59) (0.30) (0.48) (0.62) (0.36)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.38 (0.23) 0.52 0.38 (0.22) 0.49
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.67 $10.29 $10.52 $ 10.65 $ 10.27 $ 10.49
===========================================================================================================================
TOTAL RETURN(3) 8.32% 3.53% 8.34%++ 8.59% 3.92% 8.64%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period
(000's) $1,712 $ 936 $ 529 $116,652 $109,948 $121,855
Ratios to average net assets:
Ratio of expenses 1.04% 1.07% 0.95%+ 0.79% 0.82% 0.73%+
Ratio of net investment income 4.05% 4.14% 4.25%+ 4.32% 4.38% 4.44%+
Ratio of expenses* 1.05% 1.07% 1.17%+ 0.80% 0.82% 0.91%+
Ratio of net investment income* 4.04% 4.14% 4.03%+ 4.31% 4.38% 4.26%+
Portfolio turnover rate(4) 16% 40% 10% 16% 40% 10%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 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.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
23
<PAGE> 28
INTERMEDIATE TAX-FREE FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.42 $10.52 $ 9.74 $10.45 $10.04 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment
Operations:
Net investment income 0.43 0.42 0.42 0.40 0.36 **
Net realized and unrealized gains
(losses) on investments 0.26 (0.09) 0.79 (0.71) 0.46 0.04
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment
Operations: 0.69 0.33 1.21 (0.31) 0.82 0.04
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.43) (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 Dividends and Distributions: (0.43) (0.43) (0.43) (0.40) (0.41) --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.26 (0.10) 0.78 (0.71) 0.41 0.04
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.68 $10.42 $10.52 $ 9.74 $10.45 $10.04
===========================================================================================================================
TOTAL RETURN(2) 6.80% 3.17% 12.66% (3.03)% 8.29% 0.40%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $3,534 $3,368 $3,807 $4,505 $3,307 $ 92
Ratios to average net assets:
Ratio of expenses 0.97% 0.98% 0.97% 0.79% 1.08% 0.10%++
Ratio of net investment income 4.06% 4.09% 4.13% 3.99% 3.44% 1.37%+
Ratio of expenses* 0.98% 0.98% 0.97% 0.79% 1.08% 0.10%++
Ratio of net investment income* 4.05% 4.09% 4.13% 3.99% 3.44% 1.37%+
Portfolio turnover rate(3) 23% 35% 6% 36% 14% 0%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 that was previously applicable
for Investment Shares. Such sales charge was discontinued as of May 1,
1997.
(3) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
24
<PAGE> 29
INTERMEDIATE TAX-FREE FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42 $ 10.52 $ 9.74 $ 10.45 $ 10.02 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment
Operations:
Net investment income 0.45 0.44 0.45 0.40 0.37 0.01
Net realized and unrealized gains
(losses) on investments 0.26 (0.08) 0.79 (0.71) 0.47 0.03
- ---------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment
Operations: 0.71 0.36 1.24 (0.31) 0.84 0.04
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.45) (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 Dividends and Distributions: (0.45) (0.46) (0.46) (0.40) (0.41) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.26 (0.10) 0.78 (0.71) 0.43 0.02
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 10.42 $ 10.52 $ 9.74 $ 10.45 $ 10.02
===========================================================================================================================
TOTAL RETURN 7.07% 3.41% 12.90% (3.00)% 8.51% 0.40%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $275,641 $285,674 $283,733 $380,715 $135,862 $36,938
Ratios to average net assets:
Ratio of expenses 0.72% 0.73% 0.72% 0.78% 0.84% 0.11%++
Ratio of net investment income 4.31% 4.34% 4.39% 4.07% 3.62% 1.77%+
Ratio of expenses* 0.73% 0.73% 0.72% 0.78% 0.84% 0.11%++
Ratio of net investment income* 4.30% 4.34% 4.39% 4.07% 3.62% 1.77%+
Portfolio turnover rate(2) 23% 35% 6% 36% 14% 0%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 Fund as a whole without
distinguishing between the classes of shares issued.
25
<PAGE> 30
MICHIGAN MUNICIPAL BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.07 $10.11 $ 9.72 $10.08 $10.02
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.39 0.38 0.37 0.35 0.21
Net realized and unrealized gains (losses)
on investments 0.14 (0.05) 0.40 (0.34) 0.07
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Operations: 0.53 0.33 0.77 0.01 0.28
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.40) (0.35) (0.37) (0.34) (0.21)
In excess of net investment income -- (0.02) (0.01) (0.03) **
Net realized gains on investments -- -- -- -- (0.01)
In excess of net realized gains -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.40) (0.37) (0.38) (0.37) (0.22)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.13 (0.04) 0.39 (0.36) 0.06
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.20 $10.07 $10.11 $ 9.72 $10.08
===========================================================================================================================
TOTAL RETURN(2) 5.38% 3.36% 8.01% 0.16% 2.85%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $4,413 $2,422 $1,900 $1,980 $ 283
Ratios to average net assets:
Ratio of expenses 0.84% 0.85% 0.83% 0.49% 0.25%+
Ratio of net investment income 3.88% 3.68% 3.68% 3.80% 3.43%+
Ratio of expenses* 0.95% 0.95% 0.85% 0.68% 1.08%+
Ratio of net investment income* 3.77% 3.58% 3.67% 3.61% 2.60%+
Portfolio turnover rate(3) 13% 24% 42% 27% 10%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 on May 11, 1993.
(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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
26
<PAGE> 31
MICHIGAN MUNICIPAL BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 10.12 $ 9.72 $ 10.06 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.41 0.39 0.39 0.37 0.23
Net realized and unrealized gains (losses) on
investments 0.13 (0.04) 0.39 (0.34) 0.07
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Operations: 0.54 0.35 0.78 0.03 0.30
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.41) (0.39) (0.37) (0.36) (0.22)
In excess of net investment income -- -- (0.01) (0.01) (0.01)
Net realized gains on investments -- -- -- -- (0.01)
In excess of net realized gains -- -- -- -- **
- ---------------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.41) (0.39) (0.38) (0.37) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in net asset value 0.13 (0.04) 0.40 (0.34) 0.06
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.21 $ 10.08 $ 10.12 $ 9.72 $ 10.06
===========================================================================================================================
TOTAL RETURN 5.52% 3.51% 8.20% 0.36% 3.06%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $111,735 $152,623 $185,466 $118,485 $74,647
Ratios to average net assets:
Ratio of expenses 0.69% 0.70% 0.69% 0.49% 0.24%+
Ratio of net investment income 4.04% 3.83% 3.81% 3.74% 3.34%+
Ratio of expenses* 0.70% 0.70% 0.70% 0.74% 0.84%+
Ratio of net investment income* 4.03% 3.83% 3.80% 3.50% 2.74%+
Portfolio turnover rate(2) 13% 24% 42% 27% 10%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 Fund as a whole
without distinguishing between the classes of shares issued.
27
<PAGE> 32
[THIS PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE> 33
LIMITED TERM TAX-FREE FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ----------------------------------------------------------------------------------------------
Year ended December 31,
----------------------------------------------------
1997 1996 1995 1994(1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.20 $ 10.24 $ 9.81 $ 9.87
- ----------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.38 0.37 0.37 0.06
Net realized and unrealized gains
(losses) on investments 0.08 (0.02) 0.44 (0.06)
- ----------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.46 0.35 0.81 --
- ----------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.38) (0.35) (0.38) (0.06)
In excess of net investment income -- (0.03) -- --
Net realized gains on investments (0.05) (0.01) -- --
- ----------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.43) (0.39) (0.38) (0.06)
- ----------------------------------------------------------------------------------------------
Net change in net asset value 0.03 (0.04) 0.43 (0.06)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.23 $ 10.20 $ 10.24 $ 9.81
==============================================================================================
TOTAL RETURN(3) 4.61% 3.51% 8.40% 0.03%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 474 $ 106 $ 54 $ 7
Ratios to average net assets:
Ratio of expenses 0.93% 0.87% 0.84% 0.87%+
Ratio of net investment income 3.67% 3.69% 3.69% 3.86%+
Ratio of expense* 1.04% 0.97% 0.85% 0.98%+
Ratio of net investment income* 3.56% 3.59% 3.69% 3.75%+
Portfolio turnover rate(4) 29% 32% 51% 10%
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------
1997 1996 1995 1994(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.16 $ 10.22 $ 9.80 $ 10.00
- ----------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.40 0.39 0.39 0.13
Net realized and unrealized gains
(losses) on investments 0.08 (0.04) 0.42 (0.21)
- ----------------------------------------------------------------------------------------------
Total Income from Investment
Operations: 0.48 0.35 0.81 (0.08)
- ----------------------------------------------------------------------------------------------
Less Dividends and Distributions from:
Net investment income (0.40) (0.40) (0.39) (0.12)
In excess of net investment income -- ** -- --
Net realized gains on investments (0.05) (0.01) -- --
- ----------------------------------------------------------------------------------------------
Total Dividends and Distributions: (0.45) (0.41) (0.39) (0.12)
- ----------------------------------------------------------------------------------------------
Net change in net asset value 0.03 (0.06) 0.42 (0.20)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.19 $ 10.16 $ 10.22 $ 9.80
==============================================================================================
TOTAL RETURN(3) 4.78% 3.54% 8.43% (0.77)%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $36,023 $41,472 $55,347 $43,497
Ratios to average net assets:
Ratio of expenses 0.76% 0.75% 0.69% 0.79%+
Ratio of net investment income 3.86% 3.84% 3.87% 3.81%+
Ratio of expense* 0.77% 0.75% 0.74% 0.96%+
Ratio of net investment income* 3.85% 3.84% 3.82% 3.64%+
Portfolio turnover rate(4) 29% 32% 51% 10%
- ----------------------------------------------------------------------------------------------
</TABLE>
+ 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 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.
(4) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
29
<PAGE> 34
MONEY MARKET FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(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 0.05 0.05 0.05 0.04 0.03 --
- -------------------------------------------------------------------------------------------------------------------------
Less Dividends from:
Net investment income (0.05) (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 $ 1.00
=========================================================================================================================
TOTAL RETURN 5.23% 5.06% 5.56% 3.71% 2.67% 0.27%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $1,179 $ 804 $1,227 $ 369 $ 593 $ 11
Ratios to average net assets:
Ratio of expenses 0.52% 0.52% 0.55% 0.63% 0.63% 0.63%+
Ratio of net investment income 5.11% 4.94% 5.41% 3.58% 2.63% 3.30%+
Ratio of expenses* 0.62% 0.62% 0.62% 0.68% 4.49% 0.68%+
Ratio of net investment income (loss)* 5.01% 4.84% 5.33% 3.53% (1.24)% 3.25%+
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
30
<PAGE> 35
MONEY MARKET FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<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 0.05 0.05 0.05 0.04 0.03 0.03
- --------------------------------------------------------------------------------------------------------------------------
Less Dividends from:
Net investment income (0.05) (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 $ 1.00
==========================================================================================================================
TOTAL RETURN 5.23% 5.06% 5.58% 3.75% 2.68% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $474,378 $483,919 $424,815 $323,539 $359,624 $220,508
Ratios to average net assets:
Ratio of expenses 0.52% 0.52% 0.55% 0.60% 0.60% 0.60%
Ratio of net investment income 5.11% 4.95% 5.45% 3.65% 2.65% 3.23%
Ratio of expenses* 0.62% 0.62% 0.63% 0.65% 0.68% 0.91%
Ratio of net investment income* 5.01% 4.85% 5.37% 3.59% 2.57% 2.92%
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------
INSTITUTIONAL SHARES
- ----------------------------------------------------------------
Year ended December 31,
------------------------
1991 1990(1)
- ----------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- ----------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.06 0.01
- ----------------------------------------------------------------
Less Dividends from:
Net investment income (0.06) (0.01)
- ----------------------------------------------------------------
Net change in net asset value -- --
- ----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
================================================================
TOTAL RETURN 5.65% 0.60%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 28 $ 23
Ratios to average net assets:
Ratio of expenses 0.60% 0.60%+
Ratio of net investment income 5.53% 7.27%+
Ratio of expenses* 0.92% 1.02%+
Ratio of net investment income* 5.21% 6.84%+
- ----------------------------------------------------------------
</TABLE>
+ 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 December 3, 1990.
31
<PAGE> 36
[THIS PAGE INTENTIONALLY LEFT BLANK]
32
<PAGE> 37
GOVERNMENT MONEY MARKET FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------
Period Ended Period Ended
December 31, 1997(1) DECEMBER 31, 1997(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.03 0.03
- ------------------------------------------------------------------------------------------------------------------
Less Dividends from:
Net investment income (0.03) (0.03)
- ------------------------------------------------------------------------------------------------------------------
Net change in net asset value -- --
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $ 1.00
==================================================================================================================
TOTAL RETURN 3.06%++ 3.10%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 2 $94,624
Ratios to average net assets:
Ratio of expenses 0.43%+ 0.35%+
Ratio of net investment income 5.17%+ 5.23%+
Ratio of expenses* 0.77%+ 0.69%+
Ratio of net investment income* 4.83%+ 4.89%+
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 Fund commenced operations June 2, 1997.
33
<PAGE> 38
MICHIGAN MUNICIPAL MONEY MARKET FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(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 0.03 0.02 0.02 **
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends from:
Net investment income (0.03) (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 $ 1.00
===========================================================================================================================
TOTAL RETURN 3.31% 3.11% 3.48% 2.38% 1.98% 0.03%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $ 289 $ 782 $1,603 $ 379 $ 149 ***
Ratios to average net assets:
Ratio of expenses 0.52% 0.54% 0.54% 0.63% 0.63% 0.00%+
Ratio of net investment income 3.22% 3.06% 3.48% 2.47% 2.01% 2.92%+
Ratio of expenses* 0.63% 0.64% 0.62% 0.73% 3.77% 0.00%+
Ratio of net investment income (loss)* 3.11% 2.96% 3.39% 2.37% (1.13)% 2.92%+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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.
34
<PAGE> 39
MICHIGAN MUNICIPAL MONEY MARKET FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
---------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991(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 0.03 0.03 0.03 0.02 0.02 0.03 0.02
- ---------------------------------------------------------------------------------------------------------------------------
Less Dividends from:
Net investment income (0.03) (0.03) (0.03) (0.02) (0.02) (0.03) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net change 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 3.31% 3.11% 3.50% 2.40% 2.00% 2.63% 2.37%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period
(000's) $211,682 $155,424 $145,215 $128,164 $183,366 $72,906 $49,618
Ratios to average net
assets:
Ratio of expenses 0.52% 0.54% 0.56% 0.60% 0.60% 0.60% 0.60%+
Ratio of net investment
income 3.27% 3.06% 3.45% 2.33% 1.96% 2.56% 4.03%+
Ratio of expenses* 0.63% 0.64% 0.65% 0.70% 0.69% 0.86% 0.77%+
Ratio of net investment
income* 3.16% 2.96% 3.36% 2.23% 1.87% 2.29% 3.93%+
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 June 3, 1991.
35
<PAGE> 40
FUND CHOICES
----------------------------------------------------------------------------
WHAT FUNDS ARE OFFERED?
The Trust currently offers fourteen Funds, each of which is described below.
Each Fund's investment objective is considered "fundamental" and may not be
changed by a Fund without the approval of its shareholders. Unless expressly
identified as "fundamental," the other investment policies described below,
including the dollar-weighted average portfolio maturity range of each Bond and
Municipal Bond Fund, are not considered "fundamental" and may be changed by the
Trust's Board of Trustees without shareholder approval.
EQUITY FUNDS
The Trust currently offers the four Equity Funds described below.
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 Lyon
Street 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 (a
"NRSRO") or those which, if not rated, are of comparable quality as determined
by Lyon Street. Bonds in the fourth highest rating category may have speculative
characteristics. The Fund expects to earn current income mainly from stock
dividends and interest on convertible bonds.
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. Lyon Street will generally try to match the industry
composition of the S&P 500 exactly. The Fund 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.
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
36
<PAGE> 41
less than $1 billion. The Fund intends to purchase common stock issued by each
NYSE company that meets the above criteria. The amount of each NYSE company's
common stock purchased will be based on the company's capitalization relative to
all of the other eligible NYSE companies. Lyon Street may elect to exclude an
eligible NYSE company from the Fund's portfolio if it believes the company is in
financial difficulty. Lyon Street will consider selling a stock if the issuer's
market capitalization increases to the point that it is ranked in the top half
of all NYSE companies. The Fund may also purchase stocks which are listed on
other U.S. securities exchanges or which are traded over the counter.
INTERNATIONAL GROWTH FUND
OBJECTIVE: The Fund seeks long-term growth of capital and additional
diversification for U.S. investors by investing in a varied portfolio of foreign
equity securities.
PRINCIPAL INVESTMENTS: The Fund will invest mostly in common and preferred
stocks. Under ordinary circumstances, the Fund intends to invest at least 65% of
its total assets in at least 3 countries other than the United States, 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. Lyon Street 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, Lyon Street 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.
BOND FUNDS
The Trust currently offers the three Bond Funds described below.
OBJECTIVES AND MATURITIES: The INCOME FUND seeks a high level of current income
by investing in a broad range of investment quality debt securities and will
maintain a dollar-weighted average portfolio maturity between seven and twenty
years. The INTERMEDIATE BOND FUND seeks current income by investing primarily in
a broad range of investment quality debt securities and will maintain a
dollar-weighted average portfolio maturity between three and ten years. The
SHORT TERM BOND FUND seeks current income by investing primarily in a limited
range of investment quality fixed income securities and will maintain a
dollar-weighted average portfolio maturity between one and three years. Each
Bond Fund seeks preservation of capital as a secondary goal.
PRINCIPAL INVESTMENTS: Under ordinary circumstances, each Bond Fund intends to
invest at least 65% of its total assets in debt securities. In addition, the
Income Fund intends to invest at least 65% of its total assets in a combination
of (i) corporate debt obligations that are rated in one of the three highest
rating categories by a NRSRO (for example, A or higher by Standard & Poor's
Ratings Group ("S&P") or by Moody's Investors Service, Inc. ("Moody's")) or, if
unrated, will be deemed to be of comparable quality by Lyon Street, or (ii)
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. 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 Bond 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
Bond Fund may also invest a portion of its assets in bonds convertible into
common stock.
Debt securities purchased by the Bond Funds will be rated in one of the four
highest rating categories by an NRSRO (for example, BBB or higher by S&P, or Baa
or higher by Moody's) or, if unrated, will be deemed to be of comparable quality
by Lyon Street. Obligations rated in the fourth highest rating category are
considered to
37
<PAGE> 42
have speculative characteristics. See Appendix A to the SAI for a description of
applicable S&P, Moody's and other NRSRO ratings.
When a Bond Fund purchases debt securities, Lyon Street will consider the NRSRO
ratings assigned to such securities. In making its investment decisions, Lyon
Street 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 Bond Fund will adjust its
investments in particular securities or in types of securities in response to
Lyon Street's appraisal of changing economic conditions and trends. A Bond Fund
may sell one security and purchase another security of comparable quality and
maturity to take advantage of what Lyon Street believes to be short-term
differentials in market values or yield disparities. Subsequent to its purchase
by a Bond 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 such Fund. Lyon Street will consider such an event in
determining whether the Bond Fund should continue to hold the security.
MUNICIPAL BOND FUNDS
The Trust currently offers the four Municipal Bond Funds described below.
OBJECTIVES AND MATURITIES: The TAX-FREE INCOME FUND seeks to provide as high a
level of interest income exempt from Federal income tax as is consistent with
prudent investing, while preserving capital, and will maintain a dollar-weighted
average portfolio maturity between ten and twenty-five years. The INTERMEDIATE
TAX-FREE FUND seeks current income exempt from Federal income tax, while
preserving capital, and will maintain a dollar-weighted average portfolio
maturity between three and ten years. The MICHIGAN MUNICIPAL BOND FUND seeks
current income exempt from Federal income and State of Michigan personal income
taxes, while preserving capital, and will maintain a dollar-weighted average
portfolio maturity between three and five years. No obligation held by such Fund
will have a remaining maturity of more than ten years. The LIMITED TERM TAX-
FREE FUND seeks current income exempt from Federal income tax, while preserving
capital, and will maintain a dollar-weighted average portfolio maturity between
one and three years. No obligation held by such Fund will have a remaining
maturity of more than ten years.
PRINCIPAL INVESTMENTS: Each Municipal Bond 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 Municipal Bond Fund without the approval of its shareholders. In
calculating the 80% limitation, for all Municipal Bond Funds other than Michigan
Municipal Bond Fund, a security whose interest is treated as a specific tax
preference item under the Federal alternative minimum tax is considered taxable.
Federally 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 ordinary
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 Michigan Municipal Bond
Fund may invest up to 100% of its total assets for temporary defensive purposes
in municipal bonds the income on which is exempt from Federal income tax but not
exempt from Michigan personal income taxes.
The Municipal Bond Funds will principally invest in municipal bonds which are
issued by state or local governments typically for general funding purposes 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.
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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
Municipal Bond 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 Municipal Bond 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 and
corporations. Adverse changes in the credit quality of these institutions could
cause loss to a Municipal Bond Fund and affect its share price.
Municipal obligations purchased by the Municipal Bond Funds will be rated in one
of the four highest rating categories by an NRSRO (for example, BBB or higher by
S&P, or Baa or higher by Moody's) or, if unrated, will be deemed to be of
comparable quality by Lyon Street. 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 Municipal Bond Fund purchases municipal obligations, Lyon Street will
consider the NRSRO ratings assigned to such securities. In making its investment
decisions, Lyon Street 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 Municipal Bond Fund
will adjust its investments in particular securities or in types of securities
in response to Lyon Street's appraisal of changing economic conditions and
trends. A Municipal Bond Fund may sell one security and purchase another
security of comparable quality and maturity to take advantage of what Lyon
Street believes to be short-term differentials in market values or yield
disparities. Subsequent to its purchase by a Municipal Bond 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 such
Fund. Lyon Street will consider such an event in determining whether the
Municipal Bond Fund should continue to hold the security.
MONEY MARKET FUNDS
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.
The Money Market Funds, in general, will only purchase U.S. dollar-denominated
"Eligible Securities" (as defined by the Commission), which are generally
securities that either (i) have short-term debt ratings when purchased in the
two highest rating categories by at least two NRSROs, or (ii) are unrated, but
are deemed by Lyon Street to be of comparable quality pursuant to guidelines
approved by the Board of Trustees. The dollar-weighted average maturity of each
Money Market Fund's portfolio will not exceed 90 days and with certain
exceptions, the Money Market Funds will not purchase any securities which mature
in more than 397 days from the date of purchase. All securities purchased by the
Money Market Funds will be determined by Lyon Street, under guidelines
established by the Board of Trustees, to present minimal credit risks.
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, its agencies
or instrumentalities.
GOVERNMENT MONEY MARKET FUND
OBJECTIVE: The Fund seeks current income from short-term U.S. Government
securities while preserving capital and maintaining liquidity.
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PRINCIPAL INVESTMENTS: The Fund will invest exclusively in U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, repurchase agreements with respect to such
securities and shares of registered money market investment companies that
invest in 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, except during periods of unusual market
conditions. This policy is a fundamental policy which cannot be changed by the
Fund without the approval of its shareholders. Federally 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 ordinary circumstances, 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.
From time to time on a temporary defensive basis due to market conditions, the
Fund may hold uninvested cash reserves or invest in short-term taxable money
market obligations that are permissible investments 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 Lyon Street,
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.
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WHAT INSTRUMENTS DO THE FUNDS INVEST IN?
The Funds may also invest in the securities and use the investment techniques
described below, except that the Government Money Market Fund will purchase only
U.S. Treasury bills, notes and other obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, repurchase agreements with
respect to such securities and shares of registered money market investment
companies that invest in such securities. 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, its agencies or 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 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 Bond and Money Market 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 Bond and Money
Market Funds 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, as
amended (the "1940 Act"). 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.
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Each Fund 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. During the term of the agreement, the seller is required to set aside
collateral equal to the price it has to pay to repurchase the securities. This
is intended to ensure that the Fund will receive the purchase price at the time
it is due, but if the seller defaults or declares bankruptcy, 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 Lyon Street or its affiliates. Repurchase Agreements are considered to be
loans under the 1940 Act.
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 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. Reverse Repurchase
Agreements are considered to be borrowings under the 1940 Act.
Each Fund may LEND SECURITIES to broker-dealers and other financially sound
institutional investors who will pay the Fund 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 will 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 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 and short-term obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. When
Lyon Street determines that market conditions are appropriate, each of the
Equity, Bond and Municipal Bond Funds may, for temporary defensive purposes,
invest up to 100% of its assets in money market instruments. Each of the Bond
and Municipal Bond Funds may also shorten its dollar-weighted average maturity
below its normal range if such action is deemed appropriate by Lyon Street for
temporary defensive purposes. If a Fund is investing defensively, it will not be
pursuing its investment objective.
COMMERCIAL PAPER issues include securities issued by corporations without
registration under the Securities Act of 1933, as amended (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. For purposes of each
Fund's limitation on purchases of illiquid instruments, Section 4(2) Paper will
not be considered illiquid if Lyon Street has determined, in accordance with
guidelines approved by the Board of Trustees, that an adequate trading market
exists for such securities.
Each Fund 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.
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.
Each Equity, Bond and Municipal Bond 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. Each such 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 or bond
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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. Buying and selling options is a specialized
investment technique which entails greater than ordinary investment risk. 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 Equity, Bond and Municipal Bond Funds may also purchase FUTURES CONTRACTS,
which are contracts in which a Fund agrees, at maturity, to take or make
delivery of certain securities, other financial instruments, the cash value of a
specified index or, in the case of the International Growth Fund, a stated
quantity of foreign currency. The Equity, Bond and Municipal Bond 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.
The Municipal Bond Funds and 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 Funds do 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.
The Bond, Municipal Bond and Money Market 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. Such 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 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 Money Market 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 Bond Fund and the Money Market Fund may invest in MORTGAGE-RELATED
SECURITIES issued by the U.S. Government, its agencies or instrumentalities or
issued by private companies. Each such Fund may also purchase ASSET-BACKED
SECURITIES, which are securities backed by installment contracts, credit card
receivables or other assets. The average life of mortgage-related and
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. In periods of falling interest rates,
the rate of prepayments tends to increase. During these periods, the
reinvestment of prepayment proceeds by a Fund will generally be at lower rates
than the rates on the prepaid obligations.
The Equity 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 may also apply to ADRs. The Equity Funds may also purchase
WARRANTS, which are rights to purchase securities at a specific price over a
specific period of time.
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
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using forward contracts in one foreign currency to hedge against fluctuations in
the value of securities denominated in a different currency if Lyon Street
believes there is a pattern of correlation between the two currencies. The Fund
may also enter into forward currency exchange contracts relating to a "basket"
consisting of specified amounts of more than one currency. This particular type
of contract will be used to hedge against fluctuations in more than one currency
through the purchase of a single forward currency exchange contract. It is
possible that the composition of the "basket" will not match exactly the Fund's
exposure to each of the currencies in the basket. In a currency swap, the
International Growth Fund will exchange with another party the right to make or
receive payments in certain foreign currencies.
Each Bond Fund and 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 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 Money Market Fund may not invest more than 10% of its net assets in
illiquid securities, and each of the other Funds may not invest more than
15% of their respective 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 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 securities of a single issuer for a period of up to
three business days. The Money Market Funds are also permitted to invest in
excess of 25% of their respective total assets in obligations of U.S. banks and
domestic branches of foreign banks that are subject to the same regulations as
U.S. banks.
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WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
GENERAL
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.
EQUITY FUNDS
Investing in the Equity 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 Equity Funds invest mostly in stocks, rises and falls in the stock
market in general, as well as the particular stocks held by the Equity Funds,
can affect a Fund's performance. The net asset value of the Equity Funds will
change daily and you might not recoup the amount you invest. The Equity 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 the Equity
Funds should be prepared and able to maintain their investments during periods
of adverse market conditions.
SMALL COMPANY GROWTH FUND
Lyon Street 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.
BOND AND MUNICIPAL BOND FUNDS
The value of the shares of each Bond and Municipal Bond Fund, 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 such Funds. Investing in the Bond and Municipal Bond 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 corporate or
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municipal debt instruments, which have values that 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.
MONEY MARKET FUNDS
Although each Money Market 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. The Money
Market Funds invest mostly in short-term debt instruments, which have values
that 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.
MICHIGAN MUNICIPAL BOND FUND AND MICHIGAN MUNICIPAL MONEY MARKET FUND
The Michigan Municipal Bond Fund and Michigan Municipal Money Market Fund are
concentrated in securities issued by the State of Michigan and entities within
the State of Michigan and, therefore, an investment in these Funds may be
riskier than an investment in other types of funds. The performance of such
Funds 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 cyclical conditions in the automotive industry. Michigan
recovered from the downturn in the early 1990s. Structural changes in Michigan's
economy and in the automotive industry have given the Michigan economy greater
financial stability. Michigan's economy currently is in good condition, and a
Budget Stabilization Fund that exceeded $1.1 billion at September 30, 1997
should help Michigan weather an economic downturn.
The market value and the marketability of bonds issued by local units of
government in Michigan may be affected adversely by the same factors that affect
Michigan's economy in general. The ability of Michigan 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.
Municipal securities 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 and corporations. Changes in the credit quality of these
institutions could cause loss to the Michigan Municipal Money Market Fund.
For additional information on the specific risks associated with the Michigan
Municipal Bond Fund and Michigan Municipal Money Market Fund, see Appendix B to
the SAI.
YEAR 2000 RISKS
Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by Lyon Street and the Funds' other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." Lyon
Street is taking steps to address the Year 2000 Problem with respect to the
computer systems that it uses and to obtain assurance that comparable steps are
being taken by the Funds' other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds as a result of the Year 2000 Problem.
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PERFORMANCE
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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 an amount 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 BOND FUND and MUNICIPAL BOND 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.
Each MONEY MARKET FUND may advertise "yield" and "effective yield." The "yield"
advertised by the Money Market Funds 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.
In addition, each MUNICIPAL BOND FUND and the MICHIGAN MUNICIPAL MONEY MARKET
FUND may advertise "tax equivalent yield." Tax equivalent yield is, in general,
the yield divided by a factor equal to one minus a stated income tax rate and
reflects the yield a taxable investment would have to achieve in order to equal
on an after-tax basis a tax-exempt yield.
All yield figures are based on historical earnings and are not intended to
indicate future performance. 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, in the case of the Equity, Bond and Municipal Bond Funds, net asset value
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. Investment Shares
generally have higher fees and expenses than Institutional Shares, so the total
return and yield of Investment Shares will be generally lower than that of
Institutional Shares.
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 Equity Fund may also compare its total return to
indices such as the S&P 500, the Russell 2000 Index and the EAFE Index. Each of
the Bond and Municipal Bond Funds 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 dividends and interest payments) 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.
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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).
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<PAGE> 51
EXPENSE INFORMATION
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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, the Trust's former investment adviser, received from each Fund
during the fiscal year ended December 31, 1997, 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%; Index Equity Fund, 0.27%; Small
Company Growth Fund, 0.70%; International Growth Fund, 0.75%; Income Fund,
0.60%; Intermediate Bond Fund, 0.55%; Short Term Bond Fund, 0.50%; Tax-Free
Income Fund, 0.55%; Intermediate Tax-Free Fund, 0.50%; Michigan Municipal Bond
Fund, 0.45%; Limited Term Tax-Free Fund, 0.45%; Money Market Fund, 0.40%;
Government Money Market Fund, 0.20%; and Michigan Municipal Money Market Fund,
0.40%. Lyon Street, the Trust's current investment adviser, is entitled to
receive the advisory fee amounts set forth above pursuant to its contract with
the Trust, except that, with respect to the Index Equity Fund and Government
Money Market Fund, Lyon Street is entitled to receive an annual fee at the
following rates, calculated daily and paid monthly, based on each Fund's average
daily net assets: Index Equity Fund, 0.30%; and Government Money Market Fund,
0.40%. The advisory fee payable by the International Growth Fund is higher than
most mutual funds, but comparable to other global and international funds. Lyon
Street 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 Money Market Funds currently charges any fees
under the Distribution Plan.
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PURCHASES OF SHARES
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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 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.
The BOND FUNDS are designed for investors who seek current income but desire
potentially higher returns than more conservative fixed rate investments or
money market funds. The MUNICIPAL BOND 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 Bond Funds or the Municipal Bond 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 such Funds' shares depend on the
quality and maturity of the obligations in their portfolios, as well as on other
market conditions.
The MONEY MARKET FUNDS, are designed for investors who primarily seek to
preserve their capital. The instruments in which the Money Market 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 Money
Market Funds.
Shares of the MUNICIPAL BOND FUNDS and 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 such Funds' tax-exempt
dividends. In addition, the Municipal Bond Funds and the Michigan Municipal
Money Market Fund may not be appropriate investments 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.
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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. Currently one or
both of these institutions are closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day (observed), Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day (observed).
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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 Lyon Street and Old Kent, participants in tax-sheltered plans and
certain qualified retirement accounts.
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<PAGE> 53
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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 Distributor has the right to charge fees for receiving wires,
although it does not currently do so.
- - THROUGH AN 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 certain 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.
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<PAGE> 54
EXCHANGE PRIVILEGE
You may acquire Investment or Institutional Shares of a Fund (the "new fund") by
exchanging shares of another Fund (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 place an order to exchange shares. Purchases of
shares of a new fund must meet the minimum purchase requirement of that fund.
All exchanges will be effected based on the relative net asset value next
determined after the exchange order is received.
2. 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.
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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.
Eastern Time on each day the NYSE is open for trading (2:00 p.m. Eastern Time
for the Money Market Fund and Government Money Market Fund and 12:00 noon
Eastern Time for the Michigan Municipal Money Market Fund) 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. Eastern Time (or 2:00 p.m. or 12:00 noon Eastern
Time) on the day a purchase order for shares is received, if the purchase order
is received prior to or at 4:00 p.m. Eastern Time (or 2:00 p.m. or 12:00 noon
Eastern Time), and is the net asset value calculated at 4:00 p.m. Eastern Time
(or 2:00 p.m. or 12:00 noon Eastern Time) on the next business day, if the
purchase order is received after 4:00 p.m. Eastern Time (or 2:00 p.m. or 12:00
noon Eastern Time). 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.
EQUITY FUNDS, BOND FUNDS AND MUNICIPAL BOND FUNDS
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.
MONEY MARKET FUNDS
The Money Market 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 Money Market Funds' assets will be addressed by the Board of Trustees.
REDEMPTIONS (SALES) OF SHARES
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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.
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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
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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.
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.
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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.
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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.
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<PAGE> 57
To avoid a delay in receiving redemption proceeds, you should purchase shares
through a bank wire or electronic funds transfer. Information on wires can be
obtained from all national and many state banks.
STRUCTURE AND MANAGEMENT OF THE FUNDS
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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 fourteen portfolios, each of which offers two classes of shares.
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WHO MANAGES AND SERVICES THE FUNDS?
INVESTMENT ADVISER. The Funds are advised by Lyon Street, a wholly-owned
subsidiary of Old Kent. Effective as of March 2, 1998, Lyon Street assumed the
investment advisory responsibilities for each of the Funds from the Investment
Management Group of Old Kent ("IMG"). This change did not involve a change in
control or management of the investment adviser or a change in the Funds'
portfolio managers. Lyon Street maintains offices at 111 Lyon Street, N.W.,
Grand Rapids, Michigan 49503. Old Kent is a wholly-owned subsidiary of Old Kent
Financial Corporation, which is a financial services company with total assets
as of December 31, 1997 of approximately $13.8 billion. 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.
Lyon Street 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. Lyon Street has several portfolio managers committed to the
day-to-day management of the Funds. Joseph T. Keating, President and Chief
Investment Officer at Lyon Street, is responsible for developing and
implementing the Funds' investment policies. Mr. Keating has over twenty-one
years of investment experience, including ten years with IMG. Allan J. Meyers,
CFA, Director of Active Equity Management at Lyon Street, is co-portfolio
manager for the Growth and Income Fund. Mr. Meyers has over twenty-two years of
investment experience, including thirteen years with IMG. Mr. Meyers has been
co-portfolio manager for the Growth and Income Fund since November 10, 1997.
David C. Eder, Director of Structured Equity Management at Lyon Street, is
co-portfolio manager for the Index Equity, Small Company Growth and
International Growth Funds. Mr. Eder has over five years of investment
experience with IMG and, prior to his current position, worked as an Analyst for
IMG. He has been co-portfolio manager of the Index Equity Fund and International
Growth Fund since January, 1995. He has been co-portfolio manager of the Small
Company Growth Fund since August, 1996. Robert Cummisford, CFA, is co-portfolio
manager for the Growth and Income, Index Equity, Small Company Growth and
International Growth Funds. Mr. Cummisford has over five years of investment
experience, including over one year with IMG. Prior to joining Old Kent, he was
Senior Consultant with Ibbotson Associates. Mitchell L. Stapley, CFA, Director
of Taxable Fixed Income Management at Lyon Street, is the portfolio manager of
the Income Fund and Intermediate Bond Fund, which he has managed since their
inception, and the Short Term Bond Fund, which he has managed since November
1996. He has over fourteen years of investment experience, including ten years
with IMG. Michael J. Martin, CFA, Director of Tax-Free Fixed Income Management
at Lyon Street, is co-portfolio manager for each of the Municipal Bond Funds and
is responsible for their day-to-day management. Mr. Martin has managed the
Tax-Free Income Fund and Intermediate Tax-Free Fund since November 10, 1997. He
has been co-portfolio manager for the Michigan Municipal Bond Fund and Limited
Term Tax-Free Fund since January 1995. Mr. Martin has over eight years of
experience with IMG. Sarah M. Quirk has been co-portfolio manager for each of
the Municipal Bond Funds since May 1, 1998. Prior to joining Lyon Street, she
was a Retail Trader-Fixed Income Securities at Tucker Anthony, Inc.
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Lyon Street selects broker-dealers to execute portfolio transactions for the
Funds based on best price and execution terms. Lyon Street 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.
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.
Old Kent provides 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.
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.
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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.
54
<PAGE> 59
DIVIDENDS, DISTRIBUTIONS AND TAXES
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WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
The Funds will distribute substantially all of their 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, and the Money Market Funds which declare
dividends daily 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.
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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.
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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 of 1986, as amended (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 each Equity Fund, each Bond
Fund, 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.
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. 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.
The Municipal Bond Funds and the Michigan Municipal Money Market Fund intend to
distribute monthly 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.
When you redeem, transfer or exchange shares of a Fund, you may have a taxable
gain or loss depending on whether the price you receive for the shares is 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.
55
<PAGE> 60
The exemption of interest on municipal bonds for Federal income tax purposes
does not necessarily result in an 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. Potential
investors should consult their tax advisors with reference to their own tax
situations.
Dividends paid by the Michigan Municipal Bond Fund and the Michigan Municipal
Money Market Fund which are derived from interest attributable to tax-exempt
Michigan municipal obligations will generally be exempt from Michigan state and
local taxes, even though the dividends may not be exempt for Federal income tax
purposes. These Funds are unable to predict in advance the portion of their
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 and 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.
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 (if you itemize
your deductions).
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.
56
<PAGE> 61
- ----------------------------------------------------------------------------
[LOGO]
KENT FUNDS
INVESTMENT ADVISER
LYON STREET ASSET MANAGEMENT COMPANY
111 LYON STREET, N.W.
GRAND RAPIDS, MICHIGAN 49503
Not FDIC Insured No Bank Guarantee May Lose Value
DISTRIBUTOR
BISYS FUND SERVICES
3435 STELXER ROAD
COLUMBUS, OH 43219-3035
KKF-0390 5/98
- ----------------------------------------------------------------------------
<PAGE> 62
<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 Plan
Item 17. Brokerage Allocation and Securities Transactions
Other Practices Distribution Plan
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> 63
THE KENT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FOR
INVESTMENT AND INSTITUTIONAL SHARES
OF
THE KENT GROWTH AND INCOME FUND
THE KENT INDEX EQUITY FUND
THE KENT SMALL COMPANY GROWTH FUND
THE KENT INTERNATIONAL GROWTH FUND
THE KENT INCOME FUND
THE KENT INTERMEDIATE BOND FUND
THE KENT SHORT TERM BOND FUND
THE KENT TAX-FREE INCOME FUND
THE KENT INTERMEDIATE TAX-FREE FUND
THE KENT MICHIGAN MUNICIPAL BOND FUND
THE KENT LIMITED TERM TAX-FREE FUND
THE KENT MONEY MARKET FUND
THE KENT GOVERNMENT MONEY MARKET FUND
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
May 1, 1998
This Statement of Additional Information ("SAI") is not a prospectus
but relates to, and should be read in conjunction with, the prospectus for the
Investment Shares and Institutional Shares of the foregoing Funds dated May 1,
1998, as amended or supplemented from time to time. A copy of the prospectus 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 prospectus.
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 THE FUNDS INVOLVES
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. EACH MONEY MARKET FUND SEEKS TO
MAINTAIN A NET ASSET VALUE PER SHARE OF $1.00 ALTHOUGH THERE CAN BE NO ASSURANCE
THAT THEY WILL BE ABLE TO DO SO.
<PAGE> 64
TABLE OF CONTENTS
The Trust................................................................. 3
Investment Policies....................................................... 3
Investment Restrictions...................................................22
Securities Transactions...................................................24
Valuation of Securities...................................................26
Trustees and Officers.....................................................28
Expenses..................................................................30
Investment Adviser........................................................30
Administrator.............................................................33
Distributor...............................................................34
Transfer Agent............................................................35
Custodian, Auditors and Counsel...........................................35
Distribution Plan.........................................................35
Additional Purchase and Redemption Information............................36
Dividends and Taxes.......................................................37
Declaration of Trust......................................................41
Standardized Total Return and Yield Quotations............................43
Advertising Information...................................................49
Financial Statements......................................................50
Additional Information....................................................51
Appendix A................................................................A-1
Appendix B................................................................B-1
Appendix C................................................................C-1
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS SAI, OR IN THE PROSPECTUS RELATED HERETO,
IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS 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 PROSPECTUS DO NOT
CONSTITUTE AN OFFERING BY THE TRUST OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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<PAGE> 65
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
Growth and Income Fund, The Kent Index Equity Fund, The Kent Small Company
Growth Fund, The Kent International Growth Fund (collectively, the "Equity
Funds"), The Kent Income Fund, The Kent Intermediate Bond Fund, The Kent Short
Term Bond Fund (collectively, the "Bond Funds"), The Kent Tax-Free Income Fund,
The Kent Intermediate Tax-Free Fund, The Kent Michigan Municipal Bond Fund, The
Kent Limited Term Tax-Free Fund, (collectively, the "Municipal Bond Funds"), The
Kent Money Market Fund, The Kent Government Money Market Fund, and The Kent
Michigan Municipal Money Market Fund (collectively, the "Money Market Funds").
The Equity Funds, Bond 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 "Municipal Funds." Each Fund is advised by Lyon Street Asset Management
Company ("Lyon Street" or the "Investment Adviser").
Important information about the Trust and the Investment and
Institutional Shares of the Funds is contained in the Funds' prospectus. 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 the prospectus. The investment
policies discussed below are applicable to all Funds unless otherwise noted,
except that the Government Money Market Fund will purchase only U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, repurchase agreements with respect to such
securities and shares of registered money market investment companies that
invest in such securities.
MONEY MARKET INSTRUMENTS
To the extent described in the Funds' prospectus, each Fund 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 and U.S. Government obligations with remaining
maturities of thirteen months or less.
Bank obligations include certificates of deposit, bankers' acceptances
and time deposits, issued or supported by the credit of U.S. or foreign banks or
savings institutions. 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
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<PAGE> 66
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. 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.
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 Lyon Street 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.
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by banks or bank holding companies, corporations and
finance companies. Investments by the Funds in taxable commercial paper will
consist of issues that are rated A-1 by Standard & Poor's Ratings Group ("S&P")
or Prime-1 by Moody's Investors Service, Inc. ("Moody's"). In addition, the
Funds may acquire unrated commercial paper and corporate bonds that are
determined by Lyon Street 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.
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.
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<PAGE> 67
GUARANTEED INVESTMENT CONTRACTS (The Bond Funds and Money Market Fund only)
The Bond 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 insurance company's general assets. The Bond Funds and Money Market
Fund will only purchase GICs from insurance companies which, at the time of
purchase, have total assets of $1 billion or more and meet quality and credit
standards established by Lyon Street 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 Lyon Street, pursuant to guidelines established by the
Trust's Board of Trustees. During the term of any repurchase agreement, Lyon
Street will continue to monitor the creditworthiness of the seller. The Funds
will not enter into repurchase agreements with Lyon Street 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
Each 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.
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<PAGE> 68
VARIABLE AND FLOATING RATE INSTRUMENTS (The Bond 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, Lyon
Street 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 (THE MONEY MARKET FUND AND MICHIGAN MUNICIPAL MONEY
MARKET FUND ONLY)
The Money Market Fund and Michigan Municipal Money Market Fund 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.
-6-
<PAGE> 69
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
To the extent as described in the Funds' prospectus, each Fund may
purchase securities on a when-issued basis or purchase or sell securities on a
forward commitment (sometimes called delayed delivery) basis. These transactions
involve a commitment by the Fund to purchase or sell securities at a future
date. The price of the underlying securities 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 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 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 incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
When a Fund purchases securities on a when-issued 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 and forward commitment 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 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, notes and 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, 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,
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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, 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 Bond Funds and Money Market Funds only)
The Bond 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 Bond Funds and Money Market Funds only)
To the extent described in the Funds' prospectus, the Bond 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 Bond 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.
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Within the past several years, the Treasury Department has facilitated
transfers of ownership of stripped securities by accounting separately for the
beneficial ownership of particular interest coupon and principal payments on
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate Trading of Registered Interest and Principal
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 Bond Funds and Money Market Funds may acquire other
U.S. Government obligations and their unmatured interest coupons that have been
separated ("stripped") by their holder, typically a custodian bank or investment
brokerage firm. Having separated the interest coupons from the underlying
principal of the U.S. Government obligations, the holder will resell the
stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the underwriters
of these certificates or other evidences of ownership of U.S. Treasury
securities have stated that, in their opinion, purchasers of the stripped
securities most likely will be deemed the beneficial holders of the underlying
U.S. Government obligations for federal tax purposes. The Trust is unaware of
any binding legislative, judicial or administrative authority on this issue. The
staff of the Securities and Exchange Commission believes that participations in
TIGRs, CATS and other similar trusts are not U.S. Government securities.
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 Bond Funds and Money Market Funds only)
The Bond 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.
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Mortgage prepayment rates are affected by factors including the level of
interest rates, general economic conditions, the location and age of the
mortgage and other social and demographic conditions. Such prepayments are
passed through to the registered holder with the regular monthly payments of
principal and interest and have the effect of reducing future payments.
In periods of falling interest rates, the rate of mortgage prepayments
tends to increase. During such periods, the reinvestment of prepayment proceeds
by a Fund will generally be at lower rates than the rates that were carried by
the obligations that have been prepaid. As a result, the relationship between
mortgage prepayments and interest rates may give some high-yielding
mortgage-related securities less potential for growth in value than conventional
bonds with comparable maturities. In calculating the average weighted maturity
of each Fund, the maturity of mortgage-backed 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
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. 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").
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 Bond 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 Lyon Street's assumptions about prepayments are inaccurate, these
securities may expose the Funds to significantly greater market risks than
expected.
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ASSET-BACKED SECURITIES (The Bond Funds and Money Market Funds only)
The Bond 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 Bond Funds and Municipal Bond Funds only)
The Bond Funds and Municipal Bond 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 reset 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
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the Internal Revenue Service has not ruled on whether the interest received on
such securities is in fact free from Federal income taxes. Purchases of such
securities by the Municipal Bond Funds are therefore based on the opinion of
counsel to the sponsors of the security.
MUNICIPAL OBLIGATIONS (The Municipal Funds only)
The two principal classifications of municipal obligations which may be
held by the Municipal 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 generally 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) are issued by or on behalf of
public authorities to finance various privately-operated facilities. Private
activity bonds are in most cases revenue securities and are not payable from the
unrestricted revenues of the issuer. Additionally, the principal and interest on
these obligations may or may not be payable from the general revenue of the
users of the facilities involved. 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 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 Lyon Street. Neither the Trust nor
Lyon Street will review the proceedings relating to the issuance of municipal
obligations or the bases for such opinions.
An issuer's obligations under its municipal obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal obligations may be materially
adversely affected by litigation or other conditions.
From time to time proposals have been introduced before Congress for
the purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations. For example, under the Tax Reform Act of 1986
interest on certain private activity bonds must be included in an investor's
Federal alternative minimum taxable income, and corporate investors must include
all tax-exempt interest in their Federal alternative minimum taxable income. The
Trust cannot predict what legislation, if any, may be proposed in the future in
Congress as regards the Federal income tax status of interest on municipal
obligations or which proposals, if any, might be enacted. Such proposals, if
enacted, might materially adversely affect the availability of municipal
obligations and a Fund's liquidity and value. In such an event the Board of
Trustees would reevaluate the Funds' investment objectives and policies and
consider changes in their structure or possible dissolution.
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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
Municipal Funds may invest more than 25% of their assets in municipal
obligations covered by insurance policies.
The Municipal 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. Lyon Street, 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 Municipal Funds only)
The Municipal Funds may enter into standby commitments with respect to
municipal obligations held by them. Under a standby commitment, a dealer agrees
to purchase at a Fund's option a specified municipal obligation at its amortized
cost value to the Fund plus accrued interest, if any. Standby commitments may be
exercisable by a Fund at any time before the maturity of the underlying
municipal obligations and may be sold, transferred or assigned only with the
instruments involved.
The Funds expect that standby commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Funds may pay for a standby commitment either
separately in cash or by paying a higher price for municipal obligations
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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 Lyon Street'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. Standby commitments will be valued at zero in determining net asset
value of a Fund. Accordingly, where a Fund pays directly or indirectly for a
standby commitment, its cost will be reflected as unrealized depreciation 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.
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 international organizations
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 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
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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.
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 Lyon Street 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
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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 Lyon Street anticipates that a particular foreign currency may
decline substantially relative to the U.S. dollar or other leading currencies,
in order to reduce risk, the Fund may enter into a forward contract to sell, for
a fixed amount, the amount of foreign currency approximating the value of some
or all of the Fund's securities denominated in such foreign currency. Similarly,
when the securities held by the Fund create a short position in a foreign
currency, the Fund may enter into a forward contract to buy, for a fixed amount,
an amount of foreign currency approximating the short position. With respect to
any forward foreign currency contract, it will not generally be possible to
match precisely the amount covered by that contract and the value of the
securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is entered
into and the date it matures. While forward contracts may offer protection from
losses resulting from declines or appreciation in the value of a particular
foreign currency, they also limit potential gains which might result from
changes in the value of such currency. The Fund will also incur costs in
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
A separate account consisting of cash, U.S. Government securities or
other liquid high-grade debt securities, equal to the amount of the Fund's
assets that could be required to consummate forward contracts will be
established with the Fund's custodian except to the extent the contracts are
otherwise "covered." For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market or
fair value. If the market or fair value of such securities declines, additional
cash or securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by the Fund. A forward
contract to sell a foreign currency is "covered" if the Fund owns the currency
(or securities denominated in the currency) underlying the contract, or holds a
forward contract (or call option) permitting the Fund to buy the same currency
at a price no higher than the Fund's price to sell the currency. A forward
contract to buy a foreign currency is "covered" if a Fund holds a forward
contract (or put option) permitting the Fund to sell the same currency at a
price as high as or higher than the Fund's price to buy the currency.
CURRENCY SWAPS (The International Growth Fund only)
The International Growth Fund may also enter into currency swaps, which
involve the exchange of the rights of the Fund and another party to make or
receive payments in specific currencies. The net amount of the excess, if any,
of the Fund's obligations over its entitlements with respect to each currency
swap will be accrued on a daily basis and an amount of liquid assets, such as
cash, U.S. Government securities or other liquid high-grade debt securities,
having an aggregate net asset value at least equal to such accrued excess will
be maintained in segregated accounts by the Trust's custodian. Inasmuch as these
transactions are entered into for good faith hedging purposes, the Funds and
Lyon Street 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
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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, Bond and Municipal Bond Funds only)
The above-referenced Funds may buy put and call options and write
covered call and secured put options. Such options may relate to particular
securities, indices, financial instruments or foreign currencies, and may or may
not be listed on a domestic or foreign securities exchange and may or may not be
issued by the Options Clearing Corporation. Options trading is a highly
specialized activity which entails greater than ordinary investment risk.
Options may be more volatile than the underlying instruments, and therefore, on
a percentage basis, an investment in options may be subject to greater
fluctuation than an investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser of the
option the right to buy, and a writer has the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security. The premium paid to the
writer is in consideration for undertaking the obligation under the option
contract. A put option for a particular security gives the purchaser the right
to sell the security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
Options on indices provide the holder with the right to make or receive a cash
settlement upon exercise of the option. With respect to options on indices, the
amount of the settlement will equal the difference between the closing price of
the index at the time of exercise and the exercise price of the option expressed
in dollars, times a specified multiple.
The Funds will write call options only if they are "covered." In the
case of a call option on a security or currency, the option is "covered" if a
Fund owns the instrument underlying the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration (or, if
additional cash consideration is required, cash, U.S. Government securities or
other liquid high-grade debt securities, in such amount are held in a segregated
account by the Fund's custodian) upon conversion or exchange of other securities
held by it. For a call option on an index, the option is covered if a Fund
maintains with its custodian a diversified portfolio of securities comprising
the index or liquid assets equal to the contract value. A call option is also
covered if a Fund holds a call on the same instrument or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written provided the difference is maintained by the Fund in liquid
assets in a segregated account with its custodian. The Funds will write put
options only if they are "secured" by liquid assets maintained in a segregated
account by the Funds' custodian in an amount not less than the exercise price of
the option at all times during the option period.
A Fund's obligation to sell an instrument subject to a covered call
option written by it, or to purchase an instrument subject to a secured put
option written by it, may be terminated prior to the expiration date of the
option by the Fund's execution of a closing purchase transaction, which is
effected by purchasing on an exchange an option of the same series (i.e., same
underlying instrument, exercise price and expiration date) as the option
previously written. Such a purchase does not result
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in the ownership of an option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to prevent an underlying
instrument from being called, to permit the sale of the underlying instrument or
to permit the writing of a new option containing different terms on such
underlying instrument. The cost of such a liquidation purchase plus transaction
costs may be greater than the premium received upon the original option, in
which event the Fund will have incurred a loss in the transaction. There is no
assurance that a liquid secondary market will exist for any particular option.
An option writer, unable to effect a closing purchase transaction, will not be
able to sell the underlying instrument (in the case of a covered call option) or
liquidate the segregated account (in the case of a secured put option) until the
option expires or the optioned instrument or currency is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline or appreciation in the instrument during such period.
When a Fund purchases an option, the premium paid by it is recorded as
an asset of the Fund. When a Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will be
subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by a Fund expires unexercised the Fund realizes a loss equal to the
premium paid. If a Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium received by the
Fund on the closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option written
by a Fund is exercised, the proceeds of the sale will be increased by the net
premium originally received and the Fund will realize a gain or loss.
There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
value; or one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
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FUTURES CONTRACTS AND RELATED OPTIONS (The Equity, Bond and Municipal Bond Funds
only)
The above-referenced 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, as amended (the "1933 Act"), 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
1933 Act for resales of certain securities to qualified institutional buyers.
Lyon Street 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.
Lyon Street monitors the liquidity of restricted securities in the
Funds' portfolios under the supervision of the Board of Trustees. In reaching
liquidity decisions, Lyon Street 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 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 Lyon Street to
be of good standing and when, in Lyon Street's judgment, the income to be earned
from the loan justifies the attendant risks.
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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 Bond 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, Lyon Street will consider, among
other factors, the creditworthiness of the issuers of the securities; the
interest or dividend income generated by the securities; the potential for
capital appreciation of the securities and the underlying common stocks; the
prices of the securities relative to other comparable securities and to the
underlying common stocks; whether the securities are entitled to the benefits of
sinking funds or other protective conditions; diversification of the Funds'
portfolios as to issuers; and whether the securities are rated by a rating
agency and, if so, the ratings assigned.
The value of convertible securities is a function of their investment
value (determined by yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if converted into the
underlying common stock). The investment value of convertible securities is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline, and by the
credit standing of the issuer and other factors. The conversion value of
convertible securities is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible securities is governed principally by their
investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their conversion value. In
addition, convertible securities generally sell at a premium over their
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding fixed income
securities.
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,
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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.
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. Lyon Street 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.
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 Lyon Street 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. The Equity Funds may acquire corporate debt
securities as a consequence of distributions that are made to holders of equity
securities by certain corporations. The Equity Funds do not intend to hold such
debt securities for investment
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purposes but, rather, will liquidate their holdings in such securities at an
appropriate time following receipt.
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 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;
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(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 Municipal 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 Municipal Funds, purchase any security (other
than obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) of any issuer if as a result more than 25% of its total
assets would be invested in a single industry, including industrial development
bonds from the same facility or similar types of facilities if backed solely by
non-governmental users; governmental issuers of municipal bonds are not regarded
as members of an industry, and the Michigan Municipal Bond Fund and the Michigan
Municipal Money Market Fund may invest more than 25% of its assets in industrial
development bonds;
(12) With respect to the Non-Money Market Funds, purchase more than 3%
of the total outstanding voting securities of any one investment company, invest
more than 5% of a Fund's total assets in any one investment company, or invest
more than 10% of a Fund's total assets in the securities of other investment
companies in general, except as part of a merger, consolidation, reorganization,
purchase of assets or similar transaction;
(13) With respect to the Money Market Funds, purchase more than 3% of
the total outstanding voting securities of any one investment company or invest
more than 10% of its total assets in the securities of other investment
companies;
(14) Purchase or sell commodities or commodity contracts or real
estate, except a Fund may purchase and sell securities secured by real estate
and securities of companies which deal in real estate and may engage in currency
or other financial futures contracts and related options transactions;
(15) Underwrite securities of other issuers, except that a Fund may
purchase securities from the issuer or others and dispose of such securities in
a manner consistent with its investment objective; or
(16) With respect to the Equity Funds, purchase any security (other
than U.S. Government securities) of any issuer if as a result the Fund would
hold more than 10% of the voting securities of the issuer.
With respect to Investment Restriction (7), the Funds currently intend
to limit 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 Municipal 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
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(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 in "First Tier Securities" (as defined by the Securities and
Exchange Commission), and, in the case of the Money Market Fund and the
Government Money Market Fund, may be invested in First Tier Securities of 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
Lyon Street, 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 Lyon Street in
determining the overall reasonableness of brokerage commissions paid. In
determining best price and execution and selecting brokers to execute
transactions, Lyon Street 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. Lyon Street 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, Lyon Street 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 Lyon
Street to the Funds. Any such research and other statistical and factual
information provided by brokers to a Fund or Lyon Street is considered to be in
addition to and not in lieu of services required to be performed by Lyon Street
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 Lyon Street 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
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over-the-counter transactions, Lyon Street 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 Lyon Street 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.
Lyon Street expects that purchases and sales of securities for the
Equity Funds usually will be effected through brokerage transactions for which
commissions are payable. Lyon Street expects that purchases and sales of
municipal bonds and other debt instruments for the Bond 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.
For the fiscal years ended December 31, 1995, 1996 and 1997, the
following Funds paid commissions in the amounts indicated: $557,711, $478,044
and $1,400,322, respectively, for the Growth and Income Fund; $139,571, $34,687
and $235,105, respectively, for the Index Equity Fund; $1,001,650, $453,811 and
$710,902, respectively, for the Small Company Growth Fund; and $192,985,
$211,929 and $234,749, respectively, for the International Growth Fund. The
increase in the amount of brokerage commissions paid by the Index Equity Fund
and the Small Company Growth Fund is attributable to an increase in the size of
each Fund and, in the case of the Small Company Growth Fund, an increase in the
Fund's portfolio turnover. 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 Lyon
Street from those of the other Funds and investment accounts advised by Lyon
Street. 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 Lyon Street 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, Lyon Street 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 Lyon Street, 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.
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As of December 31, 1997, Growth and Income Fund owned equity securities
of J.P. Morgan & Co. in the amount of $1,851,000, equity securities of Merrill
Lynch & Co. in the amount of $2,830,000, and equity securities of Charles Schwab
Corp. in the amount of $1,313,000; Index Equity Fund owned equity securities of
Merrill Lynch & Co. in the amount of $1,969,000, equity securities of
Charles Schwab Corp. in the amount of $900,000, and equity securities of J.P.
Morgan & Co. in the amount of $1,625,000; Small Company Growth Fund owned equity
securities of McDonald & Co. Investments, Inc. in the amount of $1,683,000;
Income Fund owned debt securities of Lehman Brothers Holdings, Inc. in the
amount of $2,231,000, and debt securities of Salomon, Inc. in the amount of
$2,023,000; Intermediate Bond Fund owned debt securities of J.P. Morgan & Co. in
the amount of $5,339,000, debt securities of Smith Barney Holdings, Inc. in the
amount of $5,043,000; debt securities of Salomon, Inc. in the amount of
$10,155,000, debt securities of Bear Stearns Co. in the amount of $5,580,000,
and debt securities of Lehman Brothers, Inc. in the amount of $5,252,000; Short
Term Bond Fund owned debt securities of Goldman Sachs Group, L.P. in the amount
of $4,996,000, debt securities of Morgan Stanley Group, Inc. in the amount of
$6,071,000, and debt securities of Salomon, Inc. in the amount of $3,770,000;
and the Money Market Fund owned debt securities of J.P. Morgan & Co. in the
amount of $13,999,000. As of December 31, 1997, no other Fund owned securities
of the Trust's regular broker-dealers.
VALUATION OF SECURITIES
MONEY MARKET FUNDS
As stated in the 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 accretion or amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price a Fund would receive if the
Fund sold the instrument. During such periods the yield to investors in the Fund
may differ somewhat from that obtained in a similar entity which uses available
indications as to market value to value its portfolio instruments. For example,
if the use of amortized cost resulted in a lower (higher) aggregate Fund value
on a particular day, a prospective investor in the Fund would be able to obtain
a somewhat higher (lower) yield and ownership interest than would result from
investment in such similar entity and existing investors would receive less
(more) investment income and ownership interest. However, the Trust expects that
the procedures and limitations referred to in the following paragraphs of this
section will tend to minimize the differences referred to above.
Under Rule 2a-7, the Trust's Board of Trustees, in supervising the
Money Market Funds' operations and delegating special responsibilities involving
portfolio management to Lyon Street, 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
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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 Lyon Street 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 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
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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 Lyon Street;
(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 Lyon Street;
(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
(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 Lyon Street 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.
JOSEPH F. DAMORE, Trustee, 45; he is President and Chief Executive
Officer of Sparrow Hospital and Health System; formerly, Director and Executive
Vice President, Sisters of Mercy Health Corporation.
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<PAGE> 91
* WALTER B. GRIMM, Trustee, Chairman and Vice President, 52; he is
Senior Vice President of Client Services for BISYS Fund Services and was
formerly President of Lehigh Investments.
JAMES F. RAINEY, Trustee, 55; he is Associate Dean for Academic Affairs
in The Eli Broad Graduate School of Management at Michigan State University.
RONALD F. VANSTEELAND, Trustee, 57; 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.
JAMES F. DUCA, II, President, 40; he is Vice President of Old Kent
Financial Corporation and was formerly Vice President and Trust Counsel for
Marshall & Ilsley Trust Company.
R. JEFFREY YOUNG, Vice President and Assistant Secretary, 33; he is
Vice President - Client Services for BISYS Fund Services and was formerly
employed by The Heebink Group.
MARTIN R. DEAN, Treasurer, 34; he is Vice President - Fund
Administration for BISYS Fund Services and was formerly employed by KPMG Peat
Marwick LLP.
ROBERT L. TUCH, Secretary, 46; he is Vice President - Legal Services
for BISYS Fund Services.
W. BRUCE MCCONNEL, III, Assistant Secretary, 55; he is a partner in the
law firm of Drinker Biddle & Reath LLP.
ALAINA V. METZ, Assistant Secretary, 31; 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, 1997, 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, Dean, and Tuch 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 additional fees of $1,750 for each regular meeting attended, $1,000
for each special meeting attended and $500 for each telephonic meeting, 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, 1997. 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
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<PAGE> 92
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* $ 4,000** $ 4,000
Joseph F. Damore, Trustee $ 13,000** $ 13,000
Walter B. Grimm, Trustee $ 0 $ 0
James F. Rainey, Trustee $ 13,000** $ 13,000
Ronald F. VanSteeland, Trustee $ 13,000 $ 13,000
</TABLE>
- -------------------
* Ms. Coughlan resigned from the Trust's Board of Trustees on May 23,
1997.
** During the fiscal year ended December 31, 1997, Mr. Damore deferred
$10,000 of his compensation and Mr. Rainey deferred $6,500 of his
compensation pursuant to the Deferred Compensation Plan. Ms. Coughlan
received payment of all compensation (including compensation that was
previously deferred pursuant to the Deferred Compensation Plan) that
was due and owing to her in conjunction with her resignation from the
Trust's Board of Trustees on May 23, 1997.
As of the date hereof, the Trustees and officers of the Trust as a
group beneficially owned less than 1% of the Trust's outstanding shares.
EXPENSES
Operating expenses borne by the Funds include taxes, interest, fees and
expenses of Trustees, 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 prospectus 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
LYON STREET ASSET MANAGEMENT COMPANY
Lyon Street is the investment adviser to the Funds. Effective as of
March 2, 1998, Lyon Street, a wholly-owned subsidiary of Old Kent Bank ("Old
Kent"), assumed the investment advisory responsibilities of Old Kent for each of
the Funds on the terms and conditions stated in the prospectus. This change did
not involve a change in control or management of the investment adviser or a
change in the Funds' portfolio managers. As of March 31, 1998, Lyon Street
managed assets of approximately $4.6 billion. The Trust is the first registered
investment company for which Lyon Street has provided investment advisory
services. Lyon Street is located at 111 Lyon Street, N.W., Grand Rapids, MI
49503.
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<PAGE> 93
Old Kent is a Michigan banking corporation which, with its affiliates,
provided commercial and retail banking and trust services through more than 200
banking offices in Michigan and Illinois as of December 31, 1997. 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
$13.8 billion in total consolidated assets as of December 31, 1997. Through
offices in numerous states, Old Kent Financial Corporation and its subsidiaries
provide a broad range of financial services to individuals and businesses.
Lyon Street 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.
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, Lyon Street 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. Lyon Street is responsible for all expenses incurred by it in
connection with its advisory activities, other than the cost of securities and
other investments purchased or sold for the Funds, and any brokerage commissions
or other transaction charges that may be associated with such purchases and
sales.
For its services to each Fund, Lyon Street 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 Index Equity Fund,
0.30%; the Small Company Growth Fund, 0.70%; the International Growth Fund,
0.75%; the Income Fund, 0.60%; the Intermediate Bond Fund, 0.55%; the Short Term
Bond Fund, 0.50%; the Tax-Free Income Fund, 0.55%; the Intermediate Tax-Free
Fund, 0.50%; the Michigan Municipal Bond Fund, 0.45%; the Limited Term Tax-Free
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%. Lyon Street may
rebate its advisory fees to certain of its institutional customers.
For the fiscal years ended December 31, 1995, 1996 and 1997, Old Kent,
the Trust's former investment adviser, earned the following advisory fees for
each Fund: $2,427,434, $3,202,775 and $4,568,032, respectively, for the Growth
and Income Fund; $834,175, $654,709 and $1,278,392, respectively, for the Index
Equity Fund; $2,210,891, $3,613,394 and $4,597,213, respectively, for the Small
Company Growth Fund; $1,483,705, $2,465,291 and $3,529,317, respectively, for
the International Growth Fund; $4,765,284, $4,537,199 and $4,262,333,
respectively, for the Intermediate Bond Fund; $1,454,445, $1,421,272 and
$857,575, respectively, for the Short Term Bond Fund; $1,582,089, $1,458,010 and
$1,424,578, respectively, for the Intermediate Tax-Free Fund; $738,023, $772,339
and $563,275, respectively, for the Michigan Municipal Bond Fund; $219,989,
$225,891 and $167,800, respectively for the Limited Term Tax-Free Fund;
$2,056,213, $1,747,159 and $2,092,414, respectively, for the Money Market Fund;
and $590,771, $653,417 and $781,668, respectively, for the Michigan Municipal
Money Market
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Fund. For the fiscal period ended December 31, 1995 and the fiscal years ended
December 31, 1996 and December 31, 1997, Old Kent earned advisory fees of
$632,086, $1,209,526 and $ 1,489,950, respectively, for the Income Fund and
$442,275, $595,616 and $642,997, respectively, for the Tax-Free Income Fund. For
the fiscal period ended December 31, 1997, Old Kent earned $226,041 in advisory
fees for the Government Money Market Fund.
For the fiscal year ended December 31, 1997, Old Kent waived a portion
of its advisory fees for the Index Equity Fund. Net of such waivers, Old Kent
received $1,158,610. For the fiscal period ended December 31, 1997, Old Kent
waived a portion of its advisory fees for the Government Money Market Fund. Net
of such waivers, Old Kent received $112,896. For the fiscal year ended December
31, 1995, Old Kent waived a portion of its advisory fees for the Michigan
Municipal Bond Fund, Limited Term Tax-Free Fund, Money Market Fund and Michigan
Municipal Money Market Fund. Net of such waivers, Old Kent received $717,968,
for the Michigan Municipal Bond Fund; $199,200 for the Limited Term Tax-Free
Fund; $1,903,848, for the Money Market Fund; and $535,921, for the Michigan
Municipal Money Market Fund. 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, Lyon Street's liability in
connection with rendering services thereunder is limited to situations involving
a breach of its fiduciary duty, its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
The Trustees of the Trust, including a majority of those Trustees who
are not parties to the Investment Advisory Agreement or interested persons of
any such party, most recently approved the agreement, as amended, on May 23,
1997. The Agreement continues in effect from year to year with respect to each
Fund only if such continuance is specifically approved at least annually by the
Trustees of the Trust, including the "non-interested" Trustees, or by vote of a
majority of the outstanding voting shares of such Fund. The Investment Advisory
Agreement will terminate automatically upon its assignment and may be terminated
with respect to any Fund or Funds without penalty on 60-days' written notice at
the option of either party or by a vote of the shareholders of such Fund or
Funds.
SUB-ADMINISTRATION AGREEMENT
Old Kent provides 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 banks from
engaging in the business of underwriting, selling or distributing securities,
although national and state-chartered banks generally are permitted to purchase
and sell securities upon the order and for the account of their customers. 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")
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<PAGE> 95
issued a regulation and interpretation to the effect that the Glass-Steagall Act
and such decision forbid 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,
but do not prohibit such a holding company or affiliate from acting as
investment adviser, transfer agent and custodian to such an investment company.
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.
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.
Lyon Street believes it 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 prospectus and this SAI. However, Lyon Street's
authority to serve in such 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 Lyon Street. In addition, 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 Lyon Street to conclude that it would be unlawful or
inadvisable to continue its relationship with the Trust. If Lyon Street
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.
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 - .185% of
such assets; between $5.0 and $7.5 billion - .165% of such assets; and over $7.5
billion - .135% of such assets provided, however, that such annual fee shall be
subject to an annual
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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. 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 .015% 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, 1995, 1996 and 1997, the
Trust paid the following administration fees to BISYS and the Trust's former
administrator: $693,553, $896,290 and $1,169,235, respectively, for the Growth
and Income Fund; $422,784, $212,487 and $464,741, respectively, for the Index
Equity Fund; $631,683, $1,011,600 and $1,176,682, respectively, for the Small
Company Growth Fund; $395,655, $643,425 and $842,845, respectively, for the
International Growth Fund; $1,732,831, $1,618,455 and $1,386,330, respectively,
for the Intermediate Bond Fund; $581,778, $558,367 and $306,274, respectively,
for the Short Term Bond Fund; $632,836, $571,869 and $509,532, respectively, for
the Intermediate Tax-Free Fund; $328,010, $337,467 and $223,672, respectively,
for the Michigan Municipal Bond Fund; $97,773, $95,629 and $66,670,
respectively, for the Limited Term Tax-Free Fund; $772,894, $425,618 and
$504,642, respectively, for the Money Market Fund; and $220,170, $159,777 and
$178,917, respectively, for the Michigan Municipal Money Market Fund. For the
fiscal period ended December 31, 1995 and the fiscal years ended December 31,
1996 and December 31, 1997, the Income Fund paid $210,695, $393,938 and
$444,179, respectively, and the Tax-Free Income Fund paid $160,827, $227,178 and
$209,139, respectively, in administration fees. For the fiscal period ended
December 31, 1997, the Government Money Market Fund paid $36,124 in
administration 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 from year to year 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 1995, 1996 and 1997, the Trust paid BISYS
and the Trust's former distributor total underwriting commissions of $457,249,
$527,141 and $55,000, respectively. This entire amount was re-allocated to
broker-dealers which had selling agreements with the distributor.
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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.
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 prospectus, 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
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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 21, 1997. 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 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, 1997, the following payments
were made under the Plan: Growth and Income Fund, $59,946; Index Equity Fund,
$45,030; Small Company Growth Fund, $45,018; International Growth Fund, $23,388;
Income Fund, $8,849; Intermediate Bond Fund, $17,259; Short Term Bond Fund,
$5,481; Tax-Free Income Fund, $2,621; Intermediate Tax-Free Fund, $8,298;
Michigan Municipal Bond Fund, $4,491; and Limited Term Tax-Free Fund, $463. 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, Index Equity Fund, Small Company Growth Fund, International Growth
Fund, Income Fund, Intermediate Bond Fund, Tax-Free Income Fund and Intermediate
Tax-Free 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, Michigan Municipal Bond Fund and
Limited Term Tax-Free 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
Funds.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The prospectus for the Funds describes 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.)
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<PAGE> 99
In addition to the situation described in the prospectus 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 prospectus
from time to time.
A Fund may make payment for redemption in securities or other property
if it appears appropriate to do so in light of the Fund's responsibilities under
the 1940 Act. In the event shares are redeemed for securities or other property,
shareholders may incur additional costs in connection with the conversion
thereof to cash. Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may receive less than the
redemption value of their shares upon sale of the securities or property
received, particularly where such securities are sold prior to maturity.
The Trust has filed an election pursuant to Rule 18f-1 under the 1940
Act which provides that each portfolio of the Trust is obligated to redeem
shares solely in cash up to $250,000 or 1% of such portfolio's net asset value,
whichever is less, for any one shareholder within a 90-day period. Any
redemption beyond this amount may be made in proceeds other than cash.
DIVIDENDS AND TAXES
The following summarizes certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the prospectus. 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
prospectus 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 prospectus 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").
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
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<PAGE> 100
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a Fund has not invested more than 5% of the value
of its total assets in securities of any one issuer and as to which a Fund does
not hold more than 10% of the outstanding voting securities of any one issuer),
and no more than 25% of the value of each Fund's total assets may be invested in
the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which such Fund controls and which are engaged in the same or similar trades or
businesses.
Each Fund intends to distribute to shareholders any excess of net
long-term capital gain over net short-term capital loss ("net capital gain"), 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, Index Equity Fund
and Small Company Growth 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 effective maximum 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 20% for assets held more than 18 months
and 28% for assets held more than 12 months but not more than 18 months. 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
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<PAGE> 101
states and localities in which its offices are maintained, in which its agents
or independent contractors are located or in which it is otherwise deemed to be
conducting business, each Fund may be subject to the tax laws of such states or
localities.
FEDERAL - TAX-EXEMPT INFORMATION
As described in the prospectus, the Municipal Funds are designed to
provide investors with tax-exempt interest income. The Municipal 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 Municipal 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 Municipal 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 Municipal 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 Municipal 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 Municipal 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 Municipal 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 Municipal 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 Municipal 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 or
the Income Requirement.
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<PAGE> 102
Generally, futures contracts, options on futures contracts and certain
foreign currency contracts held by a Fund (collectively, the "Instruments") at
the close of its taxable year are treated for Federal income tax purposes as
sold for their fair market value on the last business day of such year, a
process known as "marking-to-market." Except in the case of foreign currency
contracts (which result in ordinary income or loss), 40% 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 gain or loss actually realized by the Fund in a subsequent
sale or other disposition of those Instruments is adjusted to reflect any
income, 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.
Certain foreign currency contracts entered into by a Fund may be
subject to the marking-to-market process, but gain or loss will be treated as
100% ordinary income or loss. To receive such treatment, a foreign currency
contract must meet the following conditions: (1) the contract must require
delivery of, or settlement by reference to the value of, a foreign currency of a
type in which regulated futures contracts are traded; (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. 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
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<PAGE> 103
certain transactions denominated in terms of a currency other than the U.S.
dollar or determined by reference to the value of one or more currencies other
than the U.S dollar. The types of transactions covered by these provisions
include the following: (1) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables and
payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer also is treated as a
transaction subject to the special currency rules. However, regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the 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.
A Fund may be subject to U.S. Federal income tax (and possibly
additional interest charges) on a portion of any "excess distribution" from or a
gain from the disposition of shares of a passive foreign investment company
("PFIC"), even if it distributes the income to its shareholders. In the
alternative, a Fund may elect to recognize income or gain each year with respect
to its PFIC holdings, either through making a "qualified electing fund" election
for the PFIC, under which the Fund would recognize its allocable share of the
PFIC's ordinary earnings and net capital gains for each year, or through
electing to mark-to-market and recognize ordinary income each year with respect
to any appreciation in a PFIC investment.
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 prospectus, shares will be
legally issued, fully paid and non-assessable.
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<PAGE> 104
The proceeds received by each Fund for each issue or sale of its
shares, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to and constitute the underlying assets of that Fund. The underlying assets of
each Fund will be segregated on the books of account, and will be charged with
the liabilities in respect to that Fund and with a share of the general
liabilities of the Trust. Expenses with respect to the portfolios of the Trust
are normally allocated in proportion to the net asset value of the respective
portfolios except where allocations of direct expenses can otherwise be fairly
made.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts
Business Trust." Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, there is a possibility that shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, even if the Trust were held to be a
partnership, the possibility of the shareholders incurring financial loss for
that reason appears remote because the Trust's Restatement of Declaration of
Trust contains an express disclaimer of shareholder liability for obligations of
the Trust and requires that notice of such disclaimer be given in every note,
bond, contract or other undertaking entered into or executed by the Trust or the
Trustees. In addition, the Restatement of Declaration of Trust provides for
indemnification out of the Trust property for any shareholder held personally
liable for the obligations of the Trust.
VOTING RIGHTS
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement, a
distribution plan subject to Rule 12b-1, or any change in a fundamental
investment policy would be effectively acted upon with respect to an investment
portfolio only if approved by a majority of the outstanding shares of that
investment portfolio. However, the Rule also provides that the ratification of
the appointment of independent accountants, the approval of principal
underwriting contracts and the election of Trustees may be effectively acted
upon by shareholders of the Trust voting together in the aggregate without
regard to a particular investment portfolio.
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.
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<PAGE> 105
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.
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, 1997, the yields of the Institutional Shares of the Money Market Fund,
Government Money Market Fund and Michigan Municipal Money Market Fund were
5.31%, 5.25% and 3.53%, respectively. For the same period, the 7-day yields of
the Investment Shares of the Money Market Fund, Government Money Market Fund and
Michigan Municipal Money Market Fund were 5.31%, 5.13% and 3.53%, 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.
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<PAGE> 106
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, 1997, the
effective yields of the Institutional Shares of the Money Market Fund,
Government Money Market Fund and Michigan Municipal Money Market Fund were
5.45%, 5.39% and 3.59%, respectively. For the same period, the effective yields
of the Investment Shares of the Money Market Fund, Government Money Market Fund
and Michigan Municipal Money Market Fund were 5.45%, 5.26% and 3.59%,
respectively. These yield figures reflect waivers of certain expenses.
Each Money Market Fund may also quote from time to time its total
return in accordance with Securities and Exchange Commission Regulations.
NON-MONEY MARKET 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 to the 1/nth power
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.
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<PAGE> 107
Based on the foregoing calculation, the average annual total returns for the
Funds for the periods ended December 31, 1997 were as follows:
INVESTMENT SHARES
<TABLE>
<CAPTION>
Inception Since
Date One Year Five Years Inception
---- -------- ---------- ---------
<S> <C> <C> <C> <C>
Growth and Income Fund 12/01/92 23.89% 17.42% 17.23%
Index Equity Fund 11/25/92 32.24% 19.19% 19.20%
Small Company Growth Fund 12/04/92 27.71% 17.02% 17.18%
International Growth Fund 12/04/92 2.25% 10.80% 10.65%
Income Fund 03/17/95 10.19% N/A 9.16%
Intermediate Bond Fund 11/25/92 7.62% 6.08% 6.06%
Short Term Bond Fund 12/04/92 6.26% 4.89% 4.87%
Tax-Free Income Fund 03/31/95 8.32% N/A 7.32%
Intermediate Tax-Free Fund 12/18/92 6.80% 5.47% 5.50%
Michigan Municipal Bond Fund 05/11/93 5.38% N/A 4.22%
Limited Term Tax-Free Fund 11/01/94 4.61% N/A 5.20%
Money Market Fund 12/09/92 5.23% 4.41% 4.35%
Government Money Market Fund 06/02/97 N/A N/A N/A
Michigan Municipal Money Market Fund 12/15/92 3.31% 2.81% 2.78%
</TABLE>
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<PAGE> 108
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Inception Since
Date One Year Five Years Inception
---- -------- ---------- ---------
<S> <C> <C> <C> <C>
Growth and Income Fund 11/02/92 24.14% 17.56% 17.84%
Index Equity Fund 11/02/92 32.55% 19.41% 19.72%
Small Company Growth Fund 11/02/92 27.94% 17.21% 18.54%
International Growth Fund 12/04/92 2.54% 11.05% 10.92%
Income Fund 03/20/95 10.55% N/A 9.44%
Intermediate Bond Fund 11/02/92 7.80% 6.16% 6.21%
Short Term Bond Fund 11/02/92 6.42% 5.00% 5.01%
Tax-Free Income Fund 03/20/95 8.59% N/A 7.56%
Intermediate Tax-Free Fund 12/16/92 7.07% 5.62% 5.69%
Michigan Municipal Bond Fund 05/03/93 5.52% N/A 4.39%
Limited Term Tax-Free Fund 09/01/94 4.78% N/A 4.74%
Money Market Fund 12/03/90 5.23% 4.42% 4.50%
Government Money Market Fund 06/02/97 N/A N/A N/A
Michigan Municipal Money Market Fund 06/03/91 3.31% 2.84% 2.92%
</TABLE>
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<PAGE> 109
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
Based on the foregoing calculation, the aggregate total returns for the Funds
for the periods ended December 31, 1997 were as follows:
INVESTMENT SHARES
<TABLE>
<CAPTION>
Inception Since
Date One Year Five Years Inception
---- -------- ---------- ---------
<S> <C> <C> <C> <C>
Growth and Income Fund 12/01/92 23.89% 123.23% 124.54%
Index Equity Fund 11/25/92 32.24% 140.59% 145.05%
Small Company Growth Fund 12/04/92 27.71% 119.39% 123.72%
International Growth Fund 12/04/92 2.25% 67.02% 67.19%
Income Fund 03/17/95 10.19% N/A 27.79%
Intermediate Bond Fund 11/25/92 7.62% 34.33% 35.00%
Short Term Bond Fund 12/04/92 6.26% 26.94% 27.32%
Tax-Free Income Fund 03/31/95 8.32% N/A 21.50%
Intermediate Tax-Free Fund 12/18/92 6.80% 30.48% 31.00%
Michigan Municipal Bond Fund 05/11/93 5.38% N/A 21.19%
Limited Term Tax-Free Fund 11/01/94 4.61% N/A 17.42%
Money Market Fund 12/09/92 5.23% 24.09% 24.09%
Government Money Market Fund 06/02/97 N/A N/A 3.06%
Michigan Municipal Money Market Fund 12/15/92 3.31% 14.88% 14.88%
</TABLE>
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<PAGE> 110
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Inception Since
Date One Year Five Years Inception
---- -------- ---------- ---------
<S> <C> <C> <C> <C>
Growth & Income Fund 11/02/92 24.14% 124.56% 133.50%
Index Equity Fund 11/02/92 32.55% 142.74% 153.42%
Small Company Growth Fund 11/02/92 27.94% 121.26% 140.85%
International Growth Fund 12/04/92 2.54% 68.92% 69.43%
Income Fund 03/20/95 10.55% N/A 28.71%
Intermediate Bond Fund 11/02/92 7.80% 34.86% 36.55%
Short Term Bond Fund 11/02/92 6.42% 27.63% 28.75%
Tax-Free Income Fund 03/20/95 8.59% N/A 22.58%
Intermediate Tax-Free Fund 12/16/92 7.07% 31.43% 32.22%
Michigan Municipal Bond Fund 05/03/93 5.52% N/A 22.22%
Limited Term Tax-Free Fund 09/01/94 4.78% N/A 16.72%
Money Market Fund 12/03/90 5.23% 24.17% 36.55%
Government Money Market Fund 06/02/97 N/A N/A 3.10%
Michigan Municipal Money Market Fund 06/03/91 3.31% 15.02% 20.84%
</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.
-48-
<PAGE> 111
A Fund calculates its 30-day (or one month) standard yield in
accordance with the method prescribed by the Securities and Exchange Commission
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, 1997, the yields for the Investment Shares of the Bond Funds and
Municipal Bond Funds were as follows: Income Fund, 5.53%; Intermediate Bond
Fund, 5.09%; Short Term Bond Fund, 5.21%; Tax-Free Income Fund, 3.67%;
Intermediate Tax-Free Fund, 3.49%; Michigan Municipal Bond Fund, 3.85%; and
Limited Term Tax-Free Fund, 3.46%. For the same period, the yields on the
Institutional Shares of the Bond Funds and Municipal Bond Funds were as follows:
Income Fund, 5.79%; Intermediate Bond Fund, 5.35%; Short Term Bond Fund, 5.36%;
Tax-Free Income Fund, 3.92%; Intermediate Tax-Free Fund, 3.74%; Limited Term
Tax-Free Fund, 3.61%; and Michigan Municipal Bond Fund, 4.00%.
THE MUNICIPAL FUNDS
The Investment Shares and the Institutional Shares of the Municipal
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, 1997, the tax equivalent yields, assuming a 39.6% tax rate for the
Investment Shares of the Municipal Funds were as follows: Tax-Free Income Fund,
6.08%; Intermediate Tax-Free Fund, 5.78%; Michigan Municipal Bond Fund, 6.37%;
Limited Term Tax-Free Fund, 5.73%; and Michigan Municipal Money Market Fund,
5.56%. For the same period, the yields on the Institutional Shares of the
Municipal Funds were as follows: Tax-Free Income Fund, 6.49%; Intermediate
Tax-Free Fund, 6.19%; Michigan Municipal Bond Fund, 6.62%; Limited Term Tax-Free
Fund, 5.98%; and Michigan Municipal Money Market Fund, 5.56%.
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
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<PAGE> 112
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 investment in various investment vehicles, including but not limited
to, stocks, bonds, Treasury securities and shares of a Fund and/or other mutual
funds. Materials may include a discussion of certain attributes or benefits to
be derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
FINANCIAL STATEMENTS
The Financial Statements included in the Funds' December 31, 1997
Annual Report to Shareholders are incorporated by reference into this SAI. No
other part of the Annual Reports are incorporated herein. Copies of the
Financial Statements may be obtained without charge by contacting The Kent Funds
at P.O. Box 182201, Columbus, Ohio 43218-2201 or at 1-800-633-KENT (5368).
-50-
<PAGE> 113
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 6, 1998.
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND CLASS PERCENTAGE OF
OWNERSHIP
<S> <C> <C> <C>
Trent & Co. The Kent Money Market Institutional 91%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Old Kent Bank The Kent Government Institutional 94%
Attn: Funds Management Money Market Fund
111 Lyon St., N.W.
Grand Rapids, MI 49503
Trent & Co. The Kent Government Institutional 6%
Cash Account Money Market Fund
ATTN: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Michigan Institutional 98%
Attn: Kent Fund Trader Municipal Money Market
4420 44th St., Suite A Fund
Kentwood, MI 49512
Trent & Co. The Kent Short Term Institutional 41%
Cash Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Short Term Institutional 56%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Intermediate Institutional 48%
Cash Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
-51-
<PAGE> 114
<TABLE>
<S> <C> <C> <C>
Trent & Co. The Kent Intermediate Institutional 49%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Intermediate Institutional 98%
Cash Account Tax-Free Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Michigan Institutional 99%
Cash Account Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Growth and Institutional 39%
Reinvestment Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Growth and Institutional 54%
Cash Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Small Company Institutional 43%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Small Company Institutional 50%
Cash Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent International Institutional 41%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
-52-
<PAGE> 115
<TABLE>
<S> <C> <C> <C>
Trent & Co. The Kent International Institutional 54%
Cash Account Growth Fund
Attn: Kent Fund Trader
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. The Kent Index Equity Institutional 19%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Index Equity Institutional 69%
Reinvestment Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Limited Term Institutional 99%
Cash Account Tax-Free Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Tax-Free Institutional 98%
Cash Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Income Fund Institutional 17%
Reinvestment Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Income Fund Institutional 78%
Cash Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
-53-
<PAGE> 116
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Money Investment 37%
Trade House Account Market Fund
ATTN: Mutual Fund Department
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
Fifth Third Bank, Custodian The Kent Money Investment 16%
V. Donna Berg Market Fund
Rollover IRA
403 Midlakes Boulevard
Plainwell, MI 49080
SEI Trust Company The Kent Money Investment 6%
Reinvest Account Market Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities Inc. The Kent Money Investment 20%
and Twelve Hundred Market Fund
and One Commerce Square
ATTN: Cash Sweeps Department
2005 Market Street
Philadelphia, PA 19103
BISYS Fund Services The Kent Government Investment 14%
3435 Stelzer Rd. Money Market Fund
Columbus, OH 43219-8001
Glenna Bannerman The Kent Government Investment 6%
Cust Briana Bannerman Money Market Fund
UGMA OH
3308 Gurtis Drive
Reynoldsburg, OH 43068
Fifth Third Bank, Custodian The Kent Government Investment 66%
Theresa Radtke Money Market Fund
IRA
4291 Coash Road
Vanderbilt, MI 49795
Steven N. Glaister and The Kent Government Investment 14%
Laura B. Glaister Money Market Fund
JT WROS 10 Oxford Ave.
Clarendon Hills, IL 60514
</TABLE>
-54-
<PAGE> 117
<TABLE>
<S> <C> <C> <C>
Andrew Creasor The Kent Michigan Investment 5%
3403 Greenwood Lane Municipal Money
St Charles, IL 60174 Market Fund
Sarah M. Quirk The Kent Michigan Investment 14%
3318 Pine Meadow Dr., S.E. Municipal Money
Apt. 303 Market Fund
Kentwood, MI 49512
BHC Securities Inc. The Kent Michigan Investment 33%
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 10%
3873 Clearview St. NE Municipal Money
Grand Rapids, MI 49546 Market Fund
Kathleen B Perlberg Trust The Kent Michigan Investment 14%
Kathleen B Perlberg TTEE Municipal Money
UAD 6/13/93 Market Fund
3036 Hideaway Beach Drive
Brighton, MI 48116
BHC Securities Inc. The Kent Short Term Investment 73%
Trade House Account Bond Fund
Attn Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Intermediate Investment 14%
Reinvestment Account Bond Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities, Inc. The Kent Intermediate Investment 22%
Trade House Acct. Bond Fund
Attn: Mutual Fund Dept.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
</TABLE>
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<PAGE> 118
<TABLE>
<S> <C> <C> <C>
TROBAR The Kent Intermediate Investment 6%
FBO John M. Crouse Tax-Free Fund
Attn: Mutual Fund Dept.
M/C 572-1270
P.O. Box 40200
Jacksonville, FL 32203-0200
Old Kent Bank Southeast The Kent Intermediate Investment 7%
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 7%
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 10%
FBO Christopher U. Light Tax-Free Fund
Rev. Tr.
DTD 010976
P.O. Box 92956
Chicago, IL 60675
BHC Securities The Kent Intermediate Investment 16%
Trade House Account Tax-Free Fund
ATTN: Mutual Fund Department
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
SEI Trust Company The Kent Intermediate Investment 11%
Reinvest Account Tax-Free Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
Trent & Co. The Kent Michigan Investment 8%
Reinvest Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
-56-
<PAGE> 119
<TABLE>
<S> <C> <C> <C>
Northern Trust Co. The Kent Michigan Investment 10%
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 14%
FBO Christopher U. Light Municipal Bond Fund
Rev. Tr.
DTD 010976
P.O. Box 92956
Chicago, IL 60675
BHC Securities Inc. The Kent Michigan Investment 42%
Trade House Account Municipal Bond Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. The Kent Growth and Investment 48%
Trade House Account Income Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. The Kent Small Company Investment 29%
Trade House Account Growth Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent International Investment 8%
Reinvest Account Growth Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities Inc. The Kent International Investment 27%
Trade House Account Growth Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
</TABLE>
-57-
<PAGE> 120
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Index Investment 56%
Trade House Account Equity Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
Rose M Black The Kent Limited Term Investment 6%
Rose M Black Trust Tax-Free Fund
Dtd. 06/14/1995
1208 Baker St.
Kalamazoo, MI 49001
BHC Securities Inc. The Kent Limited Term Investment 85%
Trade House Account Tax-Free Fund
Attn: Mutual Fund Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Tax-Free Investment 13%
Reinvest Account Income Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities Inc. The Kent Tax-Free Investment 54%
Trade House Account Income Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. The Kent Income Fund Investment 51%
Trade House Account
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Income Fund Investment 13%
Reinvest Account
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
-58-
<PAGE> 121
Except as otherwise stated in the Trust's prospectus, this SAI or
required by law, the Trust reserves the right to change the terms of the offers
stated in its prospectus or this SAI without shareholder approval, including the
right to impose or change certain fees for services provided.
-59-
<PAGE> 122
APPENDIX A
DESCRIPTION OF SECURITIES
COMMERCIAL PAPER RATINGS
A S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The following summarizes the rating categories used by S&P for
commercial paper:
"A-1" - Obligations are rated in the highest category
indicating that the obligor's capacity to meet its financial commitment is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations rated "A-1". However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
"B" - Obligations are regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and
are dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes such
payments will be made during such grace period. The "D" rating will also be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
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.
A-1
<PAGE> 123
"Prime-2" - Issuers (or supporting institutions) have a strong
ability for repayment of senior short-term debt 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, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime
rating categories.
The three rating categories of 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 the 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 issues 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 insure 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 IBCA short-term ratings apply to debt obligations that
have time horizons of less than 12 months for most obligations, or up to three
years for U.S. public finance securities. The following summarizes the rating
categories used by Fitch IBCA for short-term obligations:
A-2
<PAGE> 124
"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This
designation indicates a satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of
securities rated "F1."
"F3" - Securities possess fair credit quality. This
designation indicates that the capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
"B" - Securities possess speculative credit quality. this
designation indicates minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
"C" - Securities possess high default risk. This designation
indicates that the capacity for meeting financial commitments is solely reliant
upon a sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment 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 Thomson BankWatch's
lowest investment- grade category and indicates that while the obligation is
more susceptible to adverse developments (both internal and external) than those
with higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's
lowest rating category and indicates that the obligation is regarded as
non-investment grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by S&P for corporate
and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating
assigned by S&P. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
A-3
<PAGE> 125
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - Debt is more vulnerable to non-payment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable
to non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This
rating is used when payments on an obligation 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 or the taking of similar action if payments on
an obligation 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
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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 are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of 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.
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:
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"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below-average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when due.
Debt rated "B" possesses the risk that obligations will not be met when due.
Debt rated "CCC" is well below investment grade and has considerable uncertainty
as to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. These ratings denote the lowest expectation of
investment risk and are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is very unlikely to
be adversely affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. These ratings denote a very low expectation of investment
risk and indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
"A" - Bonds considered to be investment grade and of high
credit quality. These ratings denote a low expectation of investment risk and
indicate strong capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to adverse changes in
circumstances or in economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of good
credit quality. These ratings denote that there is currently a low expectation
of investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this category.
"BB" - Bonds considered to be speculative. These ratings
indicate that there is a possibility of credit risk developing, particularly as
the result of adverse economic changes over time;
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however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.
"B" - Bonds are considered highly speculative. These ratings
indicate that significant credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.
"CCC", "CC", "C" - Bonds have high default risk. Capacity for
meeting financial commitments is reliant upon sustained, favorable business or
economic developments. "CC" ratings indicate that default of some kind appears
probable, and "C" ratings signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
To provide more detailed indications of credit quality, the
Fitch IBCA ratings from and including "AA" to "B" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within these
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.
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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
A 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 Ratings Group for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
"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" - This designation denotes 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" - This designation denotes high quality, with
margins of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes 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" - This designation denotes adequate quality,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" - This designation denotes speculative quality and lack
of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
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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 1998-99 issued February 12, 1998,
and from other sources 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.
1997 ECONOMIC REVIEW AND 1998 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 1997. 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 1.5% in
1997. The rate of unemployment is estimated to have been 4.1% in 1997, below the
national average for the fourth consecutive year. Personal income grew at an
estimated 4.7% annual rate in 1997, up from 4.2% in 1996.
1997-98 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,
1997 is estimated to have been in excess of $1.1 billion.
The State budget for the 1997-98 fiscal year, which began October 1,
1997, has been accepted by the Legislature. This budget projects State General
Fund/General Purpose revenues of approximately $8.6 billion, an increase of
approximately 4.2% 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 the Asian financial
crisis will adversely affect Michigan's economy, particularly automobile
production, 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.
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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 and Economic 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 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
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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, 1997, the State had
approximately $677 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 February 12, 1998, 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 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 involving other budgetary reductions to
school districts and governmental units, and court funding. The ultimate
disposition of these proceedings was not determinable as of early 1998.
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
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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, 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.
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APPENDIX C
As stated in the Prospectus, 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
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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.
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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,
Lyon Street 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 Lyon Street. 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 Lyon Street. 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
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<PAGE> 137
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 Lyon Street'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
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<PAGE> 138
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.
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<PAGE> 139
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,
1997 for each series of Registrant 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 Report) for the
fiscal year ended December 31, 1997 for each series of
Registrant are incorporated by reference into Part B.
(b) Exhibits:
(1) Registrant's Restatement of Declaration of Trust is filed
herewith as Exhibit 24(b)(1).
(2) Registrant's Amended and Restated By-Laws are filed herewith
as Exhibit 24(b)(2).
(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 First Amendment to the Investment Advisory Agreement
between Registrant and Old Kent Bank and Trust Company (now
known as Old Kent Bank) is filed herewith as Exhibit
24(b)(5)(a).
Amended Schedule A to the First Amendment to the Investment
Advisory Agreement between Registrant and Old Kent Bank and
Trust Company is filed herewith as Exhibit 24(b)(5)(b).
The notice to Old Kent Bank pursuant to the Investment
Advisory Agreement between Registrant and Old Kent Bank
relating to The Kent Government Money Market Fund is filed
herewith as Exhibit 24(b)(5)(c).
<PAGE> 140
Assumption Agreement between Old Kent Bank and Lyon Street
Asset Management Co. dated March 2, 1998 is filed herewith as
Exhibit 24(b)(5)(d).
(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 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. 23 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.
The 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. 23 as Exhibit 24(b)(9)(a)(i) and
is incorporated by reference herein.
(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.
The 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.
23 as Exhibit 24(b)(9)(b)(i) and is incorporated by reference
herein.
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<PAGE> 141
(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.
The 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.
23 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 will when
sold be legally issued, fully paid and nonassessable is filed
herewith as Exhibit 24(b)(10).
(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) and Exhibit 24(b)(15)(b), respectively, and are
incorporated by reference herein.
(16) Schedules showing performance computations for each series of
Registrant are filed herewith as Exhibit 24(b)(16).
(17) Financial Data Schedules for each series of Registrant are
filed herewith as Exhibit 24(b)(17).
(18) Registrant's Rule 18f-3 Plan was filed with Registrant's
Post-Effective Amendment No. 23 as Exhibit 24(b)(18) and is
incorporated by reference herein.
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<PAGE> 142
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders as of April 2, 1998
----------------------------
Institutional Investment
Title of Series Class Class
--------------- ----- -----
The Kent Growth and Income Fund Shares 7 2,544
of Beneficial Interest, without par value
The Kent Index Equity Fund Shares of 7 1,939
Beneficial Interest, without par value
The Kent Small Company Growth Fund 7 2,525
Shares of Beneficial Interest, without par
value
The Kent International Growth Fund Shares 7 1,661
of Beneficial Interest, without par value
The Kent Income Fund Shares of Beneficial 5 293
Interest, without par value
The Kent Intermediate Bond Fund Shares 7 693
of Beneficial Interest, without par value
The Kent Short Term Bond Fund Shares of 7 262
Beneficial Interest, without par value
The Kent Tax-Free Income Fund Shares of 5 28
Beneficial Interest, without par value
The Kent Intermediate Tax-Free Fund 5 78
Shares of Beneficial Interest, without par
value
The Kent Michigan Municipal Bond Fund 5 34
Shares of Beneficial Interest, without par
value
The Kent Limited Term Tax-Free Fund 5 6
Shares of Beneficial Interest, without par
value
-4-
<PAGE> 143
Number of Record
Holders as of April __, 1998
----------------------------
Institutional Investment
Title of Series Class Class
--------------- ----- -----
The Kent Money Market Fund Shares of 5 111
Beneficial Interest, without par value
The Kent Government Money Market Fund 3 5
Shares of Beneficial Interest, without par
value
The Kent Michigan Municipal Money 4 20
Market Fund Shares of Beneficial Interest,
without par value
ITEM 27. INDEMNIFICATION
See Article VIII of Section 3 of Registrant's Restatement of
Declaration of Trust which is filed herewith as Exhibit 24(b)(1). See Section
1.12 of the Distribution Agreement between Registrant and BISYS Fund Services
Limited Partnership which was filed with Registrant's Post-Effective Amendment
No. 21 as Exhibit 24(b)(6)(a) and is incorporated by reference herein.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information as to any other business, profession, vocation or
employment of a substantial nature in which each director and officer of Lyon
Street Asset Management Company is, or at any time during the past two years
has been, engaged for his or her own account or in the capacity of director,
officer, employee, partner or trustee is incorporated herein by reference to
Schedule A and D of Lyon Street Asset Management Company's Form ADV (File No.
801-55015) filed on March 2, 1998.
ITEM 29. PRINCIPAL UNDERWRITERS
(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.
-5-
<PAGE> 144
The BB&T Mutual Funds Group
The Coventry Group
Empire Builder Tax Free Bond Fund
ESC Strategic Funds, Inc.
The Eureka Funds
Fountain Square Funds
Hirtle Callaghan Trust
HSBC Family of Funds
The Infinity Mutual Funds, Inc.
INTRUST Funds Trust
Magna Funds
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D&T. Funds
Pacific Capital Funds
Parkstone Group of Funds
The Parkstone Advantage Funds
Pegasus Funds
The Republic Funds Trust
The Republic Advisors Funds Trust
The Riverfront Funds, Inc.
Sefton Funds
The Sessions Group
Summit Investment Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Funds
Vintage Mutual Funds, Inc.
(b) Partners of BISYS Fund Services Limited Partnership are as
follows:
Name and Principal Positions and Offices Positions and Offices
Business Addresses with BISYS Fund Services with Registrant
- ------------------ ------------------------ ---------------
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
3435 Stelzer Road
Columbus, Ohio 43219
-6-
<PAGE> 145
(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 is 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 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.
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<PAGE> 146
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, thereto duly authorized, in the City of Philadelphia, in the
Commonwealth of Pennsylvania, on the 30th day of April, 1998.
THE KENT FUNDS
By:*/ James F. Duca, II
---------------------------
James F. Duca, II
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>
*/ James F. Duca, II President April 30, 1998
- ---------------------------
James F. Duca, II
*/ Martin R. Dean Treasurer (Principal Accounting April 30, 1998
- --------------------------- and Financial Officer)
Martin R. Dean
*/ Walter B. Grimm Chairman and Trustee April 30, 1998
- ---------------------------
Walter B. Grimm
*/ Joseph F. Damore Trustee April 30, 1998
- ---------------------------
Joseph F. Damore
*/ James F. Rainey Trustee April 30, 1998
- ---------------------------
James F. Rainey
*/ Ronald F. VanSteeland Trustee April 30, 1998
- ---------------------------
Ronald F. VanSteeland
</TABLE>
<PAGE> 147
*By: /s/ W. Bruce McConnel, III
---------------------------
W. Bruce McConnel, III
Attorney-in-Fact
* W. Bruce McConnel, III, 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.
<PAGE> 148
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of
Trustees of The Kent Funds on February 11, 1998, 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 Robert L. Tuch, 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: April 22, 1998 By: /s/ Robert L. Tuch
-----------------------
Robert L. Tuch
Secretary
<PAGE> 149
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, James F. Duca, II, hereby appoint W. Bruce McConnel, III and Robert
L. Tuch, 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. Duca, II
---------------------------
James F. Duca, II
Date: April 17, 1998
<PAGE> 150
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Martin R. Dean, hereby appoint W. Bruce McConnel, III and Robert L.
Tuch, 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/ Martin R. Dean
---------------------------
Martin R. Dean
Date: April 30, 1998
<PAGE> 151
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Walter B. Grimm, hereby appoint W. Bruce McConnel, III and Robert L.
Tuch, 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: April 30, 1998
<PAGE> 152
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Joseph F. Damore, hereby appoint W. Bruce McConnel, III and Robert
L. Tuch, 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: April 29, 1998
<PAGE> 153
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, James F. Rainey, hereby appoint W. Bruce McConnel, III and Robert L.
Tuch, 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: April 29, 1998
<PAGE> 154
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Ronald F. VanSteeland, hereby appoint W. Bruce McConnel, III and
Robert L. Tuch, 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: April 27, 1998
<PAGE> 155
EXHIBITS
Exhibit 24(b)(1) Declaration of Trust.
Exhibit 24(b)(2) Amended and Restated By-Laws.
Exhibit 24(b)(5)(a) First Amendment to Investment Advisory
Agreement.
Exhibit 24(b)(5)(b) Amended Schedule A to First Amendment to
Investment Advisory Agreement.
Exhibit 24(b)(5)(c) Notice to Old Kent Bank pursuant to the Investment
Advisory Agreement relating to The Kent
Government Money Market Fund.
Exhibit 24(b)(5)(d) Assumption Agreement between Old Kent Bank and
Lyon Street Asset Management Co.
Exhibit 24(b)(10) Opinion of Counsel.
Exhibit 24(b)(11)(a) Consent of KPMG Peat Marwick LLP.
Exhibit 24(b)(11)(b) Consent of Drinker Biddle & Reath LLP.
Exhibit 24(b)(16) Schedules showing performance computations.
Exhibit 24(b)(17) Financial Data Schedules.
<PAGE> 1
Exhibit 24(b)(1)
THE KENT FUNDS
RESTATEMENT OF DECLARATION OF TRUST
-----------------------------------
Dated May 1, 1990
-----------------
This RESTATEMENT OF DECLARATION OF TRUST amending in its entirety the
Declaration of Trust of The Kent Funds, formerly known as Master Municipal
Trust, dated May 9, 1986, made at Boston, Massachusetts on May 1, 1990 by
Frederick Amling, George S. Bissell, Edwin D. Campbell, Charles F. Chapin, James
R. Dempsey, Knight Edwards, Donald T. Ellis, Leroy Keith, Jr., David M.
Richardson and Andrew J. Simons (hereinafter with their successors referred to
as the "Trustees").
WHEREAS the Trustees have agreed to manage all property received by them as
Trustees in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name. The name of this Trust shall be changed from Master
Municipal Trust and this Trust shall be known as The Kent Funds and the Trustees
shall conduct the business of this Trust under that name or any other name as
they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided
(a) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act;
(b) The "Trust" refers to the Massachusetts business trust established
by under a Declaration of Trust, dated May 9, 1986, as restated by this
Restatement of Declaration of Trust;
(c) "Declaration of Trust" shall mean this Restatement of Declaration
of Trust as amended or restated from time to time;
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(d) "Majority Shareholder Vote" means the vote of at least a majority of
Shares entitled to vote on a matter at a meeting of Shareholders entitled to
vote on such matter;
(e) "Net Asset Value Per Share" means the net asset value per share of the
Trust determined in the manner provided or authorized in Article VI, Section 4;
(f) "Shareholder" means a record owner of Shares of the Trust;
(g) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time or, if more
than one series ("Series") or more than one class ("Class") of Shares is
authorized by the Trustees, the equal proportionate units into which each such
Series or Class of Shares shall be divided from time to time, and includes where
appropriate fractions of a Share as well as a whole Share, unless the Trustees
provide that there shall be no fractions of any particular Shares.
(h) "Trustees" refers to the Trustee or Trustees of the Trust who become
such in accordance with Article IV and where appropriate means a majority or
other portion of them acting in accordance with this Declaration of Trust or the
By-laws of the Trust; and
(i) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a continuous source of
managed investments.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into transferable Shares, without par value,
each of which shall represent an equal proportionate interest in the Trust with
each other Share outstanding, none having priority or preference over another,
except to the extent modified by the Trustees under the provisions of this
Section. The number of Shares which may be issued is unlimited. The Trustees may
from time to time divide or combine the outstanding Shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust. Contributions to
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the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or fractions.
From time to time, as they deem appropriate, the Trustees may create
additional Series and/or Classes of Shares, in addition to the Shares initially
created under this instrument ("Original Series"). References in this
Declaration of Trust to Shares of the Trust shall apply, as appropriate, to each
such Series of Shares and to each such Class of Shares.
Any additional Series of Shares created hereunder shall represent the
beneficial interest in the assets (and related liabilities) allocated by the
Trustees to such Series of Shares and acquired by the Trust only after creation
of the respective Series of Shares and only on account of such Series. If the
Trustees create any additional Series of Shares hereunder, then the Original
Series shall be deemed a separate Series of Shares. Upon creation of each Series
of Shares, the Trustees may designate it appropriately and determine the
investment policies with respect to the assets allocated to such Series of
Shares, redemption rights, dividend policies, conversion rights, liquidation
rights, voting rights, and such other rights and restrictions as the Trustees
deem appropriate, to the extent not inconsistent with the provisions of this
Declaration of Trust.
The Trustees may divide any Series (including the Original Series) into
more than one Class of Shares. Upon creation of each additional Class of Shares
the Trustees may designate it appropriately and determine its rights and
restrictions (including without limitation such redemption rights, dividend
rights, conversion rights, liquidation rights, voting rights, and other rights
and restrictions as the Trustees deem appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
in the books of the Trust or a transfer agent or a similar agent. The Trustees
may make such rules as they consider appropriate for the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer agent or similar agent, as the case may be, shall be conclusive as to
who are the holders of Shares of each Series or Class and as to the number of
Shares of each Series or Class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept investments
in the Trust from such persons and on such terms and, subject to any
requirements of law, for such consideration as the Trustees from time to time
authorize and may cease offering Shares to the public at any time. After such
acceptance, the number of Shares of the appropriate Series or Class to represent
the contribution may in the Trustees' discretion be considered as outstanding
and the amount receivable by the Trustees on account of the contribution may be
treated as an asset of the Series or Class.
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Section 4. No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 5. Provisions Relating to Series or Classes of Shares. Whenever no
Shares of a Series or Class are outstanding, then the Trustees may abolish such
Series or Class. Whenever more than one Series or Class of Shares is
outstanding, then the following provisions shall apply:
(a) Assets Belonging to Each Series or Class. All consideration
received by the Trust for the issue or sale of Shares of a particular
Series or Class, together with all assets in which such consideration is
invested or reinvested, all income, earnings and proceeds thereof, and any
funds derived from any reinvestment of such proceeds, shall, except to the
extent specifically otherwise provided in the provisions adopted by the
Board of Trustees establishing the Series or Class, irrevocably belong to
that Series or Class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of the Trust. In the
event there are assets, income, earnings, and proceeds thereof which are
not readily identifiable as belonging to a particular Series or Class, then
the Trustees shall allocate such items to the various Series or Classes
then existing, in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. The amount of each such item allocated
to a particular Series or Class by the Trustees shall then belong to that
Series or Class, and each such allocation shall be conclusive and binding
upon the Shareholders of all Series or Classes for all purposes.
(b) Liabilities Belonging to Each Series or Class. The assets
belonging to each particular Series or Class shall, except to the extent
specifically otherwise provided in the provisions adopted by the Board of
Trustees establishing the Series or Class, be charged with the liabilities,
expenses, costs and reserves of the Trust attributable to that Series or
Class; any general liabilities, expenses, costs and reserves of the Trust
attributable to that Series or Class; and any general liabilities,
expenses, costs and reserves of the Trust which are not readily
identifiable as attributable to a particular Series or Class shall be
allocated by the Trustees to the various Series or Classes then existing,
in such manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series or Classes for all purposes.
(c) Series or Classes of Shares, Dividends and Liquidation. Each Share
of each respective Class or Series shall, except to the extent specifically
otherwise provided in the provisions adopted by the Board of Trustees
establishing the Series or Class, have the same rights and pro rata
beneficial
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interest in the assets and liabilities of the Series or Class as any other
such Share. Any dividends paid on the Shares of any Series or Class shall,
except to the extent specifically otherwise provided in the provisions
adopted by the Board of Trustees establishing the Series or Class, only be
payable from and to the extent of the assets, (net of liabilities)
belonging to that Series or Class. In the event of liquidation of a Series
or Class, only the assets (less provision for liabilities) of that Series
or Class shall be distributed to the holders of the Shares of that Series
or Class.
(d) Voting by Series or Class. Except as provided in this Section or
as limited by the rights and restrictions of any Series or Class, each
Share of the Trust may vote with and in the same manner as any other Share
on matters submitted to a vote of the Shareholders entitled to vote
thereon, without differentiation among votes from the separate Series or
Classes; provided, however, that (i) as to any matter with respect to which
a separate vote of any Series or Class is required by the 1940 Act, or
otherwise by applicable law, such requirement as to a separate vote shall
apply in lieu of the voting described above; (ii) in the event that the
separate vote requirements referred to in (i) above apply with respect to
one or more Series or Classes, then, subject to (iii) below, the Shares of
all other Series or Classes shall vote without differentiation among their
votes; and (iii) as to any matter which does not affect the interest of any
particular Series or Class, only the holders of Shares of the one or more
affected Series or Classes shall be entitled to vote.
Section 6. Limitation of Personal Liability. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription to
any Shares or otherwise. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust shall include
a recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
The Trustees
Section 1. Number of Trustees. The number of Trustees shall initially be
such number as shall be elected as such by a vote of the shareholders of the
Trust and thereafter shall be such number as shall be fixed from time to time by
action of a majority of the Trustees.
Section 2. Election or Appointment and Term. The initial Trustees shall be
the individuals signing this Declaration in that
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capacity, who shall have been previously elected by a vote of the shareholders
of the Trust. Thereafter, subject to Section 16(a) of the 1940 Act, the Trustees
may elect themselves or their successors at such intervals, if any, as they deem
proper, and may appoint Trustees to fill vacancies as provided in Section 4
hereof; provided, that Trustees shall be elected by vote of a majority of Shares
voting thereon at such time or times as the Trustees shall determine that such
action is advisable. Subject to Section 3 hereof, the Trustees shall have the
power to set and alter the terms of office of the Trustees, and they may at any
time lengthen or shorten their own terms or make their terms of unlimited
duration; provided, that the term of office of any incumbent Trustee shall
continue until terminated, as provided in Section 4 hereof or, if not so
terminated until the election of such Trustee's successor in office has become
effective in accordance with this Section 2.
Section 3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any Trustee may be removed by the action of two-thirds of the
remaining Trustees. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust property held in his name. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence. However, the execution and delivery of such
documents by a former Trustee or his legal representative shall not be requisite
to the vesting of title to the Trust property in the remaining Trustees.
Section 4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of such Trustee's death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees,
subject to applicable law, the remaining Trustees or, if only one Trustee shall
then remain in office, the sole remaining Trustee, shall appoint such individual
to fill such vacancy as they or he, in their or his discretion, shall see fit.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement or resignation of a Trustee or an increase
in the number of Trustees; provided, that such appointment shall not become
effective prior to such retirement or resignation or such increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and
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shall discharge all the duties imposed upon the Trustees by this Declaration of
Trust in the manner provided by this Declaration of Trust. A written instrument
certifying the existence of such vacancy signed by a majority of the Trustees
shall be conclusive evidence of the existence of such vacancy.
Section 5. Management of the Trust. Subject to the provisions of this
Declaration of Trust, the business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility. Action by the Trustees may be taken by majority vote of
the Trustees at a meeting at which a quorum (which shall be a majority of the
Trustees then in office) shall be present, or by a writing signed by a majority
of the Trustees in office.
Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that they do
not reserve that right to any Shareholders; they may elect and remove such
officers and appoint and terminate such agents as they consider appropriate;
they may appoint from their own number and terminate any one or more committees;
they may employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities,
retain a transfer agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set, or otherwise provide for the setting of, record
dates, and in general delegate such authority to do any or all things which the
Trustees may do in the operation of the business of the Trust as they consider
desirable to any officers of the Trust and committees of the Trustees and to any
agent or employee, custodian or underwriter. Any action relating to the
operation of the Trust provided for herein to be taken by the Trustees may be
taken by any other person under authority granted by the Trustees whether or not
specifically as stated, and unless specifically so stated to the contrary. A
specific statement indicating that the Trustees may delegate any authority shall
not give rise to any contrary implication with respect to any provision of this
Declaration of Trust.
Without limiting the foregoing, the Trustees in addition to all powers
granted by law shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested, without
in anywise being bound or limited by any present or future law or custom in
regard to investments by trustees;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate or lease
any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or prop-
<PAGE> 8
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erty, and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such
person or persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depository, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depository or trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depository or
Trustee as the Trustees shall deem proper;
(h) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust for any matter in controversy, including but not
limited to claims for taxes; and
(i) To borrow funds.
The Trustees shall not be required to obtain any court order to deal with
any assets of the Trust or take any other action hereunder.
Section 6. Ownership of Assets of the Trust. The assets of the Trust shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or by any successor Trustees.
All of the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the assets of the Series or Class of Shares of which he is a holder, subject to
any rights or restrictions applicable to any Series or Class of Shares of which
he is a holder.
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Section 7. Payment of Expenses. The Trustees shall pay or cause to be paid
out of the principal or income of the Trust, or partly out of principal and
partly out of income, as they deem fair, all expenses, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including but not limited to the Trustees'
compensation and such expenses and charges for the services of the Trust's
investment adviser or manager, administrator, auditor, counsel, custodian,
transfer agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 8. Investment Management and Other Services. Without limiting the
generality of the powers of the Trustees, subject to applicable law, the
Trustees may enter into a contract with any person or persons, including any
firm, corporation, trust or association in which any Trustee, Shareholder or
officer of the Trust may be interested, to act as investment advisers and/or
managers of the Trust and to provide such investment advice and/or management as
the Trustees may from time to time consider appropriate ("Adviser"). Any such
contract may authorize the Adviser to determine from time to time what
securities shall be acquired, held or disposed of by the Trust and what portion
of assets of the Trust shall be held uninvested and to take, on behalf of the
Trust, actions which the Adviser deems necessary to implement the investment
policies of the Trust, including the placement of all orders for the purchase,
sale or loan of portfolio securities for the Trust's account with brokers or
dealers or others selected by the Adviser and the giving of instructions to the
custodian of the Trust's assets as to deliveries of securities and payments of
cash for the account of the Trust.
Without limiting the generality of the powers of the Trustees, subject to
applicable law, the Adviser may enter into an agreement to retain at its own
expense any person or persons, including any firm, corporation, trust or
association in which any Trustee, Shareholder or officer of the Trust may be
interested, to provide the Trust investment advice and/or management and any
person or persons so retained may be granted all authority which has been
granted to the Adviser under the contract which the Adviser entered into
pursuant to the preceding paragraph.
Without limiting the generality of the powers of the Trustees, the Trustees
may enter into a contract with any person or persons, including any firm,
corporation, trust or association in which any Trustee, Shareholder or officer
of the Trust may be interested, to act as principal underwriter for the Shares.
Section 9. Affiliations of Trustees or Officers, Etc. The fact that (i) any
of the Shareholders, Trustees or officers of the Trust is a shareholder,
Director, officer, partner, Trustee, employee, manager, adviser or distributor
of or for any partnership, corporation, trust, association or other organization
or for any parent or affiliate of any organization, with which any contract
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including, without limitation, contracts for services as manager, investment
adviser, distributor, principal underwriter, custodian, transfer agent or
disbursing agent or for related services may have been or may hereafter be made,
or that any such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that (ii) any partnership,
corporation, trust, association or other organization with which a contract
referred to in (i) above may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships, corporations,
trusts, associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2 of Article IV hereof
and the removal of Trustees to the extent provided in Section 16(c) of the 1940
Act, (ii) with respect to approval or termination in accordance with the 1940
Act of any investment advisory or management agreement described in Article IV
hereof, (iii) with respect to any amendment of this Declaration of Trust to the
extent and as provided in Section 7 of Article IX hereof, (iv) to the same
extent as the stockholders of a Massachusetts corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (v) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust or the By-Laws, or as to which the
Trustees in their discretion shall determine such Shareholder vote to be
required by law or otherwise to be necessary, appropriate or advisable.
Each whole Share shall be entitled to one vote as to any matter on which it
is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
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Section 2. Meetings. Meetings of Shareholders shall be held at such times
at the principal office of the Trust or such other place as the Trustees may
designate. Meetings of the Shareholders may be called by the Trustees or such
other person or persons as may be specified in the By-laws. Shareholders shall
be entitled to at least seven days' notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law,
to constitute a quorum for the transaction of business at a Shareholders'
meeting there must be present, in person or by proxy, holders of a majority of
the total number of Shares of the Trust then outstanding and entitled to vote at
the meeting, but any lesser number shall be sufficient for adjournment, and any
adjourned session or sessions may be held within 90 days after the date set for
the original meeting without the necessity of further notice. Subject to any
applicable requirements of law, a majority of the Shares present and entitled to
vote on a question or election shall decide such question or election, except
when a larger vote is required by any provision of this Declaration of Trust,
the By-Laws of the Trust or any applicable provision of law.
Section 4. Action by Written Consent. Except as otherwise required by law,
any action required or permitted to be taken at any meeting may be taken without
a meeting if a consent in writing setting forth such action is signed by the
Shareholders entitled to vote on the subject matter thereof holding a majority
of the Shares entitled to vote thereon.
Section 5. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Shareholders' Distributions and Redemptions
Section 1. Distributions. The Trustees may, but need not, each year
distribute to the Shareholders of each Series or Class such income and gains as
the Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with generally accepted accounting practices. The Trustees shall
have full discretion to determine which items shall be treated as income and
which items as capital and their determination shall be binding upon the
Shareholders. Distributions of each year's income of each Series or Class, if
any be made, may be made in one or more payments, which shall be in Shares, in
cash or otherwise and on a date or dates and as of a record date or dates
determined by or under the authority of the Trustees. At any time and from time
to time in their discretion the Trustees may distribute to the Shareholders of
any one or more Series or Class as of a record date or dates determined by or
under the authority of the Trustees, in Shares, in cash or otherwise, all or
part of any gain realized on
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the sale or disposition of property of the Trust or otherwise, or all or part of
any other principal of the Trust. Each distribution pursuant to this Section 1
shall be made ratably according to the number of Shares of the Series or Class
held by the several Shareholders on the applicable record date thereof, provided
that no distribution need be made on Shares purchased pursuant to orders
received or for which payment is made after such time or times as may be
determined by or under the authority of the Trustees. Any such distribution paid
in Shares will be paid at the net asset value thereof as determined in
accordance with Section 4 hereof.
Section 2. Redemptions. Upon offer by any Shareholder of all or part of the
Shares held by the Shareholder for redemption hereunder, in accordance with such
methods, upon such terms and subject to such conditions as from time to time may
be determined by or under the authority of the Trustees, the Trust shall redeem
the Shares so offered by distributing to the Shareholder the Net Asset Value per
Share thereof determined as of a time fixed by or under the authority of the
Trustees. The Trust shall have the right at its option and at any time to redeem
the Shares of any Shareholder for their Net Asset Value per Share if the
Shareholder owns Shares of a Series or Class having an aggregate net asset value
of less than such minimum amount as may from time to time be prescribed by or
under the authority of the Trustees or if ownership of such Shares by the
Shareholder could create adverse tax consequences for the Trust or any Series or
Class thereof. With respect to all Shares or any Series or Class of Shares, the
right to redemption or the date for payment may, however, be delayed or
suspended by the Trustees if there is an extraordinary closing or restriction of
trading on the New York Stock Exchange as determined under rules and regulations
of the Commission, or an emergency exists as a result of which it is not
reasonably practicable for the Trust to dispose of securities or fairly to
determine the value of its net assets, or as the Commission may permit. The
completion of such distribution on redemption of Shares shall constitute a full
discharge of the Trust and Trustees with respect to such Shares, and the
Trustees may require that any certificate or certificates issued by the Trust to
evidence the ownership of the Shares shall be surrendered to the Trustees for
cancellation or notation. Shares so redeemed shall be cancelled or held by the
Trust for reissue, as the Trustees may from time to time determine.
Section 3. Payment in Kind. Subject to any generally applicable limitation
imposed by the Trustees, any distribution on redemption may, if authorized by
the Trustees, be made wholly or partly in kind, instead of in cash. Such
distribution in kind shall be made by distributing investments constituting, in
the opinion of the Trustees, a fair representation of the various types of
securities then held by the Series or Class of Shares being redeemed (but not
necessarily including a portion of each particular investment) and in each case
having an aggregate value equal to the amount of cash instead of which such
distribution in kind is made.
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Section 4. Determination of Net Asset Value per Share. Subject to
applicable law, the Net Asset Value per Share of each Series or Class shall be
computed as of such times as may be determined by or under authority of the
Trustees by determining the value of all the investments of such Series or Class
in such manner as may be determined by or under authority of the Trustees,
adding any other assets of such Series or Class, subtracting all liabilities of
such Series or Class and dividing the result by the number of Shares of such
Series or Class outstanding.
Determination of Net Asset Value per Share so made in good faith and
pursuant to the provisions of the 1940 Act shall be binding on all parties
concerned.
Section 5. Constant Net Asset Value; Reduction of Outstanding Shares. The
Trustees shall have the power to determine the Net Income of each Series or
Class of the Trust, which is commonly known as a taxable or tax free money
market Series or Class, at least once on each business day and at each such
determination declare such Net Income as dividends of each Series or Class with
the result that the Net Asset Value per Share of each such Series or Class of
the Trust shall remain at a constant dollar value. Fluctuations in value will be
reflected in the number of outstanding Shares in each Shareholder's account. If
there is a net loss in such a Series or Class, the Trust will first offset such
amount against dividends of such Series or Class accrued during the month in
each Shareholder account. To the extent that such a net loss would exceed such
accrued dividends, the Trust will reduce the number of its outstanding Shares of
such Series or Class in an amount equal to the amount by which the net loss
exceeds accrued dividends by having each Shareholder of such Series or Class
contribute to the Trust's capital his pro rata portion of the total number of
Shares of such Series or Class required to be cancelled in order to permit the
Net Asset Value per Share of such Series or Class of the Trust to be maintained
at a constant dollar value. Each Shareholder of such Series or Class will be
deemed to have agreed to such contribution in these circumstances by his
investment in the Trust. The purpose of the foregoing procedure is to permit the
Net Asset Value per Share of each such Series or Class of the Trust to be
maintained at a constant dollar value per Share.
The Trustees, by resolution, may discontinue or amend the practice of
maintaining the Net Asset Value per Share of each Series or Class at a constant
dollar amount at any time and such modification shall be evidenced by
appropriate changes in the Prospectus.
Section 6. Determination of Net Income. The "Net Income" of each Series or
Class which is commonly known as a tax free or taxable money market fund shall
include all accrued and actual (but not previously accrued) interest income on
portfolio assets of that Series or Class as well as realized and unrealized
capital gains and losses, less all actual and accrued expenses and liabilities
chargeable against the income of that Series or Class determined in accordance
with generally accepted accounting practices or may be deter-
<PAGE> 14
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mined in any other manner appropriate for a money market fund approved by the
Trustees and determined in accordance with generally accepted accounting
practices. Such Net Income shall be determined as of such time or times as the
Trustees may determine on each business day. All the Net Income of each such
Series or Class which is a positive amount since the last determination of Net
Income of that Series or Class, minus any direct charges to Shareholders
approved by the Trustees and of which the Shareholders are notified, so
determined shall be declared as a dividend. If, for any reason, the Net Income
of such a Series or Class determined at any time is a negative amount, the pro
rata share of each Shareholder of that Series or Class of such negative amount
shall constitute a liability of such Shareholder to the Trust which shall be
paid at such times and in such manner as the Trustees may determine out of the
accrued dividend account of such Shareholder by reducing the number of Shares of
such Series or Class in the account of such Shareholder or otherwise.
As of any time other than the time determined by the Trustees pursuant to
the preceding paragraph, the Trustees may cause the Net Income since the last
determination to be determined in a similar manner and the Trustees may fix the
time when such redetermined or adjusted Net Income shall become effective.
Section 7. Automatic Redemption from Small Accounts. The Trustees shall
have the power to redeem shares at a redemption price determined in accordance
with Section 4 of this Article if at any time the total investment in such
account does not have a value of at least $1,000 or such other minimum amount as
the Trustees may from time to time determine. Before redeeming such Shares, the
Shareholder will be notified that the value of his account is less than the
required minimum amount and be allowed 60 days or such period as is permitted by
law to make an additional investment to bring the total value of such account to
such amount or more.
Section 8. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article VI, the Trustees may prescribe, in their
absolute discretion, such other bases and times for the declaration and payment
of dividends and distributions as they may deem desirable or necessary to enable
the Trust to comply with any provision of the 1940 Act, including any rule or
regulation adopted by the Commission or any securities association registered
under the Securities Exchange Act of 1934, or any order of exemption issued by
the Commission, all as in effect now or as hereafter amended or modified.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
<PAGE> 15
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Section 2. Limitation of Liability. Provided they have exercised reasonable
care in their selection, the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee or Adviser
of the Trust nor shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any Trustee against
any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in their or his capacity
as Trustees or Trustee, and such Trustees or Trustee shall not be personally
liable thereon.
The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officers shall give notice of the existence of this Declaration of
Trust and shall recite to the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or officers, and not individually,
and is not binding upon any of them or the Shareholders individually, but is
binding only upon the Trust property, or the assets of the particular Series or
Class in question, as the case may be, but the omission thereof shall not
operate to bind any Trustee or officer or Shareholder individually, or to
subject the assets of any Series or Class to the obligations of any other Series
or Class.
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, etc. The Trust shall indemnify each of its
present and former Trustees and officers and may indemnify any of its present or
former employees or agents, and shall indemnify any persons who serve or have
served at the Trust's request as Directors, officers or Trustees of another
organization, and may indemnify persons who serve or have served at the Trust's
request as employees or agents of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any such Covered Person
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office, employed or acting as agent thereafter, by reason
of being or having
<PAGE> 16
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been such a Trustee, officer, Director, employee or agent, except with respect
to any matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding not to have acted in
good faith in the reasonable belief that such Covered Person's action was in the
best interest of the Trust and except that no person shall be indemnified
against any liability to the Trust or its Shareholders to which such Covered
Person shall otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. Expenses, including counsel fees so incurred by any Covered Person,
may in the discretion of the Trustees be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Covered Person to repay
amounts so paid to the Trust if it is ultimately determined that indemnification
against such expenses is not authorized under this Article.
Except as otherwise provided by law, the Trust shall have power to purchase
and maintain insurance on behalf of a Covered Person against any liability
asserted against him and incurred by him in his capacity as a Covered Person, or
arising out of his status as such, whether or not the Trust would have the power
to indemnify him against the liability under the provisions of this Section.
Section 2. Compromise Payment. As to any matter disposed of by a compromise
payment by any Covered Person referred to in Section 1 above, pursuant to a
consent decree or otherwise, no such indemnification either for such payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b) or
(c) there has been obtained an opinion in writing of independent legal counsel
to the effect that such Covered Person appears to have acted in good faith in
the reasonable belief that his action was in the best interests of the Trust and
that such indemnification would not protect such person against any liability to
the Trust to which such person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office; or (d) by vote of a majority of the
Shares voting thereon, exclusive of any Shares beneficially owned by any
interested Covered Person. Approval by the Trustees pursuant to clause (a) or
(b) or any disinterested person or persons pursuant to clause (c) of this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with any such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that such person's action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by
<PAGE> 17
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reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive or affect any other rights to which any
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators. An "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending, and a "disinterested
person" is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers or other persons may be entitled by contract or otherwise
under law.
Section 4. Shareholders. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his being or having
been a Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other successor) shall be entitled out of the
assets of the Trust to be held harmless from and indemnified against all loss
and expense arising from such liability.
ARTICLE IX
Miscellaneous
Section 1. Trust Not a Partnership. It is hereby expressly declared that a
trust and not a partnership is created hereby. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any power
to bind personally either the Trust's Trustees or officers or any Shareholders.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim, and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing shall be
binding upon everyone
<PAGE> 18
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interested. Subject to the provisions of Section 1 of this Article IX, a Trustee
shall be liable for his own wilful defaults, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or law. The Trustees may
take advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and subject to the provisions of said
Section 1 shall be under no liability for any act or omission in accordance with
such advice or for failing to follow such advice. The Trustees shall not be
required to give any bond as such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees pursuant hereto
or to see to the application of any payments made or property transferred to the
Trust or upon its order.
Section 4. Duration; Termination of Trust; Amendments; Mergers, etc.
(a) This Trust shall continue without limitation of time but subject
to the provisions of this Section 4.
(b) The Trust (as used in this Section 4 the term "Trust" specifically
also means any Series or Class) may be terminated by action of the
Trustees. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration of
Trust shall continue until the affairs of the Trust shall have been
wound up, including the power to fulfill or discharge the contracts of
the Trust, collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of the remaining
Trust property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its
business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees shall distribute the remaining Trust property, in cash or in
kind or partly each, among the Shareholders according to their
respective rights and interests.
(c) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees
<PAGE> 19
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shall execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder,
and the rights and interests of all Shareholders shall thereupon cease.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in paragraphs (b) and (c), the Trust shall
terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be canceled and discharged.
Section 5. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each Declaration of Trust supplemental hereto or
Amendment hereof shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any Supplemental
Declaration of Trust or Amendments have been made and as to any matters in
connection with the trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such Supplemental Declaration of Trust or
Amendment. In this instrument or in any such Amendment or Supplemental
Declaration of Trust, references to this instrument, and all expressions such as
"herein," "hereof," and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such Supplemental Declaration of Trust or
Amendment. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the headings,
shall control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 6. Applicable Law. The Trust set forth in this instrument is made
in The Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of such
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and, without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a Trust.
Section 7. Amendments. (a) This Declaration of Trust may be amended by a
vote or written consent of the Trustees. However, if such amendment adversely
affects the rights of any Shares of any Series or any Class with respect to
matters to which such amendment is applicable, such amendment shall be subject
to approval by holders of a majority of the Shares of such Series or Class. An
amendment or other action which provides for an additional Series of Shares
(and/or Class thereof), which Series may vote together with Shares of other
Series (and/or Classes thereof) and makes other provisions with respect to such
Series (and/or Class thereof) and its relation to existing Series (and/or
Classes thereof), shall not be deemed to adversely affect the rights of any
other Series of
<PAGE> 20
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Shares or Class thereof. The Trustees may also amend this Declaration of Trust
without any Shareholder approval to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or, if they deem it necessary, to conform this
Declaration of Trust to the requirements of applicable federal laws or
regulations or the requirements of the Internal Revenue Code, or to eliminate or
reduce any federal, state or local taxes which are or may be payable by the
Trust or the Shareholders, but the Trustees shall not be liable for failing to
do so.
(b) Nothing contained in this Declaration of Trust shall permit the
amendment of this Declaration of Trust to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment by reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid, or
a copy of the Declaration of Trust as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
Section 8. Merger, Consolidation and Sale of Assets. The Trust may merge
into or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust property, including its good will, upon such terms and conditions and for
such consideration when and as authorized by the Trustees.
Section 9. Incorporation. The Trustees may cause to be organized or assist
in organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take over
all the Trust property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring the
Trust property to such organizations or entities.
<PAGE> 21
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
in the City of Boston, Massachusetts, for themselves and their assigns, as of
the day and year first above written.
/s/ Frederick Amling
-------------------------------
Frederick Amling
/s/ George S. Bissell
-------------------------------
George S. Bissell
/s/ Edwin D. Campbell
-------------------------------
Edwin D. Campbell
/s/ Charles F. Chapin
-------------------------------
Charles F. Chapin
/s/ James R. Dempsey
-------------------------------
James R. Dempsey
/s/ Knight Edwards
-------------------------------
Knight Edwards
/s/ Donald T. Ellis
-------------------------------
Donald T. Ellis
/s/ Leroy Keith, Jr.
-------------------------------
Leroy Keith, Jr.
/s/ David M. Richardson
-------------------------------
David M. Richardson
/s/ Andrew J. Simons
-------------------------------
Andrew J. Simons
<PAGE> 1
Exhibit 24(b)(2)
THE KENT FUNDS
AMENDED AND RESTATED BY-LAWS
ARTICLE 1.
Declaration of Trust and Principal Office
1.1 Declaration of Trust. These Amended and Restated By-laws are adopted
pursuant to and are subject to the terms of the Restatement of Declaration of
Trust dated May 1, 1990 ("Declaration of Trust") of The Kent Funds ("Fund").
1.2 Principal Office of the Fund. The principal office of the Fund shall be
located in Boston, Massachusetts, or such other place as the Trustees may
designate from time to time.
ARTICLE 2.
Meetings of Shareholders
2.1 Meetings. Meetings may be called by the Trustees or by the President or by
any other officers designated for the purpose by the Trustees.
2.2 Special Meetings. Special meetings may be called by the Trustees upon
written request of shareholders owning at least one-quarter of the outstanding
shares entitled to vote. Every such request shall state the purpose of the
meeting and shall be delivered at the principal office of the Fund addressed to
the Trustees of the Fund, and in case the Trustees shall refuse or fail, for
fourteen (14) days after the request shall have been so delivered, to call such
special meeting to be held within sixty (60) days after the delivery of the
request, the same may be called by the person or persons signing such request or
by any three of them. Notwithstanding the foregoing, special meetings may be
called by the Trustees upon the written request of shareholders owning at least
one-tenth of the outstanding shares entitled to vote for the purpose of voting
upon the removal of any Trustee or Trustees.
2.3 Business to be Transacted. At any meeting of shareholders, such business may
be transacted as is referred to in the notice of the meeting, and any other
business considered appropriate by or under authority of the Trustees.
2.4 Notice. A written notice of each meeting of the shareholders, specifying the
time, place and purposes thereof, shall be given as hereinafter provided by the
Secretary of the Fund or any Assistant
<PAGE> 2
Secretary or by a person or persons designated by either of them, to each
shareholder who is entitled to vote thereat at least seven (7) days (including
Sundays and holidays) before such meeting. Notice of a meeting need not be given
to any shareholder if a written waiver of notice, executed by the shareholder or
his attorney thereunto duly authorized before or after the meeting, is filed
with the records of the meeting, or to any shareholder who attends the meeting
either in person or by proxy without protesting, prior thereto or at its
commencement, the lack of notice to such shareholder. Every notice to any
shareholder required or provided for herein may be given to him personally or by
mailing it to him postage prepaid, addressed to him at his address specified in
the records of the Trust. Notice shall be deemed to have been given at the time
when it is so mailed. In respect of any share held jointly by several persons
notice so given to any one of them shall be sufficient notice to all of them.
Any notice so sent to the address of any shareholder shall be deemed to have
been duly sent in respect of any such share whether held by him solely or
jointly with others, notwithstanding he be then deceased or be bankrupt or
insolvent or legally incompetent, and whether or not the Trustees or any person
sending such notice have knowledge of his death, bankruptcy or insolvency or
legal incompetence, until some other person or persons shall be registered as
holders. The certificate of the person or persons giving such notice shall be
sufficient evidence thereof, and shall protect all persons acting in good faith
in reliance on such certificate.
2.5 Voting. Shares may be voted in person by the shareholder or by proxy in form
reasonably acceptable to the Trust. If the holder of any share is a minor or a
person of unsound mind, or subject to guardianship or to the legal control of
any other person as regards the charge or management of such share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
2.6 Record Dates. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix or authorize the fixing by others of a time
as the record date for determining the shareholders having the right to notice
of and to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding any transfer
of shares on the books of the Fund after the record date; or without fixing such
record date the Trustees may for any of such purposes close the register or
transfer books for all or any part of such period.
<PAGE> 3
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ARTICLE 3.
Meetings of Trustees
3.1 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to time
determine.
3.2 Special Meetings. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the meeting when called by the
Chairman, the President or the Treasurer, or by any other officer authorized by
the Trustees to do so, or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.3 Notice. It shall be sufficient notice to a Trustee of a special meeting to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to time
by a majority of the votes cast upon the question, whether or not a quorum is
present and the meeting may be held as adjourned without further notice.
3.5 Action by Vote. When a quorum is present at any meeting, a majority of the
Trustees present may take any action, except when a larger vote is required by
the Declaration of Trust or any applicable law.
3.6 Participation by Conference Telephone. The Trustees may participate in a
meeting of the Trustees by means of conference telephone or similar
communications equipment. Participation by such means shall constitute presence
in person at a meeting.
3.7 Action by Writing. The Trustees may act without a meeting and the action of
a majority of the Trustees then in office evidenced by a writing signed by such
a majority shall be valid and binding as the action of the Trustees.
<PAGE> 4
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ARTICLE 4.
Trustees
4.1 Term. A Trustee shall serve until his death, resignation or removal from
office or until his successor is elected and qualifies. No Trustee shall stand
for reelection after he has passed his seventieth birthday.
ARTICLE 5.
Officers
5.1 Election. The President, the Treasurer and the Secretary shall be elected
annually by the Trustees and shall serve until their successors are elected and
qualified or until their earlier death, resignation or removal. Other officers,
if any, including if desired a Controller, may be elected or appointed by the
Trustees at the meeting or at any other time. A Chairman of the Board may be
elected or appointed by the Trustees at the meeting or at any other time.
Vacancies in any office may be filled at any time by the Trustees.
5.2 Tenure. Each officer and each agent shall hold office at the pleasure of the
Trustees.
5.3 Powers. Subject to law and to the other provisions of these By-laws, each
officer shall have, in addition to any duties and powers set forth herein and in
the Restatement of Declaration of Trust, such duties and powers as are commonly
incident to the office occupied by him as if the Fund were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
5.4 President. Unless the Trustees otherwise provide, the President shall
preside at all meetings of shareholders and of the Trustees and the President
shall be the chief executive officer.
5.5 Treasurer. The Treasurer shall be the chief financial officer of the Fund.
In the absence of the Treasurer, or if there is then no person serving in such
office, the Controller of the Fund shall be the chief financial officer of the
Fund. He shall, subject to the provisions of the Declaration of Trust and
subject to any arrangement made by the Trustees with a bank or other trust
company or organization as custodian, be in charge of valuable papers, books of
account and accounting records, and shall have such other
<PAGE> 5
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duties and powers as may be designated from time to time by the Trustees or by
the President.
5.6 Secretary. The Secretary shall record all proceedings of the shareholders
and Trustees in books to be kept therefor, which books shall be kept at the
principal office of the Fund. In the absence of the Secretary, an Assistant
Secretary, or if there be none or if he is absent, a temporary Secretary chosen
by the shareholders or the Trustees, as the case may be, shall record the
proceedings in the aforesaid books.
5.7 Resignation and Removals. Any Trustee or officer may resign at any time by
written instrument signed by him and deposited with the Trustees by delivering
such resignation to the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected by
them with or without cause by vote of a majority of the Trustees then in office.
Except to the extent expressly provided in a written agreement with the Fund, no
Trustee or officer resigning and no officer removed shall have any right to
compensation for any period following his resignation or removal, or any right
to damages on account of such removal.
ARTICLE 6.
Committees
6.1 General. The Trustees may appoint from their number an executive committee
to serve during their pleasure. The executive committee may, when the Trustees
are not in session at a meeting, exercise such of the powers and authority of
the Trustees as may be conferred from time to time by the Trustees. Rules
governing the actions of the executive committee may be adopted by the Trustees
from time to time as they deem appropriate. The Trustees may appoint from their
number such other committees from time to time as they deem appropriate. The
number composing such committees, the powers and authority conferred upon such
committees and the rules governing the actions of such committees shall be
determined by the Trustees at their discretion.
6.2 Quorum; Voting. A majority of the members of any committee of the Trustees
shall constitute a quorum for the transaction of business, and any action of
such a committee may be taken at a meeting by a vote of a majority of the
members present (a quorum being present) or evidenced by one or more writings
signed by such a majority. Members of a committee may participate in a meeting
of such committee by means of conference telephone or similar communica-
<PAGE> 6
-6-
tions equipment. Participation by such means shall constitute presence in person
at a meeting.
ARTICLE 7.
Fiscal Year and Seal
7.1 Fiscal Year. The fiscal year of the Fund shall end on the last day of
December in each year.
7.2 Seal. The seal of the Fund shall consist of a flat-faced die with the name
of the Fund and 1986 cut or engraved thereon.
ARTICLE 8.
Amendments
8.1 Amendment by Trustees or Shareholders. These By-laws may be altered, amended
or repealed at any time by vote of the shareholders. These By-laws may also be
altered, amended or repealed by vote of the Trustees, except with respect to any
provision which by law, the Declaration of Trust or these by-laws required
action by the shareholders. Such action by the shareholders is hereby declared
necessary to amend, alter or repeal this Section 8.1 so as to increase the power
of the Trustees or reduce the power of the shareholders to amend, alter or
repeal these By-laws.
8.2 Further Amendment by the Shareholders. Any By-law so altered, amended or
repealed by the Trustees may be further altered or reinstated by the
shareholders.
<PAGE> 1
Exhibit 24(b)(5)(a)
THE KENT FUNDS
--------------
FIRST AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
This FIRST AMENDMENT dated as of May 2, 1991 to AGREEMENT ("Agreement")
made October 12, 1990 by and between THE KENT FUNDS, a Massachusetts business
trust ("Fund"), and OLD KENT BANK AND TRUST COMPANY ("Adviser").
WHEREAS, the Fund and the Adviser have previously entered into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Fund's Money Market Fund ("Portfolio I"), Michigan Municipal Money Market
Fund, formerly known as Tax Free Money Market Fund, ("Portfolio II"), U.S.
Government Securities Money Market Fund ("Portfolio III") and each Portfolio of
the Fund subsequently established; and
WHEREAS, the Fund and the Adviser wish to amend such Agreement to set forth
the terms on which the Adviser will perform certain services for each additional
Portfolio of the Fund subsequently established.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Adviser amend the Agreement in full as
follows:
1. (a) The Fund hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Portfolios of the Fund in conformity with each
Portfolio's investment objectives, fundamental policies and restrictions as set
forth from time to time in the Fund's then current prospectus and statement of
additional information thereto and other governing documents, subject to the
supervision and control of the Board of Trustees of the Fund, for the period and
on the terms set forth in this Agreement. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations set forth herein for the compensation provided herein. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed an agent of
the Fund.
(b) In the event the Fund establishes one or more Portfolios, in addition
to Portfolios I, II and III, for which it wishes the Adviser to perform services
hereunder, it shall notify the Adviser in writing. If the Adviser is willing to
render such services, it shall notify the Fund in writing and such Portfolio
shall become a Portfolio hereunder, and the compensation payable to the Adviser
by the new Portfolio will be as agreed to in writing at the time and as set
forth on Schedule A attached hereto and made a part hereof.
-1-
<PAGE> 2
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Portfolio with broker-dealers
selected by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Portfolio. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best execution available, and in selecting
the broker-dealer to execute a particular transaction, the Adviser may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934 ("1934 Act")) provided to
each Portfolio and or other accounts over which the Adviser or an affiliate of
the Adviser exercises investment discretion. The Adviser is authorized to pay a
broker-dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for a Portfolio which is in excess of the
amount of commission another broker-dealer would have charged for affecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.
3. The Adviser assumes and shall pay for all expenses of the Adviser
incurred in the management of the investment and reinvestment of the assets of
each Portfolio of the Fund. The Fund assumes and shall pay all other costs and
expenses of the Fund and its Portfolios, including, without limitation: (1) all
charges and expenses of a manager; (2) all charges and expenses of any custodian
or depository appointed by the Fund for the safekeeping of its cash, securities
and other property; (3) all charges and expenses for bookkeeping and auditors;
(4) all charges and expenses of any transfer agents and registrars appointed by
the Fund; (5) all fees of all Trustees of the Fund; (6) the cost of all
securities and other property purchased by the Fund and all brokers' fees,
expenses and commissions, issue and transfer taxes and other expenses chargeable
to the Fund in connection with transactions involving securities and other
property to which the Fund is a party; (7) all taxes and corporate fees payable
by the Fund to federal, state or other governmental agencies; (8) all fees and
expenses involved in registering and maintaining registrations of the Fund and
of its shares with the Securities and Exchange Commission ("Commission") and
registering or qualifying its shares under state or other securities laws,
including the preparation and printing of prospectuses for filing with the
Commission and other authorities; (9) the
-2-
<PAGE> 3
costs of sales literature and advertising, including expenses of preparing,
printing and mailing prospectuses and reports to shareholders of the Fund; (10)
all expenses of shareholders' and Trustees' meetings and of preparing, printing
and mailing notices, reports and proxy materials to shareholders of the Fund;
(11) all charges and expenses of legal counsel for the Fund, its officers and
Trustees in connection with legal matters relating to the Fund, including,
without limitation, legal services rendered in connection with the Fund's
existence, trust and financial structure and relations with its shareholders,
registrations and qualifications of securities under federal, state and other
laws, issues of securities, expenses which the Fund has herein assumed and
extraordinary matters; (12) all charges and expenses of filing annual and other
reports with the Commission; and (13) all extraordinary expenses and charges of
the Fund. In the event that the Adviser provides any of these services or pays
any of these expenses, the Fund will promptly reimburse the Adviser therefor on
a cost basis. No agreement is made hereby with respect to the provision of any
other of such services by the Adviser or any of its affiliates, or payment
therefor.
The services of the Adviser to the Fund's Portfolios hereunder are not to
be deemed exclusive, and the Adviser shall be free to render similar services to
others.
4. As compensation for the Adviser's services during the period of this
Agreement for Portfolios I, II, III, and for each Portfolio subsequently
established, the Fund will pay to the Adviser for each Portfolio a fee at the
annual rate as set forth on Schedule A attached hereto and made a part hereof
and as computed in the manner provided in the Fund's then current prospectus and
statement of additional information thereto as of the close of business on each
business day.
A pro rata portion of the fee shall be payable in arrears at the end of
each calendar month. If this Agreement terminates other than at the end of a
fiscal year of the Fund, any compensation payable hereunder for the period
ending with the date of such termination shall be payable upon such termination.
Amounts payable hereunder shall be paid promptly when due.
5. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
-3-
<PAGE> 4
officer, Director, partner, employee or agent of the Adviser, who may be or
become an officer, Trustee, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund (other than
services or business in connection with the Adviser's duties hereunder), to be
rendering such services to or acting solely for the Fund and not as an officer,
Director, partner, employee or agent or one under the control or direction of
the Adviser even though paid by it. The Fund agrees to indemnify and hold the
Adviser harmless from all taxes charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, the 1934 Act, the Investment Company Act of 1940 (1940
Act), and any state and foreign securities and blue sky laws, as amended from
time to time) and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which the
Adviser takes or does or omits to take or do hereunder provided that the Adviser
shall not be indemnified against any liability to the Fund or to its
shareholders (or any expenses incident to such liability) arising out of a
breach of fiduciary duty with respect to the receipt of compensation for
services, willful misfeasance, bad faith or negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
6. This Agreement shall continue in effect for each Portfolio for a period
more than two years from the date of its execution only so long as (1) such
continuance is specifically approved at least annually by the Board of Trustees
of the Fund or by a vote of a majority of the outstanding voting securities of
such Portfolio, and (2) such renewal has been approved by the vote of a majority
of Trustees of the Fund who are not interested persons, as that term is defined
in the 1940 Act, of the Adviser, a manager of the Fund or the Fund, cast in
person at a meeting called for the purpose of voting on such approval.
7. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time with respect to a Portfolio, without the payment of any
penalty, by the Board of Trustees of the Fund or by vote of the holders of a
majority of the outstanding voting securities of such Portfolio; and on sixty
days' written notice to the Fund this Agreement may be terminated at any time
with respect to a Portfolio, without the payment of any penalty, by the Adviser.
This Agreement shall automatically terminate upon its assignment (as that term
is defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
-4-
<PAGE> 5
8. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
such execution by the Fund shall have been first approved by vote of the holders
of a majority of the outstanding voting securities of the affected Portfolio of
the Fund and by the vote of a majority of Trustees of the Fund who are not
interested persons (as that term is defined in the 1940 Act) of the Adviser, or
any predecessor of the Adviser, a manager of the Fund or the Fund, cast in
person at a meeting called for the purpose of voting on such approval. A
"majority of the outstanding voting securities of the Fund" shall have, for all
purposes of this Agreement, the meaning provided therefor in the 1940 Act.
9. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
10. The Fund is a Massachusetts business trust established under a
Declaration of Trust as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but the property of the Fund only shall be bound.
11. The provisions of this Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
OLD KENT BANK AND TRUST COMPANY
By: /s/ Joseph T. Keating
--------------------------------
Name: Joseph T. Keating
Title: Sr. Vice President
THE KENT FUNDS
By: /s/ Mary L. Hidden
--------------------------------
Mary L. Hidden
President
-5-
<PAGE> 1
Exhibit 24(b)(5)(b)
SCHEDULE A
TO
FIRST AMENDMENT TO
INVESTMENT ADVISORY AGREEMENT
SCHEDULE OF ANNUAL INVESTMENT ADVISORY FEES
-------------------------------------------
<TABLE>
<CAPTION>
Fund Annual Advisory Fee
- ---- -------------------
<S> <C>
The Kent Money Market Fund 0.40% of the Portfolio's average daily net assets
The Kent Michigan Municipal 0.40% of the Portfolio's average daily net assets
Money Market Fund
The Kent ValuePlus Equity Fund 0.70% of the Portfolio's average daily net assets
The Kent Expanded Market 0.70% of the Portfolio's average daily net assets
Equity Fund
The Kent International Equity 0.75% of the Portfolio's average daily net assets
Fund
The Kent Index Equity Fund 0.30% of the Portfolio's average daily net assets
The Kent Limited Maturity 0.50% of the Portfolio's average daily net assets
Fund
The Kent Fixed Income Fund 0.55% of the Portfolio's average daily net assets
The Kent Medium Term Tax 0.50% of the Portfolio's average daily net assets
Exempt Bond Fund
The Kent Michigan Municipal 0.45% of the Portfolio's average daily net assets
Limited Maturity Bond Fund
The Kent Limited Maturity 0.45% of the Portfolio's average daily net assets
Tax Exempt Bond Fund
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
The Kent Tax Free Income Fund 0.55% of the Portfolio's average net assets
The Kent Income Fund 0.60% of the Portfolio's average net assets
</TABLE>
Amended: February 1, 1995
----------------
<PAGE> 1
Exhibit 24(b)(5)(c)
THE KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
May 1, 1997
Old Kent Bank
One Vandenberg Center
Grand Rapids, Michigan 49503
Attn: Joseph T. Keating,
Senior Vice President
Re: The Kent Funds (the "Trust")
Dear Mr. Keating:
The Trust hereby requests, pursuant to paragraph 1(b) of the First
Amendment to the Investment Advisory Agreement dated May 2, 1991 ("Agreement")
between Old Kent Bank and the Trust, that Old Kent perform for the following
additional portfolio of the Trust the services described in the Agreement. The
compensation to be paid by such portfolio to Old Kent for its services is as set
forth below:
COMPENSATION - ANNUAL FEE AS A
PORTFOLIO PERCENTAGE OF AVERAGE DAILY NET ASSETS
The Kent Government 0.40%
Money Market Fund
Please acknowledge your consent to the above by signing and returning
this letter to the Trust.
Very truly yours,
THE KENT FUNDS
By: /s/ R. JEFFREY YOUNG
----------------------------
Title: Vice President
-------------------------
Agreed to and Accepted:
OLD KENT BANK
By: /s/ Joseph T. Keating
----------------------------
Title: Senior Vice President
-------------------------
<PAGE> 1
Exhibit 24(b)(5)(d)
ASSUMPTION OF INVESTMENT ADVISORY AGREEMENT
This ASSUMPTION is made as of this 2nd day of March, 1998 by Lyon
Street Asset Management, Co. ("Lyon Street").
WHEREAS, Old Kent Bank and The Kent Funds, a Massachusetts business
trust registered as an investment company under the Investment Company Act of
1940, are parties to an Investment Advisory Agreement dated as of October 12,
1990, as amended (the "Advisory Agreement"); and
WHEREAS, Lyon Street wishes to assume Old Kent Bank's duties and
obligations under the Advisory Agreement.
NOW, THEREFORE, Lyon Street, intending to be legally bound, hereby
agrees to assume and perform all duties and obligations of Old Kent Bank under
the Advisory Agreement.
IN WITNESS WHEREOF, Lyon Street has executed this Assumption as of the
day and year first above written.
LYON STREET ASSET MANAGEMENT, CO.
By: /s/ Joseph T. Keating
Name: Joseph T. Keating
Title: President
<PAGE> 1
Exhibit 24(b)(10)
[Letterhead of Drinker Biddle & Reath LLP]
April 30, 1998
The Kent Funds
3435 Stelzer Road
Columbus, OH 43219
Re: The Kent Funds - Shares of Beneficial Interest
----------------------------------------------
Gentlemen:
We have acted as counsel for The Kent Funds, a Massachusetts
business trust (the "Trust"), in connection with the registration of its shares
of beneficial interest under the Securities Act of 1933, as amended.
The Trust is authorized to issue an unlimited number of shares
of beneficial interest. The Board of Trustees of the Trust has the power to
divide any unissued shares of beneficial interest into one or more series of
shares and to divide any series of shares into one or more classes of shares.
Pursuant to such authority, the Board of Trustees has previously classified an
unlimited number of the Trust's shares of beneficial interest into fourteen
series of shares (the "Series") and has classified each Series into two classes
of shares (the "Classes"). The shares of beneficial interest in such Series and
Classes are referred to herein as the "Shares." The Board of Trustees has
previously authorized the issuance of the Shares to the public. You have asked
for our opinion on certain matters relating to the Shares.
We have reviewed the Trust's Restatement of Declaration of
Trust, its by-laws, resolutions adopted by its Board of Trustees and
shareholders, and such other legal and factual matters as we have considered
necessary.
This opinion is based exclusively on the laws of the
Commonwealth of Massachusetts and the federal law of the United States of
America. We have relied on an opinion of Ropes & Gray, special Massachusetts
counsel to the Trust, insofar as our
<PAGE> 2
The Kent Funds
April 30, 1998
Page 2
opinion below relates to matters arising under the laws of the Commonwealth of
Massachusetts.
We have also assumed the following for this opinion:
1. The Shares have been, and will continue to be, issued in
accordance with the Trust's Restatement of Declaration of Trust, it's by-laws
and resolutions of the Trust's Board of Trustees and shareholders relating to
the creation, authorization and issuance of the Shares.
2. All Shares issued after December 31, 1996 through the date
hereof were offered and sold on the terms, and the Trust received for the sale
of such Shares the consideration, set forth in the Trust's Registration
Statement on Form N-1A as in effect at the time of such sale, and that such
consideration was in each case at least equal to the applicable net asset value.
3. All Shares issued and sold after the date hereof will be
offered and sold on the terms, and the Trust will receive for the sale of such
Shares the consideration, set forth in the Trust's Registration Statement on
Form N-1A as in effect at the time of such sale, and that such consideration
will be in each case at least equal to the applicable net asset value.
On the basis of the foregoing, it is our opinion that (A) the
Shares issued after (i) December 31, 1996 or (ii) with respect to any Series
created thereafter, the effective date of the first amendment to the Trust's
Registration Statement on Form N-1A relating to such Series, were validly
issued, fully paid and non-assessable by the Trust, and (B) any Shares issued or
sold after the date hereof will be validly issued, fully paid and non-assessable
by the Trust.
Under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held personally liable for
the obligations of the trust. However, the Restatement of Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that a recitation of such disclaimer be included in every note, bond,
contract or other undertaking issued by or on behalf of the Trust or its
trustees relating to the Trust. The Restatement of Declaration of Trust provides
for indemnification out of the assets of the Trust for all loss and expense of
any shareholder held personally liable solely by reason of his being or having
been a shareholder. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations.
<PAGE> 3
The Kent Funds
April 30, 1998
Page 3
We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to Post-Effective Amendment
No. 24 to the Trust's Registration Statement on Form N-1A.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE> 1
Exhibit 24(b)(11)(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
The Kent Funds:
We consent to the use of our report incorporated by reference dated February 20,
1998 for The Kent Funds as of December 31, 1997 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" and
"Financial Statements" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 30, 1998
<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. 24 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: April 30, 1998
<PAGE> 1
Exhibit 24(b)(16)
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT GROWTH AND INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,241.44 /1,000) - 1 = 24.14%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 2,245.61 /1,000) - 1 = 124.56%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
( 2,335.04 /1,000) - 1 = 133.50%
<PAGE> 2
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT GROWTH AND INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
- --------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
((1,241.44/1,000) (1/(365/365))-1) = 24.14%
5 YEAR ( 1/1/93 TO 12/31/97):
((2,245.61/1,000) (1/(1825/365))-1) = 17.56%
SINCE INCEPTION: (11/2/92 TO 12/31/97):
((2,335.04/1,000) (1/(1886/365))-1) = 17.84%
<PAGE> 3
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT GROWTH AND INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97):
( 1,238.91/1,000) - 1 = 23.89%
FIVE YEARS: ( 1/1/93 TO 12/31/97):
( 2,232.34/1,000) - 1 = 123.23%
SINCE INCEPTION: ( 12/1/92 TO 12/31/97):
( 2,245.44/1,000) - 1 = 124.54%
<PAGE> 4
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT GROWTH AND INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
((1,238.91/1,000) (1/( 365/365))-1) = 23.89%
5 YEAR ( 1/1/93 TO 12/31/97):
((2,232.38/1,000) (1/(1825/365))-1) = 17.42%
SINCE INCEPTION: ( 12/1/92 TO 12/31/97):
((2,245.41/1,000) (1/(1857/365))-1) = 17.23%
<PAGE> 5
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT SMALL COMPANY GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,279.42 /1,000) - 1 = 27.94%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 2,212.64 /1,000) - 1 = 121.26%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
( 2,408.53 /1,000) - 1 = 140.85%
<PAGE> 6
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT SMALL COMPANY GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,279.42 /1,000)(1/( 365 /365))-1) = 27.94%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 2,212.66 /1,000)(1/( 1825 /365))-1) = 17.21%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
(( 2,408.53 /1,000)(1/( 1886 /365))-1) = 18.54%
<PAGE> 7
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT SMALL COMPANY GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,277.07 /1,000) - 1 = 27.71%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 2,193.86 /1,000) - 1 = 119.39%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
( 2,237.18 /1,000) - 1 = 123.72%
<PAGE> 8
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT SMALL COMPANY GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
(( 1,277.07 /1,000) (1/( 365 /365))-1) = 27.71%
5 YEAR ( 1/1/93 TO 12/31/97):
(( 2,193.86 /1,000) (1/( 1825 /365))-1) = 17.02%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97):
(( 2,237.18 /1,000) (1/( 1854 /365))-1) = 17.18%
<PAGE> 9
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERNATIONAL GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,025.37 /1,000) - 1 = 2.54%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,689.21 /1,000) - 1 = 68.92%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
( 1,694.28 /1,000) - 1 = 69.43%
<PAGE> 10
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERNATIONAL GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,025.37 /1,000)(1/( 365 /365))-1) = 2.54%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 1,689.23 /1,000)(1/( 1825 /365))-1) = 11.05%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
(( 1,693.25 /1,000)(1/( 1854 /365))-1) = 10.92%
<PAGE> 11
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERNATIONAL GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
======================
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,022.55 /1,000) - 1 = 2.25%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,670.24 /1,000) - 1 = 67.02%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
( 1,671.91 /1,000) - 1 = 67.19%
<PAGE> 12
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERNATIONAL GROWTH FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
((1,022.55 /1,000) (1/( 365 /365))-1) = 2.25%
5 YEAR ( 1/1/93 TO 12/31/97 ):
((1,670.24 /1,000) (1/( 1825 /365))-1) = 10.80%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
((1,671.89 /1,000) (1/( 1854 /365))-1) = 10.65%
<PAGE> 13
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INDEX EQUITY FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
======================
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,325.47 /1,000) - 1 = 32.55%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 2,427.40 /1,000) - 1 = 142.74%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
( 2,534.22 /1,000) - 1 = 153.42%
<PAGE> 14
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INDEX EQUITY FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,325.47 /1,000) (1/( 365 /365))-1) = 32.55%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 2,427.40 /1,000) (1/( 1825 /365))-1) = 19.41%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
(( 2,534.22 /1,000) (1/( 1886 /365))-1) = 19.72%
<PAGE> 15
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INDEX EQUITY FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97):
( 1,322.36/1,000) - 1 = 32.24%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 2,405.92/1,000) - 1 = 140.59%
SINCE INCEPTION: ( 11/25/92 TO 12/31/97 ):
( 2,450.45/1,000) - 1 = 145.05%
<PAGE> 16
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INDEX EQUITY FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,322.36 /1,000)(1/( 365 /365))-1) = 32.24%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 2,405.92 /1,000)(1/( 1825 /365))-1) = 19.19%
SINCE INCEPTION: (11/25/92 TO 12/31/97 ):
(( 2,450.45 /1,000)(1/( 1863 /365))-1) = 19.20%
<PAGE> 17
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT SHORT TERM BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,064.20 /1,000) - 1 = 6.42%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,276.29 /1,000) - 1 = 27.63%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
( 1,287.50 /1,000) - 1 = 28.75%
<PAGE> 18
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT SHORT TERM BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,064.20 /1,000)(1/( 365 /365))-1) = 6.42%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 1,276.29 /1,000)(1/(1825 /365))-1) = 5.00%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
(( 1,287.50 /1,000)(1/(1886 /365))-1) = 5.01%
<PAGE> 19
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT SHORT TERM BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,062.61 /1,000) - 1 = 6.26%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,269.41 /1,000) - 1 = 26.94%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97 ):
( 73.22 /1,000) - 1 = 27.32%
<PAGE> 20
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT SHORT TERM BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
(( 1,062.61 /1,000) (1/( 365 /365))-1) = 6.26%
5 YEAR ( 1/1/93 TO 12/31/97):
(( 1,269.41 /1,000) (1/( 1825 /365))-1) = 4.89%
SINCE INCEPTION: ( 12/4/92 TO 12/31/97):
(( 1,273.23 /1,000) (1/( 1854 /365))-1) = 4.87%
<PAGE> 21
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERMEDIATE BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
Year TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,077.97 /1,000) - 1 = 7.80%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,348.57 /1,000) - 1 = 34.86%
SINCE INCEPTION: ( 11/2/92 TO 12/31/97 ):
( 1,365.54 /1,000) - 1 = 36.55%
<PAGE> 22
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERMEDIATE BOND FUND
DATE AS OF: 12/31/97
=====================================================================
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR (1/1/97 TO 12/31/97):
((1,077.97/1,000) (1/(365/365))-1) = 7.80%
5 YEAR (1/1/93 TO 12/31/97):
((1,348.57/1,000) (1/(1825/365))-1) = 6.16%
SINCE INCEPTION: (11/2/92 TO 12/31/97):
((1,365.54/1,000) (1/(1886/365))-1) = 6.21%
<PAGE> 23
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERMEDIATE BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,076.25 /1,000) - 1 = 7.62%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,343.33 /1,000) - 1 = 34.33%
SINCE INCEPTION: ( 11/25/92 TO 12/31/97 ):
( 1,350.04 /1,000) - 1 = 35.00%
<PAGE> 24
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERMEDIATE BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,076.25 /1,000)(1/( 365 /365))-1) = 7.62%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 1,343.33 /1,000)(1/(1825 /365))-1) = 6.08%
SINCE INCEPTION: (11/25/92 TO 12/31/97 ):
(( 1,350.04 /1,000)(1/(1863 /365))-1) = 6.06%
<PAGE> 25
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,105.50 /1,000) - 1 = 10.55%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
( 1,287.06 /1,000) - 1 = 28.71%
<PAGE> 26
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,105.50 /1,000) (1/( 365/365))-1) = 10.55%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
(( 1,287.06 /1,000) (1/(1021/365))-1) = 9.44%
<PAGE> 27
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,101.86 /1,000) - 1 = 10.19%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
( 1,277.89 /1,000) - 1 = 27.79%
<PAGE> 28
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,101.86 /1,000) (1/( 365 /365))-1) = 10.19%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
(( 1,277.89 /1,000) (1/(1021 /365))-1) = 9.16%
<PAGE> 29
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT LIMITED TERM TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,047.75 /1,000) - 1 = 4.78%
SINCE INCEPTION: ( 9/1/94 TO 12/31/97 ):
( 1,167.23 /1,000) - 1 = 16.72%
<PAGE> 30
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT LIMITED TERM TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
- --------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,047.75 /1,000) (1/( 365 /365))-1) = 4.78%
SINCE INCEPTION: ( 9/1/94 TO 12/31/97 ):
(( 1,167.23 /1,000) (1/(1218 /365))-1) = 4.74%
<PAGE> 31
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT LIMITED TERM TAX-FREE FUND
DATE AS OF: 12/31/97
=========== ========= = ==== ======== ======== ==== === =========
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,046.14 /1,000) - 1 = 4.61%
SINCE INCEPTION: ( 11/1/94 TO 12/31/97 ):
( 1,174.24 /1,000) - 1 = 17.42%
<PAGE> 32
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT LIMITED TERM TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
- --------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
(( 1,046.14/1,000) (1/( 365 /365))-1) = 4.61%
SINCE INCEPTION: ( 11/1/94 TO 12/31/97):
(( 1,174.24/1,000) (1/( 1157 /365))-1) = 5.20%
<PAGE> 33
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MICHIGAN MUNICIPAL BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,055.20 /1,000) - 1 = 5.52%
SINCE INCEPTION: ( 5/3/93 TO 12/31/97 ):
( 1,222.23 /1,000) - 1 = 22.22%
<PAGE> 34
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MICHIGAN MUNICIPAL BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
====================
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
((1,055.20 /1,000) (1/( 365 /365))-1) = 5.52%
SINCE INCEPTION: ( 5/3/93 TO 12/31/97 ):
((1,222.23 /1,000) (1/( 1704 /365))-1) = 4.39%
<PAGE> 35
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MICHIGAN MUNICIPAL BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,053.80 /1,000) - 1 = 5.38%
SINCE INCEPTION: ( 5/11/93 TO 12/31/97 ):
( 1,211.85 /1,000) - 1 = 21.19%
<PAGE> 36
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MICHIGAN MUNICIPAL BOND FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
((1,053.80 /1,000) (1/( 365 /365))-1) = 5.38%
SINCE INCEPTION: ( 5/11/93 TO 12/31/97 ):
((1,211.85 /1,000) (1/( 1696 /365))-1) = 4.22%
<PAGE> 37
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERMEDIATE TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,070.68 /1,000) - 1 = 7.07%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,314.28 /1,000) - 1 = 31.43%
SINCE INCEPTION: ( 12/16/92 TO 12/31/97 ):
( 1,322.17 /1,000) - 1 = 32.22%
<PAGE> 38
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT INTERMEDIATE TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
((1,070.68 /1,000) (1/( 365 /365))-1) = 7.07%
5 YEAR ( 1/1/93 TO 12/31/97 ):
((1,314.28 /1,000) (1/( 1825 /365))-1) = 5.62%
SINCE INCEPTION: ( 12/16/92 TO 12/31/97 ):
((1,322.17 /1,000) (1/( 1842 /365))-1) = 5.69%
<PAGE> 39
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERMEDIATE TAX-FREE FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,068.03 /1,000) - 1 = 6.80%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,304.82 /1,000) - 1 = 30.48%
SINCE INCEPTION: ( 12/18/92 TO 12/31/97 ):
( 1,310.03 /1,000) - 1 = 31.00%
<PAGE> 40
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT INTERMEDIATE TAX-FREE FUND
DATE AS OF: 12/31/97
=========== ========= = ==== ======== ======== ==== === =========
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,068.03 /1,000) (1/( 365 /365))-1) = 6.80%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 1,304.82 /1,000) (1/( 1825 /365))-1) = 5.47%
SINCE INCEPTION: ( 12/18/92 TO 12/31/97 ):
(( 1,310.03 /1,000) (1/( 1840 /365))-1) = 5.50%
<PAGE> 41
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT TAX-FREE INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,085.94 /1,000) - 1 = 8.59%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
( 1,225.75 /1,000) - 1 = 22.58%
<PAGE> 42
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT TAX-FREE INCOME FUND
DATE AS OF: 12/31/97
=========== ========= = ==== ======== ======== ==== === =========
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,085.94 /1,000) (1/( 365 /365))-1) = 8.59%
SINCE INCEPTION: ( 3/17/95 TO 12/31/97 ):
(( 1,226.00 /1,000) (1/( 1021 /365))-1) = 7.56%
<PAGE> 43
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT TAX-FREE INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,083.24 /1,000) - 1 = 8.32%
SINCE INCEPTION: ( 4/1/95 TO 12/31/97 ):
( 1,215.02 /1,000) - 1 = 21.50%
<PAGE> 44
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT TAX-FREE INCOME FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P)(1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR (1/1/97 TO 12/31/97):
(( 1,083.24 /1,000) (1/( 365 /365))-1) = 8.32%
SINCE INCEPTION: (4/1/95 TO 12/31/97):
(( 1,215.02 /1,000) (1/( 1006 /365))-1) = 7.32%
<PAGE> 45
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,052.34 /1,000) - 1 = 5.23%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,241.68 /1,000) - 1 = 24.17%
SINCE INCEPTION: ( 12/3/90 TO 12/31/97 ):
( 1,365.52 /1,000) - 1 = 36.55%
<PAGE> 46
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
((1,052.34 /1,000) (1/( 365 /365))-1) = 5.23%
5 YEAR ( 1/1/93 TO 12/31/97 ):
((1,241.68 /1,000) (1/( 1825 /365))-1) = 4.42%
SINCE INCEPTION: ( 12/3/90 TO 12/31/97 ):
((1,365.52 /1,000) (1/( 2586 /365))-1) = 4.50%
<PAGE> 47
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
======================
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,052.33 /1,000) - 1 = 5.23%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,240.90 /1,000) - 1 = 24.09%
SINCE INCEPTION: ( 12/9/92 TO 12/31/97 ):
( 1,240.90 /1,000) - 1 = 24.09%
<PAGE> 48
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,052.33 /1,000) (1/( 365 /365))-1) = 5.23%
5 YEAR ( 1/1/93 TO 12/31/97 ):
(( 1,240.90 /1,000) (1/( 1825 /365))-1) = 4.41%
SINCE INCEPTION: ( 12/9/92 TO 12/31/97 ):
(( 1,240.90 /1,000) (1/( 1849 /365))-1) = 4.35%
<PAGE> 49
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
======================
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97 ):
( 1,033.09 /1,000) - 1 = 3.31%
FIVE YEARS: ( 1/1/93 TO 12/31/97 ):
( 1,150.19 /1,000) - 1 = 15.02%
SINCE INCEPTION: ( 6/3/91 TO 12/31/97 ):
( 1,208.35 /1,000) - 1 = 20.84%
<PAGE> 50
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97 ):
(( 1,033.09 /1,000) (1/( 365 /365))-1) = 3.31%
5 YEAR ( 1/1/93 TO 12/31/97 ):
((1,150.19 /1,000) (1/( 1825 /365))-1) = 2.84%
SINCE INCEPTION: ( 6/3/91 TO 12/31/97 ):
((1,208.35 /1,000) (1/( 2404 /365))-1) = 2.92%
<PAGE> 51
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 1/1/97 TO 12/31/97):
( 1,033.09/1,000) - 1 = 3.31%
FIVE YEARS: ( 1/1/93 TO 12/31/97):
( 1,148.77/1,000) - 1 = 14.88%
SINCE INCEPTION: ( 12/15/92 TO 12/31/97):
( 1,148.77/1,000) - 1 = 14.88%
<PAGE> 52
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AVERAGE TOTAL RETURN
- --------------------
T = ((ERV/P) (1/N)) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
1 YEAR ( 1/1/97 TO 12/31/97):
((1,033.09/1,000) (1/(365/365))-1) = 3.31%
5 YEAR ( 1/1/93 TO 12/31/97):
((1,148.77/1,000) (1/(1825/365))-1) = 2.81%
SINCE INCEPTION: ( 12/15/92 TO 12/31/97):
((1,148.77/1,000) (1/(1843/365))-1) = 2.78%
<PAGE> 53
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INSTITUTIONAL SHARES
THE KENT GOVERNMENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 6/2/97 TO 12/31/97 ):
( 1,030.97 /1,000) - 1 = 3.10%
<PAGE> 54
THE KENT FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTMENT SHARES
THE KENT GOVERNMENT MONEY MARKET FUND
DATE AS OF: 12/31/97
= = = = = = = = = =
AGGREGATE TOTAL RETURN
- ----------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 6/2/97 TO 12/31/97 ):
( 1,030.64 /1,000) - 1 = 3.06%
<PAGE> 55
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT SHORT TERM BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 703,451.86 - 85,310.24 )
= 2[( -------------------------------------- +1) 6-1) = 5.36%
( 14,339,762.906 * 9.75 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 56
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT SHORT TERM BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 36,338.44 - 5,300.60 )
= 2[( -------------------------------------- +1) 6-1) = 5.21%
( 741,928.755 * 9.74 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 57
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 3,841,729.28 - 474,220.57 )
= 2[( -------------------------------------- +1) 6-1) = 5.35%
( 77,116,065.522 * 9.90 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 58
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 34,835.76 - 5,724.60 )
= 2[( -------------------------------------- +1) 6-1) = 5.09%
( 698,001.194 * 9.93 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 59
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INCOME FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 1,251,334.90 - 156,994.22 )
= 2[( -------------------------------------- +1) 6-1) = 5.79%
( 22,290,010.440 * 10.30 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 60
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INCOME FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 28,461.14 - 4,649.28 )
= 2[( -------------------------------------- +1) 6-1) = 5.53%
( 508,160.672 * 10.29 )
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 61
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
30 Day SEC Yield
( 131,568.93 - 23,498.18 )
= 2[( -------------------------------------- +1) 6-1) = 3.61%
( 3,552,469.461 * 10.19 )
Tax Equivalent Yield Quotation:
[3.61% /(1 - 0.396 )] = 5.98%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 62
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 1,734.29 - 368.80 )
= 2[( -------------------------------------- +1) 6-1) = 3.46%
( 46,659.993 * 10.23 )
Tax Equivalent Yield Quotation:
[3.46% /(1 - 0.396 )] = 5.73%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 63
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT MICHIGAN MUNICIPAL BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
30 Day SEC Yield
( 436,419.32 - 63,955.78 )
= 2[( -------------------------------------- +1) 6-1) = 4.00%
( 11,026,423.276 * 10.21 )
Tax Equivalent Yield Quotation:
[4.00% /(1 - 0.396 )] = 6.62%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 64
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT MICHIGAN MUNICIPAL BOND FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 16,446.14 - 2,936.74 )
= 2[( -------------------------------------- +1) 6-1) = 3.85%
( 416,610.096 * 10.20 )
Tax Equivalent Yield Quotation:
[3.85% /(1 - 0.396 )] = 6.37%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 65
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
30 Day SEC Yield
( 1,018,658.11 - 162,500.14 )
= 2[( -------------------------------------- +1) 6-1) = 3.74%
( 25,915,292.757 * 10.68 )
Tax Equivalent Yield Quotation:
[3.74% /(1 - 0.396 )] = 6.19%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 66
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 12,873.76 - 2,773.31 )
= 2[( -------------------------------------- +1) 6-1) = 3.49%
( 327,701.140 * 10.68 )
Tax Equivalent Yield Quotation:
[3.49% /(1 - 0.396 )] = 5.78%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 67
THE KENT FUNDS
EXHIBIT 16
INSTITUTIONAL SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT TAX-FREE INCOME FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
30 Day SEC Yield
( 455,383.89 - 76,405.56 )
= 2[( -------------------------------------- +1) 6-1) = 3.92%
( 10,970,863.279 * 10.65 )
Tax Equivalent Yield Quotation:
[3.92% /(1 - 0.396 )] = 6.49%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 68
THE KENT FUNDS
EXHIBIT 16
INVESTOR SHARES
30-DAY S.E.C. YIELD CALCULATIONS
- --------------------------------------------------------------------------------
THE KENT TAX-FREE INCOME FUND
(a-b)
30-Day S.E.C. Yield Equation = 2[( --------------
(cd) +1) 6-1) =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The maximum offering price (NAV for No Load) per
share on the last day of the period
================================================================================
( 6,530.20 - 1,439.88 )
= 2[( -------------------------------------- +1) 6-1) = 3.67%
( 157,079.330 * 10.67 )
Tax Equivalent Yield Quotation:
[3.67% /(1 - 0.396 )] = 6.08%
The performance was computed based on the thirty day period ending 12/31/97
<PAGE> 69
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INSTITUTIONAL SHARES
================================================================================
THE KENT MONEY MARKET FUND
<TABLE>
<CAPTION>
7 DAY YIELD CALCULATION
-------------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
------------
Dividend Declaration
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000144902
DECEMBER 26 0.000145474
DECEMBER 27 0.000145474
DECEMBER 28 0.000145474
DECEMBER 29 0.000145532
DECEMBER 30 0.000145712
DECEMBER 31 0.000145319
Less: Deductions from Shareholders Accounts 0.000000000
-----------
Base period return 0.001017888
-----------
Ending Account Balance 1.001017888
Less: Beginning Account Balance 1.000000000
-----------
Difference 0.001017888
Base Period Return
(Difference/Beginning Account Balance) 0.001017888
Yield Quotation
(Base Period Return * 365/Base Period) 5.31%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 5.45%
For the seven days ending: December 31, 1997
</TABLE>
<PAGE> 70
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INVESTOR SHARES
================================================================================
THE KENT MONEY MARKET FUND
<TABLE>
7 DAY YIELD CALCULATION
-------------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
------------
Dividend Declaration
DECEMBER 1
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000144898
DECEMBER 26 0.000145471
DECEMBER 27 0.000145471
DECEMBER 28 0.000145471
DECEMBER 29 0.000145527
DECEMBER 30 0.000145704
DECEMBER 31 0.000145316
Less: Deductions from Shareholders Accounts 0.000000000
-------------------
Base period return 0.001017857
-------------------
Ending Account Balance 1.001017857
Less: Beginning Account Balance 1.000000000
-------------------
Difference 0.001017857
Base Period Return
(Difference/Beginning Account Balance) 0.001017857
Yield Quotation
(Base Period Return * 365/Base Period) 5.31%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 5.45%
For the seven days ending: December 31, 1997
</TABLE>
<PAGE> 71
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INSTITUTIONAL SHARES
================================================================================
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
7 DAY YIELD CALCULATION
----------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
-----------
Dividend Declaration
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000095075
DECEMBER 26 0.000096658
DECEMBER 27 0.000096658
DECEMBER 28 0.000096658
DECEMBER 29 0.000096733
DECEMBER 30 0.000096985
DECEMBER 31 0.000097633
Less: Deductions from Shareholders Accounts 0.000000000
------------
Base period return 0.000676401
------------
Ending Account Balance 1.000676401
Less: Beginning Account Balance 1.000000000
------------
Difference 0.000676401
Base Period Return
(Difference/Beginning Account Balance) 0.000676401
Yield Quotation
(Base Period Return * 365/Base Period) 3.53%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 3.59%
For the seven days and thirty days ending: December 31, 1997
</TABLE>
<PAGE> 72
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INVESTOR SHARES
================================================================================
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
7 DAY YIELD CALCULATION
-------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
----------
Dividend Declaration
DECEMBER 1
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000095054
DECEMBER 26 0.000096645
DECEMBER 27 0.000096645
DECEMBER 28 0.000096645
DECEMBER 29 0.000096715
DECEMBER 30 0.000097026
DECEMBER 31 0.000097614
Less: Deductions from Shareholders Accounts 0.000000000
------------
Base period return 0.000676345
------------
Ending Account Balance 1.000676345
Less: Beginning Account Balance 1.000000000
------------
Difference 0.000676345
Base Period Return
(Difference/Beginning Account Balance) 0.000676345
Yield Quotation
(Base Period Return * 365/Base Period) 3.53%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 3.59%
For the seven days and thirty days ending: December 31, 1997
</TABLE>
<PAGE> 73
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INSTITUTIONAL SHARES
================================================================================
<TABLE>
<CAPTION>
THE KENT GOVERNMENT MONEY MARKET FUND
7 DAY YIELD CALCULATION
--------------------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
-----------
Dividend Declaration
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000144016
DECEMBER 26 0.000143863
DECEMBER 27 0.000143863
DECEMBER 28 0.000143863
DECEMBER 29 0.000144102
DECEMBER 30 0.000143878
DECEMBER 31 0.000144129
Less: Deductions from Shareholders Accounts 0.000000000
------------
Base period return 0.001007715
------------
Ending Account Balance 1.001007715
Less: Beginning Account Balance 1.000000000
------------
Difference 0.001007715
Base Period Return
(Difference/Beginning Account Balance) 0.001007715
Yield Quotation
(Base Period Return * 365/Base Period) 5.25%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 5.39%
For the seven days and thirty days ending: December 31, 1997
</TABLE>
<PAGE> 74
THE KENT FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
INVESTOR SHARES
================================================================================
<TABLE>
<CAPTION>
THE KENT GOVERNMENT MONEY MARKET FUND
7 DAY YIELD CALCULATION
-------------------------------------
<S> <C>
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
-----------
Dividend Declaration
DECEMBER 1
DECEMBER 2
DECEMBER 3
DECEMBER 4
DECEMBER 5
DECEMBER 6
DECEMBER 7
DECEMBER 8
DECEMBER 9
DECEMBER 10
DECEMBER 11
DECEMBER 12
DECEMBER 13
DECEMBER 14
DECEMBER 15
DECEMBER 16
DECEMBER 17
DECEMBER 18
DECEMBER 19
DECEMBER 20
DECEMBER 21
DECEMBER 22
DECEMBER 23
DECEMBER 24
DECEMBER 25 0.000144053
DECEMBER 26 0.000139086
DECEMBER 27 0.000139086
DECEMBER 28 0.000139086
DECEMBER 29 0.000139086
DECEMBER 30 0.000144053
DECEMBER 31 0.000139086
Less: Deductions from Shareholders Accounts 0.000000000
-----------
Base period return 0.000983533
-----------
Ending Account Balance 1.000983533
Less: Beginning Account Balance 1.000000000
-----------
Difference 0.000983533
Base Period Return
(Difference/Beginning Account Balance) 0.000983533
Yield Quotation
(Base Period Return * 365/Base Period) 5.13%
Effective Yield Quotation
[(Base Period Return + 1) 365/Base Period] - 1 5.26%
For the seven days and thirty days ending: December 31, 1997
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 011
[NAME] THE KENT MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 474,127,129
[INVESTMENTS-AT-VALUE] 474,127,129
[RECEIVABLES] 3,884,471
[ASSETS-OTHER] 6,680
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 478,018,280
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,461,065
[TOTAL-LIABILITIES] 2,461,065
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 475,546,186
[SHARES-COMMON-STOCK] 474,371,951<F1>
[SHARES-COMMON-PRIOR] 483,911,518<F1>
[ACCUMULATED-NII-CURRENT] 13,072
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 2,043
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 475,557,215
[DIVIDEND-INCOME] 909,527
[INTEREST-INCOME] 28,553,830
[OTHER-INCOME] 0
[EXPENSES-NET] 2,722,014
[NET-INVESTMENT-INCOME] 26,741,343
[REALIZED-GAINS-CURRENT] (1,165)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 26,740,178
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 26,699,476<F1>
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,151,538,209<F1>
[NUMBER-OF-SHARES-REDEEMED] 1,162,770,823<F1>
[SHARES-REINVESTED] 1,693,047<F1>
[NET-CHANGE-IN-ASSETS] (9,165,494)
[ACCUMULATED-NII-PRIOR] 13,072
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 878
[GROSS-ADVISORY-FEES] 2,092,414
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,231,852
[AVERAGE-NET-ASSETS] 522,291,933<F1>
[PER-SHARE-NAV-BEGIN] 1.000<F1>
[PER-SHARE-NII] .051<F1>
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .051<F1>
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.000<F1>
[EXPENSE-RATIO] .52<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 012
[NAME] THE KENT MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 474,127,129
[INVESTMENTS-AT-VALUE] 474,127,129
[RECEIVABLES] 3,884,471
[ASSETS-OTHER] 6,680
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 478,018,280
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,461,065
[TOTAL-LIABILITIES] 2,461,065
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 475,546,186
[SHARES-COMMON-STOCK] 1,179,430<F1>
[SHARES-COMMON-PRIOR] 804,189<F1>
[ACCUMULATED-NII-CURRENT] 13,072
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 2,043
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 475,557,215
[DIVIDEND-INCOME] 909,527
[INTEREST-INCOME] 28,553,830
[OTHER-INCOME] 0
[EXPENSES-NET] 2,722,014
[NET-INVESTMENT-INCOME] 26,741,343
[REALIZED-GAINS-CURRENT] (1,165)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 26,740,178
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 41,867<F1>
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,909,306<F1>
[NUMBER-OF-SHARES-REDEEMED] 1,572,981<F1>
[SHARES-REINVESTED] 38,916<F1>
[NET-CHANGE-IN-ASSETS] (9,165,494)
[ACCUMULATED-NII-PRIOR] 13,072
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 878
[GROSS-ADVISORY-FEES] 2,092,414
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,231,852
[AVERAGE-NET-ASSETS] 818,247<F1>
[PER-SHARE-NAV-BEGIN] 1.000<F1>
[PER-SHARE-NII] 0.51<F1>
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .051<F1>
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.000<F1>
[EXPENSE-RATIO] .52<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799770
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 021
[NAME] THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 211,226,490
[INVESTMENTS-AT-VALUE] 211,226,490
[RECEIVABLES] 1,400,326
[ASSETS-OTHER] 218
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 212,627,034
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 655,841
[TOTAL-LIABILITIES] 655,841
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 211,982,881
[SHARES-COMMON-STOCK] 211,671,569<F1>
[SHARES-COMMON-PRIOR] 155,401,227<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 11,688
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 211,971,193
[DIVIDEND-INCOME] 138,215
[INTEREST-INCOME] 7,265,643
[OTHER-INCOME] 0
[EXPENSES-NET] 1,021,930
[NET-INVESTMENT-INCOME] 6,381,928
[REALIZED-GAINS-CURRENT] (12,469)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 6,369,459
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 6,369,567<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 279,013,482<F1>
[NUMBER-OF-SHARES-REDEEMED] 222,935,438<F1>
[SHARES-REINVESTED] 192,298<F1>
[NET-CHANGE-IN-ASSETS] 55,765,253
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 781
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 781,668
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,221,720<F1>
[AVERAGE-NET-ASSETS] 195,052,992<F1>
[PER-SHARE-NAV-BEGIN] 1.000<F1>
[PER-SHARE-NII] .033<F1>
[PER-SHARE-GAIN-APPREC] .0<F1>
[PER-SHARE-DIVIDEND] .033<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 1.00<F1>
[EXPENSE-RATIO] 0.52<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[FN][ARTICLE] 6
[CIK] 0000799770
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 022
[NAME] THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 211,226,490
[INVESTMENTS-AT-VALUE] 211,226,490
[RECEIVABLES] 1,400,326
[ASSETS-OTHER] 218
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 212,627,034
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 655,841
[TOTAL-LIABILITIES] 655,841
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 211,982,881
[SHARES-COMMON-STOCK] 288,995<F1>
[SHARES-COMMON-PRIOR] 781,614<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 11,688
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 211,971,193
[DIVIDEND-INCOME] 138,215
[INTEREST-INCOME] 7,265,643
[OTHER-INCOME] 0
[EXPENSES-NET] 1,021,930
[NET-INVESTMENT-INCOME] 6,381,928
[REALIZED-GAINS-CURRENT] (12,469)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 6,369,459
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 12,361<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 279,013,482
[NUMBER-OF-SHARES-REDEEMED] 222,935,438
[SHARES-REINVESTED] 192,298
[NET-CHANGE-IN-ASSETS] 55,765,253
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 781
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 781,668
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,221,720
[AVERAGE-NET-ASSETS] 383,980<F1>
[PER-SHARE-NAV-BEGIN] 1.000<F1>
[PER-SHARE-NII] .033<F1>
[PER-SHARE-GAIN-APPREC] .0<F1>
[PER-SHARE-DIVIDEND] .033<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 1.00<F1>
[EXPENSE-RATIO] 0.52<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 031
[NAME] THE KENT GROWTH AND INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 622,545,953
[INVESTMENTS-AT-VALUE] 732,393,124
[RECEIVABLES] 14,020,349
[ASSETS-OTHER] 242
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 746,413,715
[PAYABLE-FOR-SECURITIES] 12,970,762
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 127,319
[TOTAL-LIABILITIES] 13,098,081
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 567,102,155
[SHARES-COMMON-STOCK] 44,881,954<F1>
[SHARES-COMMON-PRIOR] 36,032,375<F1>
[ACCUMULATED-NII-CURRENT] 50,009
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 56,041,229
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 110,122,241
[NET-ASSETS] 733,315,634
[DIVIDEND-INCOME] 16,501,498
[INTEREST-INCOME] 2,433
[OTHER-INCOME] (40,067)
[EXPENSES-NET] 6,048,343
[NET-INVESTMENT-INCOME] 10,415,521
[REALIZED-GAINS-CURRENT] 111,871,558
[APPREC-INCREASE-CURRENT] 15,936,958
[NET-CHANGE-FROM-OPS] 138,224,037
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 10,051,899<F1>
[DISTRIBUTIONS-OF-GAINS] 58,514,755<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 16,279,124
[NUMBER-OF-SHARES-REDEEMED] 9,401,038
[SHARES-REINVESTED] 1,971,493
[NET-CHANGE-IN-ASSETS] 217,395,381
[ACCUMULATED-NII-PRIOR] 9,008
[ACCUMULATED-GAINS-PRIOR] 5,409,917
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,568,032
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,125,754
[AVERAGE-NET-ASSETS] 629,137,755<F1>
[PER-SHARE-NAV-BEGIN] 13.90<F1>
[PER-SHARE-NII] 0.25<F1>
[PER-SHARE-GAIN-APPREC] 3.04<F1>
[PER-SHARE-DIVIDEND] 0.25<F1>
[PER-SHARE-DISTRIBUTIONS] 1.39<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 15.55
[EXPENSE-RATIO] 0.92
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 032
[NAME] THE KENT GROWTH AND INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 622,545,953
[INVESTMENTS-AT-VALUE] 732,393,124
[RECEIVABLES] 14,020,349
[ASSETS-OTHER] 242
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 746,413,715
[PAYABLE-FOR-SECURITIES] 12,970,762
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 127,319
[TOTAL-LIABILITIES] 13,098,081
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 567,102,155
[SHARES-COMMON-STOCK] 1,283,993<F1>
[SHARES-COMMON-PRIOR] 1,090,608<F1>
[ACCUMULATED-NII-CURRENT] 50,009
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 56,041,229
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 110,122,241
[NET-ASSETS] 733,315,634
[DIVIDEND-INCOME] 16,501,498
[INTEREST-INCOME] 2,433
[OTHER-INCOME] 40,067
[EXPENSES-NET] 6,048,343
[NET-INVESTMENT-INCOME] 10,415,521
[REALIZED-GAINS-CURRENT] 111,871,558
[APPREC-INCREASE-CURRENT] 15,936,958
[NET-CHANGE-FROM-OPS] 138,224,037
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 322,621<F1>
[DISTRIBUTIONS-OF-GAINS] 2,725,491<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 1,283,993
[NUMBER-OF-SHARES-REDEEMED] 280,261
[SHARES-REINVESTED] 195,172
[NET-CHANGE-IN-ASSETS] 217,395,381
[ACCUMULATED-NII-PRIOR] 9,008
[ACCUMULATED-GAINS-PRIOR] 5,409,917
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,568,032
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,125,754
[AVERAGE-NET-ASSETS] 629,137,755<F1>
[PER-SHARE-NAV-BEGIN] 13.81<F1>
[PER-SHARE-NII] 0.21<F1>
[PER-SHARE-GAIN-APPREC] 3.02<F1>
[PER-SHARE-DIVIDEND] 0.21<F1>
[PER-SHARE-DISTRIBUTIONS] 1.39<F1>
[RETURNS-OF-CAPITAL] 0.00<F1>
[PER-SHARE-NAV-END] 15.44<F1>
[EXPENSE-RATIO] 1.17<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 041
[NAME] THE KENT INDEX EQUITY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 434,589,423
[INVESTMENTS-AT-VALUE] 617,142,498
[RECEIVABLES] 1,378,184
[ASSETS-OTHER] 561
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 618,521,243
[PAYABLE-FOR-SECURITIES] 259,042
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 98,675
[TOTAL-LIABILITIES] 357,717
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 436,155,073
[SHARES-COMMON-STOCK] 30,834,874<F1>
[SHARES-COMMON-PRIOR] 16,551,211<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 74,354
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 596,477
[ACCUM-APPREC-OR-DEPREC] 182,679,284
[NET-ASSETS] 618,163,526
[DIVIDEND-INCOME] 7,982,276
[INTEREST-INCOME] 18,020
[OTHER-INCOME] (27,698)
[EXPENSES-NET] 1,871,711
[NET-INVESTMENT-INCOME] 6,100,887
[REALIZED-GAINS-CURRENT] 2,508,205
[APPREC-INCREASE-CURRENT] 98,473,728
[NET-CHANGE-FROM-OPS] 107,082,820
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5,949,417<F1>
[DISTRIBUTIONS-OF-GAINS] 2,198,502<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 18,391,993<F1>
[NUMBER-OF-SHARES-REDEEMED] 4,462,155<F1>
[SHARES-REINVESTED] 353,825<F1>
[NET-CHANGE-IN-ASSETS] 364,801,063
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 733
[OVERDIST-NET-GAINS-PRIOR] 806,339
[GROSS-ADVISORY-FEES] 1,278,392
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,357,672
[AVERAGE-NET-ASSETS] 409,065,498<F1>
[PER-SHARE-NAV-BEGIN] 14.71<F1>
[PER-SHARE-NII] 0.25<F1>
[PER-SHARE-GAIN-APPREC] 4.50<F1>
[PER-SHARE-DIVIDEND] 0.25<F1>
[PER-SHARE-DISTRIBUTIONS] 0.07<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 19.14<F1>
[EXPENSE-RATIO] 0.43<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 042
[NAME] THE KENT INDEX EQUITY FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 434,589,423
[INVESTMENTS-AT-VALUE] 617,142,498
[RECEIVABLES] 1,378,184
[ASSETS-OTHER] 561
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 618,521,243
[PAYABLE-FOR-SECURITIES] 259,042
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 98,675
[TOTAL-LIABILITIES] 357,717
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 436,155,073
[SHARES-COMMON-STOCK] 1,458,040<F1>
[SHARES-COMMON-PRIOR] 674,264<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 74,354
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 596,477
[ACCUM-APPREC-OR-DEPREC] 182,679,284
[NET-ASSETS] 618,163,526
[DIVIDEND-INCOME] 7,982,276
[INTEREST-INCOME] 18,020
[OTHER-INCOME] (27,698)
[EXPENSES-NET] 1,871,711
[NET-INVESTMENT-INCOME] 6,100,887
[REALIZED-GAINS-CURRENT] 2,508,205
[APPREC-INCREASE-CURRENT] 98,473,728
[NET-CHANGE-FROM-OPS] 107,082,820
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 225,091<F1>
[DISTRIBUTIONS-OF-GAINS] 99,841<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 915,280<F1>
[NUMBER-OF-SHARES-REDEEMED] 149,114<F1>
[SHARES-REINVESTED] 17,611<F1>
[NET-CHANGE-IN-ASSETS] 364,801,063
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 733
[OVERDIST-NET-GAINS-PRIOR] 806,339
[GROSS-ADVISORY-FEES] 1,278,392
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,357,672
[AVERAGE-NET-ASSETS] 18,061,486<F1>
[PER-SHARE-NAV-BEGIN] 14.72<F1>
[PER-SHARE-NII] 0.20<F1>
[PER-SHARE-GAIN-APPREC] 4.51<F1>
[PER-SHARE-DIVIDEND] 0.21<F1>
[PER-SHARE-DISTRIBUTIONS] 0.07<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 19.15<F1>
[EXPENSE-RATIO] 0.68<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 051
[NAME] THE KENT INTERNATIONAL GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 431,328,252
[INVESTMENTS-AT-VALUE] 498,543,204
[RECEIVABLES] 4,017,815
[ASSETS-OTHER] 334,684
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 502,895,703
[PAYABLE-FOR-SECURITIES] 265,195
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 251,799
[TOTAL-LIABILITIES] 516,994
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 437,423,380
[SHARES-COMMON-STOCK] 33,089,656<F1>
[SHARES-COMMON-PRIOR] 26,286,311<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 1,890,654
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 348,561
[ACCUM-APPREC-OR-DEPREC] 67,194,544
[NET-ASSETS] 502,378,709
[DIVIDEND-INCOME] 9,365,340
[INTEREST-INCOME] 520,830
[OTHER-INCOME] (1,172,538)
[EXPENSES-NET] 4,985,045
[NET-INVESTMENT-INCOME] 3,728,587
[REALIZED-GAINS-CURRENT] 2,742,836
[APPREC-INCREASE-CURRENT] 4,769,670
[NET-CHANGE-FROM-OPS] 11,241,093
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4,886,422<F1>
[DISTRIBUTIONS-OF-GAINS] 2,742,782<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 12,562,556<F1>
[NUMBER-OF-SHARES-REDEEMED] 5,990,183<F1>
[SHARES-REINVESTED] 230,973<F1>
[NET-CHANGE-IN-ASSETS] 105,780,844
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 637,883
[OVERDIST-NET-GAINS-PRIOR] 293,774
[GROSS-ADVISORY-FEES] 3,529,317
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,041,107
[AVERAGE-NET-ASSETS] 461,507,062<F1>
[PER-SHARE-NAV-BEGIN] 14.75<F1>
[PER-SHARE-NII] 0.11<F1>
[PER-SHARE-GAIN-APPREC] 0.26<F1>
[PER-SHARE-DIVIDEND] 0.15<F1>
[PER-SHARE-DISTRIBUTIONS] 0.08<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 14.89<F1>
[EXPENSE-RATIO] 1.05<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 052
[NAME] THE KENT INTERNATIONAL GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 431,328,252
[INVESTMENTS-AT-VALUE] 498,543,204
[RECEIVABLES] 4,017,815
[ASSETS-OTHER] 334,684
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 502,895,703
[PAYABLE-FOR-SECURITIES] 265,195
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 251,799
[TOTAL-LIABILITIES] 516,994
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 437,423,380
[SHARES-COMMON-STOCK] 661,384<F1>
[SHARES-COMMON-PRIOR] 599,004<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 1,890,654
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 348,561
[ACCUM-APPREC-OR-DEPREC] 67,194,544
[NET-ASSETS] 502,378,709
[DIVIDEND-INCOME] 9,365,340
[INTEREST-INCOME] 520,830
[OTHER-INCOME] (1,172,538)
[EXPENSES-NET] 4,985,045
[NET-INVESTMENT-INCOME] 3,728,587
[REALIZED-GAINS-CURRENT] 2,742,836
[APPREC-INCREASE-CURRENT] 4,769,670
[NET-CHANGE-FROM-OPS] 11,241,093
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 94,936<F1>
[DISTRIBUTIONS-OF-GAINS] 54,841<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 227,807<F1>
[NUMBER-OF-SHARES-REDEEMED] 175,388<F1>
[SHARES-REINVESTED] 9,962<F1>
[NET-CHANGE-IN-ASSETS] 105,780,844
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 637,883
[OVERDIST-NET-GAINS-PRIOR] 293,774
[GROSS-ADVISORY-FEES] 3,529,317
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,041,107
[AVERAGE-NET-ASSETS] 9,357,796<F1>
[PER-SHARE-NAV-BEGIN] 14.69<F1>
[PER-SHARE-NII] 0.08<F1>
[PER-SHARE-GAIN-APPREC] 0.25<F1>
[PER-SHARE-DIVIDEND] 0.15<F1>
[PER-SHARE-DISTRIBUTIONS] 0.08<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 14.79<F1>
[EXPENSE-RATIO] 1.30<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 061
[NAME] THE KENT SMALL COMPANY GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 554,217,563
[INVESTMENTS-AT-VALUE] 742,017,687
[RECEIVABLES] 11,051,475
[ASSETS-OTHER] 176
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 753,069,338
[PAYABLE-FOR-SECURITIES] 10,103,824
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 183,826
[TOTAL-LIABILITIES] 10,287,650
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 516,979,693
[SHARES-COMMON-STOCK] 39,149,106<F1>
[SHARES-COMMON-PRIOR] 34,776,451<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 609,721
[ACCUMULATED-NET-GAINS] 38,341,507
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 188,070,209
[NET-ASSETS] 742,781,688
[DIVIDEND-INCOME] 7,646,316
[INTEREST-INCOME] 32,372
[OTHER-INCOME] (4,583)
[EXPENSES-NET] 6,125,467
[NET-INVESTMENT-INCOME] 1,548,638
[REALIZED-GAINS-CURRENT] 78,612,706
[APPREC-INCREASE-CURRENT] 81,574,907
[NET-CHANGE-FROM-OPS] 161,736,251
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,142,990<F1>
[DISTRIBUTIONS-OF-GAINS] 52,695,021<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 11,956,401<F1>
[NUMBER-OF-SHARES-REDEEMED] 9,131,520<F1>
[SHARES-REINVESTED] 1,547,774<F1>
[NET-CHANGE-IN-ASSETS] 184,265,092
[ACCUMULATED-NII-PRIOR] 21,461
[ACCUMULATED-GAINS-PRIOR] 13,989,151
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,597,213
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,203,298
[AVERAGE-NET-ASSETS] 639,219,398<F1>
[PER-SHARE-NAV-BEGIN] 15.65<F1>
[PER-SHARE-NII] 0.04<F1>
[PER-SHARE-GAIN-APPREC] 4.19<F1>
[PER-SHARE-DIVIDEND] 0.06<F1>
[PER-SHARE-DISTRIBUTIONS] 1.43<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 18.39<F1>
[EXPENSE-RATIO] 0.93<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 062
[NAME] THE SMALL COMPANY GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 554,217,563
[INVESTMENTS-AT-VALUE] 742,017,687
[RECEIVABLES] 11,051,475
[ASSETS-OTHER] 176
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 753,069,338
[PAYABLE-FOR-SECURITIES] 10,103,824
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 183,826
[TOTAL-LIABILITIES] 10,287,650
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 516,979,693
[SHARES-COMMON-STOCK] 1,243,018<F1>
[SHARES-COMMON-PRIOR] 924,573<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 609,721
[ACCUMULATED-NET-GAINS] 38,341,507
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 188,070,209
[NET-ASSETS] 742,781,688
[DIVIDEND-INCOME] 7,646,316
[INTEREST-INCOME] 3,2372
[OTHER-INCOME] (4,583)
[EXPENSES-NET] 6,125,467
[NET-INVESTMENT-INCOME] 1,548,638
[REALIZED-GAINS-CURRENT] 78,612,706
[APPREC-INCREASE-CURRENT] 81,574,907
[NET-CHANGE-FROM-OPS] 161,736,251
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 36,830<F1>
[DISTRIBUTIONS-OF-GAINS] 1,565,329<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 419,135<F1>
[NUMBER-OF-SHARES-REDEEMED] 191,859<F1>
[SHARES-REINVESTED] 91,169<F1>
[NET-CHANGE-IN-ASSETS] 184,265,092
[ACCUMULATED-NII-PRIOR] 21,461
[ACCUMULATED-GAINS-PRIOR] 13,989,151
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,597,213
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,203,298
[AVERAGE-NET-ASSETS] 18,030,152<F1>
[PER-SHARE-NAV-BEGIN] 15.61<F1>
[PER-SHARE-NII] 0.01<F1>
[PER-SHARE-GAIN-APPREC] 4.18<F1>
[PER-SHARE-DIVIDEND] 0.04<F1>
[PER-SHARE-DISTRIBUTIONS] 1.43<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 18.33<F1>
[EXPENSE-RATIO] 1.18<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 071
[NAME] THE KENT SHORT TERM BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 143,861,713
[INVESTMENTS-AT-VALUE] 144,648,825
[RECEIVABLES] 2,545,389
[ASSETS-OTHER] 10,266
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 147,204,480
[PAYABLE-FOR-SECURITIES] 4,729
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 28,087
[TOTAL-LIABILITIES] 32,816
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 153,081,385
[SHARES-COMMON-STOCK] 14,338,849<F1>
[SHARES-COMMON-PRIOR] 24,151,394<F1>
[ACCUMULATED-NII-CURRENT] 1,374
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 6,698,207
[ACCUM-APPREC-OR-DEPREC] 787,112
[NET-ASSETS] 147,171,664
[DIVIDEND-INCOME] 418,796
[INTEREST-INCOME] 11,152,170
[OTHER-INCOME] 0
[EXPENSES-NET] 1,244,561
[NET-INVESTMENT-INCOME] 10,326,405
[REALIZED-GAINS-CURRENT] (1,502,731)
[APPREC-INCREASE-CURRENT] 1,638,919
[NET-CHANGE-FROM-OPS] 10,462,593
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 10,203,409<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 4,932,559<F1>
[NUMBER-OF-SHARES-REDEEMED] 15,426,349<F1>
[SHARES-REINVESTED] 681,245<F1>
[NET-CHANGE-IN-ASSETS] (89,925,246)
[ACCUMULATED-NII-PRIOR] 108,998
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 5,195,476
[GROSS-ADVISORY-FEES] 857,575
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,269,381
[AVERAGE-NET-ASSETS] 167,598,856<F1>
[PER-SHARE-NAV-BEGIN] 9.75<F1>
[PER-SHARE-NII] 0.61<F1>
[PER-SHARE-GAIN-APPREC] 0<F1>
[PER-SHARE-DIVIDEND] 0.61<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 9.75<F1>
[EXPENSE-RATIO] 0.72<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 072
[NAME] THE KENT SHORT TERM BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 143,861,713
[INVESTMENTS-AT-VALUE] 144,648,825
[RECEIVABLES] 2,545,389
[ASSETS-OTHER] 10,266
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 147,204,480
[PAYABLE-FOR-SECURITIES] 4,729
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 28,087
[TOTAL-LIABILITIES] 32,816
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 153,081,385
[SHARES-COMMON-STOCK] 763,364<F1>
[SHARES-COMMON-PRIOR] 171,112<F1>
[ACCUMULATED-NII-CURRENT] 1,374
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 6,698,207
[ACCUM-APPREC-OR-DEPREC] 787,112
[NET-ASSETS] 147,171,664
[DIVIDEND-INCOME] 418,796
[INTEREST-INCOME] 11,152,170
[OTHER-INCOME] 0
[EXPENSES-NET] 1,244,561
[NET-INVESTMENT-INCOME] 10,326,405
[REALIZED-GAINS-CURRENT] (1,502,731)
[APPREC-INCREASE-CURRENT] 1,638,919
[NET-CHANGE-FROM-OPS] 10,462,593
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 230,620<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 806,758<F1>
[NUMBER-OF-SHARES-REDEEMED] 237,636<F1>
[SHARES-REINVESTED] 23,130<F1>
[NET-CHANGE-IN-ASSETS] (89,925,246)
[ACCUMULATED-NII-PRIOR] 108,998
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 5,195,476
[GROSS-ADVISORY-FEES] 857,575
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,296,381
[AVERAGE-NET-ASSETS] 3,669,568<F1>
[PER-SHARE-NAV-BEGIN] 9.74<F1>
[PER-SHARE-NII] 0.57<F1>
[PER-SHARE-GAIN-APPREC] 0.02<F1>
[PER-SHARE-DIVIDEND] 0.54<F1>
[PER-SHARE-DISTRIBUTIONS] 0.05<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 9.74<F1>
[EXPENSE-RATIO] 0.87<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 081
[NAME] THE KENT INTERMEDIATE TAX-FREE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 258,732,405
[INVESTMENTS-AT-VALUE] 274,829,833
[RECEIVABLES] 4,400,489
[ASSETS-OTHER] 2,996
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 279,233,318
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 57,566
[TOTAL-LIABILITIES] 57,566
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 263,066,394
[SHARES-COMMON-STOCK] 25,809,044<F1>
[SHARES-COMMON-PRIOR] 27,404,331<F1>
[ACCUMULATED-NII-CURRENT] 29,615
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 17,685
[ACCUM-APPREC-OR-DEPREC] 16,097,428
[NET-ASSETS] 279,175,752
[DIVIDEND-INCOME] 154,379
[INTEREST-INCOME] 14,164,975
[OTHER-INCOME] 0
[EXPENSES-NET] 2,050,304
[NET-INVESTMENT-INCOME] 12,269,050
[REALIZED-GAINS-CURRENT] 691,582
[APPREC-INCREASE-CURRENT] 6,286,893
[NET-CHANGE-FROM-OPS] 19,247,525
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 12,149,068<F1>
[DISTRIBUTIONS-OF-GAINS] 103,796<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 4,110,419<F1>
[NUMBER-OF-SHARES-REDEEMED] 5,717,527<F1>
[SHARES-REINVESTED] 11,820<F1>
[NET-CHANGE-IN-ASSETS] (9,867,153)
[ACCUMULATED-NII-PRIOR] 44,748
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 604,167
[GROSS-ADVISORY-FEES] 1,424,578
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,110,549
[AVERAGE-NET-ASSETS] 281,568,898<F1>
[PER-SHARE-NAV-BEGIN] 10.42<F1>
[PER-SHARE-NII] 0.45<F1>
[PER-SHARE-GAIN-APPREC] 0.26<F1>
[PER-SHARE-DIVIDEND] 0.45<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.68<F1>
[EXPENSE-RATIO] 0.72<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>INSTITUTIONAL SHARES
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 082
[NAME] THE KENT INTERMEDIATE TAX-FREE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 258,732,405
[INVESTMENTS-AT-VALUE] 274,829,833
[RECEIVABLES] 4,400,489
[ASSETS-OTHER] 2,996
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 279,923,318
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 57,566
[TOTAL-LIABILITIES] 57,566
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 263,066,394
[SHARES-COMMON-STOCK] 330,953<F1>
[SHARES-COMMON-PRIOR] 323,136<F1>
[ACCUMULATED-NII-CURRENT] 29,615
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 17,685
[ACCUM-APPREC-OR-DEPREC] 16,097,428
[NET-ASSETS] 279,175,752
[DIVIDEND-INCOME] 154,379
[INTEREST-INCOME] 14,164,975
[OTHER-INCOME] 0
[EXPENSES-NET] 2,050,304
[NET-INVESTMENT-INCOME] 12,269,050
[REALIZED-GAINS-CURRENT] 691,582
[APPREC-INCREASE-CURRENT] 6,286,893
[NET-CHANGE-FROM-OPS] 19,247,525
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 135,115<F1>
[DISTRIBUTIONS-OF-GAINS] 1,304<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 103,878<F1>
[NUMBER-OF-SHARES-REDEEMED] 104,039<F1>
[SHARES-REINVESTED] 7,978<F1>
[NET-CHANGE-IN-ASSETS] (9,867,153)
[ACCUMULATED-NII-PRIOR] 44,748
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 604,167
[GROSS-ADVISORY-FEES] 1,424,578
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,084,710
[AVERAGE-NET-ASSETS] 3,319,682<F1>
[PER-SHARE-NAV-BEGIN] 10.42<F1>
[PER-SHARE-NII] 0.43<F1>
[PER-SHARE-GAIN-APPREC] 0.26<F1>
[PER-SHARE-DIVIDEND] 0.43<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.68<F1>
[EXPENSE-RATIO] 0.97<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>INVESTMENT SHARES
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 091
[NAME] THE KENT INTERMEDIATE BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 746,770,016
[INVESTMENTS-AT-VALUE] 756,627,353
[RECEIVABLES] 13,165,515
[ASSETS-OTHER] 65,300
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 769,858,168
[PAYABLE-FOR-SECURITIES] 37,064
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 109,603
[TOTAL-LIABILITIES] 146,667
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 770,245,558
[SHARES-COMMON-STOCK] 77,010,335<F1>
[SHARES-COMMON-PRIOR] 78,822,775<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 41,201
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 10,350,193
[ACCUM-APPREC-OR-DEPREC] 9,857,337
[NET-ASSETS] 769,711,501
[DIVIDEND-INCOME] 1,514,383
[INTEREST-INCOME] 51,050,679
[OTHER-INCOME] 0
[EXPENSES-NET] 5,845,094
[NET-INVESTMENT-INCOME] 46,719,968
[REALIZED-GAINS-CURRENT] (3,093,390)
[APPREC-INCREASE-CURRENT] 15,305,110
[NET-CHANGE-FROM-OPS] 58,715,688
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 46,492,693<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 20,424,141<F1>
[NUMBER-OF-SHARES-REDEEMED] 24,790,453<F1>
[SHARES-REINVESTED] 2,553,873<F1>
[NET-CHANGE-IN-ASSETS] (7,011,337)
[ACCUMULATED-NII-PRIOR] 131,834
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 7,040,803
[GROSS-ADVISORY-FEES] 4,262,333
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,938,348
[AVERAGE-NET-ASSETS] 768,047,597<F1>
[PER-SHARE-NAV-BEGIN] 9.76<F1>
[PER-SHARE-NII] 0.59<F1>
[PER-SHARE-GAIN-APPREC] 0.14<F1>
[PER-SHARE-DIVIDEND] 0.59<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 9.90<F1>
[EXPENSE-RATIO] 0.75<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 092
[NAME] THE KENT INTERMEDIATE BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 746,770,016
[INVESTMENTS-AT-VALUE] 756,627,353
[RECEIVABLES] 13,165,515
[ASSETS-OTHER] 65,300
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 769,858,168
[PAYABLE-FOR-SECURITIES] 37,064
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 109,603
[TOTAL-LIABILITIES] 146,667
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 770,245,558
[SHARES-COMMON-STOCK] 702,443<F1>
[SHARES-COMMON-PRIOR] 749,163<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 41,204
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 10,350,193
[ACCUM-APPREC-OR-DEPREC] 9,857,337
[NET-ASSETS] 769,711,501
[DIVIDEND-INCOME] 1,514,383
[INTEREST-INCOME] 51,050,679
[OTHER-INCOME] 0
[EXPENSES-NET] 5,845,094
[NET-INVESTMENT-INCOME] 46,719,968
[REALIZED-GAINS-CURRENT] (3,309,390)
[APPREC-INCREASE-CURRENT] 153,051,110
[NET-CHANGE-FROM-OPS] 58,715,688
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 400,310<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 180,929<F1>
[NUMBER-OF-SHARES-REDEEMED] 261,548<F1>
[SHARES-REINVESTED] 33,899<F1>
[NET-CHANGE-IN-ASSETS] (7,011,337)
[ACCUMULATED-NII-PRIOR] 131,834
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 7,040,803
[GROSS-ADVISORY-FEES] 4,262,333
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,938,348
[AVERAGE-NET-ASSETS] 6,902,781<F1>
[PER-SHARE-NAV-BEGIN] 9.78<F1>
[PER-SHARE-NII] 0.57<F1>
[PER-SHARE-GAIN-APPREC] 0.15<F1>
[PER-SHARE-DIVIDEND] 0.57<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 9.93<F1>
[EXPENSE-RATIO] 1.00<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 101
[NAME] THE KENT MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 111,336,719
[INVESTMENTS-AT-VALUE] 114,678,942
[RECEIVABLES] 1,504,817
[ASSETS-OTHER] 20
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 116,183,779
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 35,480
[TOTAL-LIABILITIES] 35,480
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 112,834,960
[SHARES-COMMON-STOCK] 10,944,576<F1>
[SHARES-COMMON-PRIOR] 15,140,896<F1>
[ACCUMULATED-NII-CURRENT] 28,694
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 57,578
[ACCUM-APPREC-OR-DEPREC] 3,342,223
[NET-ASSETS] 116,148,299
[DIVIDEND-INCOME] 75,421
[INTEREST-INCOME] 5,830,519
[OTHER-INCOME] 0
[EXPENSES-NET] 863,716
[NET-INVESTMENT-INCOME] 5,042,224
[REALIZED-GAINS-CURRENT] 49,676
[APPREC-INCREASE-CURRENT] 1,602,539
[NET-CHANGE-FROM-OPS] 6,694,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 4,914,390<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 3,222,928<F1>
[NUMBER-OF-SHARES-REDEEMED] 7,426,189<F1>
[SHARES-REINVESTED] 6,941<F1>
[NET-CHANGE-IN-ASSETS] (38,895,871)
[ACCUMULATED-NII-PRIOR] 22,437
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 107,254
[GROSS-ADVISORY-FEES] 563,275
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 881,962
[AVERAGE-NET-ASSETS] 122,066,324<F1>
[PER-SHARE-NAV-BEGIN] 10.08<F1>
[PER-SHARE-NII] 0.41<F1>
[PER-SHARE-GAIN-APPREC] 0.13<F1>
[PER-SHARE-DIVIDEND] 0.41<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.21<F1>
[EXPENSE-RATIO] 0.69<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>INSTITUTIONAL SHARES
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 102
[NAME] THE KENT MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 111,336,719
[INVESTMENTS-AT-VALUE] 114,678,942
[RECEIVABLES] 1,504,817
[ASSETS-OTHER] 20
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 116,183,779
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 35,480
[TOTAL-LIABILITIES] 35,480
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 112,834,960
[SHARES-COMMON-STOCK] 432,714<F1>
[SHARES-COMMON-PRIOR] 240,448<F1>
[ACCUMULATED-NII-CURRENT] 28,694
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 57,578
[ACCUM-APPREC-OR-DEPREC] 3,342,223
[NET-ASSETS] 116,148,299
[DIVIDEND-INCOME] 75,421
[INTEREST-INCOME] 5,830,519
[OTHER-INCOME] 0
[EXPENSES-NET] 863,716
[NET-INVESTMENT-INCOME] 5,042,224
[REALIZED-GAINS-CURRENT] 49,676
[APPREC-INCREASE-CURRENT] 1,602,539
[NET-CHANGE-FROM-OPS] 6,694,439
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 121,577<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 283,459
[NUMBER-OF-SHARES-REDEEMED] 97,266
[SHARES-REINVESTED] 6,073
[NET-CHANGE-IN-ASSETS] (32,321,415)
[ACCUMULATED-NII-PRIOR] 22,437
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 107,254
[GROSS-ADVISORY-FEES] 563,275
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 881,962
[AVERAGE-NET-ASSETS] 2,999,409<F1>
[PER-SHARE-NAV-BEGIN] 10.07<F1>
[PER-SHARE-NII] 0.39<F1>
[PER-SHARE-GAIN-APPREC] 0.14<F1>
[PER-SHARE-DIVIDEND] 0.40<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.20<F1>
[EXPENSE-RATIO] 0.84<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 111
[NAME] THE KENT LIMITED TERM TAX-FREE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 35,258,329
[INVESTMENTS-AT-VALUE] 35,991,523
[RECEIVABLES] 522,947
[ASSETS-OTHER] 16
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 36,514,486
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 16,916
[TOTAL-LIABILITIES] 16,916
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 35,758,635
[SHARES-COMMON-STOCK] 3,534,456<F1>
[SHARES-COMMON-PRIOR] 4,080,067<F1>
[ACCUMULATED-NII-CURRENT] 2,082
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,569
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 733,284
[NET-ASSETS] 36,497,570
[DIVIDEND-INCOME] 25,281
[INTEREST-INCOME] 1,696,028
[OTHER-INCOME] 0
[EXPENSES-NET] 282,237
[NET-INVESTMENT-INCOME] 1,439,072
[REALIZED-GAINS-CURRENT] 159,864
[APPREC-INCREASE-CURRENT] 136,663
[NET-CHANGE-FROM-OPS] 1,735,599
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,432,406<F1>
[DISTRIBUTIONS-OF-GAINS] 170,851<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 888,774<F1>
[NUMBER-OF-SHARES-REDEEMED] 1,435,754<F1>
[SHARES-REINVESTED] 1,369<F1>
[NET-CHANGE-IN-ASSETS] (5,079,749)
[ACCUMULATED-NII-PRIOR] 7,011
[ACCUMULATED-GAINS-PRIOR] 16,601
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 167,800
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 287,058
[AVERAGE-NET-ASSETS] 36,965,772<F1>
[PER-SHARE-NAV-BEGIN] 10.16<F1>
[PER-SHARE-NII] 0.40<F1>
[PER-SHARE-GAIN-APPREC] 0.08<F1>
[PER-SHARE-DIVIDEND] 0.40<F1>
[PER-SHARE-DISTRIBUTIONS] 0.05<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.19<F1>
[EXPENSE-RATIO] 0.76<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 112
[NAME] THE KENT LIMITED TERM TAX-FREE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 35,258,329
[INVESTMENTS-AT-VALUE] 35,991,523
[RECEIVABLES] 522,947
[ASSETS-OTHER] 16
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 36,514,486
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 16,916
[TOTAL-LIABILITIES] 16,916
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 35,758,635
[SHARES-COMMON-STOCK] 46,374<F1>
[SHARES-COMMON-PRIOR] 10,370<F1>
[ACCUMULATED-NII-CURRENT] 2,082
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,569
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 733,284
[NET-ASSETS] 36,497,570
[DIVIDEND-INCOME] 25,281
[INTEREST-INCOME] 1,696,028
[OTHER-INCOME] 0
[EXPENSES-NET] 282,237
[NET-INVESTMENT-INCOME] 1,439,072
[REALIZED-GAINS-CURRENT] 159,864
[APPREC-INCREASE-CURRENT] 136,663
[NET-CHANGE-FROM-OPS] 1,735,599
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 11,595<F1>
[DISTRIBUTIONS-OF-GAINS] 2,045<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 66,418<F1>
[NUMBER-OF-SHARES-REDEEMED] 31,731<F1>
[SHARES-REINVESTED] 1,317<F1>
[NET-CHANGE-IN-ASSETS] (5,079,749)
[ACCUMULATED-NII-PRIOR] 7,011
[ACCUMULATED-GAINS-PRIOR] 16,601
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 167,800
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 287,058
[AVERAGE-NET-ASSETS] 309,142<F1>
[PER-SHARE-NAV-BEGIN] 10.20<F1>
[PER-SHARE-NII] 0.38<F1>
[PER-SHARE-GAIN-APPREC] 0.08<F1>
[PER-SHARE-DIVIDEND] 0.38<F1>
[PER-SHARE-DISTRIBUTIONS] 0.05<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.23<F1>
[EXPENSE-RATIO] 0.93<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 121
[NAME] THE KENT INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 224,424,903
[INVESTMENTS-AT-VALUE] 231,759,445
[RECEIVABLES] 3,633,993
[ASSETS-OTHER] 51,762
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 235,445,200
[PAYABLE-FOR-SECURITIES] 20,922
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 35,973
[TOTAL-LIABILITIES] 56,895
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 227,743,701
[SHARES-COMMON-STOCK] 22,313,511<F1>
[SHARES-COMMON-PRIOR] 23,623,536<F1>
[ACCUMULATED-NII-CURRENT] 13,070
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 296,992
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,334,542
[NET-ASSETS] 235,388,305
[DIVIDEND-INCOME] 382,540
[INTEREST-INCOME] 18,158,378
[OTHER-INCOME] 0
[EXPENSES-NET] 2,042,456
[NET-INVESTMENT-INCOME] 16,498,462
[REALIZED-GAINS-CURRENT] 3,441,169
[APPREC-INCREASE-CURRENT] 5,214,704
[NET-CHANGE-FROM-OPS] 25,154,335
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 16,298,443<F1>
[DISTRIBUTIONS-OF-GAINS] 4,496,656<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 6,376,298<F1>
[NUMBER-OF-SHARES-REDEEMED] 8,087,197<F1>
[SHARES-REINVESTED] 400,874<F1>
[NET-CHANGE-IN-ASSETS] (7,393,410)
[ACCUMULATED-NII-PRIOR] 49,689
[ACCUMULATED-GAINS-PRIOR] 1,437,936
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,489,950
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,072,360
[AVERAGE-NET-ASSETS] 244,757,262<F1>
[PER-SHARE-NAV-BEGIN] 10.16<F1>
[PER-SHARE-NII] 0.68<F1>
[PER-SHARE-GAIN-APPREC] 0.34<F1>
[PER-SHARE-DIVIDEND] 0.68<F1>
[PER-SHARE-DISTRIBUTIONS] 0.20<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.30<F1>
[EXPENSE-RATIO] 0.82<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 122
[NAME] THE KENT INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 224,424,903
[INVESTMENTS-AT-VALUE] 231,759,445
[RECEIVABLES] 3,633,993
[ASSETS-OTHER] 51,762
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 235,445,200
[PAYABLE-FOR-SECURITIES] 20,922
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 35,973
[TOTAL-LIABILITIES] 56,895
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 227,743,701
[SHARES-COMMON-STOCK] 545,475<F1>
[SHARES-COMMON-PRIOR] 267,927<F1>
[ACCUMULATED-NII-CURRENT] 13,070
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 296,992
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,334,542
[NET-ASSETS] 235,388,305
[DIVIDEND-INCOME] 382,540
[INTEREST-INCOME] 18,158,378
[OTHER-INCOME] 0
[EXPENSES-NET] 2,042,456
[NET-INVESTMENT-INCOME] 16,498,462
[REALIZED-GAINS-CURRENT] 3,441,169
[APPREC-INCREASE-CURRENT] 5,214,704
[NET-CHANGE-FROM-OPS] 25,154,335
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 236,638<F1>
[DISTRIBUTIONS-OF-GAINS] 85,457<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 338,211<F1>
[NUMBER-OF-SHARES-REDEEMED] 89,859<F1>
[SHARES-REINVESTED] 29,196<F1>
[NET-CHANGE-IN-ASSETS] (7,393,410)
[ACCUMULATED-NII-PRIOR] 49,689
[ACCUMULATED-GAINS-PRIOR] 1,437,936
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,489,950
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,072,360
[AVERAGE-NET-ASSETS] 3,547,490<F1>
[PER-SHARE-NAV-BEGIN] 10.16<F1>
[PER-SHARE-NII] 0.63<F1>
[PER-SHARE-GAIN-APPREC] 0.35<F1>
[PER-SHARE-DIVIDEND] 0.65<F1>
[PER-SHARE-DISTRIBUTIONS] 0.20<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.29<F1>
[EXPENSE-RATIO] 1.07<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 131
[NAME] THE KENT TAX-FREE INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 109,343,734
[INVESTMENTS-AT-VALUE] 116,701,571
[RECEIVABLES] 1,680,842
[ASSETS-OTHER] 4,088
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 118,386,501
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 22,342
[TOTAL-LIABILITIES] 22,342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 110,915,251
[SHARES-COMMON-STOCK] 10,954,275<F1>
[SHARES-COMMON-PRIOR] 10,708,823<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 1,539
[ACCUMULATED-NET-GAINS] 92,610
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,357,837
[NET-ASSETS] 118,364,159
[DIVIDEND-INCOME] 79,656
[INTEREST-INCOME] 5,900,518
[OTHER-INCOME] 0
[EXPENSES-NET] 929,777
[NET-INVESTMENT-INCOME] 5,050,397
[REALIZED-GAINS-CURRENT] 376,069
[APPREC-INCREASE-CURRENT] 4,279,292
[NET-CHANGE-FROM-OPS] 9,705,758
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5,016,840<F1>
[DISTRIBUTIONS-OF-GAINS] 330,223<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 3,066,893<F1>
[NUMBER-OF-SHARES-REDEEMED] 2,828,842<F1>
[SHARES-REINVESTED] 7,401<F1>
[NET-CHANGE-IN-ASSETS] 7,480,413
[ACCUMULATED-NII-PRIOR] 8,405
[ACCUMULATED-GAINS-PRIOR] 51,110
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 642,997
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 943,846
[AVERAGE-NET-ASSETS] 115,878,738<F1>
[PER-SHARE-NAV-BEGIN] 10.27<F1>
[PER-SHARE-NII] 0.45<F1>
[PER-SHARE-GAIN-APPREC] 0.41<F1>
[PER-SHARE-DIVIDEND] 0.45<F1>
[PER-SHARE-DISTRIBUTIONS] 0.03<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.65<F1>
[EXPENSE-RATIO] 0.79<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 132
[NAME] THE KENT TAX-FREE INCOME FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 109,343,734
[INVESTMENTS-AT-VALUE] 116,701,571
[RECEIVABLES] 1,680,842
[ASSETS-OTHER] 4,088
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 118,386,501
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 22,342
[TOTAL-LIABILITIES] 22,342
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 110,915,251
[SHARES-COMMON-STOCK] 160,364<F1>
[SHARES-COMMON-PRIOR] 90,957<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 1,539
[ACCUMULATED-NET-GAINS] 92,610
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 7,357,837
[NET-ASSETS] 118,364,159
[DIVIDEND-INCOME] 79,656
[INTEREST-INCOME] 5,900,518
[OTHER-INCOME] 0
[EXPENSES-NET] 929,777
[NET-INVESTMENT-INCOME] 5,050,397
[REALIZED-GAINS-CURRENT] 376,069
[APPREC-INCREASE-CURRENT] 4,279,292
[NET-CHANGE-FROM-OPS] 9,705,758
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 43,501<F1>
[DISTRIBUTIONS-OF-GAINS] 4,346<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 116,872<F1>
[NUMBER-OF-SHARES-REDEEMED] 51,267<F1>
[SHARES-REINVESTED] 3,802<F1>
[NET-CHANGE-IN-ASSETS] 7,480,413
[ACCUMULATED-NII-PRIOR] 8,405
[ACCUMULATED-GAINS-PRIOR] 51,110
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 642,997
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 943,846
[AVERAGE-NET-ASSETS] 1,050,325<F1>
[PER-SHARE-NAV-BEGIN] 10.29<F1>
[PER-SHARE-NII] 0.42<F1>
[PER-SHARE-GAIN-APPREC] 0.42<F1>
[PER-SHARE-DIVIDEND] 0.43<F1>
[PER-SHARE-DISTRIBUTIONS] 0.03<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 10.67<F1>
[EXPENSE-RATIO] 1.04<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 141
[NAME] THE KENT GOVERNMENT MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 94,843,356
[INVESTMENTS-AT-VALUE] 94,843,356
[RECEIVABLES] 267,814
[ASSETS-OTHER] 4,836
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 95,116,006
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 489,545
[TOTAL-LIABILITIES] 489,545
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 94,626,457
[SHARES-COMMON-STOCK] 94,624,444<F1>
[SHARES-COMMON-PRIOR] 0<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 94,626,461
[DIVIDEND-INCOME] 193,020
[INTEREST-INCOME] 2,957,599
[OTHER-INCOME] 0
[EXPENSES-NET] 197,944
[NET-INVESTMENT-INCOME] 2,952,675
[REALIZED-GAINS-CURRENT] 4
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,952,679
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,952,603<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 328,632,081<F1>
[NUMBER-OF-SHARES-REDEEMED] 236,421,222<F1>
[SHARES-REINVESTED] 2,413,585<F1>
[NET-CHANGE-IN-ASSETS] 94,626,461
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 112,896
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 279,946
[AVERAGE-NET-ASSETS] 96,834,454<F1>
[PER-SHARE-NAV-BEGIN] 1.00<F1>
[PER-SHARE-NII] 0.031<F1>
[PER-SHARE-GAIN-APPREC] 0<F1>
[PER-SHARE-DIVIDEND] 0.031<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 1.00<F1>
[EXPENSE-RATIO] 0.35<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[CIK] 0000799700
[NAME] THE KENT FUNDS
[SERIES]
[NUMBER] 142
[NAME] THE KENT GOVERNMENT MONEY MARKET FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 94,843,356
[INVESTMENTS-AT-VALUE] 94,843,356
[RECEIVABLES] 267,814
[ASSETS-OTHER] 4,836
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 95,116,006
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 489,545
[TOTAL-LIABILITIES] 489,545
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 94,626,457
[SHARES-COMMON-STOCK] 2,013<F1>
[SHARES-COMMON-PRIOR] 0<F1>
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 94,626,461
[DIVIDEND-INCOME] 193,020
[INTEREST-INCOME] 2,957,599
[OTHER-INCOME] 0
[EXPENSES-NET] 197,944
[NET-INVESTMENT-INCOME] 2,952,675
[REALIZED-GAINS-CURRENT] 4
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,952,679
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 72<F1>
[DISTRIBUTIONS-OF-GAINS] 0<F1>
[DISTRIBUTIONS-OTHER] 0<F1>
[NUMBER-OF-SHARES-SOLD] 4,460<F1>
[NUMBER-OF-SHARES-REDEEMED] 2,511<F1>
[SHARES-REINVESTED] 64<F1>
[NET-CHANGE-IN-ASSETS] 94,626,461
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 112,896
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 279,946
[AVERAGE-NET-ASSETS] 2,392<F1>
[PER-SHARE-NAV-BEGIN] 1.00<F1>
[PER-SHARE-NII] 0.030<F1>
[PER-SHARE-GAIN-APPREC] 0<F1>
[PER-SHARE-DIVIDEND] 0.030<F1>
[PER-SHARE-DISTRIBUTIONS] 0<F1>
[RETURNS-OF-CAPITAL] 0<F1>
[PER-SHARE-NAV-END] 1.00<F1>
[EXPENSE-RATIO] 0.68<F1>
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>Investment Shares
</FN>
</TABLE>
