<PAGE> 1
As filed with the Securities and Exchange Commission on January 27, 1999.
Registration No.:
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. __
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
THE KENT FUNDS
Area Code and Telephone Number:
(614) 470-8000
Address of Principal Executive Offices:
3435 Stelzer Road
Columbus, Ohio 43219
Name and Address of Agent for Service:
W. Bruce McConnel, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing fee
is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 33-8398; 811-4824) pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant's Rule 24f-2
Notice for the fiscal year ended December 31, 1997 was filed on or about March
23, 1998. Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement relates to the shares previously registered on the
aforesaid Registration Statement on Form N-1A.
It is proposed that this filing will become effective on February 26, 1999
pursuant to Rule 488 under the Securities Act of 1933.
<PAGE> 2
KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
1-800-633-KENT (5368)
February 26, 1999
To the Shareholders of the
Limited Term Tax-Free Fund:
Enclosed you will find a proxy statement in connection with the
solicitation of proxies by the Board of Trustees of the Kent Funds (the "Trust")
for a Special Meeting of Shareholders of the Limited Term Tax-Free Fund to be
held on March 24, 1999.
The proxy statement relates to the approval or disapproval of a plan of
reorganization whereby the Limited Term Tax-Free Fund would be acquired by the
Trust's Intermediate Tax-Free Fund.
The Board of Trustees recommends that shareholders vote in favor of the
proposal.
James F. Duca, II
President
<PAGE> 3
KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
1-800-633-KENT (5368)
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE
LIMITED TERM TAX-FREE FUND
To Be Held on March 24, 1999
To the Shareholders of the
Limited Term Tax-Free Fund:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders (the
"Meeting") of the Limited Term Tax-Free Fund, an investment portfolio offered by
the Kent Funds (the "Trust"), will be held on March 24, 1999 in the Board Room
at BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 at 9:00 a.m.
Eastern Time. During the Meeting, the shareholders will vote on the following
proposals:
ITEM 1. To approve or disapprove a Plan of Reorganization and
the transactions contemplated thereby, including the
transfer of all of the assets and liabilities of the
Limited Term Tax-Free Fund to the Trust's Intermediate
Tax-Free Fund, in exchange for Investment Shares and
Institutional Shares of the Intermediate Tax-Free Fund and
a liquidating distribution of such Investment Shares and
Institutional Shares to the holders of Investment Shares
and Institutional Shares, respectively, of the Limited
Term Tax-Free Fund.
ITEM 2. To transact such other business as may properly come
before the Meeting or any adjournment(s) thereof.
THE TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF EACH PROPOSAL.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Plan of Reorganization.
Shareholders of record as of the close of business on January 31, 1999
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE
BOARD OF TRUSTEES OF THE TRUST. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY
ARE EXERCISED BY SUBMITTING TO THE TRUST A WRITTEN NOTICE OF REVOCATION OR A
SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND ELECTING TO VOTE IN
PERSON.
Robert L. Tuch
Secretary
February 26, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY.................................................................................3
PROPOSED REORGANIZATION........................................................3
REASONS FOR REORGANIZATION.....................................................3
FEDERAL INCOME TAX CONSEQUENCES................................................4
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS..............4
COMPARISON OF OTHER FEATURES OF THE FUNDS......................................4
COMPARATIVE FEE TABLE..........................................................4
EXPENSE RATIOS.................................................................6
THE INVESTMENT ADVISER.........................................................6
THE ADMINISTRATOR..............................................................7
THE DISTRIBUTOR AND OTHER SERVICE PROVIDERS....................................8
DISTRIBUTION PLAN..............................................................8
THE CUSTODIAN..................................................................8
PURCHASE AND REDEMPTION PROCEDURES; EXCHANGE PROCEDURES; DIVIDENDS,
DISTRIBUTIONS AND PRICING......................................................8
VOTING INFORMATION.............................................................9
RISK FACTORS...................................................................9
INFORMATION RELATING TO THE PROPOSED REORGANIZATION.....................................9
DESCRIPTION OF THE PLAN OF REORGANIZATION.....................................10
BOARD CONSIDERATION...........................................................11
CAPITALIZATION................................................................11
FEDERAL INCOME TAX CONSEQUENCES...............................................12
COMPARISON OF THE FUNDS................................................................13
INVESTMENT OBJECTIVES AND POLICIES............................................13
FUNDAMENTAL INVESTMENT LIMITATIONS............................................14
OTHER INFORMATION.............................................................14
INFORMATION RELATING TO VOTING MATTERS.................................................15
GENERAL INFORMATION...........................................................15
SHAREHOLDER AND BOARD APPROVAL................................................15
QUORUM........................................................................16
ANNUAL MEETINGS...............................................................16
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................................17
FINANCIAL HIGHLIGHTS...................................................................17
FINANCIAL STATEMENTS...................................................................22
OTHER BUSINESS.........................................................................22
LITIGATION.............................................................................22
SHAREHOLDER INQUIRIES..................................................................22
APPENDIX A - PLAN OF REORGANIZATION
APPENDIX B - MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
</TABLE>
<PAGE> 5
KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
1-800-633-KENT (5368)
COMBINED PROXY STATEMENT/PROSPECTUS
DATED FEBRUARY 26, 1999
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of the Kent Funds (the
"Trust") for use at a Special Meeting of Shareholders of the Trust's Limited
Term Tax-Free Fund ("Transferor Fund") to be held on March 24, 1999 in the Board
Room at BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 at 10:00
a.m. Eastern Time, or any adjournment thereof (the "Meeting"). At the Meeting,
shareholders of the Transferor Fund will be asked to consider and approve a
proposed Plan of Reorganization dated as of November 19, 1998 and the
transactions contemplated thereby. A copy of the Plan of Reorganization is
attached as Appendix A to this Combined Proxy Statement/Prospectus.
The Trust is an open-end management investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and currently offers shares
in fifteen investment portfolios. The Transferor Fund and the Trust's
Intermediate Tax-Free Fund (the "Surviving Fund") are separate investment
portfolios of the Trust. Each of the Transferor Fund and the Surviving Fund
offers two classes of shares, Investment Shares and Institutional Shares. The
investment objective, policies and fundamental limitations of the Transferor
Fund are similar to those of the Surviving Fund. The Funds' investment adviser
has used similar investment strategies in managing the Transferor Fund and the
Surviving Fund, although the dollar-weighted average maturity of the Surviving
Fund is longer. The distribution and purchase procedures, exchange rights,
redemption procedures and the service providers of the Transferor Fund and the
Surviving Fund are the same.
The Plan of Reorganization provides that the Transferor Fund will
transfer all of its assets and liabilities to the Surviving Fund. In exchange
for the transfers of these assets and liabilities, the Trust will simultaneously
issue Investment and Institutional Shares in the Surviving Fund to the
Transferor Fund. The Transferor Fund will then make a liquidating distribution
of the Surviving Fund's Investment and Institutional Shares to the holders of
Investment and Institutional Shares of the Transferor Fund, respectively, so
that each holder of Investment and Institutional Shares of the Transferor Fund
will hold, immediately after the effective time of the reorganization, full and
fractional shares of the corresponding class of the Surviving Fund
("Corresponding Shares") with the same aggregate net asset value as the
shareholder had in the Transferor Fund immediately before the transaction.
This Combined Proxy Statement/Prospectus sets forth the information
that a shareholder of the Transferor Fund should know before voting on the Plan
of Reorganization and should be retained for future reference. Additional
information is set forth in the Prospectus relating to
<PAGE> 6
Investment Shares and Institutional Shares of the Transferor Fund and the
Surviving Fund (collectively, the "Funds") dated May 1, 1998 (as supplemented),
the Statement of Additional Information dated May 1, 1998 (as supplemented)
relating to the Funds and the Statement of Additional Information dated February
26, 1999 relating to this Combined Proxy Statement/Prospectus. Further
information about the Funds' performance is also available in the Trust's Annual
and Semi-Annual Reports dated December 31, 1997 and June 30, 1998, respectively.
Each of these documents is on file with the Securities and Exchange Commission
(the "SEC") and is available without charge upon oral or written request by
writing or calling the Trust at the address or telephone number indicated above.
The information contained in the aforesaid Prospectus and Statements of
Additional Information is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Transferor
Fund's Proxy Statement for the Meeting, and the Prospectus for the Corresponding
Shares of the Surviving Fund that have been registered with the SEC and are to
be issued in connection with the reorganization.
This Combined Proxy Statement/Prospectus is expected to be sent to
shareholders of the Transferor Funds on or about February 26, 1999.
SHARES OF THE TRANSFEROR FUND AND THE SURVIVING FUND ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, OLD KENT BANK OR ANY OF ITS
AFFILIATES AND THE SHARES 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 INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THE SHARES OF THE SURVIVING FUND OR PASSED UPON THE ADEQUACY OF THIS COMBINED
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST.
-2-
<PAGE> 7
SUMMARY
The following is a summary of certain information relating to the
proposed reorganization, the parties thereto and the related transactions, and
is qualified by reference to the more complete information contained elsewhere
in this Combined Proxy Statement/Prospectus, including the Plan of
Reorganization attached as Appendix A hereto, and in the Prospectus and
Statement of Additional Information of the Funds.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Trust's Board of Trustees, including the trustees who
are not "interested persons" within the meaning of the 1940 Act, have determined
that the proposed Plan of Reorganization is in the best interests of the
Transferor Fund's shareholders.
THE TRUST'S BOARD OF TRUSTEES RECOMMENDS THE APPROVAL OF THE PLAN OF
REORGANIZATION BY THE SHAREHOLDERS OF THE TRANSFEROR FUND AT THE MEETING.
Subject to shareholder approval, the Plan of Reorganization provides
for the acquisition by the Surviving Fund of all of the assets and liabilities
of the Transferor Fund (such assets subject to such liabilities are called the
"Assets") in exchange for Corresponding Shares of the Surviving Fund. The
Transferor Fund will then make a liquidating distribution of the Corresponding
Shares to its shareholders.
As a result of the proposed reorganization, each shareholder of the
Transferor Fund will become a shareholder of the Surviving Fund and will hold,
immediately after the time the reorganization becomes effective (the "Effective
Time of the Reorganization"), the same aggregate dollar value of Corresponding
Shares of the Surviving Fund as the shareholder held in the Transferor Fund
immediately before the Effective Time of the Reorganization. The costs of the
proposed reorganization will be borne by the Transferor Fund.
For further information, see "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION--Description of the Plan of Reorganization."
REASONS FOR REORGANIZATION. The primary reason for the reorganization
is to streamline and simplify the Trust's municipal securities products. In
connection with its approval of the Plan of Reorganization, the Trust's Board of
Trustees considered that the investment objective and policies of the Transferor
Fund were similar to those of the Surviving Fund, and that the service providers
for the Transferor Fund and Surviving Fund were the same. After consideration of
the reasons for the proposed reorganization and the proposed operations of the
Surviving Fund after the reorganization, and in consideration of the fact that
the reorganization will be tax-free and will not dilute the interests of the
shareholders of the Transferor Fund or the Surviving Fund, the Board of Trustees
authorized the Plan of Reorganization and recommended approval of the Plan of
Reorganization by the shareholders of the Transferor Fund. See "INFORMATION
RELATING TO THE PROPOSED REORGANIZATION--Board Consideration."
-3-
<PAGE> 8
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the reorganization
will not give rise to tax liability for federal income tax purposes to the
Transferor Fund or the Surviving Fund or their respective shareholders. See
"INFORMATION RELATING TO THE PROPOSED REORGANIZATION--Federal Income Tax
Consequences."
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS. The
investment objective of both the Transferor Fund and the Surviving Fund is to
seek current income exempt from federal income tax, while preserving capital.
Each Fund seeks to invest at least 80% of its net assets in federally tax-exempt
obligations, except during periods of unusual market conditions.
The principal distinction between investment policies of the Transferor
Fund and the Surviving Fund is the maturity range of the obligations held by the
Funds. The Transferor Fund maintains a dollar-weighted average portfolio
maturity between one and three years. In addition, no obligation held by the
Transferor Fund has a remaining maturity of more than ten years. The Surviving
Fund maintains a dollar-weighted average portfolio maturity between three and
ten years. For further information, see "COMPARISON OF THE FUNDS--Investment
Objectives and Policies."
COMPARISON OF OTHER FEATURES OF THE FUNDS. The distribution and
purchase procedures, exchange rights, redemption procedures and service
providers of the Funds are the same.
COMPARATIVE FEE TABLE. The following table sets forth: (1) the fees and
expenses of the Investment Shares and Institutional Shares of the Transferor
Fund; (2) the fees and expenses of the Investment Shares and Institutional
Shares of the Surviving Fund; and (3) the estimated fees and expenses of the
Investment Shares and Institutional Shares of the Surviving Fund on a pro forma
basis after giving effect to the proposed reorganization. Hypothetical examples
based on the table are shown following the table.
-4-
<PAGE> 9
<TABLE>
<CAPTION>
PRO FORMA
LIMITED TERM INTERMEDIATE INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND TAX-FREE FUND
Investment Institutional Investment Institutional Investment Institutional
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 0.45% 0.45% 0.50% 0.50% 0.50% 0.50%
12b-1 Fees
(after fee waivers)2, 3 0.15% None 0.25% None 0.25% None
Other Expenses
(after fee waivers)3 0.33% 0.31% 0.22% 0.22% 0.22% 0.22%
----- ----- ----- ----- ----- -----
TOTAL FUND
OPERATING EXPENSES
(after fee waivers)3 0.93% 0.76% 0.97% 0.72% 0.97% 0.72%
===== ===== ===== ===== ===== =====
</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 Bank 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 Limited Term Tax-Free Fund, voluntary waivers of a
portion of the 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%, 0.34% 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 0.32% and 0.77%,
respectively, for the Institutional Shares of the Limited Term Tax-Free
Fund. In the case of the Intermediate Tax-Free Fund and pro forma
Intermediate Tax-Free Fund, a voluntary waiver of a portion of such Fund's
administration fee has been reflected. Absent such waiver, Other Expenses
and Total Fund Operating Expenses would be 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.
-5-
<PAGE> 10
EXAMPLE: The following table illustrates the expenses on a $1,000
investment based on the fees and expenses stated in the above Fee Table,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE PRO FORMA INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND TAX-FREE FUND
Investment Institutional Investment Institutional Investment Institutional
Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
One Year After Purchase $9 $8 $10 $7 $10 $7
Three Years After Purchase $30 $24 $31 $23 $31 $23
Five Years After Purchase $51 $42 $54 $40 $54 $40
Ten Years After Purchase $114 $94 $119 $89 $119 $89
</TABLE>
THE PURPOSE OF THE FEE TABLE AND THE EXAMPLE IS TO ASSIST INVESTORS IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES OF INVESTING IN SHARES OF THE
FUNDS. 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.
EXPENSE RATIOS. The following table sets forth the ratios of operating
expenses to average net assets of the Investment Shares and Institutional Shares
of the pro forma combined Surviving Fund, Investment Shares and Institutional
Shares of the Transferor Fund and Investment Shares and Institutional Shares of
the Surviving Fund for the year ended December 31, 1997 (a) after fee waivers
and (b) absent fee waivers:
<TABLE>
<CAPTION>
RATIO OF OPERATING EXPENSES RATIO OF OPERATING EXPENSES
TO AVERAGE NET TO AVERAGE NET
ASSETS AFTER FEE WAIVERS ASSETS ABSENT FEE WAIVERS
------------------------ -------------------------
<S> <C> <C>
Pro Forma Combined
Intermediate Tax Free Fund:
Investment Shares 0.97% 0.98%
Institutional Shares 0.72% 0.73%
Limited Term Tax-Free Fund:
Investment Shares 0.93% 1.04%
Institutional Shares 0.76% 0.77%
Intermediate Tax-Free Fund:
Investment Shares 0.97% 0.98%
Institutional Shares 0.72% 0.73%
</TABLE>
After taking into account current fee waivers, the ratio of expenses to
average net assets for the Investment Shares of the Transferor Fund is lower
than the ratio of expenses to average net assets for the Investment Shares of
the Surviving Fund. However, absent such fee waivers, the ratio of expenses to
average net assets for the Investment Shares of the Transferor Fund would be
higher than the ratio of expenses to average net assets for the Investment
Shares of the Surviving Fund.
THE INVESTMENT ADVISER. Lyon Street Asset Management Company ("Lyon
Street"), a wholly-owned subsidiary of Old Kent Bank ("Old Kent"), serves as
investment adviser for each Fund. Old Kent is a wholly-owned subsidiary of Old
Kent Financial Corporation, which is a financial services company with total
assets as of October 1, 1998 of approximately $15.4 billion. Lyon Street is
entitled to receive advisory fees from the Funds, computed daily and paid
monthly, at the annual rates set forth in the table below.
-6-
<PAGE> 11
The following table sets forth comparative data regarding the advisory
fees paid to Old Kent Bank (from which Lyon Street has assumed the investment
advisory responsibilities for the Trust) by the Surviving Fund and the
Transferor Fund for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Annual Advisory Fee as a
Percentage of Average
Advisory Fees Paid Daily Net Assets
------------------ ----------------
<S> <C> <C>
Limited Term Tax Free Fund $167,800 0.45%
Intermediate Tax-Free Fund $1,424,578 0.50%
</TABLE>
Lyon Street manages each Fund, makes decisions with respect to and
places orders for all purchases and sales of portfolio securities, and maintains
records relating to such purchases and sales.
THE ADMINISTRATOR. Administrative services are provided to the
Transferor Fund and to the Surviving Fund by BISYS Fund Services Limited
Partnership ("BISYS" or the "Administrator"). The Administrator also provides
administrative services to the other investment portfolios of the Trust. For
services provided to all of the investment portfolios of the Trust, the
Administrator is entitled to fees, computed daily and paid monthly, based on the
combined aggregate average daily net assets of the Trust as follows:
<TABLE>
<CAPTION>
Annual Administration
Fees as a Percentage of
Average Daily Net Assets
------------------------
<S> <C>
First $5.0 billion 0.185%
$5.0-7.5 billion 0.165%
Over $7.5 billion 0.135%
</TABLE>
The following table sets forth comparative data regarding the
administration fees paid by the Surviving Fund and the Transferor Funds for the
year ended December 31, 1997:
<TABLE>
<CAPTION>
Administration Administration Fees as a Percentage
Fees Paid of Average Daily Net Assets
--------- ---------------------------
<S> <C> <C>
Limited Term Tax-Free Fund $ 66,670 0.179%
Intermediate Tax-Free Fund $509,532 0.179%
</TABLE>
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 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.
-7-
<PAGE> 12
THE DISTRIBUTOR AND OTHER SERVICE PROVIDERS. BISYS is also the
distributor of the Funds' shares. BISYS Fund Services, Inc., an affiliate of
BISYS, acts as the fund accountant, transfer agent and dividend paying agent of
the Funds.
DISTRIBUTION PLAN. 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.
The services under the Plan may include assistance in advertising and
marketing of Investment Shares, aggregating and processing purchase, exchange
and redemption requests for Investment Shares, maintaining account records,
issuing confirmations of transactions and providing sub-accounting with respect
to Investment Shares.
As required by Rule 12b-1, the Plan and the related Distribution and
Servicing Agreements have been approved, and are subject to annual approval, by
a majority of the Trust's Board of Trustees, and by a majority of the Trustees
who are not "interested" persons of the Trust (as defined by the 1940 Act) and
who have no direct or indirect interest in the operation of the Plan and the
agreements related thereto ("Independent Trustees"), by a vote cast in person at
a meeting called for the purpose of voting on the Plan and related agreements.
Currently, Investment Shares of the Limited Term Tax-Free Fund bear a
fee pursuant to the Plan at an annual rate of 0.15% of such Fund's average
Investment class net assets and Investment Shares of the Intermediate Tax-Free
Fund bear a fee pursuant to the Plan at an annual rate of 0.25% of such Fund's
average Investment class net assets.
THE CUSTODIAN. Bankers Trust Company, 16 Wall Street, 4th Floor, New
York, New York 10005, serves as custodian of the assets of both the Transferor
Fund and the Surviving Fund. The Trust has entered into a Custody Agreement with
The Bank of New York, 90 Washington Street, 22nd Floor, New York, New York
10286, pursuant to which The Bank of New York is expected to become custodian of
the assets of both the Transferor Fund and the Surviving Fund prior to March 31,
1999.
PURCHASE AND REDEMPTION PROCEDURES; EXCHANGE PROCEDURES; DIVIDENDS,
DISTRIBUTIONS AND PRICING. The procedures for purchasing, redeeming and
exchanging Investment Shares and Institutional Shares of the Transferor Fund are
the same as those of the Surviving Fund. Additionally, dividends are declared
and paid monthly for both the Transferor Fund and the Surviving Fund, and net
investment income and long-term capital gains (if any) for the Funds are
distributed at least annually. The net asset value per share of each Fund is
determined as of the close of regular trading hours on the New York Stock
Exchange. The procedures for valuing the assets of the Transferor Fund are the
same as for those of the Surviving Fund.
Additional information concerning each Fund's purchase, redemption,
exchange, dividends and distributions and pricing procedures is contained in the
Funds' Prospectus.
-8-
<PAGE> 13
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Trust's Board of
Trustees in connection with a Special Meeting of Shareholders to be held on
March 24, 1999 in the Board Room at BISYS Fund Services, 3435 Stelzer Road,
Columbus, Ohio 43219 at 10:00 a.m. Eastern Time. Only shareholders of record at
the close of business on January 31, 1999 will be entitled to notice of and to
vote at the Meeting or any adjournment thereof. Each share or fraction of a
share is entitled to one vote or a fractional vote, respectively. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions thereon, or if no specification is made, the persons named as
proxies will vote in favor of each proposal set forth in the Notice of Meeting.
Proxies may be revoked at any time before they are exercised by submitting to
the Trust a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person. In addition, as of January 31, 1999,
Old Kent and its affiliates held investment and/or voting power with respect to
a majority of the Transferor Fund's outstanding shares on behalf of their
customers. The Trust has been advised by Old Kent that Old Kent and its
affiliates intend to exercise their discretion to vote all shares over which
they have voting power in a manner consistent with their fiduciary
responsibilities. Old Kent and its affiliates have also advised the Trust that
they intend to vote the shares over which they have voting power in favor of
each proposal. If Old Kent and its affiliates cast their votes in favor of each
proposal, the proposals will be approved by a majority of the outstanding shares
of the Transferor Fund. For additional information, including a description of
the shareholder vote required for approval of the Plan of Reorganization and
related transactions contemplated thereby, see "INFORMATION RELATING TO VOTING
MATTERS."
RISK FACTORS. Because of the similarities of the investment objectives
and policies of the Transferor Fund and the Surviving Fund, Lyon Street believes
that an investment in the Surviving Fund involves risks that are similar to
those of the Transferor Fund. However, bonds with shorter maturities, such as
those held by the Transferor Fund, tend to be less affected by interest rate
changes than bonds with longer maturities, such as those held by the Surviving
Fund. Consequently, the net asset value per share of the Surviving Fund may be
more volatile than the net asset value per share of the Transferor Fund. The
prices of bonds and other debt instruments generally fluctuate inversely with
interest rate changes.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions under which the reorganization may be
consummated are set forth in the Plan of Reorganization. Significant provisions
of the Plan of Reorganization are summarized below; however, this summary is
qualified in its entirety by reference to the Plan of Reorganization, a copy of
which is attached as Appendix A to this Combined Proxy Statement/Prospectus.
-9-
<PAGE> 14
DESCRIPTION OF THE PLAN OF REORGANIZATION. The Plan of Reorganization
provides that at the Effective Time of the Reorganization, all of the Assets of
the Transferor Fund will be transferred to the Surviving Fund, so that at and
after the Effective Time of the Reorganization, the Assets (and liabilities) of
the Transferor Fund will become and be the assets (and liabilities) of the
Surviving Fund. In exchange for the transfer of the Assets, the Surviving Fund
will assume all of the liabilities of the Transferor Fund and issue to the
Transferor Fund full and fractional Corresponding Shares of the Surviving Fund.
The number of Corresponding Shares of the Surviving Fund so issued will have an
aggregate net asset value equal to the aggregate net asset value of the
Investment and Institutional Shares of the Transferor Fund that are outstanding
immediately prior to the Effective Time of the Reorganization. The Transferor
Fund will then make a liquidating distribution of such shares to its
shareholders. At and after the Effective Time of the Reorganization, all debts,
liabilities and obligations of the Transferor Fund will attach to the Surviving
Fund and may thereafter be enforced against the Surviving Fund to the same
extent as if they had been incurred by it.
The Plan of Reorganization provides that the Board of Trustees of the
Trust will declare a dividend or dividends prior to the Effective Time of the
Reorganization which, together with all previous dividends, will have the effect
of distributing to the shareholders of the Transferor Fund all undistributed
ordinary income earned and net capital gains realized up to and including the
Effective Time of the Reorganization.
The stock transfer books of the Trust for the Transferor Fund will be
permanently closed as of the close of business on the day immediately preceding
the Effective Time of the Reorganization. Redemption requests received
thereafter by the Trust with respect to the Transferor Fund will be deemed to be
redemption requests for the Surviving Fund. If any Transferor Fund shares held
by a Transferor Fund shareholder are represented by a share certificate, the
certificate must be surrendered to the Company's transfer agent for cancellation
before the Surviving Fund shares issued to the shareholder in the reorganization
will be redeemed.
The reorganization is subject to a number of conditions, including
approval of the Plan of Reorganization and the transactions contemplated therein
by the shareholders of the Transferor Fund, and the receipt of certain legal
opinions described in the Plan of Reorganization including a legal opinion of
Drinker Biddle & Reath LLP that the Corresponding Shares of the Surviving Fund
issued to shareholders of the Transferor Fund in accordance with the terms of
the Plan of Reorganization will be validly issued, fully paid and nonassessable.
The Trust, by consent of its Board of Trustees, may waive any condition to the
obligations of the Transferor Fund or Surviving Fund under the Plan of
Reorganization if, in its judgment, such waiver will not have a material adverse
affect on the interests of the shareholders of the Transferor Fund or the
Surviving Fund.
-10-
<PAGE> 15
The expenses incurred in connection with the reorganization will be
borne by the Transferor Fund.
Assuming satisfaction of the conditions in the Plan of Reorganization,
the Effective Time of the Reorganization will be on February 26, 1999, or such
other date as is scheduled by the Trust.
The Plan of Reorganization and the reorganization described therein may
be abandoned at any time for any reason prior to the Effective Time of the
Reorganization upon the vote of a majority of the Board of Trustees of the
Trust. The Plan of Reorganization provides further that at any time prior to or
(to the fullest extent permitted by law) after approval of the Plan of
Reorganization by the shareholders of the Transferor Fund the Trust may, upon
authorization by its Board of Trustees, and with or without the approval of the
shareholders, amend any of the provisions of the Plan of Reorganization.
BOARD CONSIDERATION. The Board of Trustees of the Trust considered the
proposed reorganization at a meeting held on November 19, 1998. In considering
the Plan of Reorganization, the Board of Trustees considered the terms of the
Plan of Reorganization; a comparison of the Transferor Fund's expense ratios
with those of the Surviving Fund; the recommendation of Lyon Street in favor of
the proposed reorganization; the fact that the proposed reorganization would be
conducted on a tax-free basis; and the fact that the interests of shareholders
would not be diluted as a result of the reorganization. In connection with its
approval of the Plan of Reorganization, the Trustees noted that the investment
objectives and investment limitations of the Transferor Fund were identical to
those of the Surviving Fund, although the dollar-weighted average maturity of
the Surviving Fund is longer. The Board considered that after taking into
account current fee waivers, the ratio of expenses to average net assets for the
Investment Shares of the Transferor Fund was lower than the ratio of expenses to
average net assets for the Investment Shares of the Surviving Fund. The Board
noted, however, that absent current fee waivers, the ratio of expenses to
average net assets for the Investment Shares of the Transferor Fund was higher
than the ratio of expenses to average net assets for the Investment Shares of
the Surviving Fund. In addition, the relatively small asset base of the
Transferor Fund made its continued viability questionable, and merging the
Transferor Fund into the Surviving Fund on a tax-free basis presented
substantial capital gains tax savings compared to simply liquidating the
Transferor Fund. Similarly, the Board noted that the costs to be borne by the
Transferor Fund associated with merging it into the Surviving Fund would be more
than offset by such tax savings.
Based upon their evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Board of Trustees unanimously determined that (i) the proposed reorganization
was in the best interests of the Transferor Fund and the Surviving Fund, (ii)
that the interests of existing shareholders of the Funds will not be diluted as
a result of the transaction, and recommended the approval of the Plan of
Reorganization by shareholders of the Transferor Fund at the Meeting. The Plan
of Reorganization in the form attached hereto as Appendix A was approved by the
Board of Trustees on November 19, 1998.
CAPITALIZATION. Because the Transferor Fund will be combined with the
Surviving Fund in the reorganization, the total capitalization of the Surviving
Fund after the reorganization is expected to be greater than the current
capitalization of the Transferor Fund. The following table sets forth as of
November 30, 1998 (i) the capitalization of the Transferor Fund; (ii) the
capitalization of the Surviving Fund; and (iii) the pro forma capitalization of
the Surviving Fund as adjusted to give effect to the proposed reorganization of
the Transferor Fund. There is, of course, no assurance that the reorganization
will be consummated. Moreover, if consummated, the capitalization of each Fund
is likely to be different at the Effective Time of the Reorganization as a
result of daily share purchase and redemption activity in the Funds.
-11-
<PAGE> 16
<TABLE>
<CAPTION>
PRO FORMA
LIMITED TERM INTERMEDIATE INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND TAX-FREE FUND
------------- ------------- -------------
<S> <C> <C> <C>
Total Net Assets:
Investment Shares $382,283 $4,011,594 $4,393,877
Institutional Shares $32,782,749 $297,975,519 $330,758,268
Shares Outstanding:
Investment Shares 37,153.550 371,040.835 406,404.644
Institutional Shares 3,198,189.503 27,559,695.315 30,592,327.007
Net Asset Value Per Shares:
Investment Shares $10.29 $10.81 $10.81
Institutional Shares $10.25 $10.81 $10.81
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the transaction is
subject to the condition that the Trust receive an opinion from Drinker Biddle &
Reath LLP, subject to appropriate factual assumptions, to the effect that for
federal income tax purposes: (i) the transfer of all of the Assets of the
Transferor Fund to the Surviving Fund in exchange for shares of the Surviving
Fund and the liquidating distributions to shareholders of the Transferor Fund of
the shares of the Surviving Fund so received, as described in the Plan of
Reorganization, will constitute a reorganization within the meaning of Section
368(a)(1)(C) or Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended, (the "Code") and the Transferor Fund and the Surviving Fund each will
be considered "a party to a reorganization" within the meaning of Section 368(b)
of the Code; (ii) no gain or loss will be recognized by the Transferor Fund as a
result of such transactions; (iii) no gain or loss will be recognized by the
Surviving Fund as a result of such transactions; (iv) no gain or loss will be
recognized by the shareholders of the Transferor Fund on the distribution to
them by the Trust of the Corresponding Shares of the Surviving Fund in exchange
for their Investment Shares or Institutional Shares of the Transferor Fund; (v)
the basis of the Corresponding Shares received by a shareholder of the
Transferor Fund will be the same as the basis of the shareholder's Investment
Shares or Institutional Shares of the Transferor Fund immediately prior to the
reorganization; (vi) the basis of the Surviving Fund in the Assets of the
Transferor Fund received pursuant to the reorganization will be the same as the
basis of the Assets in the hands of the Transferor Fund immediately before the
reorganization; (vii) a shareholder's holding period for the Corresponding
Shares will be determined by including the period for which the shareholder held
the Investment Shares or Institutional Shares of the Transferor Fund exchanged
therefor, provided that the shareholder held such Transferor Fund's Investment
Shares or Institutional Shares as a capital asset; and (viii) the Surviving
Fund's holding period with respect to the Assets of the Transferor Fund received
in the reorganization will include the period for which such Assets were held by
the Transferor Fund.
The Trust has not sought a tax ruling from the Internal Revenue Service
("IRS"). The tax opinion described in the preceding paragraph will not be
binding on the IRS and will not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisors concerning the
potential tax consequences to them, including state and local income tax
consequences.
-12-
<PAGE> 17
COMPARISON OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of both
the Transferor Fund and the Surviving Fund is to seek current income exempt from
federal income tax, while preserving capital. This investment objective is
non-fundamental. The principal distinction between investment policies of the
Transferor Fund and the Surviving Fund is the maturity range of obligations held
by the Funds. The Transferor Fund maintains a dollar-weighted average portfolio
maturity between one and three years. In addition, no obligation held by the
Transferor Fund has a remaining maturity of more than ten years. The Surviving
Fund maintains a dollar-weighted average portfolio maturity of between three and
ten years. The Transferor Fund and the Surviving Fund have identical investment
limitations and invest in the same types of securities.
Each Fund intends to invest at least 80% of its net assets in federally
tax-exempt obligations, except during periods of unusual market conditions. This
policy is a fundamental policy which cannot be changed by a Fund without the
approval of its shareholders. In calculating the 80% limitation, 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.
The 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.
The amount of information regarding the financial condition of issuers
of municipal obligations may be less extensive than the information for public
corporations, and the secondary market for municipal obligations may be less
liquid than that for taxable obligations. Accordingly, the ability of a Fund to
buy and sell municipal obligations may, at any particular time and with respect
to any particular securities, be limited. In addition, municipal obligations
purchased by the Funds include obligations backed by letters of credit and other
forms of credit enhancement issued by domestic and foreign banks, as well as
other financial institutions and corporations. Adverse changes in the credit
quality of these institutions could cause loss to a Fund and affect its share
price.
-13-
<PAGE> 18
Municipal obligations purchased by the Funds will be rated in one of
the four highest rating categories by a nationally recognized statistical rating
organization ("NRSRO") (for example, BBB or higher by Standard & Poor's Ratings
Services ("S&P"), or Baa or higher by Moody's Investors Service, Inc.
("Moody's"), or, if unrated, will be deemed to be of comparable quality by Lyon
Street. Obligations rated in the fourth highest rating category are considered
to have speculative characteristics. See Appendix A to the Funds' Statement of
Additional Information for a description of applicable S&P, Moody's and other
NRSRO ratings.
FUNDAMENTAL INVESTMENT LIMITATIONS. The Funds have in place certain
fundamental investment limitations that cannot be changed for a Fund without
the approval of a "majority" of that Fund's outstanding shares. Some of these
limitations are summarized below. A complete list of the fundamental investment
limitations for the Funds is contained in the Funds' Statement of Additional
Information.
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.
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.
OTHER INFORMATION. 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 fifteen portfolios, each of which offers two
classes of shares: Investment Shares and Institutional Shares. The Trust has
also created an additional portfolio that will offer one class of shares and
that is expected to commence operations in March 1999.
Each share in a Fund represents an equal proportionate interest in the
particular Fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such Fund as are declared in the discretion of the Board of Trustees. The
Declaration of Trust authorizes the issuance of an unlimited number of shares
with beneficial interest in one or more separate series, and the creation of one
or more classes of shares within each series. The Trust's shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held and vote in the aggregate and not by class or series,
except as otherwise expressly required by law.
The foregoing is only a summary of certain material attributes of the
Funds and their shares. Shareholders may obtain copies of the Trust's
Restatement of Declaration of Trust upon written request at the address shown on
the cover page of this Combined Proxy Statement/Prospectus.
-14-
<PAGE> 19
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Board of
Trustees of the Trust for use at the Meeting. It is expected that the
solicitation of proxies will be primarily by mail. The Trust's officers and
service contractors may also solicit proxies by telephone, telegraph or personal
interview. The cost of such solicitation will be borne by the Transferor Fund.
Only shareholders of record at the close of business on January 31,
1999 will be entitled to vote at the Meeting. On that date, there were
outstanding and entitled to be voted __________ Investment Shares and
______________ Institutional Shares of the Transferor Fund.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting. Any shareholder giving
a proxy may revoke it at any time before it is exercised by submitting to the
Trust a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and electing to vote in person.
SHAREHOLDER AND BOARD APPROVAL. The Plan of Reorganization and the
transactions contemplated therein are being submitted for approval at the
Meeting by the holders of a majority of the outstanding shares of the Transferor
Fund in accordance with the terms of the Plan. The term "majority of the
outstanding shares" as used herein means more than 50% of all the votes cast at
a meeting at which a quorum is present. The vote of the shareholders of the
Surviving Fund is not being solicited, because their approval or consent is not
required for the reorganization.
The approval of the Plan of Reorganization by the Board of Trustees is
discussed above under "INFORMATION RELATING TO THE PROPOSED
REORGANIZATION--Board Consideration."
As of January 31, 1999, Old Kent, the parent company of the Trust's
investment adviser, and its affiliates held of record approximately % and
% of the outstanding shares of the Transferor Fund and the Surviving Fund
respectively, as agent or custodian for their customers. In addition, as of
January 31, 1999, Old Kent and its affiliates held investment and/or voting
power with respect to a majority of the outstanding shares of the Transferor
Fund on behalf of their customers. The Trust has been advised by Old Kent that
Old Kent and its affiliates intend to exercise their discretion to vote all
shares over which they have voting power in a manner consistent with their
fiduciary responsibilities. Old Kent and its affiliates have also advised the
Trust that they intend to vote all shares over which they have voting power in
favor of each proposal. If Old Kent and its affiliates cast their votes in favor
of each proposal, the proposals will be approved by a majority of the
outstanding shares of the Transferor Fund.
-15-
<PAGE> 20
For purposes of the 1940 Act, any person who owns directly or through
one or more controlled companies more than 25 percent of the voting securities
of a company is presumed to "control" such company. Under this definition, Old
Kent and its affiliates may be deemed to be controlling persons of the Trust.
At January 31, 1999, the name, address and share ownership of each
person who owned beneficially and/or of record 5% or more of the outstanding
shares of the Transferor Fund and the Surviving Fund are listed in the following
table. The table also shows the percentage of each Fund that would be owned by
these persons upon the consummation of the reorganization based on their
holdings at that date.
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP OF CLASS
PERCENTAGE OF OF THE SURVIVING
OWNERSHIP OF FUND AFTER
NAME AND ADDRESS FUND/CLASS CLASS REORGANIZATION
- ---------------- ---------- ----------- -----------------
<S> <C> <C> <C>
Trent & Co. Limited Term Tax-Free
Cash Account (Institutional Shares)
Attn.: Kent Fund Trader
4420 44th St., Ste. A
Kentwood, MI 49512
BHC Securities Inc. Limited Term Tax-Free
Trade House Acct. (Investment Shares)
Attn.: Mutual Fund Dept.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Rose M. Black Limited Term Tax-Free
Trustee, Rose M. (Investment Shares)
Black Trust
1208 Baker Street
Kalamazoo, MI 49512
Trent & Co. Intermediate Tax-Free
Attn.: Kent Fund Trader (Institutional Shares)
4420 44th St., Ste. A
Kentwood, MI 49512
</TABLE>
At the record date for the Meeting, the Trustees and officers of the
Trust as a group owned beneficially less than 1% of the outstanding shares of
the Transferor Fund and the Surviving Fund.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Plan of Reorganization are not received, the persons named as
proxies, or their substitutes, may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in
-16-
<PAGE> 21
person or by proxy. If a quorum is not present, the persons named as proxies
will vote those proxies FOR adjournment. If a quorum is present, the persons
named as proxies will vote those proxies which they are entitled to vote FOR the
Plan of Reorganization in favor of such adjournments, and will vote those
proxies required to be voted AGAINST such proposal against any adjournment. A
quorum is constituted with respect to the Transferor Fund by the presence in
person or by proxy of the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at the Meeting. Shares represented by broker non-votes
are treated as being present at the meeting for purposes of determining a
quorum. A vote cast does not include an abstention or the failure to vote for or
against a proposal. Therefore, for purposes of determining the affirmative vote
of a "majority of the outstanding shares," an abstention or the failure to vote,
including a broker non-vote, will be the equivalent of voting against approval
of the Plan of Reorganization.
ANNUAL MEETINGS. The Trust does not presently intend to hold annual
meetings of shareholders except as required by the 1940 Act or other applicable
law. The Trust will call a meeting of shareholders for the purpose of voting
upon the question of removal of a member of the Board of Trustees upon written
request of shareholders owning at least 25% of the outstanding shares of the
Trust entitled to vote.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Information about the Transferor Fund and the Surviving Fund is
included in the Prospectus dated May 1, 1998 (as supplemented) which is
incorporated by reference herein. Additional information about the Transferor
Fund and the Surviving Fund is included in the Statement of Additional
Information dated May 1, 1998 (as supplemented), which has been filed with the
SEC and is incorporated by reference herein. Copies of the Prospectus and the
Statement of Additional Information may be obtained without charge by calling
the Trust at 1-800-633-KENT (5368). The Trust is subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act, as
applicable, and, in accordance with such requirements, files proxy materials,
reports and other information with the SEC. These materials can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, these materials can be
inspected and copied at the SEC's Regional Offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
FINANCIAL HIGHLIGHTS
The tables set forth below present financial information for the
Investment Shares and Institutional Shares of the Transferor Fund and the
Surviving Fund. This information is derived from the Trust's unaudited financial
statements presented in the Semi-Annual Report for the period ended June 30,
1998, and should be read in conjunction with the unaudited financial statements
and related notes, which are included in the Statement of Additional Information
related to this Combined Proxy Statement/Prospectus. Financial highlights for
the Transferor
-17-
<PAGE> 22
Fund and the Surviving Fund for prior periods are contained in the Prospectus
dated May 1, 1998 (as supplemented), and financial statements for the Transferor
Fund and the Surviving Fund for the prior periods are contained in the Trust's
Annual Report to Shareholders and are incorporated by reference into the
Transferor Funds' and the Surviving Fund's Statement of Additional Information
dated May 1, 1998 (as supplemented), 1999, which Prospectus and Statement of
Additional Information are incorporated herein by reference. Additional
information about the Funds' performance is included in Appendix B attached
hereto.
-18-
<PAGE> 23
LIMITED TERM TAX-FREE FUND
(for a share outstanding throughout the period)
Investment Shares
-----------------
<TABLE>
<CAPTION>
For the Six-Month
Period ended June 30, 1998
(unaudited)
--------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $10.23
----------------------------------------------------------------------- -----------------------
Income (Loss) from Investment Operations:
Net investment income............................................ 0.19
Net realized and unrealized gains (losses)
on investments................................................ (0.02)
----------------------------------------------------------------------- -----------------------
Total Income (Loss) from Investment Operations:.................. 0.17
----------------------------------------------------------------------- -----------------------
Less Dividends and Distributions from:
Net investment income............................................ (0.19)
In excess of net investment income............................... --
Net realized gains on investments................................ --
----------------------------------------------------------------------- -----------------------
Total Dividends and Distributions:............................... (0.19)
----------------------------------------------------------------------- -----------------------
Net change in net asset value.................................... (0.02)
======================================================================= =======================
NET ASSET VALUE, END OF PERIOD................................... $10.21
======================================================================= =======================
TOTAL RETURN (1)................................................. 1.63%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's)................................ $292
Ratios to average net assets:
Ratio of expenses............................................. 0.90%+
Ratio of net investment income ............................... 3.70%+
Ratio of expenses*............................................ 1.01%+
Ratio of net investment income*............................... 3.59%+
Portfolio turnover rate(2)....................................... 24%
</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) Calculation does not include sales charge that was previously
applicable for Investment Shares. Such sales charge was discontinued as
of May 1, 1997.
(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
LIMITED TERM TAX-FREE FUND
(for a share outstanding throughout the period)
Institutional Shares
--------------------
<TABLE>
<CAPTION>
For the Six-Month
Period ended June 30, 1998
(unaudited)
--------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $10.19
------------------------------------------------------------------ --------------------
Income (Loss) from Investment Operations:
Net investment income....................................... 0.19
Net realized and unrealized gains (losses)
on investments........................................... (0.02)
------------------------------------------------------------------ --------------------
Total Income (Loss) from Investment Operations:................ 0.17
------------------------------------------------------------------ --------------------
Less Dividends and Distributions from:
Net investment income....................................... (0.19)
In excess of net investment income.......................... --
Net realized gains on investments........................... --
------------------------------------------------------------------ --------------------
Total Dividends and Distributions:.......................... (0.19)
------------------------------------------------------------------ --------------------
Net change in net asset value............................... (0.02)
------------------------------------------------------------------ --------------------
NET ASSET VALUE, END OF PERIOD.............................. $10.17
================================================================== ====================
TOTAL RETURN................................................ 1.72%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's)........................... $37,205
Ratios to average net assets:
Ratio of expenses ....................................... 0.75%+
Ratio of net investment income .......................... 3.85%+
Ratio of expenses*....................................... 0.76%+
Ratio of net investment income*.......................... 3.84%+
Portfolio turnover rate(1).................................. 24%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
-20-
<PAGE> 25
INTERMEDIATE TAX-FREE FUND
(for a share outstanding throughout the period)
Investment Shares
-----------------
<TABLE>
<CAPTION>
For the Six-Month Period
Ended June 30, 1998
(unaudited)
------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $10.68
----------------------------------------------------------------- ---------------------------------------------------
Income(Loss) from Investment Operations:
Net investment income....................................... 0.21
Net realized and unrealized gains (losses)
on investments........................................... (0.02)
----------------------------------------------------------------- ---------------------------------------------------
Total Income (Loss) from Investment Operations:............... 0.19
----------------------------------------------------------------- ---------------------------------------------------
Less Dividends and Distributions from:
Net investment income....................................... (0.21)
In excess of net investment income.......................... --
Net realized gains on investments........................... --
----------------------------------------------------------------- ---------------------------------------------------
Total Dividends and Distributions:.......................... (0.21)
----------------------------------------------------------------- ---------------------------------------------------
Net change in net asset value............................... (0.02)
----------------------------------------------------------------- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD.............................. $10.66
================================================================= ===================================================
TOTAL RETURN(1)............................................. 1.80%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's)........................... $3,770
Ratios to average net assets:
Ratio of expenses ....................................... 0.98%+
Ratio of net investment income .......................... 4.03%+
Ratio of expenses*....................................... 0.99%+
Ratio of net investment income*.......................... 4.02%+
Portfolio turnover rate(2).................................. 12%
</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) Calculation does not include sales charge that was previously
applicable for Investment Shares. Such sales charge was discontinued as
of May 1, 1997.
(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
INTERMEDIATE TAX-FREE FUND
(for a share outstanding throughout the period)
Institutional Shares
--------------------
<TABLE>
<CAPTION>
For the Six-Month Period
Ended June 30, 1998
(unaudited)
------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................... $10.68
------------------------------------------------------------- ---------------------------------------------------
Income (Loss) from Investment Operations:
Net investment income..................................... 0.23
Net realized and unrealized gains (losses)
on investments......................................... (0.02)
------------------------------------------------------------- ---------------------------------------------------
Total Income (Loss) from Investment Operations: 0.21
------------------------------------------------------------- ---------------------------------------------------
Less Dividends and Distributions from:
Net investment income..................................... (0.23)
In excess of net investment income........................ --
Net realized gains on investments......................... --
------------------------------------------------------------- ---------------------------------------------------
Total Dividends and Distributions:........................ (0.23)
------------------------------------------------------------- ---------------------------------------------------
Net change in net asset value............................. (0.02)
------------------------------------------------------------- ---------------------------------------------------
NET ASSET VALUE, END OF PERIOD............................ $10.66
============================================================= ===================================================
TOTAL RETURN.............................................. 1.84%++
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's)......................... $284,980
Ratios to average net assets:.............................
Ratio of expenses ..................................... 0.73%+
Ratio of net investment income ........................ 4.28%+
Ratio of expenses*..................................... 0.74%+
Ratio of net investment income*........................ 4.27%+
Portfolio turnover rate(1)................................ 12%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
-22-
<PAGE> 27
FINANCIAL STATEMENTS
The audited financial statements and condensed financial information
for the Transferor Fund and the Surviving Fund for the annual period ended
December 31, 1997 are included in or incorporated by reference into the Funds'
Prospectus dated May 1, 1998 (as supplemented) and the Statement of Additional
Information dated May 1, 1998 (as supplemented). Such audited financial
statements and condensed financial information have been incorporated herein in
reliance on the report of KPMG LLP, independent auditors, given on the authority
of that firm as experts in accounting and auditing.
OTHER BUSINESS
The Trust's Board of Trustees knows of no other business to be brought
before the Meeting with respect to the Transferor Fund. However, if any other
matters come before the Meeting, it is the intention of the Board that proxies
that do not contain specific restrictions to the contrary will be voted on such
matters in accordance with the judgment of the persons named in the enclosed
form of proxy.
LITIGATION
The Trust is not involved in any litigation that would have any
material adverse financial effect upon the funds.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-633-KENT (5368).
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-23-
<PAGE> 28
APPENDIX A
PLAN OF REORGANIZATION
This PLAN OF REORGANIZATION (the "Plan") is dated as of the 19th day of
November, 1998, and has been adopted by the Board of Trustees of The Kent Funds
(the "Trust") to provide for the reorganization of The Kent Limited Term
Tax-Free Fund (the "Transferor Fund") into The Kent Intermediate Tax-Free Fund
(the "Surviving Fund").
A. BACKGROUND
The Transferor Fund and the Surviving Fund (individually, a "Fund" and
collectively, the "Funds") are separate investment portfolios of the Trust. The
Trust is organized as a Massachusetts business trust and is an open-end
management investment company registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 (the "1940
Act"). The Board of Trustees of the Trust has determined that it is in the best
interests of the Transferor Fund and its shareholders to be reorganized through
the transfer of all of the Transferor Fund's assets and liabilities to the
Surviving Fund upon the terms set forth in this Plan (the "Reorganization").
B. THE REORGANIZATION
1. At the Effective Time of the Reorganization (as defined below in
Section 5 of this Article B), all property of every description, and all
interests, rights, privileges and powers of the Transferor Fund, subject to all
liabilities of the Transferor Fund, whether accrued, absolute, contingent or
otherwise (such assets subject to such liabilities are herein referred to as the
"Assets") will be transferred and conveyed by the Transferor Fund to the
Surviving Fund and will be assumed by the Surviving Fund, such that at and after
the Effective Time of the Reorganization, the Assets of the Transferor Fund will
become and be the Assets of the Surviving Fund. In exchange for the transfer of
the Assets of the Transferor Fund, the Surviving Fund will contemporaneously
issue to the Transferor Fund full and fractional Investment and Institutional
shares of the Surviving Fund (as contemplated by Section 3 of this Article B)
having an aggregate net asset value equal to the value of the Assets of the
Transferor Fund. For purposes of effecting such exchange, the value of the
Assets of the Transferor Fund and the net asset value of the shares of the
Surviving Fund shall be determined as of 4:00 p.m., Eastern time, on March 29,
1999, or at such other time as may be determined by the Board of Trustees or an
authorized officer of the Trust. Such values shall be computed in the manner set
forth in the Funds' then current prospectus under the Securities Act of 1933, as
amended. At and after the Effective Time of the Reorganization, all debts,
liabilities, obligations and duties of the Transferor Fund will attach to the
Surviving Fund as aforesaid and may thenceforth be enforced against the
Surviving Fund to the same extent as if the same had been incurred by the
Surviving Fund.
2. Prior to the Effective Time of the Reorganization, the Transferor
Fund shall declare a dividend, with a record date and ex-dividend date prior to
the Effective Time of the
<PAGE> 29
Reorganization, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of the Transferor Fund's net
investment income, if any, for the taxable periods or years ended on or before
December 31, 1998 and for the period from said date to and including the
Effective Time of the Reorganization, and all of the Transferor Fund's net
capital gain, if any, realized in the taxable periods or years ended on or
before December 31, 1998 and in the period from said date to and including the
Effective Time of the Reorganization.
3. At the Effective Time of the Reorganization, the Transferor Fund
will make a liquidating distribution to its shareholders of full and fractional
shares of the Surviving Fund, such that (a) the shares of the Surviving Fund
that are distributed to a shareholder of the Transferor Fund will have an
aggregate net asset value equal to the aggregate net asset value of the shares
of the Transferor Fund held by such shareholder immediately prior to the
Effective Time of the Reorganization, and (b) the class of shares of the
Surviving Fund that are distributed to a shareholder of the Transferor Fund will
be the same as the class of shares of the Transferor Fund held by such
shareholder immediately prior to the Effective Time of the Reorganization. In
addition, each shareholder of the Transferor Fund will have the right to receive
any unpaid dividends or other distributions that were declared before the
Effective Time of the Reorganization with respect to the shares of the
Transferor Fund held by such shareholder immediately prior to the Effective Time
of the Reorganization.
4. The stock transfer books of the Trust with respect to the Transferor
Fund will be permanently closed as of the close of business on the day
immediately preceding the Effective Time of the Reorganization. Redemption
requests received thereafter by the Trust with respect to the Transferor Fund
will be deemed to be redemption requests for shares of the Surviving Fund issued
pursuant to this Plan. If any shares of the Transferor Fund are represented by a
share certificate, the certificate must be surrendered to the Trust's transfer
agent for cancellation before the Surviving Fund shares issuable to the
shareholder pursuant to this Plan will be redeemed.
5. The Effective Time of the Reorganization for purposes of this
Agreement shall be the opening of business on March 30, 1999, or at such other
time as may be determined by the Board of Trustees or an authorized officer of
the Trust.
C. ACTIONS BY SHAREHOLDERS OF THE TRANSFEROR FUND
Prior to the Effective Time of the Reorganization and as a condition
thereto, the Board of Trustees of the Trust will call, and the Trust will hold,
a meeting of the shareholders of the Transferor Fund to consider and vote upon:
1. Approval of this Plan and the transactions contemplated
hereby.
2. Such other matters as may be determined by the Board of
Trustees of the Trust.
-2-
<PAGE> 30
D. CONDITIONS TO THE REORGANIZATION
Consummation of this Plan will be subject to:
1. The approval of the matters referred to in Article C of this Plan by
the shareholders of the Transferor Fund in the manner required by law and
otherwise deemed necessary or advisable by the Board of Trustees of the Trust;
and
2. The following additional conditions:
a. The Trust will have received an opinion of Drinker Biddle &
Reath LLP to the effect that:
(i) the shares of the Surviving Fund issued pursuant
to this Plan will, when issued in accordance with the provisions hereof, be
legally issued, fully paid and non-assessable; and
(ii) for federal income tax purposes: (i) the
acquisition of the assets and assumption of the liabilities of the Transferor
Fund by the Surviving Fund in return for Investment and Institutional shares of
the Surviving Fund followed by the distribution of such shares to the
shareholders of the Transferor Fund will constitute a "reorganization" within
the meaning of Section 368(a)(1)(C) or Section 368(a)(1)(D) of the Code and the
Surviving Fund and the Transferor Fund will be "a party to the reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Transferor Fund upon the transfer of its assets and
liabilities to the Surviving Fund; (iii) no gain or loss will be recognized by
the Surviving Fund upon the receipt of the assets of the Transferor Fund in
exchange for Investment and Institutional shares of the Surviving Fund and the
assumption by the Surviving Fund of the liabilities of the Transferor Fund; (iv)
no gain or loss will be recognized by the shareholders of the Transferor Fund
upon the receipt of the Investment and Institutional shares of the Surviving
Fund in exchange for their Investment and Institutional shares in the Transferor
Fund; (v) the basis of the Investment and Institutional shares of the Surviving
Fund received by the shareholders of the Transferor Fund will be the same as the
basis of the Investment and Institutional shares of the Transferor Fund
exchanged therefor; (vi) the tax basis of the assets of the Transferor Fund in
the hands of the Surviving Fund will be the same as the tax basis of such assets
in the hands of the Transferor Fund immediately prior to the transfer; (vii) the
holding period of the Investment and Institutional shares of the Surviving Fund
received by the shareholders of the Transferor Fund will include the holding
period of the Investment and Institutional shares of the Transferor Fund
exchanged therefor, provided that at the time of the exchange the Investment and
Institutional shares of the Transferor Fund were held as capital assets; and
(viii) the holding period of the Surviving Fund for the assets of the Transfer
Fund transferred to it will include the period during which such assets were
held by the Transferor Fund.
b. All necessary approvals, registrations and exemptions
required under federal and state laws will have been obtained.
-3-
<PAGE> 31
E. MISCELLANEOUS
1. This Plan and the transactions contemplated hereby will be governed
and construed in accordance with the laws of the Commonwealth of Massachusetts.
2. This Plan and the transactions contemplated hereby may be abandoned
at any time for any reason prior to the Effective Time of the Reorganization
upon the vote of a majority of the Board of Trustees of the Trust.
3. At any time prior to or (to the fullest extent permitted by law)
after approval of this Plan by the shareholders of the Transferor Fund, the
Trust may, upon authorization by the Board of Trustees and with or without the
approval of shareholders of the Transferor Fund, amend any of the provisions of
this Plan.
4. Notwithstanding Section 1 of Article B, unamortized organizational
expenses of the Transferor Fund shall not be transferred or assumed hereunder.
The Trust has been advised that such expenses will be paid to the Transferor
Fund by one or more third parties and will be eliminated from the balance sheet
of the Transferor Fund prior to the Effective Time of the Reorganization.
5. The Trust, by consent of its Board of Trustees, or an officer
authorized by such Board of Trustees, may waive any condition to the obligations
of the Transferor Fund or the Surviving Fund hereunder if, in its or such
officer's judgment, such waiver will not have a material adverse effect on the
interests of the shareholders of the Transferor Fund or the shareholders of the
Surviving Fund.
-4-
<PAGE> 32
APPENDIX B
THE KENT LIMITED TERM TAX-FREE FUND
BY MICHAEL J. MARTIN
PORTFOLIO MANAGER
Municipal bond yields generally rose during the early months of 1997
due to stronger than expected economic growth and investor concerns about the
possibility of higher inflation. In March, the Federal Reserve increased
short-term interest rates in an effort to address concerns. Yields generally
declined during the remainder of the year, reflecting a slower pace of economic
activity and continued low inflation readings, as well as concerns that the
economic and financial market turmoil in Asia would slow our economy during
1998. Yields on three-year AAA-rated generally obligation municipal securities
began the year at 4.20%, rose to a peak of 4.60% in April and finished the
period at 3.95%.
Early in the year, we reduced the Fund's average maturity target range
from between one and one-half to five years to between one and three years. The
Fund's Institutional and Investment Shares posted total returns of 4.78% and
4.61%, respectively, for the 12 months through December 31, 1997. That compares
to a total return of 4.62% for the Lehman Brothers One-Year General Obligation
Municipal Bond Index and 5.41% for the Lehman Brothers Three-Year General
Obligation Municipal Bond.
TAKING ADVANTAGE OF FALLING YIELDS
The Fund's average maturity began the period at 3.84 years. The average
maturity fell to 3.0 years when we reduced the Fund's maturity target range.
However, the maturity of the Fund's portfolio remained near the high end of its
new target range, ending the period at 2.87 years. That strategy benefited the
Fund's performance as yields declined from their April peak.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
DISTRIBUTION OF NET ASSETS
AS OF DECEMBER 31, 1997
-----------------------------------
<S> <C>
Pacific 6.5%
Mountain 12.3%
South 20.6% [PIE CHART]
East 19.9%
North Central 36.2%
Other 4.5%
Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
</TABLE>
We maintained the Fund's AA credit quality. At the same time,
we increased the Fund's yield by boosting its investment in securities
that are subject to the federal alternative minimum tax.
<PAGE> 33
LOOKING AHEAD
We will continue to hold a portfolio with an average maturity
near the long end of the Fund's target range, reflecting our view that
yields could fall further in the coming months. We also will maintain
the Fund's high credit quality. We will continue to look for any
decline in municipal yields as an opportunity to purchase higher
yielding securities for the Fund.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE KENT LIMITED TERM TAX-FREE FUND
TAX EQUIVALENT YIELDS+ AS OF DECEMBER 31, 1997
----------------------------------------------
Tax Bracket Institutional Class Investment Class
- --------------------------------------------------------------------------------
<S> <C> <C>
28.0% 5.01% 4.81%
31.0% 5.23% 5.01%
36.0% 5.64% 5.41%
39.6% 5.98% 5.73%
+ Based on a SEC 30-day yield on 12/31/97 of 3.61% for the
Institutional Class and 3.46% for the Investment Class. SEC
30-day yield is computed based on net income during the 30-day
period ended December 31, 1997. Yield calculations represent
past performance and will fluctuate.
Certain fees were being waived. Had these waivers not been in
effect, the 30-day SEC yields would have been 3.60% for
Institutional Shares and 3.35% for Investment Shares.
</TABLE>
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND++
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1997
----------------------------------------------
<TABLE>
<CAPTION>
Institutional Class Investment Class
(Inception: 9/1/94) (Inception: 11/1/94)
---------------------------------------------------------------------------------------------
<S> <C> <C>
One Year 4.78% 4.61%
Three Year 5.56% 5.49%
Life of Fund 4.74% 5.20%
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS ONE-YEAR GENERAL OBLIGATION MUNICIPAL BOND
INDEX
AND THE LEHMAN BROTHERS THREE-YEAR GENERAL OBLIGATION MUNICIPAL BOND
INDEX
-2-
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
$12,000 The Kent Limited Term Tax-Free Fund $11,931 The Lehman Brothers One-Year
Institutional Class Shares General Obligation
11,500 $11,762 Municipal Bond Index
11,000 [GRAPH] $11,672 The Lehman Brothers Three-Year
General Obligation Municipal
Bond Index
10,500
10,000
9,500
----------------------------------------------------------
9/1/94 12/31/94 12/31/95 12/31/96 12/31/97
</TABLE>
<TABLE>
<S> <C> <C>
$12,500 The Kent Limited Term Tax-Free Fund $12,158
Investment Class Shares
12,000 $11,867
11,500 $11,742
11,000 [GRAPH]
10,500
10,000
9,500
----------------------------------------------------------
11/1/94 12/31/94 12/31/95 12/31/96 12/31/97
</TABLE>
++ The Fund's income may be subject to certain state and local taxes and
depending on your tax status, the federal alternative minimum tax. Past
performance is no guarantee of future performance. The investment
return and principal value will fluctuate, so that shares, when
redeemed, may be worth more or less than the original cost. Performance
for each class will differ based on differences in expenses for each
class of shares. Return figures and investment values are quoted after
deducting all expenses.
The Lehman Brothers One-Year General Obligation Municipal Bond Index
and the Lehman Brothers Three-Year General Obligation Municipal Bond
Index are unmanaged indices of debt instruments issued by
municipalities. Total return is based on changes in net asset value,
assuming reinvestment of all dividends and capital gains distributions.
Certain fees were waived. Had these waivers not been in effect, total
return would have been lower.
-3-
<PAGE> 35
THE KENT INTERMEDIATE TAX-FREE FUND+
BY MICHAEL J. MARTIN
PORTFOLIO MANAGER
Yields in the municipal market rose during the first quarter of 1997,
before declining significantly over the remainder of the year. The rise in
municipal yields early in the year resulted from an unexpectedly strong surge in
economic growth and fears of higher inflation. The Federal Reserve raised
short-term interest rates in March in response to the unexpectedly strong pace
of economic growth. Yields generally declined during the spring as the pace of
economic activity moderated and inflation concerns subsided. Municipal yields
fell further later in the year as investors became concerned that the economic
and financial market turmoil in Southeast Asia would further slow the U.S.
economy during 1998.
The yield on a ten-year AAA-rated general obligation municipal bond
began the year at 4.80%, rose to a peak of 5.20% in mid-April and then declined
to 4.35% by the end of 1997. The Fund's Institutional and Investment Shares
posted total returns of 7.07% and 6.80%, respectively, for the 12 months ended
December 31, 1997. That compares to a total return of 5.41% for the Lehman
Brothers Three-Year General Obligation Municipal Bond Index and 6.49% for the
Lehman Brothers Five-Year General Obligation Municipal Bond Index.
A CONSISTENT STRATEGY
We maintained the Fund's average credit rating at AA during the period.
The Fund's average maturity began the year at 7.8 years and rose slightly to 8.1
years in April as municipal bond prices declined and yields rose. From there, we
allowed the Fund's average maturity to gradually decline along with municipal
bond yields. The average maturity ended 1997 at 7.1 years. The shifts in average
maturity were consistent with our strategy of increasing the Fund's average
maturity to lock in higher income when yields are rising, and letting the Fund's
average maturity decline as yields become less attractive.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND
DISTRIBUTION OF NET ASSETS
AS OF DECEMBER 31, 1997
----------------------------------
<S> <C>
East 19.0%
North Central 29.9%
South 20.0% [PIE CHART]
Pacific 16.3%
Mountain 4.8%
Other 10.0%
- --------------------------------------------------------------------------------
</TABLE>
Portfolio composition is subject to change.
-4-
<PAGE> 36
GOING FORWARD
The Fund is well positioned to take advantage of any additional
increases in municipal bond prices during 1998. Additionally, we will maintain
the Fund's high credit quality to reduce the impact of any detrimental effects
to the municipal bond market in the event concerns over the impact on the U.S.
economy from the events in Southeast Asia become even more of an investor focus
during 1998.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE KENT INTERMEDIATE TAX-FREE FUND+
TAX EQUIVALENT YIELDS+ AS OF DECEMBER 31, 1997
----------------------------------------------
Tax Bracket Institutional Class Investment Class
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
28.0% 5.19% 4.85%
31.0% 5.42% 5.06%
36.0% 5.84% 5.46%
39.6% 6.19% 5.78%
</TABLE>
- --------------------------------------------------------------------------------
+ Based on a SEC 30-day yield on 12/31/97 of 3.74% for the
Institutional Class and 3.49% for the Investment Class. SEC
30-day yield is computed based on net income during the 30-day
period ended December 31, 1997. Yield calculations represent
past performance and will fluctuate.
Certain fees were being waived. Had these waivers not been in
effect, the 30-day SEC yields would have been 3.73% for
Institutional Shares and 3.48% for Investment Shares.
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND++
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1997
----------------------------------------------
<TABLE>
<CAPTION>
Institutional Class Investment Class
(Inception: 12/16/92) (Inception: 12/18/92)
-------------------------------------------------------------------------------------------
<S> <C> <C>
One Year 7.07% 6.80%
Three Year 7.76% 7.51%
Five Years 5.62% 5.47%
Life of Fund 5.69% 5.50%
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS THREE-YEAR GENERAL OBLIGATION MUNICIPAL BOND
INDEX
AND THE LEHMAN BROTHERS FIVE-YEAR GENERAL OBLIGATION MUNICIPAL BOND
INDEX
-5-
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
$14,000 The Kent Intermediate Tax-Free Fund $13,406 The Lehman Brothers Three-Year
Institutional Class Shares General Obligation
13,000 $13,222 Municipal Bond Index
12,000 [GRAPH] $12,905 The Lehman Brothers Five-Year
General Obligation Municipal
Bond Index
11,000
10,000
9,000
----------------------------------------------------------
12/16/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
</TABLE>
<TABLE>
<S> <C> <C>
$14,000 The Kent Intermediate Tax-Free Fund $13,406
Investment Class Shares
13,000 $13,100
12,000 $12,905
11,000 [GRAPH]
10,000
9,000
----------------------------------------------------------
12/18/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
</TABLE>
++ The Fund's income may be subject to certain state and local taxes and
depending on your tax status, the federal alternative minimum tax. Past
performance is no guarantee of future performance. The investment
return and principal value will fluctuate, so that shares, when
redeemed, may be worth more or less than the original cost. Performance
for each class will differ based on differences in expenses for each
class of shares. Return figures and investment values are quoted after
deducting all expenses.
The Lehman Brothers Three-Year General Obligation Municipal Bond Index
and the Lehman Brothers Five-Year General Obligation Municipal Bond
Index are unmanaged indices of debt instruments issued by
municipalities. Total return is based on changes in net asset value,
assuming reinvestment of all dividends and capital gains distributions.
Certain fees were waived. Had these waivers not been in effect, total
return would have been lower.
-6-
<PAGE> 38
KENT FUNDS
P.O. BOX 182201
COLUMBUS, OHIO 43218-2201
1-800-633-KENT (5368)
STATEMENT OF ADDITIONAL INFORMATION
(SPECIAL MEETING OF SHAREHOLDERS OF THE LIMITED TERM TAX-FREE FUND)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement/Prospectus dated
February 26, 1999 (the "Combined Proxy Statement/Prospectus") for the Special
Meeting of Shareholders of the Limited Term Tax-Free Fund (the "Transferor
Fund"), an investment portfolio offered by the Kent Funds (the "Trust"), to be
held on March 24, 1999. Copies of the Combined Proxy Statement/Prospectus may be
obtained at no charge by calling 1-800-633-KENT (5368).
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about the Transferor Fund and the Intermediate
Tax-Free Fund is contained in and incorporated by reference to said Funds'
Statement of Additional Information dated May 1, 1998 (as supplemented).
The date of this Statement of Additional Information is February 24,
1999.
<PAGE> 39
TABLE OF CONTENTS
PAGE
----
General Information......................................................1
Pro Forma Financial Information.......................................PF-1
Unaudited Financial Statements for the Six Months Ended June 30, 1998
Audited Financial Statements for the Fiscal Year Ended December 31, 1997
<PAGE> 40
GENERAL INFORMATION
The shareholders of the Transferor Fund are being asked to approve or
disapprove the Plan of Reorganization dated November 19, 1998 and the
transactions contemplated thereby. The Plan of Reorganization contemplates the
transfer of all of the assets and liabilities of the Transferor Fund to the
Intermediate Tax-Free Fund (the "Surviving Fund") in exchange for full and
fractional shares of the Surviving Fund. Following the exchange, the Transferor
Fund will make a liquidating distribution of the Surviving Fund's Investment and
Institutional Shares to the holders of the Investment and Institutional Shares
of the Transferor Fund, respectively, so that each holder of Investment and
Institutional Shares of the Transferor Fund will hold, immediately after the
effective time of the reorganization, full and fractional shares of the
corresponding class of the Surviving Fund with the same aggregate net asset
value as the shareholder had in the Transferor Fund immediately before the
transaction.
The Special Meeting of Shareholders of the Transferor Fund to consider
the Plan of Reorganization and the related transactions will be held at 10:00
a.m. Eastern Time on March 24, 1999 in the Board Room at BISYS Fund Services,
3435 Stelzer Road, Columbus, Ohio 43219. For further information about the
transaction, see the Combined Proxy Statement/Prospectus.
1
<PAGE> 41
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma information set forth below for the period
ended June 30, 1998 is intended to present ratios and supplemental data as if
the merger of the Transferor Fund into the Surviving Fund (the "Funds") had been
consummated at December 31, 1997. The unaudited pro forma information set forth
below for the year ended December 31, 1997 is intended to present ratios and
supplemental data as if the merger of the Transferor Fund into the Surviving
Fund had been consummated at December 31, 1996. Each Fund offers two classes of
shares, Investment Shares and Institutional Shares. Pro forma information is
presented for both classes of shares.
The Funds have the same investment adviser, administrator, fund
accounting agent, transfer agent, distributor and custodian. Each of such
service providers has entered into an agreement with the Trust which governs the
provision of services to the Funds. Such agreements contain the same terms with
respect to each Fund except for a difference in the investment advisory fees
charged by the Funds' investment adviser. The Transferor Fund pays an advisory
fee at the annual rate of 0.45% of its average daily net assets while the
Surviving Fund pays an advisory fee at the annual rate of 0.50% of its average
daily net assets. Consequently, on a pro forma basis for the six months ended
June 30, 1998, the proposed reorganization would result in an increase of $9,457
in the advisory fees charged with respect to the assets of the Transferor Fund.
Similarly, on a pro forma basis for the year ended December 31, 1997, the
proposed reorganization would result in an increase of $18,637 in the advisory
fees charged with respect to the assets of the Transferor Fund. However, the
proposed reorganization would also result in a decrease in other operating
expenses (including audit fees, fund accounting fees and transfer agency fees)
of approximately $15,000 on a pro forma basis for the six months ended June 30,
1998 and $40,300 on a pro forma basis for the year ended December 31, 1997.
These pro forma adjustments are reflected in the information presented below.
PF-1
<PAGE> 42
<TABLE>
For the Six Months Ended June 30, 1998
--------------------------------------
<CAPTION>
Limited Pro Forma
Term Intermediate Intermediate
Tax-Free Tax-Free Tax-Free
Institutional Shares Fund Fund Fund
- -------------------- ---- ---- ----
<S> <C> <C> <C>
Net Assets, end of period (000's) $37,205 $284,980 $322,191
Total Return(1) 1.72% 1.84% 1.83%
Ratio of Expenses to
Average Net Assets(2):
After Fee Waivers 0.75% 0.73% 0.73%
Absent Fee Waivers 0.76% 0.74% 0.74%
Ratio of Net Investment Income to
Average Net Assets(2):
After Fee Waivers 3.85% 4.28% 4.23%
Absent Fee Waivers 3.84% 4.27% 4.22%
</TABLE>
<TABLE>
<CAPTION>
Limited Pro Forma
Term Intermediate Intermediate
Tax-Free Tax-Free Tax-Free
Investment Shares Fund Fund Fund
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Net Assets, end of period (000's) $ 292 $ 3,770 $ 4,062
Total Return(1) 1.63% 1.80% 1.78%
Ratio of Expenses to
Average Net Assets(2):
After Fee Waivers 0.90% 0.98% 0.98%
Absent Fee Waivers 1.01% 0.99% 0.99%
Ratio of Net Investment Income to
Average Net Assets(2):
After Fee Waivers 3.70% 4.03% 3.98%
Absent Fee Waivers 3.59% 4.02% 3.97%
</TABLE>
- --------------------------
(1) Not Annualized
(2) Annualized
PF-2
<PAGE> 43
<TABLE>
For the Year Ended December 31, 1997
------------------------------------
<CAPTION>
Limited Pro Forma
Term Intermediate Intermediate
Tax-Free Tax-Free Tax-Free
Institutional Shares Fund Fund Fund
- -------------------- ---- ---- ----
<S> <C> <C> <C>
Net Assets, end of period (000's) $36,023 $275,641 $311,686
Total Return 4.78% 7.07% 6.79%
Ratio of Expenses to
Average Net Assets:
After Fee Waivers 0.76% 0.72% 0.72%
Absent Fee Waivers 0.77% 0.73% 0.73%
Ratio of Net Investment Income to
Average Net Assets:
After Fee Waivers 3.86% 4.31% 4.26%
Absent Fee Waivers 3.85% 4.30% 4.25%
</TABLE>
<TABLE>
<CAPTION>
Limited Pro Forma
Term Intermediate Intermediate
Tax-Free Tax-Free Tax-Free
Investment Shares Fund Fund Fund
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Net Assets, end of period (000's) $ 474 $ 3,534 $ 4,009
Total Return 4.61% 6.80% 6.73%
Ratio of Expenses to
Average Net Assets:
After Fee Waivers 0.93% 0.97% 0.97%
Absent Fee Waivers 1.04% 0.98% 0.98%
Ratio of Net Investment Income to
Average Net Assets:
After Fee Waivers 3.67% 4.06% 4.01%
Absent Fee Waivers 3.56% 4.05% 4.00%
</TABLE>
The total return figures set forth above for the Intermediate Tax-Free
Fund on a pro forma basis are based on the weighted average total return of the
Surviving Fund and the Transferor Fund during the periods presented. Following
the reorganization, however, the Surviving Fund will be managed in accordance
with its investment policies which, although they provide the Surviving Fund
will invest in the same type of securities as the Transferor Fund, provide that
the Surviving Fund will maintain a longer weighted average maturity.
Consequently, the pro forma total return figures for the Intermediate Tax-Free
Fund may not be indicative of the total return the Intermediate Tax-Free Fund
would have achieved if the reorganization had been consummated at the beginning
of the periods presented.
PF-3
<PAGE> 44
The unaudited pro forma information set forth above should be read in
conjunction with the semi-annual unaudited financial statements for the period
ended June 30, 1998 and the annual audited financial statements for the year
ended December 31, 1997.
PF-4
<PAGE> 45
Unaudited Financial Statements
for the Six Months Ended June 30, 1998
<PAGE> 46
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 97.5%
ADVERTISING -- 0.1%
15,000 Interpublic Group Cos., Inc..... $ 910,313
------------
AEROSPACE & DEFENSE -- 1.0%
95,900 Boeing Co....................... 4,273,544
21,000 Lockheed Martin Corp............ 2,223,375
28,600 Raytheon Co. -- Class B......... 1,690,975
------------
8,187,894
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.3%
24,800 Maytag Corp..................... 1,224,500
11,600 Whirlpool Corp.................. 797,500
------------
2,022,000
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.2%
14,800 Dana Corp....................... 791,800
16,600 TRW, Inc........................ 906,775
------------
1,698,575
------------
AUTO/TRUCK -- REPLACEMENT EQUIPMENT -- 0.1%
12,200 Genuine Parts Co................ 421,663
------------
AUTOMOTIVE -- 1.6%
116,600 Ford Motor Co................... 6,879,400
88,100 General Motors Corp............. 5,886,181
------------
12,765,581
------------
BANKS -- MAJOR REGIONAL -- 5.7%
75,000 Banc One Corp................... 4,185,937
35,800 Bank of New York Co., Inc....... 2,172,613
33,800 BankBoston Corp................. 1,880,125
11,300 Comerica, Inc................... 748,625
27,500 First Chicago NBD Corp.......... 2,437,188
81,570 First Union Corp................ 4,751,452
23,200 Fleet Financial Group, Inc...... 1,937,200
62,000 KeyCorp......................... 2,208,750
29,500 Mellon Bank Corp................ 2,053,938
20,000 National City Corp.............. 1,420,000
62,000 NationsBank..................... 4,742,999
98,400 Norwest Corp.................... 3,677,700
41,900 PNC Bank Corp................... 2,254,744
13,600 Republic New York Corp.......... 855,950
20,500 SunTrust Banks, Inc............. 1,666,906
69,000 U.S. Bancorp.................... 2,967,000
23,700 Wachovia Corp................... 2,002,650
8,300 Wells Fargo & Co................ 3,062,700
------------
45,026,477
------------
BANKS -- MIDWEST -- 0.3%
25,100 Fifth Third Bancorp............. 1,581,300
19,000 Huntington Bancshares........... 636,500
------------
2,217,800
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- MONEY CENTER -- 2.5%
63,700 BankAmerica Corp................ $ 5,506,069
8,800 Bankers Trust New York Corp..... 1,021,350
68,600 Chase Manhattan Corp............ 5,179,300
41,900 Citicorp........................ 6,253,575
16,200 J.P. Morgan & Co., Inc.......... 1,897,425
------------
19,857,719
------------
BANKS -- NORTHEAST -- 0.1%
15,700 State Street Corp............... 1,091,150
------------
BEVERAGES -- ALCOHOLIC -- 0.3%
45,800 Anheuser-Busch Co., Inc......... 2,161,188
------------
BEVERAGES -- SOFT DRINKS -- 3.2%
213,700 Coca-Cola Co.................... 18,271,349
178,700 PepsiCo, Inc.................... 7,360,206
------------
25,631,555
------------
BROADCASTING/CABLE -- 0.9%
14,000 Clear Channel Communications.... 1,527,750
31,200 Comcast Corp. Special........... 1,266,525
58,500 Media One Group*................ 2,570,344
54,900 Tele-Communications Inc.,
Class A*........................ 2,110,219
------------
7,474,838
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.3%
9,800 Armstrong World Industries,
Inc............................. 660,275
23,900 Masco Corp...................... 1,445,950
------------
2,106,225
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.2%
18,400 Centex Corp..................... 694,600
36,600 Pulte Corp...................... 1,093,425
------------
1,788,025
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.9%
68,100 Home Depot, Inc................. 5,656,556
34,200 Lowe's Cos., Inc................ 1,387,238
------------
7,043,794
------------
BUILDING PRODUCTS -- WOOD -- 0.1%
18,300 Weyerhaeuser Co................. 845,231
------------
CHEMICALS -- DIVERSIFIED -- 1.9%
25,600 Dow Chemical Co................. 2,475,200
107,500 E.I. du Pont de Nemours & Co.... 8,022,187
22,300 Hercules, Inc................... 917,088
36,500 PPG Industries, Inc............. 2,539,031
23,400 Union Carbide Corp.............. 1,248,975
------------
15,202,481
------------
</TABLE>
Continued
28
<PAGE> 47
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CHEMICALS -- SPECIALTY -- 0.3%
25,300 Great Lakes Chemical Corp....... $ 997,768
27,100 Nalco Chemical Co............... 951,888
9,900 Sigma-Aldrich Corp.............. 347,738
------------
2,297,394
------------
COMMERCIAL SERVICES -- 0.2%
71,400 Cendant Corp.................... 1,490,475
------------
COMPUTER SOFTWARE -- 3.7%
29,600 Computer Associates
International, Inc.............. 1,644,650
235,400 Microsoft Corp.*................ 25,511,474
96,300 Oracle Corp.*................... 2,365,369
------------
29,521,493
------------
COMPUTERS -- LOCAL AREA NETWORK -- 1.3%
19,100 Cabletron Systems*.............. 256,656
106,050 Cisco Systems, Inc.*............ 9,763,228
------------
10,019,884
------------
COMPUTERS -- MAINFRAME -- 1.3%
93,300 International Business Machines
Corp............................ 10,712,006
------------
COMPUTERS -- MEMORY DEVICES -- 0.1%
30,800 Seagate Technology, Inc.*....... 733,425
------------
COMPUTERS -- MICRO -- 1.3%
154,574 Compaq Computer Corp............ 4,386,037
66,200 Dell Computer Corp.*............ 6,144,188
------------
10,530,225
------------
COMPUTERS -- MINI -- 0.9%
99,400 Hewlett-Packard Co.............. 5,951,575
35,600 Sun Microsystems, Inc.*......... 1,546,375
------------
7,497,950
------------
COMPUTERS -- SERVICES -- 0.6%
56,200 Automatic Data Processing,
Inc............................. 4,095,575
29,600 First Data Corp................. 986,050
------------
5,081,625
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.7%
13,300 American Greetings Corp......... 677,469
59,900 Unilever NV, ADR................ 4,728,356
------------
5,405,825
------------
CONTAINERS & PACKAGING -- 0.1%
20,200 Owens-Illinois*................. 903,950
------------
COSMETICS & TOILETRIES -- 1.0%
103,600 Gillette Co..................... 5,872,825
51,200 Kimberly-Clark Corp............. 2,348,800
------------
8,221,625
------------
DIVERSIFIED -- 5.1%
53,800 Allied Signal, Inc.............. 2,387,375
305,700 General Electric Co. (b)........ 27,818,699
23,600 Johnson Controls, Inc........... 1,346,675
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED (CONTINUED)
38,200 Minnesota Mining & Manufacturing
Co.............................. $ 3,139,563
45,500 Seagram Co., Ltd................ 1,862,656
24,500 Tenneco, Inc.................... 932,531
22,400 Textron, Inc.................... 1,605,800
22,200 United Technologies Corp........ 2,053,500
------------
41,146,799
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 2.1%
40,000 Applied Materials, Inc.*........ 1,180,000
141,800 Intel Corp...................... 10,510,924
18,600 Micron Technology, Inc.......... 461,513
48,900 Rockwell International Corp..... 2,350,256
38,600 Texas Instruments, Inc.......... 2,250,863
------------
16,753,556
------------
ELECTRONIC -- CONNECTORS -- 0.3%
45,800 AMP, Inc........................ 1,574,375
8,900 Thomas & Betts Corp............. 438,325
------------
2,012,700
------------
ELECTRONIC MEASURING EQUIPMENT -- 0.1%
30,400 Tektronix, Inc.................. 1,075,400
------------
FINANCE -- 0.3%
30,557 Associates First Capital,
Class A......................... 2,349,069
------------
FINANCIAL -- CONSUMER LOANS -- 0.3%
6,100 Beneficial Corp................. 934,444
22,200 Household International, Inc.... 1,104,450
------------
2,038,894
------------
FINANCIAL -- INVESTMENT BANKERS -- 0.4%
38,200 Merrill Lynch & Co., Inc........ 3,523,950
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 1.4%
40,300 American Express Co............. 4,594,200
70,400 Morgan Stanley, Dean Witter,
Discover & Co................... 6,432,800
------------
11,027,000
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.1%
98,500 Fannie Mae...................... 5,983,875
61,300 Freddie Mac..................... 2,884,931
------------
8,868,806
------------
FINANCIAL -- SAVINGS & LOAN -- 0.1%
11,300 H.F. Ahmanson & Co.............. 802,300
------------
FOOD -- CANNED -- 0.6%
42,000 Campbell Soup Co................ 2,231,250
44,200 H.J. Heinz Co................... 2,480,725
------------
4,711,975
------------
FOOD -- CONFECTIONARY -- 0.1%
12,400 Hershey Foods Corp.............. 855,600
------------
</TABLE>
Continued
29
<PAGE> 48
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOOD -- DIVERSIFIED -- 1.3%
26,200 Bestfoods....................... $ 1,521,238
44,800 ConAgra, Inc.................... 1,419,600
23,000 General Mills, Inc.............. 1,572,625
37,500 Kellogg Co...................... 1,408,594
20,000 Quaker Oats Co.................. 1,098,750
10,300 Ralston Purina Group............ 1,203,169
45,600 Sara Lee Corp................... 2,550,749
------------
10,774,725
------------
FOOD -- FLOUR & GRAIN -- 0.1%
53,200 Archer-Daniels-Midland Co....... 1,030,750
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
23,800 Supervalu, Inc.................. 1,056,125
------------
GAS & ELECTRIC UTILITY -- 0.4%
41,100 PG & E Corp..................... 1,297,219
57,000 Public Service Enterprises...... 1,962,937
------------
3,260,156
------------
HOTELS & LODGING -- 0.2%
39,400 Hilton Hotels Corp.............. 1,122,900
24,800 Marriott International,
Class A......................... 802,900
------------
1,925,800
------------
INSTRUMENTS -- CONTROL -- 0.2%
9,700 General Signal Corp............. 349,200
12,600 Honeywell, Inc.................. 1,052,888
------------
1,402,088
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.2%
19,300 Aon Corp........................ 1,355,825
------------
INSURANCE -- BROKERS -- 0.2%
22,350 Marsh & McLennan Cos., Inc...... 1,350,778
------------
INSURANCE -- LIFE -- 0.7%
43,700 American General Corp........... 3,110,894
19,800 Torchmark Corp.................. 905,850
12,200 TransAmerica Corp............... 1,404,525
------------
5,421,269
------------
INSURANCE -- MULTI-LINE -- 1.6%
14,900 Aetna, Inc...................... 1,134,263
30,300 CIGNA Corp...................... 2,090,699
19,700 Loews Corp...................... 1,716,363
10,700 MBIA, Inc....................... 801,163
110,300 Travelers Group, Inc............ 6,686,937
------------
12,429,425
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.6%
56,300 Allstate Corp................... 5,154,969
64,400 American International Group.... 9,402,399
16,100 Chubb Corp...................... 1,294,038
11,700 General Re Corp................. 2,965,950
21,400 Safeco Corp..................... 972,363
15,596 St. Paul Cos., Inc.............. 656,007
------------
20,445,726
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
LEISURE & RECREATION/GAMING -- 0.1%
11,600 Harrah's Entertainment, Inc..... $ 269,700
16,300 Mirage Resorts*................. 347,394
------------
617,094
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.1%
47,500 Cincinnati Milacron, Inc........ 1,154,844
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.2%
36,400 Caterpillar, Inc................ 1,924,650
------------
MACHINERY -- ELECTRICAL -- 0.4%
40,900 Emerson Electric Co............. 2,466,781
21,400 W.W. Grainger, Inc.............. 1,065,988
------------
3,532,769
------------
MACHINERY -- FARM -- 0.2%
33,000 Deere & Co...................... 1,744,875
------------
MACHINERY -- GENERAL INDUSTRIAL -- 0.4%
34,000 Cooper Industries, Inc.......... 1,867,875
15,900 Illinois Tool Works, Inc........ 1,060,331
------------
2,928,206
------------
MACHINERY -- THERMAL PROCESSOR -- 0.1%
26,100 Thermo Electron Corp.*.......... 892,294
------------
MEDIA CONGLOMERATES -- 1.4%
55,200 Time Warner, Inc................ 4,716,150
63,700 Walt Disney Co.................. 6,692,481
------------
11,408,631
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
25,000 Amgen, Inc.*.................... 1,634,375
------------
MEDICAL -- DRUGS -- 9.4%
145,200 Abbott Laboratories............. 5,935,050
126,800 American Home Products Corp..... 6,561,900
116,600 Bristol-Myers Squibb Co......... 13,401,712
98,400 Eli Lilly & Co.................. 6,500,550
108,300 Merck & Co., Inc................ 14,485,124
116,000 Pfizer, Inc..................... 12,607,750
46,900 Pharmacia & Upjohn, Inc......... 2,163,263
71,800 Schering-Plough Corp............ 6,578,675
87,000 Warner-Lambert Co............... 6,035,625
------------
74,269,649
------------
MEDICAL -- HEALTH MEDICAL ORGANIZATION -- 0.1%
21,200 Humana, Inc.*................... 661,175
------------
MEDICAL -- WHOLESALE DRUG -- 0.2%
14,700 Cardinal Health, Inc............ 1,378,125
------------
MEDICAL INSTRUMENTS -- 0.2%
42,100 Biomet, Inc.*................... 1,391,931
------------
MEDICAL PRODUCTS -- 0.5%
37,400 Baxter International, Inc....... 2,012,588
27,700 Guidant Corp.................... 1,975,356
------------
3,987,944
------------
</TABLE>
Continued
30
<PAGE> 49
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL/DENTAL SUPPLIES -- 1.5%
19,700 Becton, Dickinson & Co.......... $ 1,529,213
34,300 C.R. Bard, Inc.................. 1,305,544
125,900 Johnson & Johnson............... 9,285,124
------------
12,119,881
------------
METAL -- GOLD -- 0.3%
57,400 Barrick Gold Corp............... 1,101,363
39,400 Newmont Mining Corp............. 930,825
------------
2,032,188
------------
METAL -- MISCELLANEOUS -- 0.1%
75,600 Cyprus Amax Minerals Co......... 1,001,700
------------
METAL -- NON-FERROUS -- 0.4%
23,300 Aluminum Co. of America......... 1,536,343
5,300 Phelps Dodge Corp............... 303,094
24,600 Reynolds Metals Co.............. 1,376,063
------------
3,215,500
------------
OFFICE AUTOMATION & EQUIPMENT -- 0.7%
28,700 IKON Office Solutions, Inc...... 417,944
41,200 Pitney Bowes, Inc............... 1,982,750
29,800 Xerox Corp...................... 3,028,425
------------
5,429,119
------------
OIL & GAS -- DRILLING -- 0.4%
49,400 Schlumberger Ltd................ 3,374,638
------------
OIL -- INTERNATIONAL INTEGRATED -- 4.4%
63,000 Chevron Corp.................... 5,232,938
238,500 Exxon Corp...................... 17,008,030
76,000 Mobil Corp...................... 5,823,500
130,500 Royal Dutch Petroleum Co., ADR.. 7,153,031
------------
35,217,499
------------
OIL -- PRODUCTION/PIPELINE -- 0.1%
14,250 Columbia Gas System, Inc........ 792,656
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.0%
19,700 Union Pacific Resources Group,
Inc............................. 345,981
------------
OIL -- U.S. INTEGRATED -- 2.4%
109,600 Amoco Corp...................... 4,562,099
91,400 Atlantic Richfield Co........... 7,140,624
12,900 Kerr-Mcgee Corp................. 746,588
15,700 Pennzoil Co..................... 794,813
39,400 Phillips Petroleum Co........... 1,898,588
39,400 Unocal Corp..................... 1,408,550
87,100 USX-Marathon Group.............. 2,988,619
------------
19,539,881
------------
OIL REFINING -- 0.4%
30,400 Ashland, Inc.................... 1,569,400
35,100 Sun Co., Inc.................... 1,362,319
------------
2,931,719
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PAPER & RELATED PRODUCTS -- 0.6%
28,000 Fort James Corp................. $ 1,246,000
39,300 International Paper Co.......... 1,689,900
19,700 Mead Corp....................... 625,475
19,400 Union Camp Corp................. 962,725
9,900 Westvaco Corp................... 279,675
------------
4,803,775
------------
PHOTOGRAPHY -- 0.1%
26,100 Polaroid Corp................... 928,181
------------
PROTECTION -- SAFETY -- 0.6%
74,900 Tyco International Ltd.......... 4,718,700
------------
PUBLISHING -- BOOKS -- 0.1%
13,800 McGraw-Hill Cos., Inc........... 1,125,563
------------
PUBLISHING -- NEWSPAPERS -- 0.8%
9,100 Dow Jones & Co.................. 507,325
40,100 Gannett, Inc.................... 2,849,606
14,400 Knight-Ridder, Inc.............. 792,900
9,900 New York Times Co............... 784,575
9,300 Times Mirror Co................. 584,738
17,700 Tribune Co...................... 1,217,981
------------
6,737,125
------------
RESTAURANTS -- 0.6%
65,100 McDonald's Corp................. 4,491,900
------------
RETAIL -- APPAREL/SHOES -- 0.7%
58,200 Gap, Inc........................ 3,586,575
57,800 Limited, Inc.................... 1,914,625
------------
5,501,200
------------
RETAIL -- DISCOUNT -- 2.7%
61,600 Dayton-Hudson Corp.............. 2,987,600
39,400 Kmart Corp.*.................... 758,450
293,700 Wal-Mart Stores, Inc............ 17,842,274
------------
21,588,324
------------
RETAIL -- DRUG STORE -- 0.3%
48,500 Walgreen Co..................... 2,003,656
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.7%
30,000 J.C. Penney, Inc................ 2,169,375
22,800 May Department Stores Co........ 1,493,400
37,000 Sears, Roebuck & Co............. 2,259,313
------------
5,922,088
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.1%
20,200 Federated Department Stores,
Inc.*........................... 1,087,013
------------
RETAIL -- SUPERMARKETS -- 0.1%
34,100 American Stores Co.............. 824,794
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.2%
37,700 Autozone, Inc.*................. 1,204,044
------------
RUBBER -- TIRES -- 0.1%
17,200 Goodyear Tire & Rubber Co....... 1,108,325
------------
</TABLE>
Continued
31
<PAGE> 50
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SOAP & CLEANING PREPARATIONS -- 1.4%
125,200 Procter & Gamble Co............. $ 11,401,025
------------
TELECOMMUNICATIONS -- CELLULAR -- 0.3%
45,700 Airtouch Communications,
Inc.*........................... 2,670,594
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 2.2%
27,300 General Instrument Corp.*....... 742,219
15,800 Harris Corp..................... 706,063
142,300 Lucent Technologies, Inc........ 11,837,580
82,700 Motorola, Inc................... 4,346,919
------------
17,632,781
------------
TEXTILE -- APPAREL -- 0.1%
19,700 VF Corp......................... 1,013,319
------------
TOBACCO -- 1.3%
243,500 Philip Morris Cos., Inc......... 9,587,813
28,600 U.S.T., Inc..................... 772,200
------------
10,360,013
------------
TOOLS -- HAND HELD -- 0.2%
9,300 Black & Decker Corp............. 567,300
12,300 Snap-On, Inc.................... 445,875
9,600 The Stanley Works............... 399,000
------------
1,412,175
------------
TOYS/GAME/HOBBY -- 0.3%
33,300 Hasbro, Inc..................... 1,309,107
30,900 Mattel, Inc..................... 1,307,456
------------
2,616,563
------------
TRANSPORTATION -- AIR FREIGHT -- 0.1%
14,700 FDX Corp.*...................... 922,425
------------
TRANSPORTATION -- AIRLINE -- 0.5%
18,000 AMR Corp.*...................... 1,498,500
7,200 Delta Air Lines, Inc............ 930,600
43,200 Southwest Airlines Co........... 1,279,800
------------
3,708,900
------------
TRANSPORTATION -- EQUIPMENT &
LEASING -- 0.0%
9,900 Ryder Systems, Inc.............. 312,469
------------
TRANSPORTATION -- RAILROAD -- 0.5%
34,500 CSX Corp........................ 1,569,750
34,000 Norfolk Southern Corp........... 1,013,625
29,100 Union Pacific Corp.............. 1,284,038
------------
3,867,413
------------
UTILITIES -- ELECTRIC POWER -- 1.9%
9,600 Ameren Corp..................... 381,600
39,400 Baltimore Gas & Electric Co..... 1,223,863
47,900 Consolidated Edison, Inc........ 2,206,393
33,200 Detroit Edison Co............... 1,340,450
37,200 Dominion Resources, Inc......... 1,515,900
19,700 Entergy Corp.................... 566,375
49,800 First Energy Corp............... 1,531,350
16,600 Florida Power & Light, Inc...... 1,045,800
19,100 Houston Industries, Inc......... 589,713
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- ELECTRIC POWER (CONTINUED)
30,400 Northern States Power Co........ $ 870,200
43,500 PacifiCorp...................... 984,188
43,900 Peco Energy Corp................ 1,281,331
34,600 Texas Utilities Co.............. 1,440,225
------------
14,977,388
------------
UTILITIES -- GAS DISTRIBUTION -- 0.1%
19,700 Eastern Enterprises............. 844,638
8,600 ONEOK, Inc...................... 342,925
------------
1,187,563
------------
UTILITIES -- TELEPHONE -- 6.0%
94,300 Ameritech Corp.................. 4,231,713
139,600 AT&T Corp....................... 7,974,649
160,400 Bell Atlantic Corp.............. 7,318,249
103,600 BellSouth Corp.................. 6,954,150
88,800 GTE Corp........................ 4,939,500
17,800 MCI Communications Corp......... 1,034,625
182,200 SBC Communications, Inc......... 7,288,000
40,200 Sprint Corp..................... 2,834,100
49,997 US West, Inc.................... 2,349,859
53,400 WorldCom, Inc.*................. 2,586,563
------------
47,511,408
------------
TOTAL COMMON STOCKS............. 779,653,150
------------
(Cost $574,851,717)
INVESTMENT COMPANIES -- 2.5%
10,029,788 Dreyfus Cash Management Money
Market Fund..................... 10,029,788
9,826,991 Federated Prime Value
Obligations Money Market Fund... 9,826,991
------------
TOTAL INVESTMENT COMPANIES...... 19,856,779
------------
(Cost $19,856,779)
TOTAL INVESTMENTS -- 100.0%................. 799,509,929
(Cost $594,708,496)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.0%....................... 303,909
------------
TOTAL NET ASSETS -- 100.0%.................. $799,813,838
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $215,160,344
Unrealized depreciation............... (10,358,911)
------------
Net unrealized appreciation........... $204,801,433
============
</TABLE>
(b) Security has been deposited as initial margin on open futures contract.
* Non-income producing security
ADR American Depositary Receipt
At June 30, 1998 the Fund's open future contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ----------------- ----------- -----------
<S> <C> <C> <C>
66... Standard & Poor's $18,615,835 $18,859,500
500, 9/17/98
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 51
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 98.4%
ADVERTISING -- 0.9%
51,000 Catalina Market Corp. *......... $ 2,648,813
45,400 Ha-Lo Industries, Inc. *........ 1,413,075
163,400 Sitel Corp. *................... 1,082,525
66,300 True North Communications....... 1,939,275
------------
7,083,688
------------
AEROSPACE & DEFENSE -- 0.3%
20,200 Alliant Techsystems, Inc. *..... 1,277,650
39,100 Newport News Shipbuilding....... 1,045,925
------------
2,323,575
------------
AEROSPACE/DEFENSE EQUIPMENT -- 0.6%
42,250 AAR Corp. ...................... 1,249,016
42,800 Aviall, Inc. *.................. 585,825
39,100 Banner Aerospace, Inc. *........ 503,413
3,600 Ducommun, Inc. *................ 72,000
38,800 Fairchild Corp., Class A *...... 783,275
56,200 Hexcel Corp. *.................. 1,271,524
3,000 Simula, Inc. *.................. 49,313
------------
4,514,366
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.1%
119,900 Fedders Corp. .................. 801,831
50,400 Royal Appliance Manufacturing
Co. *........................... 315,000
------------
1,116,831
------------
AUDIO/VIDEO PRODUCTION -- 0.2%
48,280 Harman International Industries,
Inc. ........................... 1,858,780
148,369 Zenith Electronics Corp. *...... 44,511
------------
1,903,291
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 1.0%
51,800 Arvin Industries, Inc. ......... 1,880,987
23,100 Breed Technologies, Inc. *...... 353,719
71,500 Detroit Diesel Corp. *.......... 1,541,718
3,100 Excel Industries, Inc........... 44,369
37,500 Miller Industries, Inc. *....... 290,625
27,700 Standard Products Co. .......... 779,063
23,000 Superior Industries
International................... 648,313
64,975 Titan International Inc. ....... 1,104,575
35,500 Tower Automotive, Inc. *........ 1,522,062
5,800 Wabash National Corp. .......... 149,350
------------
8,314,781
------------
AUTO/TRUCK -- REPLACEMENT EQUIPMENT -- 0.3%
16,200 Exide Corp. .................... 272,363
38,000 Standard Motor Products, Inc. *. 845,500
61,837 Wynn's International, Inc. ..... 1,190,362
------------
2,308,225
------------
BANKS -- MIDWEST -- 0.9%
63,900 CNB Bancshares, Inc. ........... 3,067,199
57,200 First Midwest Bancgroup, Inc. .. 2,515,013
68,200 Irwin Financial Corp. .......... 1,982,063
------------
7,564,275
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- NORTHEAST -- 1.1%
45,045 Commerce Bancorp, Inc. ......... $ 2,635,133
11,100 Commercial Bank of New York..... 294,150
72,600 First Commonwealth Financial.... 2,050,950
57,200 Hubco, Inc. .................... 2,048,475
43,200 Independent Bank Corp. ......... 837,000
21,800 Sterling Bancorp................ 566,800
------------
8,432,508
------------
BANKS -- SOUTHEAST -- 0.7%
115,600 BancorpSouth, Inc. ............. 2,427,600
62,300 F & M National Corp. ........... 1,806,700
28,700 Trans Financial, Inc. .......... 1,646,663
------------
5,880,963
------------
BANKS -- SOUTHWEST -- 0.1%
32,800 Texas Regional Bancshares....... 1,074,200
------------
BANKS -- WEST -- 0.1%
25,826 First Republic Bancorp, Inc. *.. 932,964
------------
BEVERAGES -- ALCOHOLIC -- 0.0%
31,000 Boston Beer Company, Inc.-
Class A *....................... 395,250
------------
BEVERAGES -- SOFT DRINKS -- 0.0%
2,145 Buenos Aires Embotella Doro-
ADR *........................... 0
8,000 Pepsi-Cola Puerto Rico
Bottling Co. *.................. 60,000
------------
60,000
------------
BROADCASTING/CABLE -- 0.5%
45,500 BET Holdings, Inc. *............ 2,863,656
130,300 Spelling Entertainment Group *.. 1,221,563
------------
4,085,219
------------
BUILDING -- 0.7%
65,400 Calmat Co. ..................... 1,438,800
37,400 Centex Construction Products,
Inc. ........................... 1,439,900
40,800 Dravo Corp. *................... 374,850
22,700 Lone Star Industries, Inc. ..... 1,749,319
12,000 Medusa Corp. ................... 753,000
------------
5,755,869
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.4%
2,200 Butler Manufacturing Co. ....... 74,938
45,900 Dal-Tile International, Inc. *.. 450,394
1,700 Dayton Superior Corp. .......... 30,600
37,050 Elcor Corp. .................... 935,513
32,800 Nortek, Inc. *.................. 1,008,599
33,760 Republic Gypsum Co. ............ 708,960
4,400 Willbros Group, Inc. *.......... 68,750
------------
3,277,754
------------
</TABLE>
Continued
33
<PAGE> 52
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- HEAVY CONSTRUCTION -- 0.6%
24,600 Dycom Industries, Inc. *........ $ 830,250
5,200 Granite Construction, Inc. ..... 159,250
18,400 Jacobs Engineering Group,
Inc. *.......................... 591,100
123,000 Morrison Knudsen Corp. *........ 1,729,687
37,700 Stone & Webster, Inc. .......... 1,493,863
------------
4,804,150
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.2%
57,800 ABM Industries, Inc............. 1,611,175
4,100 American Residential Services *. 46,125
9,700 Rollins, Inc. .................. 198,850
4,100 Service Experts, Inc. *......... 141,450
------------
1,997,600
------------
BUILDING -- MOBILE/MANUFACTURING &
RECREATIONAL VEHICLES -- 0.2%
30,500 Cavalier Homes, Inc. ........... 394,594
25,100 Coachmen Industries, Inc. ...... 655,737
38,300 Winnebago Industries, Inc. ..... 478,750
------------
1,529,081
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 1.0%
10,000 Beazer Homes USA, Inc. *........ 259,375
46,000 D. R. Horton, Inc. ............. 960,250
54,400 Kaufman & Broad Home Corp. ..... 1,727,199
23,900 M/I Schottenstein Homes, Inc. .. 516,838
24,900 MDC Holdings, Inc. ............. 491,775
35,400 Pulte Corp. .................... 1,057,575
21,800 Ryland Group, Inc. ............. 572,250
64,500 Standard-Pacific Corp. ......... 1,330,313
31,000 Toll Brothers, Inc. *........... 889,313
3,300 U.S. Home Corp. *............... 136,125
------------
7,941,013
------------
BUILDING PRODUCTS -- AIR CONDITIONING/
HEAT -- 0.2%
41,975 Watsco, Inc. ................... 1,476,995
------------
BUILDING PRODUCTS -- LIGHTING/FIXTURES -- 0.1%
23,000 Thomas Industries, Inc. ........ 562,063
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.3%
71,400 HomeBase, Inc. *................ 566,738
59,900 Hughes Supply, Inc.............. 2,193,837
------------
2,760,575
------------
BUSINESS INFORMATION -- 0.3%
71,900 Primark Corp. *................. 2,251,369
------------
BUSINESS SERVICES -- 1.2%
61,600 ADVO, Inc. *.................... 1,736,349
37,400 Budget Group, Inc.-Class A *.... 1,194,463
56,400 Caribiner International, Inc. *. 987,000
38,300 Fair Issac & Co., Inc. ......... 1,455,400
66,700 Franklin Covey Co. *............ 1,283,975
45,200 Healthplan Services Corp. ...... 791,000
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
51,200 Interim Services, Inc. *........ $ 1,644,800
64,100 Physicians Resource Group,
Inc. *.......................... 292,456
------------
9,385,443
------------
CHEMICALS -- DIVERSIFIED -- 0.2%
47,800 ChemFirst, Inc. ................ 1,206,950
------------
CHEMICALS -- PLASTIC -- 0.5%
12,600 Borden Chemicals & Plastics LP.. 72,450
44,100 Geon Co. ....................... 1,011,544
61,700 Spartech Corp. ................. 1,322,693
57,400 Wellman, Inc. .................. 1,302,263
------------
3,708,950
------------
CHEMICALS -- SPECIALTY -- 1.2%
40,000 Bush Boake Allen, Inc. *........ 1,172,500
45,800 General Chemical Group, Inc. ... 1,270,950
55,600 Lawter International, Inc. ..... 604,650
30,400 LeaRonal, Inc. ................. 725,800
53,000 Lilly Industries, Inc. ......... 1,146,125
45,300 Material Sciences Corp. *....... 526,613
24,000 McWhorter Technologies, Inc. *.. 634,500
91,400 NL Industries, Inc. ............ 1,827,999
40,800 OM Group, Inc................... 1,683,000
5,000 TETRA Technologies, Inc. *...... 83,750
------------
9,675,887
------------
COAL -- 0.1%
49,100 Zeigler Coal Holding Co. ....... 840,838
------------
COMMERCIAL SERVICES -- 1.2%
35,100 CDI Corp. *..................... 938,925
4,800 InaCom Corp. *.................. 152,400
24,500 Leasing Solutions, Inc. *....... 704,375
40,100 Maximus, Inc. *................. 1,170,419
140,400 National Processing, Inc. *..... 1,500,525
65,900 Norrell Corp. .................. 1,313,881
85,800 NOVA Corp. *.................... 3,067,349
54,200 Personnel Group of America,
Inc. *.......................... 1,084,000
------------
9,931,874
------------
COMPUTER SOFTWARE -- 1.6%
27,700 Ardent Software, Inc. *......... 380,875
60,000 Excalibur Technologies Corp. *.. 660,000
133,000 Learning Co., Inc. *............ 3,940,124
34,500 MacNeal-Schwendler Corp. *...... 338,531
17,400 Microprose, Inc. *.............. 77,213
138,208 Midway Games, Inc. *............ 2,159,500
63,200 Platinum Software, Inc. *....... 1,540,500
29,400 Project Software & Development,
Inc. *.......................... 589,838
25,100 Rainbow Technologies, Inc. *.... 514,550
15,800 Software Spectrum, Inc. *....... 319,950
135,700 Vanstar Corp. *................. 1,976,131
------------
12,497,212
------------
</TABLE>
Continued
34
<PAGE> 53
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS -- GRAPHICS -- 0.1%
105,366 Chyron Corp. *.................. $ 388,537
28,800 STB Systems, Inc. *............. 360,000
------------
748,537
------------
COMPUTERS -- INTEGRATED SYSTEMS -- 0.6%
104,000 Cerner Corp. *.................. 2,944,500
48,600 MICROS Systems, Inc. *.......... 1,608,356
------------
4,552,856
------------
COMPUTERS -- LOCAL AREA NETWORK -- 0.4%
149,600 Anixter International, Inc. *... 2,851,750
------------
COMPUTERS -- MEMORY DEVICES -- 0.3%
74,911 Applied Magnetics Corp. *....... 571,196
57,100 Hutchinson Technology, Inc. *... 1,555,975
------------
2,127,171
------------
COMPUTERS -- MICRO -- 0.2%
128,100 Data General Corp. *............ 1,913,494
------------
COMPUTERS -- OPTICAL RECOGNITION -- 0.2%
65,900 BancTec, Inc. *................. 1,523,938
------------
COMPUTERS -- PERIPHERAL EQUIPMENT -- 0.4%
37,000 Analogic Corp. ................. 1,655,750
31,100 ENCAD, Inc. *................... 423,738
44,900 Media 100, Inc. *............... 171,181
69,500 Mylex Corp. *................... 469,125
24,200 Printronix, Inc. *.............. 387,200
18,362 TransAct Technologies, Inc. *... 162,963
12,400 Tridex Corp. *.................. 89,900
------------
3,359,857
------------
COMPUTERS -- SERVICES -- 2.2%
105,000 Affiliated Computer
Services--Class A *............. 4,042,499
70,500 Analysts International Corp. ... 2,000,438
44,000 BA Merchant Services, Inc. *.... 888,250
65,300 Bell & Howell Co. *............. 1,685,556
24,500 Broadway & Seymour, Inc. *...... 137,813
20,400 BTG, Inc. *..................... 183,600
57,600 Computer Task Group, Inc. ...... 1,929,600
52,500 DBT Online, Inc. *.............. 1,417,500
30,100 Factset Research Systems *...... 978,250
114,400 PSINet, Inc. *.................. 1,487,200
82,000 Safeguard Scientifics, Inc. *... 3,418,374
------------
18,169,080
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.8%
61,200 Department 56, Inc. *........... 2,172,599
49,900 Ekco Group, Inc. *.............. 392,963
67,500 Jenny Craig, Inc. *............. 409,219
71,500 Jostens, Inc. .................. 1,724,938
46,950 Oneida, Ltd. ................... 1,437,844
------------
6,137,563
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CONTAINERS -- METAL & GLASS -- 0.3%
17,900 BWAY Corp. *.................... $ 384,850
37,400 United States Can Corp. *....... 549,313
43,700 Zero Corp. ..................... 1,250,912
------------
2,185,075
------------
CONTAINERS -- PAPER & PLASTIC -- 0.3%
58,700 ACX Technologies, Inc. *........ 1,276,725
95,400 Longview Fibre Co. ............. 1,359,450
------------
2,636,175
------------
COSMETICS & TOILETRIES -- 0.4%
118,000 Playtex Products, Inc. *........ 1,880,625
39,400 Windmere-Durable
Holding, Inc. *................. 1,411,013
------------
3,291,638
------------
DATA PROCESSING & REPRODUCTION -- 0.5%
38,400 Choicepoint, Inc. *............. 1,944,000
90,100 Pegasystems, Inc. *............. 2,443,963
------------
4,387,963
------------
DIVERSIFIED -- 1.4%
33,850 Allied Products Corp. .......... 717,197
17,700 Chemed Corp. ................... 602,906
38,400 Clarcor, Inc. .................. 806,400
45,100 Federal Signal Corp. ........... 1,096,494
60,800 Gencorp, Inc. .................. 1,535,200
41,700 Griffon Corp. *................. 534,281
17,200 Imation Corp. *................. 284,875
23,350 Manitowoc Co., Inc. ............ 942,756
38,000 MascoTech, Inc. ................ 912,000
31,500 Standex International Corp. .... 933,188
84,300 Triarc Cos., Inc. *............. 1,849,330
30,720 U.S. Industries, Inc. .......... 760,320
------------
10,974,947
------------
ELECTRICAL & ELECTRONIC -- 0.3%
36,600 MDU Resources Group, Inc. ...... 1,306,162
29,400 Sigcorp, Inc. .................. 942,638
------------
2,248,800
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 1.5%
279,700 Cypress Semiconductor Corp. *... 2,325,005
115,000 General Semiconductor, Inc. *... 1,135,625
36,900 Integrated Circuit Systems,
Inc. ........................... 613,463
158,500 International Rectifier Corp. *. 1,347,250
128,600 MEMC Electronic Materials,
Inc. *.......................... 1,334,225
86,900 PMC-Sierra, Inc. *.............. 4,073,437
72,700 Unitrode Corp. *................ 836,050
------------
11,665,055
------------
ELECTRICAL EQUIPMENT -- 0.3%
17,300 C&D Technologies, Inc. ......... 1,003,400
27,100 United Illuminating Co. ........ 1,371,938
------------
2,375,338
------------
</TABLE>
Continued
35
<PAGE> 54
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC -- CONNECTORS -- 0.3%
131,400 Berg Electronics Corp. *........ $ 2,570,513
------------
ELECTRONIC -- MANUFACTURING &
MACHINERY -- 0.4%
70,300 Kulicke & Soffa Industries,
Inc. *.......................... 1,195,100
46,400 PRI Automation, Inc. *.......... 791,700
48,100 SpeedFam International, Inc. *.. 886,844
27,600 Watkins-Johnson Co.............. 717,600
------------
3,591,244
------------
ELECTRONIC -- MILITARY -- 0.1%
29,800 ESCO Electronics Corp. *........ 566,200
36,100 United Industrial Corp. ........ 469,300
------------
1,035,500
------------
ELECTRONIC -- MISCELLANEOUS
COMPONENTS -- 1.6%
24,100 ACT Manufacturing, Inc. *....... 228,950
83,600 BMC Industries, Inc. ........... 731,500
29,800 California Amplifier, Inc. *.... 55,875
46,056 CTS Corp. ...................... 1,358,652
24,100 Del Global Technologies
Corp. *......................... 241,000
32,500 Hadco Corp. *................... 757,656
44,800 Innovex, Inc. .................. 585,200
61,200 Littlefuse, Inc. *.............. 1,545,300
57,300 Oak Industries, Inc. *.......... 2,026,987
63,800 OEA, Inc. *..................... 1,020,800
37,700 Park Electrochemical Corp. ..... 796,413
73,700 Photronics Corp. *.............. 1,626,006
40,000 Plexus Corp. *.................. 795,000
23,500 RadiSys Corp. *................. 505,250
17,900 Reptron Electronics, Inc. *..... 200,256
------------
12,474,845
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 0.7%
74,000 Artesyn Technologies, Inc. *.... 1,184,000
87,200 Cable Design Technologies *..... 1,798,500
25,150 Dynatech Corporation-W/I *...... 78,468
50,900 Technitrol, Inc. ............... 2,032,819
3,200 Triumph Group, Inc. *........... 134,400
------------
5,228,187
------------
ELECTRONIC MEASURING MACHINES -- 0.5%
58,200 Fluke Corp. .................... 1,913,325
82,800 Genrad, Inc. *.................. 1,635,300
32,500 Microtest, Inc. *............... 148,281
------------
3,696,906
------------
ELECTRONIC PARTS -- DISTRIBUTION -- 0.4%
29,418 Bell Industries, Inc. *......... 334,630
86,200 Kent Electronics Corp. *........ 1,578,537
51,500 Marshall Industries *........... 1,403,375
29,200 Nu Horizons Electronics Corp. *. 175,200
------------
3,491,742
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC PRODUCTS -- MISCELLANEOUS -- 1.3%
32,900 Aeroflex, Inc. *................ $ 341,338
83,900 Allen Telecom, Inc. *........... 975,338
23,500 American Precision Industries *. 358,375
104,600 Ametek, Inc. ................... 3,066,087
61,900 Electronic Retailing Systems
International, Inc. *........... 177,963
26,400 Franklin Electronic Publishers,
Inc. *.......................... 264,000
51,400 Integrated Process Equipment *.. 578,250
31,700 Kollmorgen Corp. ............... 635,981
34,100 Kopin Corp. *................... 656,425
96,500 MagneTek, Inc. *................ 1,519,874
39,900 Recoton Corp. *................. 1,336,649
25,300 Three-Five Systems, Inc. *...... 441,169
------------
10,351,449
------------
ENGINEERING -- RESEARCH & DEVELOPMENT
SERVICES -- 0.1%
26,490 URS Corp. *..................... 450,330
------------
ENTERTAINMENT -- 0.3%
31,430 Loews Cineplex Entertainment *.. 402,697
4,700 Scientific Games Holdings
Corp. *......................... 108,100
63,400 Vail Resorts, Inc. *............ 1,688,025
------------
2,198,822
------------
FERTILIZERS -- 0.4%
54,636 Mississippi Chemical Corp. ..... 898,079
138,300 Terra Industries, Inc. ......... 1,244,700
6,200 Terra Nitrogen Company LP....... 155,000
16,100 The Scotts Company *............ 599,725
------------
2,897,504
------------
FINANCIAL -- CONSUMER LOANS -- 0.8%
83,600 AmeriCredit Corp. *............. 2,983,474
113,500 Arcadia Financial Ltd. *........ 858,344
47,800 Student Loan Corp. ............. 2,249,588
------------
6,091,406
------------
FINANCIAL -- INVESTMENT BANKER/BROKER -- 1.2%
35,000 Ameritrade Holding Corp.-
Class A *....................... 945,000
38,750 Dain Rauscher Corp. ............ 2,121,563
126,700 E*Trade Group, Inc. *........... 2,906,180
100,600 Everen Capital Corp. ........... 2,816,800
28,600 Southwest Securities Group,
Inc. ........................... 643,500
------------
9,433,043
------------
FINANCIAL -- INVESTMENT BANKERS -- 1.1%
28,200 Advest Group, Inc. ............. 814,275
17,900 Interstate/Johnson Lane, Inc. .. 563,850
62,800 Jefferies Group, Inc. .......... 2,574,800
59,300 McDonald & Co. Investments,
Inc. ........................... 1,945,781
</TABLE>
Continued
36
<PAGE> 55
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- INVESTMENT BANKERS (CONTINUED)
100,325 Morgan Keegan, Inc. ............ $ 2,595,909
39,500 National Discount Brokers
Group *......................... 419,688
------------
8,914,303
------------
FINANCIAL -- LEASING COMPANY -- 0.9%
30,900 Cort Business Services Corp. *.. 973,350
36,200 DVI, Inc. *..................... 923,100
43,000 Rental Service Corp. *.......... 1,445,875
100,400 U S Rentals, Inc. *............. 3,959,525
------------
7,301,850
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.0%
82,800 Aames Financial Corp. .......... 1,138,500
34,100 Delta Financial Corp. *......... 626,588
109,100 Imperial Credit Industries,
Inc. *.......................... 2,563,849
56,700 Southern Pacific Funding
Corp. *......................... 889,481
31,000 Triad Guaranty, Inc. *.......... 1,054,000
88,100 United Cos. Financial Corp. .... 1,376,563
------------
7,648,981
------------
FINANCIAL -- SAVINGS & LOAN -- 1.2%
91,486 Downey Financial Corp. ......... 2,990,448
101,300 Firstbank Puerto Rico........... 2,633,799
34,700 Firstfed Financial Corp. *...... 1,804,400
17,700 Maryland Federal Bancorp........ 701,363
18,100 PonceBank....................... 467,206
80,273 Westcorp........................ 1,103,754
------------
9,700,970
------------
FINANCIAL -- SMALL BUSINESS INVESTMENT CO. &
COMMERCIAL -- 0.2%
66,000 Sirrom Capital Corp. ........... 1,716,000
------------
FINANCIAL SERVICES -- DIVERSIFIED -- 0.6%
28,500 Healthcare Financial Partners *. 1,747,406
105,000 Paymentech, Inc. *.............. 2,159,063
144,500 Phoenix Investment Partners..... 1,255,344
------------
5,161,813
------------
FOOD -- DIVERSIFIED -- 0.7%
54,400 Earthgrains Co. ................ 3,039,599
4,400 Morrison Health Care, Inc....... 81,400
39,400 Ralcorp Holding, Inc. *......... 743,675
41,500 Smucker (J.M.) Co. ............. 1,011,563
2,900 Tasty Baking Co. ............... 45,131
64,020 Zapata Corp. ................... 632,198
------------
5,553,566
------------
FOOD -- FLOUR & GRAIN -- 0.2%
50,600 International Multi-Foods
Corp. .......................... 1,391,500
------------
FOOD -- MEAT PRODUCTS -- 0.2%
77,500 Pilgrim's Pride Corp. .......... 1,550,000
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOOD ITEMS -- WHOLESALE -- 0.4%
42,500 Fleming Co., Inc. .............. $ 746,406
69,436 U.S. Foodservices *............. 2,434,600
------------
3,181,006
------------
FOREST PRODUCTS -- 0.1%
12,400 Crown Pacific Partners, LP...... 313,875
3,700 Deltic Timber Corp. ............ 92,731
------------
406,606
------------
FUNERAL SERVICES -- 0.1%
23,000 Equity Corp. International *.... 552,000
------------
FURNITURE -- 0.2%
40,387 Bush Industries, Inc. .......... 878,417
3,900 Falcon Products, Inc. .......... 49,238
47,700 O'Sullivan Industries *......... 667,800
24,900 Shelby Williams Industries,
Inc. ........................... 373,500
------------
1,968,955
------------
GLASS PRODUCTS -- 0.2%
36,200 Libbey, Inc. ................... 1,386,913
------------
HEALTH CARE -- 0.3%
108,000 IDEXX Laboratories, Inc. *...... 2,686,500
------------
HOTELS & LODGING -- 0.7%
37,800 Capstar Hotel Co. *............. 1,058,400
54,450 Marcus Corp. ................... 973,294
107,500 Prime Hospitality Corp. *....... 1,874,532
79,900 Red Roof Inns, Inc. *........... 1,353,306
15,500 Sunburst Hospitality Corp. *.... 107,531
------------
5,367,063
------------
INDUSTRIAL -- AUTOMOTIVE/ROBOTICS -- 0.4%
56,800 Esterline Technologies Corp. ... 1,167,950
76,000 Gerber Scientific, Inc. ........ 1,729,000
35,500 Medar, Inc. *................... 75,438
------------
2,972,388
------------
INSTRUMENTS -- CONTROL -- 0.5%
93,200 Roper Industries, Inc. ......... 2,434,850
85,500 Watts Industries, Inc.-Class A.. 1,784,813
------------
4,219,663
------------
INSTRUMENTS -- SCIENTIFIC -- 0.6%
73,400 Dionex Corp. *.................. 1,935,925
98,200 EG&G, Inc....................... 2,946,000
------------
4,881,925
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.6%
76,800 John Alden Financial Corp. ..... 1,689,600
18,600 Penn Treaty American Corp. *.... 585,900
79,200 Penncorp Financial Group, Inc. . 1,623,600
31,937 RLI Corp. ...................... 1,299,437
------------
5,198,537
------------
</TABLE>
Continued
37
<PAGE> 56
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- BROKERS -- 0.6%
58,500 Arthur J. Gallagher & Co. ...... $ 2,617,875
43,300 Blanch (E.W.) Holdings, Inc. ... 1,591,275
43,800 Hilb, Rogal & Hamilton Co. ..... 684,375
------------
4,893,525
------------
INSURANCE -- LIFE -- 2.2%
126,700 American Annuity Group, Inc. *.. 3,048,719
90,200 American Heritage Life
Investment Corp. ............... 2,085,875
51,554 Amerus Life Holdings, Inc. ..... 1,669,061
53,040 Delphi Financial Group *. ...... 2,986,815
41,800 Life Re Corp. .................. 3,464,174
47,300 Life USA Holding, Inc. ......... 611,944
73,500 Nationwide Financial Services... 3,748,499
------------
17,615,087
------------
INSURANCE -- MULTI-LINE -- 1.3%
99,300 Allied Group, Inc. ............. 4,648,480
91,600 Enhance Financial Services
Group, Inc. .................... 3,091,500
108,200 FBL Financial Group, Inc. --
Class A......................... 2,772,625
------------
10,512,605
------------
INSURANCE -- PROPERTY & CASUALTY -- 4.1%
49,600 Acceptance Insurance Cos. *..... 1,218,300
42,200 Capital Re Corp. ............... 3,022,574
25,600 Centris Group, Inc. ............ 316,800
21,300 Chartwell Re Corp. ............. 627,019
32,600 Executive Risk, Inc. ........... 2,404,250
51,599 Fidelity National Financial,
Inc. ........................... 2,054,285
45,950 First American Financial Corp. . 4,135,499
26,800 FPIC Insurance Group, Inc. *.... 901,150
85,118 Frontier Insurance Group, Inc. . 1,920,475
59,700 GAINSCO, Inc. .................. 402,975
9,500 Gryphon Holdings, Inc. *........ 156,750
103,500 HCC Insurance Holdings, Inc. ... 2,277,000
43,700 Highlands Insurance Group *..... 808,450
69,900 Lasalle Re Holdings Ltd. ....... 2,647,463
39,100 MMI Cos., Inc. ................. 904,188
59,900 NAC Re Corp. ................... 3,197,162
15,700 Penn--America Group, Inc. ...... 211,950
26,000 Philadelphia Consolidated
Holding Corp. *................. 546,000
40,400 PXRE Corp. ..................... 1,212,000
28,900 SCPIE Holdings, Inc. ........... 978,988
26,900 Symons International Group *.... 504,375
54,050 Vesta Insurance Group, Inc. .... 1,151,941
58,300 Zenith National Insurance Co. .. 1,643,331
------------
33,242,925
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
LASERS -- SYSTEMS/COMPONENTS -- 0.6%
64,900 Coherent, Inc. *................ $ 1,113,441
16,200 Cyberoptics Corp. *............. 232,875
30,800 Electro Scientific Industries,
Inc. *.......................... 972,125
47,500 VISX, Inc. *.................... 2,826,250
------------
5,144,691
------------
LEISURE & RECREATION PRODUCTS -- 0.9%
21,200 Coastcast Corp. *............... 381,600
38,000 Huffy Corp. .................... 688,750
47,530 K2, Inc. ....................... 837,716
112,500 Oakley, Inc. *.................. 1,462,500
42,400 Polaris Industries, Inc. ....... 1,595,300
21,900 Steinway Musical Instruments *.. 706,275
76,400 Sturm, Ruger & Co., Inc. ....... 1,279,700
------------
6,951,841
------------
LEISURE & RECREATION SERVICES -- 0.1%
32,100 Carmike Cinemas, Inc. *......... 864,694
------------
LEISURE & RECREATION/GAMING -- 0.9%
96,900 Aztar Corp. *................... 660,131
173,400 Boyd Gaming Corp. *............. 997,050
101,550 Grand Casinos, Inc. *........... 1,700,962
27,900 Harveys Casino Resorts.......... 756,788
37,200 Hollywood Park, Inc. *.......... 469,650
25,300 Jackpot Enterprises, Inc. *..... 317,831
48,100 Rio Hotel & Casino, Inc. *...... 907,888
56,300 Station Casinos, Inc. *......... 826,906
48,700 Trump Hotels & Casino Resorts,
Inc. *.......................... 343,944
52,800 WMS Industries, Inc. *.......... 221,100
------------
7,202,250
------------
LINEN SUPPLY & RELATED -- 0.2%
26,000 Angelica Corp. ................. 546,000
27,900 Unifirst Corp. ................. 704,475
------------
1,250,475
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.4%
60,000 Applied Power, Inc. ............ 2,062,500
23,600 Brown & Sharpe Manufacturing
Co. *........................... 283,200
20,400 Gleason Corp. .................. 573,750
------------
2,919,450
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.4%
40,400 CMI Corp., Class A.............. 287,850
35,150 Commercial Intertech Corp. ..... 637,094
62,300 JLG Industries, Inc. ........... 1,257,681
40,600 Terex Corp. *................... 1,157,100
------------
3,339,725
------------
</TABLE>
Continued
38
<PAGE> 57
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MACHINERY -- DIVERSIFIED -- 0.1%
22,500 Cascade Corp. .................. $ 410,625
3,800 Gardner Denver Machinery,
Inc. *.......................... 104,975
------------
515,600
------------
MACHINERY -- ELECTRICAL -- 0.6%
65,800 Baldor Electric Co. ............ 1,607,988
28,157 Kuhlman Corp. .................. 1,113,961
38,600 Smith (A.O.) Corp. ............. 1,995,137
------------
4,717,086
------------
MACHINERY -- GENERAL INDUSTRIAL -- 1.1%
48,466 Albany International Corp.,
Class A......................... 1,160,167
42,725 Applied Industrial Technology,
Inc. ........................... 878,533
35,400 Chart Industries, Inc. ......... 845,175
52,900 Global Industrial Technologies,
Inc. *.......................... 760,438
48,087 Graco, Inc. .................... 1,677,034
62,425 Idex Corp. ..................... 2,153,662
83,566 Paxar Corp. *................... 961,009
27,700 Scotsman Industries, Inc. ...... 768,675
------------
9,204,693
------------
MACHINERY -- MATERIAL HANDLING -- 0.3%
62,600 Interlake Corp. *............... 266,050
14,600 Nacco Industries, Inc. ......... 1,887,050
------------
2,153,100
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.6%
64,400 Affymetrix, Inc. *.............. 1,549,624
57,900 Alkermes, Inc. *................ 1,034,963
90,800 Creative Biomolecules, Inc. *... 436,975
81,400 Millennium Pharmaceuticals *.... 1,149,775
52,889 Molecular Biosystems, Inc. *.... 380,140
------------
4,551,477
------------
MEDICAL -- BIOTECHNOLOGY -- 0.1%
29,800 Cryolife, Inc. *................ 469,350
------------
MEDICAL -- DRUGS -- 1.1%
66,200 Alpharma, Inc. ................. 1,456,400
131,400 Carter-Wallace, Inc. ........... 2,373,412
54,000 Guilford Pharmaceuticals *...... 951,750
91,900 Ligand Pharmaceuticals *........ 1,183,213
39,900 Medicus Pharmaceuticals, Inc. *. 1,456,350
73,060 Vitalink Pharmacy Services,
Inc. *.......................... 1,611,886
------------
9,033,011
------------
MEDICAL -- HEALTH MEDICAL
ORGANIZATION -- 0.6%
131,900 Mid Atlantic Medical Services,
Inc. *.......................... 1,516,850
41,200 PHP Healthcare Corp. *.......... 303,850
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
1,100 Rightchoice Managed Care *...... $ 13,956
80,250 Sierra Health Services, Inc. *.. 2,021,297
44,900 United Wisconsin Services,
Inc. ........................... 1,274,038
------------
5,129,991
------------
MEDICAL -- HOSPITAL -- 0.4%
34,900 Curative Health Services, Inc. . 994,650
165,400 Paracelsus Health *............. 516,875
46,900 Pediatrix Medical Group, Inc. *. 1,744,094
------------
3,255,619
------------
MEDICAL -- HOSPITAL SERVICES -- 0.5%
81,700 Magellan Health Services,
Inc. *.......................... 2,073,138
89,400 Quest Diagnostics, Inc. *....... 1,955,625
------------
4,028,763
------------
MEDICAL -- NURSING HOMES -- 1.0%
25,000 American Retirement Corp. *..... 443,750
70,600 Integrated Health Services,
Inc. ........................... 2,647,500
166,292 Paragon Health Network *........ 2,681,459
35,100 Retirement Care Associates *.... 254,475
140,700 Sun Healthcare Group, Inc. *.... 2,066,531
------------
8,093,715
------------
MEDICAL -- OUTPATIENT/HOME CARE -- 1.2%
144,400 Apria Healthcare Group, Inc. *.. 965,675
126,900 Coram Healthcare Corp. *........ 245,869
99,300 Genesis Health Ventures, Inc. *. 2,482,500
52,400 National Surgery Centers,
Inc. *.......................... 1,522,875
172,700 NovaCare, Inc. *................ 2,029,225
124,800 Orthodontic Centers of
America *....................... 2,612,999
------------
9,859,143
------------
MEDICAL -- WHOLESALE DRUG -- 0.3%
47,066 Bindley Western Industries,
Inc. ........................... 1,553,178
11,000 Express Scripts, Inc.-Class A *. 886,875
------------
2,440,053
------------
MEDICAL EQUIPMENT & SUPPLIES -- 0.2%
41,000 CONMED Corp. *.................. 943,000
55,200 Respironics, Inc. *............. 859,050
------------
1,802,050
------------
MEDICAL INSTRUMENTS -- 0.3%
82,000 Acuson Corp. *.................. 1,491,375
72,690 Graham-Field Health Products,
Inc. *.......................... 408,881
38,800 OEC Medical Systems, Inc. *..... 873,000
------------
2,773,256
------------
MEDICAL PRODUCTS -- 0.5%
41,600 Diagnostic Products Corp. ...... 1,198,600
83,200 Haemonetics Corp. *............. 1,331,200
24,800 Maxxim Medical, Inc. *.......... 719,200
96,200 Owens & Minor, Inc. ............ 962,000
------------
4,211,000
------------
</TABLE>
Continued
39
<PAGE> 58
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL SUPPLIES -- 0.5%
58,000 Ocular Sciences, Inc. *......... $ 1,885,000
69,200 Sola International, Inc. *...... 2,261,975
------------
4,146,975
------------
MEDICAL/DENTAL SUPPLIES -- 0.7%
82,000 Ballard Medical Products........ 1,476,000
41,000 Cooper Cos, Inc. *.............. 1,493,938
57,100 Sunrise Medical, Inc. *......... 856,500
50,000 West Co., Inc. ................. 1,415,625
------------
5,242,063
------------
METAL -- GOLD -- 0.1%
91,100 Hecla Mining Co. *.............. 483,969
10,000 Meridian Gold, Inc. *........... 21,250
------------
505,219
------------
METAL -- IRON -- 0.2%
24,000 Cleveland Cliffs, Inc. ......... 1,287,000
------------
METAL -- MISCELLANEOUS -- 0.1%
37,400 Brush Wellman, Inc. ............ 769,038
------------
METAL -- NON-FERROUS -- 0.2%
135,000 Kaiser Aluminum Corp. *......... 1,290,938
------------
METAL -- PROCESSING & FABRICATION -- 0.6%
25,000 Amcast Industrial Corp. ........ 465,625
30,300 Chase Industries, Inc. *........ 598,425
35,233 Commercial Metals Co. .......... 1,092,223
24,600 Huntco, Inc., Class A........... 292,125
40,000 Mueller Industries, Inc. *...... 1,485,000
32,500 Wolverine Tube, Inc. *.......... 1,235,000
------------
5,168,398
------------
METAL -- SILVER -- 0.0%
36,400 Coeur d'Alene Mines Corp. *..... 245,700
------------
METAL PRODUCTS -- DISTRIBUTION -- 0.2%
32,950 Reliance Steel & Aluminum Co. .. 1,272,694
------------
METAL PRODUCTS -- FASTENERS -- 0.2%
27,500 SPS Technologies, Inc. *........ 1,608,750
13,800 TransTechnology Corp. .......... 354,488
------------
1,963,238
------------
OFFICE AUTOMATION & EQUIPMENT -- 0.1%
68,600 In Focus Systems, Inc. *........ 484,488
------------
OFFICE SUPPLIES & FORMS -- 0.9%
38,400 American Business Products,
Inc. ........................... 787,200
51,200 American Pad & Paper Co. *...... 230,400
58,300 BT Office Products
International *................. 787,050
34,000 Daisytek International Corp.
*............................... 864,875
29,700 Ennis Business Forms, Inc. ..... 345,263
32,200 Hunt Manufacturing Corp. ....... 762,738
39,900 John H. Harland Co. ............ 675,806
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OFFICE SUPPLIES & FORMS (CONTINUED)
33,800 New England Business Service,
Inc. ........................... $ 1,090,050
43,400 Standard Register Co. .......... 1,535,274
------------
7,078,656
------------
OIL & GAS -- DRILLING -- 0.2%
20,200 Atwood Oceanics, Inc. *......... 804,213
165,800 Parker Drilling Co. *........... 1,170,962
------------
1,975,175
------------
OIL -- FIELD SERVICES -- 0.8%
28,400 Hanover Compressor Co. *........ 768,575
47,800 Oceaneering International,
Inc. *.......................... 848,450
67,600 RPC Energy Services, Inc. ...... 845,000
23,600 Seacor Holdings, Inc. *......... 1,446,974
54,600 Seitel, Inc. *.................. 883,838
73,800 Unit Corp. *.................... 447,413
23,100 Veritas DGC, Inc. *............. 1,153,556
------------
6,393,806
------------
OIL -- PRODUCTION/PIPELINE -- 0.6%
46,800 Aquila Gas Pipeline Corp. ...... 573,300
101,200 Kaneb Services, Inc. *.......... 550,275
38,100 Leviathan Gas Pipe Line
Partners, LP.................... 1,114,425
31,600 Northern Border Partners, LP.... 1,007,250
13,200 TEPPCO Partners................. 712,800
65,000 Western Gas Resources, Inc. .... 950,625
------------
4,908,675
------------
OIL -- U.S. EXPLORATION &
PRODUCTION -- 2.1%
27,400 Barrett Resources Corp. *....... 1,025,788
31,300 Belco Oil & Gas Corp. *......... 269,963
30,600 Benton Oil & Gas Co. *.......... 325,125
66,000 Berry Petroleum Co. ............ 858,000
59,700 Cabot Oil & Gas Corp. .......... 1,194,000
100,800 Chesapeake Energy Corp. ........ 403,200
17,500 Comstock Resources, Inc. *...... 130,156
64,150 Cross Timbers Oil Co. .......... 1,222,859
27,000 Forcenergy, Inc. *.............. 480,938
30,100 Forest Oil Corp. *.............. 430,806
7,200 Houston Exploration Co. *....... 165,150
53,000 HS Resources, Inc. *............ 771,813
71,900 KCS Energy, Inc. ............... 822,356
3,800 Key Production Company,
Inc. *.......................... 45,125
6,300 Lomak Petroleum, Inc. .......... 65,756
71,500 Louis Dreyfus Natural Gas *..... 1,354,030
24,900 Meridian Resource Corp. *....... 175,856
57,700 Newfield Exploration Co. *...... 1,435,287
32,000 Nuevo Energy Co. *.............. 1,028,000
66,000 Snyder Oil Corp. ............... 1,315,875
24,000 Stone Energy Corp. *............ 853,500
50,036 Swift Energy Co. *.............. 797,449
</TABLE>
Continued
40
<PAGE> 59
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- U.S. EXPLORATION &
PRODUCTION (CONTINUED)
83,700 Vintage Petroleum, Inc. ........ $ 1,579,837
24,700 Wiser Oil Co. .................. 273,244
------------
17,024,113
------------
OIL -- U.S. INTEGRATED -- 0.0%
13,600 Howell Corp. ................... 147,900
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.1%
51,300 Daniel Industries, Inc. ........ 974,700
------------
OIL REFINING -- 0.5%
5,800 Eott Energy Partners, LP........ 86,638
77,400 Frontier Oil Corp. *............ 648,225
33,500 Giant Industries, Inc. ......... 582,063
63,500 Quaker State Corp. ............. 1,039,812
55,100 Tesoro Petroleum Corp. *........ 874,712
21,600 Tokheim Corp. *................. 442,800
27,050 World Fuel Services Corp. ...... 468,303
------------
4,142,553
------------
PAPER & RELATED PRODUCTS -- 0.5%
70,800 Buckeye Technologies, Inc. *.... 1,668,225
43,300 Chesapeake Corp. ............... 1,685,994
2,100 Fibermark, Inc. ................ 33,600
38,700 Pope & Talbot, Inc. ............ 452,306
12,200 Rock-Tenn Company............... 153,263
------------
3,993,388
------------
POLLUTION CONTROL -- 0.6%
78,700 Calgon Carbon Corp. ............ 782,080
47,500 Dames & Moore, Inc. ............ 611,563
34,700 Imco Recycling, Inc. ........... 641,950
51,239 International Technology
Corp. *......................... 486,771
15,700 Ionics, Inc. *.................. 578,938
200,000 Laidlaw Environmental Services,
Inc. *.......................... 724,999
41,000 Lydall, Inc. *.................. 597,063
28,200 Osmonics, Inc. *................ 338,400
------------
4,761,764
------------
PRINTING -- COMMERCIAL -- 0.3%
36,800 American Banknote Corp. *....... 112,700
14,300 Consolidated Graphics, Inc. *... 843,700
62,300 Mail-Well, Inc. *............... 1,351,131
------------
2,307,531
------------
PROTECTION -- SAFETY -- 0.3%
42,100 Borg-Warner Security Corp. *.... 952,513
28,400 Checkpoint Systems, Inc. *...... 401,150
46,900 Wackenhut Corrections Corp. *... 1,105,081
------------
2,458,744
------------
PUBLISHING -- BOOKS -- 0.1%
46,300 Thomas Nelson, Inc. ............ 619,263
------------
PUBLISHING -- NEWSPAPERS -- 0.2%
107,200 Journal Register Co. *.......... 1,795,600
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING -- PERIODICALS -- 0.3%
117,400 American Media, Inc. *.......... $ 777,775
26,600 Big Flower Holdings, Inc. *..... 798,000
41,100 Playboy Enterprises, Inc. *..... 729,525
------------
2,305,300
------------
REAL ESTATE -- 0.9%
46,300 Castle & Cooke, Inc. *.......... 879,700
32,100 CB Richard Ellis Services *..... 1,073,344
65,100 Grubb & Ellis Co. *............. 927,675
107,300 Insignia Financial Group,
Inc. *.......................... 2,628,850
58,300 Webb (Del) Corp. ............... 1,512,156
------------
7,021,725
------------
RESTAURANTS -- 1.0%
6,700 Consolidated Products, Inc. *... 141,538
30,600 Cooker Restaurant Corp. ........ 298,350
116,400 Foodmaker, Inc. *............... 1,964,249
54,300 Host Marriott Services Corp. *.. 790,744
69,700 Luby's Cafeteria, Inc. ......... 1,224,106
19,000 Morton's Restaurant Group,
Inc. *.......................... 457,188
45,000 Ruby Tuesday, Inc. ............. 697,500
60,200 Sbarro, Inc. *.................. 1,632,925
65,500 Shoney's, Inc. *................ 229,250
73,900 TCBY Enterprises, Inc. ......... 678,956
------------
8,114,806
------------
RETAIL -- APPAREL/SHOES -- 1.4%
60,700 Ann Taylor Stores Corp. *....... 1,286,081
132,480 Burlington Coat Factory
Warehouse Corp. *............... 2,980,799
107,000 CML Group, Inc. *............... 207,313
40,000 Cole (Kenneth) Productions,
Inc. *.......................... 1,035,000
56,100 Footstar, Inc. *................ 2,692,800
55,500 Genesco, Inc. *................. 905,344
52,200 Syms Corp. *.................... 743,850
42,400 Talbots Inc. ................... 1,110,350
18,150 The Buckle, Inc. *.............. 535,425
------------
11,496,962
------------
RETAIL -- AUTOMOBILE -- 0.1%
9,300 Circuit City Stores-Carmax *.... 94,744
6,000 Cross-Continent Auto Retailer *. 41,625
17,700 United Auto Group, Inc. *....... 387,187
------------
523,556
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.1%
73,900 Handleman Co. *................. 849,850
------------
RETAIL -- DISCOUNT -- 0.5%
25,300 99 Cents Only Stores *.......... 1,049,950
57,000 Shopko Stores, Inc. *........... 1,938,000
62,600 Smart & Final, Inc. ............ 1,072,025
------------
4,059,975
------------
RETAIL -- GENERAL MERCHANDISE -- 1.1%
55,900 Cash America Intl., Inc. ....... 852,475
35,200 Cole National Corp. *........... 1,408,000
54,700 Fabri-Centers of America,
Inc. *.......................... 1,497,413
</TABLE>
Continued
41
<PAGE> 60
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- GENERAL MERCHANDISE (CONTINUED)
63,500 Hancock Fabrics, Inc. .......... $ 793,750
69,000 Musicland Stores Corp. *........ 966,000
64,350 Russ Berrie & Co., Inc. ........ 1,608,750
95,550 The Sports Authority, Inc. *.... 1,427,278
------------
8,553,666
------------
RETAIL -- HOME FURNISHINGS -- 0.7%
96,500 Bombay Co., Inc. *.............. 458,375
104,000 Heilig Meyers Co. .............. 1,280,500
30,400 La-Z-Boy, Inc. ................. 1,717,600
44,200 Linens 'n Things, Inc. *........ 1,350,863
33,800 Maxim Group, Inc. *............. 671,775
------------
5,479,113
------------
RETAIL -- JEWELRY -- 0.6%
98,800 Claire's Stores, Inc. .......... 2,025,400
75,800 Zale Corp. *.................... 2,411,388
------------
4,436,788
------------
RETAIL -- MAIL ORDER -- 0.5%
32,100 Brylane, Inc. *................. 1,476,600
52,900 Enesco Group, Inc. ............. 1,626,675
65,900 Global Directmail, Inc. *....... 831,988
56,800 National Media Corp. *.......... 63,900
------------
3,999,163
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
73,500 Value City Department Stores,
Inc. *.......................... 1,543,500
------------
RETAIL -- SPECIAL LINE -- 0.0%
2,400 Heritage Propane Partners LP.... 57,450
3,500 National Propane Partners LP.... 54,469
------------
111,919
------------
RETAIL -- SUPERMARKETS -- 0.4%
39,500 Dominick's Supermarkets, Inc. *. 1,762,688
32,100 Penn Traffic Co. *.............. 106,331
86,000 Ruddick Corp. .................. 1,558,750
------------
3,427,769
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.2%
48,900 Discount Auto Parts, Inc. *..... 1,271,400
41,000 Tyler Corp. *................... 425,375
------------
1,696,775
------------
RUBBER & PLASTICS -- 0.1%
34,300 Furon Co. ...................... 621,688
------------
SHOES & RELATED APPAREL -- 0.6%
25,175 Barry (R.G.) Corp. *............ 415,388
49,800 Brown Group, Inc. .............. 989,775
45,300 Converse, Inc. *................ 249,150
80,400 Stride Rite Corp. .............. 1,211,025
29,900 Timberland Co., Class A *....... 2,150,931
------------
5,016,269
------------
SOAP & CLEANING PREPARATIONS -- 0.2%
54,800 Church & Dwight Co., Inc. ...... 1,774,150
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
STEEL -- PIPES & TUBES -- 0.2%
41,800 NS Group, Inc. *................ $ 423,225
31,900 Quanex Corp. ................... 966,969
12,300 Shaw Group, Inc. *.............. 319,800
------------
1,709,994
------------
STEEL -- PRODUCERS -- 0.9%
21,000 ACME Metals, Inc. *............. 105,000
197,600 Armco, Inc. *................... 1,259,700
2,600 Atchison Casting Corp. *........ 46,475
48,900 Birmingham Steel Corp. ......... 605,138
36,000 Carpenter Technology............ 1,809,000
31,300 Lone Star Technologies, Inc. *.. 477,325
78,800 National Steel Corp. ........... 935,750
50,200 Rouge Industries, Inc. ......... 640,050
76,700 Weirton Steel Corp. *........... 282,831
55,800 WHX Corp. *..................... 718,425
------------
6,879,694
------------
STEEL -- SPECIALTY -- 0.3%
88,900 J & L Specialty Steel, Inc. .... 527,844
60,000 Oregon Steel Mills, Inc. ....... 1,117,499
33,630 RMI Titanium Co. *.............. 765,083
------------
2,410,426
------------
TELECOMMUNICATIONS -- CELLULAR -- 0.1%
70,300 American Mobile Satellite
Corp. * ........................ 685,425
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 1.3%
37,200 C-Cor Electronics, Inc. *....... 706,800
27,600 Centigram Communications
Corp. *......................... 310,500
35,550 Davox Corp. *................... 777,656
57,300 InterVoice, Inc. *.............. 1,017,075
69,400 Network Equipment Technologies,
Inc. *.......................... 1,088,713
57,800 Plantronics, Inc. *............. 2,976,699
51,100 Superior Telecom, Inc. ......... 2,127,037
20,300 Tech-Sym Corp. *................ 564,594
31,200 Telco Systems, Inc. *........... 442,650
100,500 Telular Corp. *................. 194,719
45,900 Titan Corp. *................... 275,400
------------
10,481,843
------------
TELECOMMUNICATIONS -- SERVICES AND
EQUIPMENT -- 0.3%
62,700 Mastec, Inc. *.................. 1,496,963
50,500 Smartalk Teleservices, Inc. *... 735,406
------------
2,232,369
------------
TEXTILE -- APPAREL -- 1.2%
63,000 Authentic Fitness Corp. ........ 996,188
104,300 Burlington Industries, Inc. *... 1,466,718
66,500 Delta Woodside Industries,
Inc. ........................... 344,969
8,000 Donna Karan International,
Inc. *.......................... 117,500
37,700 Guess ?, Inc. *................. 186,144
82,700 Hartmarx Corp. *................ 625,419
57,650 Kellwood Co. ................... 2,060,987
</TABLE>
Continued
42
<PAGE> 61
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TEXTILE -- APPAREL (CONTINUED)
24,700 Oxford Industries, Inc. ........ $ 862,956
75,900 Phillips-Van Heusen Corp. ...... 1,119,525
33,500 St. John Knits, Inc. ........... 1,293,937
81,000 Tultex Corp. *.................. 197,438
------------
9,271,781
------------
TEXTILE -- HOME FURNISHINGS -- 0.2%
34,013 Pillowtex Corp. ................ 1,364,772
------------
TEXTILE -- PRODUCTS -- 0.4%
46,900 Collins & Aikman Corp. *........ 348,819
75,300 Cone Mills Corp. *.............. 649,463
4,800 Culp, Inc. ..................... 62,100
38,500 Dyersburg Corp. ................ 223,781
20,700 Galey & Lord, Inc. *............ 307,913
47,550 Guilford Mills, Inc. ........... 950,999
74,900 Polymer Group, Inc. *........... 870,713
------------
3,413,788
------------
TOBACCO -- 0.4%
38,300 Brooke Group, Ltd. ............. 430,875
60,700 Consolidated Cigar Holdings,
Inc. *.......................... 743,575
10,100 General Cigar Holdings *........ 99,738
53,346 General Cigar Holdings, Inc.-
Class B *....................... 526,792
45,100 Schweitzer-Mauduit
International................... 1,307,899
25,740 Standard Commercial Corp. *..... 283,140
------------
3,392,019
------------
TOOLS -- HAND HELD -- 0.2%
35,200 Toro Co. ....................... 1,205,600
------------
TOYS/GAME/HOBBY -- 0.1%
49,700 Galoob (Lewis) Toys, Inc. *..... 497,000
10,900 Toy Biz, Inc. *................. 100,825
------------
597,825
------------
TRANSPORTATION -- 0.3%
29,100 Coach USA, Inc. *............... 1,327,688
129,900 OMI Corp. *..................... 1,039,200
------------
2,366,888
------------
TRANSPORTATION -- AIR FREIGHT -- 0.3%
20,600 Airnet Systems, Inc. *.......... 332,175
22,700 Atlas Air, Inc. *............... 767,544
58,900 Pittston Burlington Group....... 916,631
------------
2,016,350
------------
TRANSPORTATION -- AIRLINE -- 0.4%
31,900 Alaska Airgroup, Inc. *......... 1,740,543
57,800 America West Holding Corp.--
Class B *....................... 1,650,913
5,550 Midwest Express Holdings........ 200,841
------------
3,592,297
------------
TRANSPORTATION -- EQUIPMENT &
LEASING -- 1.0%
43,000 Greenbrier Cos., Inc. .......... 741,750
71,250 Interpool, Inc. ................ 1,028,672
6,700 Motivepower Industries, Inc. *.. 164,150
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- EQUIPMENT &
LEASING (CONTINUED)
166,650 Rollins Truck Leasing Corp. .... $ 2,093,541
82,800 Westinghouse Air Brake Co. ..... 2,183,850
26,000 Xtra Corp....................... 1,573,000
------------
7,784,963
------------
TRANSPORTATION -- RAILROAD -- 0.2%
50,400 Florida East Coast Industries... 1,474,200
------------
TRANSPORTATION -- SHIPPING -- 0.1%
12,990 Marine Transport Corp. *........ 52,772
43,600 Overseas Shipholding Group...... 888,350
------------
941,122
------------
TRAVEL SERVICES -- 0.1%
26,800 Sabre Group Holdings, Inc. *.... 1,018,400
------------
UTILITIES -- ELECTRIC POWER -- 2.2%
39,900 Black Hills Corp. .............. 917,700
5,900 Calpine Corp. *................. 119,106
34,400 Central Hudson Gas & Electric
Corp. .......................... 1,578,100
55,200 Central Maine Power Co. ........ 1,076,400
31,500 Central Vermont Public Service
Corp. .......................... 470,531
28,200 CILCORP, Inc. .................. 1,353,600
31,700 Cleco Corp. .................... 943,075
41,600 Commonwealth Energy Systems
Co. ............................ 1,570,400
21,000 Eastern Utilities Association... 551,250
35,200 Empire District Electric Co. ... 734,800
64,681 Interstate Energy Corp. ........ 2,102,132
37,800 Northwestern Corp. ............. 945,000
25,900 Orange & Rockland Utilities..... 1,390,506
64,200 Public Service New Mexico....... 1,456,538
31,000 TNP Enterprises, Inc. .......... 957,125
70,320 UniSource Energy Corp. *........ 1,107,540
34,000 WPS Resources Corp. ............ 1,115,625
------------
18,389,428
------------
UTILITIES -- GAS DISTRIBUTION -- 2.3%
33,150 Atmos Energy Corp. ............. 1,011,075
25,800 Bay State Gas Co. .............. 988,463
25,400 Connecticut Energy Corp. ....... 708,025
29,900 Connecticut Natural Gas Corp. .. 702,650
22,400 Eastern Enterprises............. 960,400
59,200 Energen Corp. .................. 1,191,400
48,500 Indiana Energy, Inc. ........... 1,448,938
39,400 Laclede Gas Co. ................ 965,300
40,800 New Jersey Resources Corp. ..... 1,456,049
11,750 North Carolina Natural Gas...... 298,156
31,200 NUI Corp. ...................... 793,650
38,900 Public Service Co. of North
Carolina........................ 846,075
30,200 South Jersey Industries, Inc. .. 834,275
35,605 Southern Union Co. *............ 1,148,261
54,900 Southwest Gas Corp. ............ 1,341,619
69,500 Southwestern Energy Co. ........ 638,531
34,800 UGI Corp. ...................... 865,650
</TABLE>
Continued
43
<PAGE> 62
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- GAS DISTRIBUTION (CONTINUED)
53,600 Wicor, Inc. .................... $ 1,239,500
29,400 Yankee Energy System, Inc. ..... 723,975
------------
18,161,992
------------
UTILITIES -- WATER SUPPLY -- 0.5%
19,600 Aquarion Co. ................... 670,075
43,700 Philadelphia Suburban Corp. .... 955,938
22,500 Southern California Water *..... 610,313
76,600 United Water Resources, Inc. ... 1,378,799
------------
3,615,125
------------
WHOLESALE DISTRIBUTION -- 0.0%
3,300 Aviation Sales Co. *............ 130,763
------------
WIRE & CABLE PRODUCTS -- 0.5%
6,900 Alpine Group, Inc. *............ 143,175
40,700 Barnes Group, Inc. ............. 1,101,444
37,100 Belden, Inc. ................... 1,136,188
67,400 General Cable Corp. *........... 1,946,174
------------
4,326,981
------------
TOTAL COMMON STOCKS............. 787,644,839
------------
(Cost $619,890,235)
INVESTMENT COMPANIES -- 2.7%
10,872,568 Dreyfus Cash Management Money
Market Fund..................... 10,872,568
10,885,705 Federated Prime Value
Obligations Money Market Fund... 10,885,705
------------
TOTAL INVESTMENT COMPANIES...... 21,758,273
------------
(Cost $21,758,273)
RIGHTS -- FOREIGN -- 0.0%
STEEL -- PRODUCERS -- 0.0%
99,400 WCI Steel, Inc.--Escrow A/C..... 0
------------
TOTAL RIGHTS -- FOREIGN......... 0
------------
(Cost $0)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
$840,000 U.S. Treasury Bill, Discount
Note, 9/24/98................... $ 830,399
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS..................... 830,399
------------
(Cost $830,480)
TOTAL INVESTMENTS -- 101.2%................. 810,233,511
(Cost $642,478,988) (a)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 1.2%............................ (9,626,758)
------------
TOTAL NET ASSETS -- 100.0%.................. $800,606,753
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation $218,556,030
Unrealized depreciation (50,801,507)
------------
Net unrealized appreciation $167,754,523
============
</TABLE>
(b) Security has been deposited as initial margin on open futures contract
* Non-income producing security
At June 30, 1998 the Fund's open future contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ------------------ ----------- -----------
<S> <C> <C> <C>
42 Standard & Poor's $11,724,995 $12,001,500
500, 9/17/98
</TABLE>
See Notes to Financial Statements.
44
<PAGE> 63
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 97.2%
AUSTRALIA -- 2.0%
BANKING -- 0.5%
106,087 National Australia Bank Ltd...... $ 1,399,285
142,912 Westpac Banking Corp., Ltd....... 871,704
------------
2,270,989
------------
BEVERAGES & TOBACCO -- 0.1%
70,676 Coca-Cola Amatil Ltd............. 458,798
------------
BREWERY -- 0.1%
178,336 Fosters Brewing Group Ltd........ 419,650
------------
BROADCASTING & PUBLISHING -- 0.2%
147,083 News Corp., Ltd.................. 1,200,445
------------
BUILDING PRODUCTS -- 0.1%
107,742 Boral Ltd........................ 202,158
34,780 Hardie (James) Industries Ltd.... 97,134
80,788 Pioneer International Ltd........ 192,607
------------
491,899
------------
CHEMICALS -- 0.0%
22,970 ICI Australia Ltd................ 135,840
------------
CLOSED END FUNDS -- 0.0%
29,241 Stockland Trust Group............ 66,816
------------
DIVERSIFIED -- 0.0%
16,044 Smith (Howard) Ltd............... 94,384
54,495 Southcorp Holdings Ltd........... 158,268
------------
252,652
------------
ENERGY -- 0.2%
156,213 Broken Hill Proprietary Co.,
Ltd.............................. 1,320,426
------------
ENGINEERING -- 0.0%
22,400 Leighton Holdings Ltd............ 78,441
------------
ENTERTAINMENT -- 0.0%
62,916 Crown Ltd.*...................... 18,896
40,300 Sydney Harbour Casino Holdings
Ltd.*............................ 23,458
26,100 TABCORP Holdings Ltd............. 133,339
------------
175,693
------------
FOOD PRODUCTS -- 0.0%
39,301 Burns, Philp & Co., Ltd.*........ 3,164
109,142 Goodman Fielder Ltd.............. 158,827
------------
161,991
------------
GAS UTILITY -- 0.0%
25,513 Australian Gas Light Co., Ltd.... 159,569
------------
INDUSTRIAL GOODS & SERVICES -- 0.1%
91,818 CSR Ltd.......................... 264,959
88,700 Pacific Dunlop Ltd............... 143,360
------------
408,319
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUSTRALIA (CONTINUED)
INSURANCE -- 0.0%
53,350 GIO Australia Holdings Ltd....... $ 136,905
32,565 QBE Insurance Group Ltd.......... 114,945
------------
251,850
------------
MANUFACTURING-CAPITAL GOODS -- 0.0%
26,212 Email Ltd........................ 45,449
------------
METALS -- 0.0%
145,238 M.I.M. Holdings Ltd.............. 70,152
15,796 RGC Ltd.......................... 15,651
------------
85,803
------------
METALS & MINING -- 0.2%
68,058 Australian National Industries
Ltd.............................. 39,195
16,431 Great Central Mines Ltd.......... 15,669
3,978 Homestake Mining Co.............. 38,182
17,377 Newcrest Mining Ltd..*........... 21,306
146,141 Normandy Mining Ltd.............. 119,457
62,696 North Ltd........................ 128,897
49,377 QCT Resources Ltd................ 32,717
29,836 Rio Tinto Ltd.................... 354,737
104,971 WMC Ltd.......................... 315,915
------------
1,066,075
------------
OIL & GAS -- 0.0%
52,241 Santos Ltd....................... 161,751
------------
PACKAGING -- 0.0%
58,093 Amcor Ltd........................ 254,336
------------
PHARMACEUTICALS -- 0.0%
10,510 Faulding (F.H.) & Co., Ltd....... 47,934
------------
REAL ESTATE -- 0.2%
109,430 General Property Trust Units..... 176,865
24,706 Lend Lease Corp., Ltd............ 499,517
104,347 Westfield Trust Units............ 200,312
------------
876,694
------------
REAL ESTATE INVESTMENT TRUST -- 0.0%
14,411 Schroders Property Fund.......... 21,775
------------
RETAIL STORES -- 0.1%
115,528 Coles Myer Ltd................... 450,705
------------
SERVICES -- 0.1%
20,119 Brambles Industries Ltd.......... 394,814
------------
TOBACCO -- 0.0%
8,400 Rothmans Holdings Ltd............ 51,653
------------
11,310,367
------------
AUSTRIA -- 0.7%
AIRLINES -- 0.0%
4,100 Austrian Airlines*............... 134,955
------------
</TABLE>
Continued
45
<PAGE> 64
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUSTRIA (CONTINUED)
BANKING -- 0.2%
10,550 Bank Austria AG.................. $ 858,106
100 Bank Austria AG, Participating
Certificates..................... 7,182
------------
865,288
------------
BEVERAGES & TOBACCO -- 0.0%
3,100 Oesterreichische
Brau-Beteiligungs AG............. 183,085
------------
BUILDING PRODUCTS -- 0.1%
1,433 Wienerberger Baustoffindustrie
AG............................... 346,655
------------
CHEMICALS -- 0.0%
600 Lenzing AG *..................... 45,830
------------
CONSTRUCTION -- 0.0%
1,455 Bau Holding AG*.................. 82,495
------------
ELECTRIC UTILITY -- 0.1%
4,769 Oesterreichische
Elektrizitaetswirtschafts AG,
Class A.......................... 570,822
------------
ELECTRICAL EQUIPMENT -- 0.0%
1,000 Austria Mikro Systeme
International AG................. 67,722
------------
ENGINEERING -- 0.1%
2,400 VA Technologie AG................ 298,606
------------
INSURANCE -- 0.1%
1,180 EA-Generali AG................... 346,594
------------
MANUFACTURING-CONSUMER GOODS -- 0.0%
100 Steyr-Daimler-Puch AG............ 2,740
------------
METALS & MINING -- 0.0%
2,575 Radex-Heraklith
Industriebeteiligungs AG......... 124,705
------------
OIL & GAS -- 0.1%
4,240 OMV AG........................... 567,937
------------
PAPER PRODUCTS -- 0.0%
1,900 Mayr-Melnhof Karton AG........... 124,183
------------
STEEL -- 0.0%
1,800 Boehler-Uddeholm AG.............. 118,923
------------
TRANSPORTATION -- 0.0%
3,300 Flughafen Wien AG................ 158,256
------------
4,038,796
------------
BELGIUM -- 1.4%
BANKING -- 0.3%
1,116 Generale de Banque SA............ 828,527
12,520 Kredietbank NV................... 1,120,441
------------
1,948,968
------------
BUILDING PRODUCTS -- 0.0%
1,925 Cimenteries CBR Cementbedrijven.. 215,728
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BELGIUM (CONTINUED)
CHEMICALS -- 0.1%
8,510 Solvay SA........................ $ 674,671
------------
ELECTRIC UTILITY -- 0.2%
5,840 Tractebel........................ 855,361
------------
ENERGY -- 0.1%
1,897 PetroFina SA..................... 778,733
------------
GAS & ELECTRIC UTILITY -- 0.2%
3,800 Electrabel SA.................... 1,077,398
------------
INDUSTRIAL HOLDING COMPANY -- 0.1%
2,000 Groupe Bruxelles Lambert SA...... 403,655
------------
INSURANCE -- 0.2%
2,900 Fortis AG........................ 740,392
1,350 Royale Belge..................... 513,370
------------
1,253,762
------------
MERCHANDISING -- 0.1%
4,400 Delhaize-Le Lion SA.............. 307,444
------------
TECHNOLOGY -- 0.1%
1,000 Barco NV......................... 279,495
------------
TRANSPORTATION -- 0.0%
1,422 Union Miniere SA*................ 87,896
------------
7,883,111
------------
DENMARK -- 1.0%
BANKING & FINANCE -- 0.2%
4,147 Den Danske Bank.................. 497,494
4,193 Unidanmark AS, Class A........... 376,802
------------
874,296
------------
BEVERAGES & TOBACCO -- 0.1%
2,760 Carlsberg AS, Class A*........... 200,668
2,305 Carlsberg AS, Class B*........... 167,587
------------
368,255
------------
COMMERCIAL SERVICES -- 0.0%
2,390 ISS International Service System
AS, Series B*.................... 139,014
------------
ENGINEERING -- 0.0%
3,615 FLS Industries AS, Class B....... 91,991
------------
FOOD PRODUCTS -- 0.1%
4,795 Danisco AS....................... 322,130
------------
PHARMACEUTICALS -- 0.2%
6,946 Novo Nordisk AS, Class B......... 957,510
------------
TELECOMMUNICATIONS -- 0.2%
11,300 Tele Danmark AS, Class B......... 1,084,482
------------
</TABLE>
Continued
46
<PAGE> 65
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DENMARK (CONTINUED)
TRANSPORTATION & SHIPPING -- 0.2%
85 D/S 1912, Class B................ $ 729,241
60 D/S Svendborg AS, Class B........ 732,876
------------
1,462,117
------------
5,299,795
------------
FINLAND -- 0.9%
BANKING & FINANCE -- 0.1%
57,106 Merita Ltd., Class A............. 376,787
------------
CHEMICALS -- 0.0%
8,900 Kemira........................... 91,977
------------
DIVERSIFIED -- 0.0%
800 Amer Group Ltd.*................. 15,456
1,500 Instrumentarium Group, Series B.. 95,690
------------
111,146
------------
ENGINEERING -- 0.0%
5,500 Metra AB......................... 180,443
------------
FOOD PRODUCTS -- 0.0%
5,200 Cultor-Series 1.................. 83,405
4,400 Cultor-Series 2.................. 71,375
------------
154,780
------------
FOREST PRODUCTS -- 0.1%
18,660 UPM-Kymmene Corp................. 513,564
------------
INSURANCE -- 0.0%
800 Pohjola Insurance Group, Class B. 39,807
4,300 Sampo Insurance Co............... 203,773
------------
243,580
------------
MACHINERY & EQUIPMENT -- 0.0%
500 Kone Corp.-Class B............... 70,172
------------
METALS -- 0.0%
8,700 Outokumpu........................ 111,000
------------
RETAIL-GENERAL MERCHANDISE -- 0.0%
6,300 Kesko............................ 99,326
2,250 Stockmann AB-B Share............. 52,493
------------
151,819
------------
TELECOMMUNICATIONS -- 0.6%
30,600 Nokia-Class A.................... 2,250,458
11,000 Nokia-Class K.................... 809,991
------------
3,060,449
------------
5,065,717
------------
FRANCE -- 8.0%
ADVERTISING -- 0.0%
3 Havas SA......................... 255
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.0%
3,050 Moulinex*........................ 79,150
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
AUTO PARTS -- 0.1%
7,267 Valeo SA......................... $ 742,803
------------
AUTOMOTIVE -- 0.1%
3,662 PSA Peugeot Citroen.............. 787,393
------------
BANKING -- 0.8%
14,674 Banque Nationale de Paris........ 1,198,962
11,664 Paribas.......................... 1,248,192
6,847 Societe Generale................. 1,423,526
------------
3,870,680
------------
BEVERAGES & TOBACCO -- 0.3%
6,120 LVMH (Moet Hennessy Louis
Vuitton)......................... 1,224,804
5,400 Pernod Ricard.................... 374,229
------------
1,599,033
------------
BROADCASTING/CABLE -- 0.1%
3,136 Canal Plus....................... 586,117
------------
BUILDING PRODUCTS -- 0.2%
1,195 Imetal SA........................ 164,247
6,721 Lafarge SA....................... 694,774
------------
859,021
------------
CHEMICALS -- 0.4%
5,932 L'Air Liquide.................... 981,160
24,814 Rhone-Poulenc SA................. 1,399,526
------------
2,380,686
------------
COMMERCIAL SERVICES -- 0.1%
2,840 Sodexho SA....................... 536,901
------------
CONSTRUCTION -- 0.0%
1,466 Bouygues......................... 266,236
------------
DEFENSE -- 0.1%
200 Sagem SA......................... 155,606
12,325 Thomson CSF...................... 468,861
------------
624,467
------------
DIVERSIFIED -- 0.1%
498 Chargeurs International SA....... 41,143
12,106 Lagardere SCA.................... 503,980
1,350 Nord-Est SA...................... 29,697
------------
574,820
------------
ELECTRICAL & ELECTRONIC -- 0.6%
10,437 Alcatel Alsthom.................. 2,125,022
2,100 Legrand SA....................... 555,737
10,800 Schneider SA..................... 861,174
------------
3,541,933
------------
ENERGY -- 0.9%
17,367 Elf Aquitane SA.................. 2,441,594
15,800 Total SA, Class B................ 2,054,042
------------
4,495,636
------------
</TABLE>
Continued
47
<PAGE> 66
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
ENGINEERING -- 0.0%
200 Groupe Gtm....................... $ 20,774
------------
FINANCE -- 0.5%
11,988 Compagnie Generale des Eaux...... 2,559,781
523 CPR (Compagnie Parisenne de
Reescompte)...................... 42,127
844 Credit National.................. 53,046
192 Eurafrance*...................... 120,674
------------
2,775,628
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.1%
2,600 Eridania Beghin-Say SA........... 574,096
------------
FOOD PRODUCTS -- 0.3%
5,121 Groupe Danone.................... 1,411,953
------------
HEALTH & PERSONAL CARE -- 0.6%
4,266 L'OREAL.......................... 2,372,889
7,623 Sanofi SA........................ 896,448
------------
3,269,337
------------
INDUSTRIAL GOODS & SERVICES -- 0.1%
9,690 Michelin Class B, Registered..... 559,344
------------
INDUSTRIAL HOLDING COMPANY -- 0.3%
8,780 Lyonnaise des Eaux SA............ 1,444,932
------------
INSURANCE -- 0.4%
21,000 Axa-UAP.......................... 2,361,881
------------
LEISURE -- 0.1%
2,650 Accor SA......................... 741,611
541 Club Mediterranee SA*............ 46,709
------------
788,320
------------
MACHINE -- DIVERSIFIED -- 0.0%
1,600 Sidel SA......................... 116,440
------------
MEDIA -- 0.0%
498 Pathe SA......................... 97,606
------------
MEDICAL SUPPLIES -- 0.0%
500 Essilor International............ 211,461
------------
MERCHANDISING -- 0.9%
2,639 Carrefour SA..................... 1,669,555
6,600 Etablissements Economiques du
Casino Guichard-Perrachon........ 527,037
1,577 Pinault-Printemps-Redoute SA..... 1,319,812
1,450 Promodes......................... 803,420
------------
4,319,824
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.2%
6,333 Compagnie de Saint Gobain........ 1,174,208
------------
OFFICE EQUIPMENT & SERVICES -- 0.1%
5,700 Bic.............................. 405,390
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
OIL & GAS -- 0.0%
50 Cie Gen Geophysiq*............... $ 7,335
1,300 Primagaz Cie..................... 114,174
------------
121,509
------------
REAL ESTATE -- 0.1%
2,600 SEFIMEG.......................... 188,355
918 Simco SA......................... 75,310
800 Unibail.......................... 103,473
572 Union Immobiliere de France...... 45,128
------------
412,266
------------
RETAIL -- SPECIAL LINE -- 0.0%
352 Comptoirs Modernes............... 183,393
------------
STEEL -- 0.1%
25,100 Unisor Sacilor SA................ 387,749
------------
TELECOMMUNICATIONS -- SERVICES &
EQUIPMENT -- 0.4%
35,000 France Telecom*.................. 2,413,981
------------
TEXTILE PRODUCTS -- 0.0%
1,050 Dollfus-Mieg & Cie*.............. 28,308
------------
TOBACCO -- 0.0%
3,200 SEITA............................ 145,021
------------
44,168,552
------------
GERMANY -- 10.0%
AIRLINES -- 0.1%
28,980 Lufthansa AG*.................... 727,296
------------
AUTOMOTIVE -- 1.2%
39,170 Daimler-Benz AG.................. 3,840,975
761 MAN AG*.......................... 295,962
2,447 Volkswagen AG.................... 2,352,058
------------
6,488,995
------------
BANKING -- 1.8%
54,840 Bayer AG......................... 2,828,536
23,028 Bayerische Vereinsbank AG........ 1,958,300
40,260 Deutsche Bank AG................. 3,409,211
37,160 Dresdner Bank AG................. 2,003,102
------------
10,199,149
------------
BANKING & FINANCE -- 0.2%
19,520 Bayerische Hypotheken-und
Weschel-Bank AG.................. 1,237,145
------------
BUILDING PRODUCTS -- 0.1%
4,070 Heidelberger Zement AG........... 385,572
------------
CHEMICALS -- 0.5%
46,780 BASF AG.......................... 2,215,853
7,120 Degussa AG....................... 438,237
------------
2,654,090
------------
</TABLE>
Continued
48
<PAGE> 67
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
CLOTHING -- 0.1%
3,500 Adidas AG........................ $ 604,975
------------
COMPUTER SOFTWARE -- 0.5%
4,700 SAP AG........................... 2,851,193
------------
CONSTRUCTION -- 0.0%
4,730 Hochtief AG...................... 226,669
------------
DIVERSIFIED -- 0.8%
1,231 Preussag AG...................... 439,196
37,390 VEBA AG.......................... 2,547,858
2,007 Viag AG.......................... 1,356,506
------------
4,343,560
------------
ELECTRICAL & ELECTRONIC -- 0.5%
43,470 Siemens AG....................... 2,644,275
------------
ENGINEERING -- 0.5%
2,040 AGIV-AG*......................... 56,057
2,970 Bilfinger & Berger Bau AG........ 100,863
27,820 Mannesmann AG.................... 2,822,020
------------
2,978,940
------------
GAS & ELECTRIC UTILITY -- 0.3%
25,650 RWE AG *......................... 1,520,498
------------
HEALTH & PERSONAL CARE -- 0.1%
7,860 Beiersdorf AG, Series ABC........ 500,331
------------
HEALTH CARE -- 0.1%
5,300 Schering AG...................... 624,537
------------
INSURANCE -- 1.7%
1,780 Aachener & Muenchener............ 208,074
17,070 Allianz AG....................... 5,626,847
3,660 Amb Aachener & Muenchener........ 427,634
6,045 Muenchener Rueckver.............. 2,997,326
------------
9,259,881
------------
MACHINERY & EQUIPMENT -- 0.1%
3,830 Kloeckner-Humbolt-Deutz AG*...... 44,559
636 Linde AG......................... 445,720
------------
490,279
------------
METALS & MINING -- 0.1%
2,480 FAG Kugelfischer Georg Schaefer
AG............................... 36,959
2,734 Thyssen AG....................... 692,196
------------
729,155
------------
PHARMACEUTICALS -- 0.1%
13,100 Merck KGaA....................... 585,679
------------
RETAIL STORES -- 0.3%
791 Karstadt AG...................... 382,127
17,073 Metro AG*........................ 1,035,711
------------
1,417,838
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
RETAIL -- GENERAL MERCHANDISE -- 0.0%
1,630 Douglas Holding AG............... $ 86,239
------------
TELECOMMUNICATIONS -- 0.8%
158,800 Deutsche Telekom AG.............. 4,284,440
------------
TIRE & RUBBER -- 0.0%
4,870 Continental AG................... 151,628
------------
54,992,364
------------
HONG KONG -- 1.8%
AIRLINES -- 0.0%
12,600 Hong Kong Aircraft Engineering
Co., Ltd......................... 19,513
------------
BANKING -- 0.2%
356,630 Bank of East Asia Ltd.*.......... 386,612
108,800 Hang Seng Bank Ltd............... 615,008
------------
1,001,620
------------
BANKING & FINANCE -- 0.0%
14,695 Wing Lung Bank................... 34,137
------------
BROADCASTING & PUBLISHING -- 0.0%
96,000 South China Morning Post Holdings
Ltd.............................. 46,150
25,000 Television Broadcasts Ltd........ 66,141
------------
112,291
------------
DISTRIBUTION -- 0.0%
18,000 Dickson Concepts International... 25,088
------------
DIVERSIFIED -- 0.1%
94,500 Swire Pacific Ltd., Class A...... 356,727
250,000 Wharf Holdings Ltd............... 246,820
------------
603,547
------------
ELECTRIC UTILITY -- 0.1%
141,400 CLP Holdings Ltd................. 644,173
------------
ELECTRICAL & ELECTRONIC -- 0.1%
161,700 Johnson Electric Holdings Ltd.... 598,922
------------
ELECTRICAL EQUIPMENT -- 0.0%
65,000 Elec & Eltek International
Holdings Ltd..................... 12,415
------------
GAS UTILITY -- 0.1%
383,075 Hong Kong & China Gas Co., Ltd... 435,055
------------
HOTELS & LODGING -- 0.0%
65,500 Hong Kong & Shanghai Hotels Ltd.. 32,756
33,000 Miramar Hotel & Investment Ltd... 28,960
218,714 Regal Hotels International....... 26,251
------------
87,967
------------
INDUSTRIAL HOLDING COMPANY -- 0.3%
282,000 Hutchison Whampoa Ltd............ 1,488,506
------------
</TABLE>
Continued
49
<PAGE> 68
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HONG KONG (CONTINUED)
MANUFACTURING -- CONSUMER GOODS -- 0.0%
20,000 Varitronix International Ltd..... $ 40,007
------------
PRINTING & PUBLISHING -- 0.0%
127,500 Oriental Press Group Ltd......... 11,847
------------
REAL ESTATE -- 0.4%
133,000 Cheung Kong Holdings Ltd. ....... 653,965
108,000 Chinese Estates Ltd. ............ 18,816
241,000 Hopewell Holdings Ltd. .......... 25,815
332,000 Hysan Development Co., Ltd. ..... 274,218
26,000 Kumagai Gumi (Hong Kong)......... 10,821
116,525 New World Development Co., Ltd. . 225,574
384,000 Shangri-La Asia Ltd. ............ 247,787
773,796 Sino Land Company................ 269,630
133,695 Sun Hung Kai Properties Ltd. .... 567,661
43,270 Tai Cheung Holdings Ltd. ........ 10,498
------------
2,304,785
------------
REAL ESTATE INVESTMENT TRUST -- 0.1%
455,100 Hang Lung Development Co. ....... 452,247
------------
RETAIL STORES -- 0.0%
50,000 Giordano International Ltd. ..... 10,131
------------
TELECOMMUNICATIONS -- 0.2%
677,343 Hong Kong Telecommunications
Ltd. ............................ 1,271,891
------------
TRANSPORTATION -- 0.1%
1,092,000 Cathay Pacific Airways........... 768,064
109,859 Shun Tak Holdings Ltd. .......... 10,775
------------
778,839
------------
9,932,981
------------
IRELAND -- 0.2%
BANKING -- 0.2%
33,900 Allied Irish Banks............... 489,399
------------
BUILDING PRODUCTS -- 0.0%
15,100 C.R.H. PLC....................... 214,201
------------
CONSUMER GOODS & SERVICES -- 0.0%
29,000 Waterford Wedgewood.............. 37,619
------------
DIVERSIFIED -- 0.0%
3,200 DCC PLC.......................... 28,566
------------
FINANCE -- 0.0%
3,700 Irish Permanent PLC.............. 43,610
------------
FOOD PRODUCTS -- 0.0%
11,700 Fyffes PLC....................... 28,396
7,600 Greencore Group.................. 41,343
6,500 Kerry Group PLC.................. 89,758
------------
159,497
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
IRELAND (CONTINUED)
INDUSTRIAL GOODS & SERVICES -- 0.0%
43,100 Smurfit (Jefferson) Group........ $ 128,050
------------
INSURANCE -- 0.0%
12,500 Irish Life PLC................... 115,074
------------
MEDIA -- 0.0%
9,800 Independent Newspapers PLC....... 52,627
------------
OIL & GAS -- 0.0%
9,100 Tullow Oil....................... 16,501
------------
PRINTING & PUBLISHING -- 0.0%
1,600 Clondalkin Group PLC............. 13,390
------------
TRANSPORTATION & SHIPPING -- 0.0%
1,000 Irish Continental Group PLC...... 16,041
------------
1,314,575
------------
ITALY -- 5.0%
AGRICULTURE -- 0.0%
130,300 Parmalat Finanziaria SpA......... 265,724
------------
AUTO PARTS -- 0.0%
72,520 Magneti Marelli SpA.............. 159,111
------------
AUTOMOTIVE -- 0.3%
322,938 Fiat SpA......................... 1,413,438
70,340 Fiat SpA di Risp.
(Non-convertible)*............... 174,114
90,820 Fiat SpA Preferred............... 226,086
------------
1,813,638
------------
BANKING -- 0.9%
157,800 Banca Commerciale Italiana....... 943,666
136,782 Banco Ambrosiano Veneto SpA...... 765,265
59,100 Banco Ambrosiano Veneto SpA di
Risp. (Non-convertible).......... 174,220
20,400 Banco Popolare de Milano......... 162,392
253,200 Credito Italiano SpA............. 1,325,434
71,800 Istituto Bancario San Paolo di
Torino........................... 1,036,072
12,523 Riunione Adriatica di Sicurta SpA
di Risp., (Non-convertible)...... 112,721
------------
4,519,770
------------
BROADCASTING & PUBLISHING -- 0.1%
103,400 Mediaset SpA..................... 659,938
------------
BUILDING PRODUCTS -- 0.0%
1,900 Cementir SpA..................... 2,159
15,050 Italcementi SpA.................. 135,298
900 Italcementi SpA di Risp.
(Non-convertible)................ 3,944
------------
141,401
------------
</TABLE>
Continued
50
<PAGE> 69
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ITALY (CONTINUED)
CHEMICALS -- 0.1%
438,762 Montedison SpA................... $ 544,272
12,800 Montedison SpA di Risp.
(Non-convertible)................ 9,901
84,200 Snia BPD SpA..................... 103,263
900 Snia BPD SpA di Risp.
(Non-convertible)................ 861
------------
658,297
------------
ENGINEERING -- 0.0%
7,900 Impregilo SpA*................... 6,978
------------
FINANCE -- 0.3%
52,800 Istituto Mobiliare Italiano SpA.. 831,707
50,370 Mediobanca SpA*.................. 638,994
------------
1,470,701
------------
GAS & ELECTRIC UTILITY -- 0.1%
55,800 Edison SpA....................... 447,800
------------
GAS UTILITY -- 0.0%
61,300 Italgas SpA...................... 249,676
------------
INSURANCE -- 0.8%
86,263 Assicurazioni Generali*.......... 2,804,985
351,600 Istituto Nazionale delle
Assicurazioni.................... 998,892
29,262 Riuniune Adriatici de Sicurta
SpA.............................. 381,095
10,900 Societa Assicuratrice Industriale
(SAI) SpA........................ 139,197
------------
4,324,169
------------
JEWELRY -- 0.0%
25,400 Bulgari SpA...................... 133,177
------------
OFFICE EQUIPMENT & SERVICES -- 0.1%
236,196 Olivetti SpA*.................... 351,460
------------
OIL & GAS -- 0.8%
674,000 ENI SpA.......................... 4,417,372
------------
PAPER PRODUCTS -- 0.0%
15,200 Burgo (Cartiere) SpA............. 121,725
------------
PRINTING & PUBLISHING -- 0.0%
11,400 Mondadori (Arnoldo) Editore SpA.. 134,680
------------
RETAIL STORES -- 0.0%
18,300 La Rinascente SpA................ 182,223
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ITALY (CONTINUED)
STEEL -- 0.0%
10,400 Falck, Acciaierie & Ferriere
Lombarde SpA..................... $ 67,284
------------
TELECOMMUNICATIONS -- 1.3%
19,400 Sirti SpA........................ 105,537
137,560 Telecom Italia Mobile SpA........ 464,324
559,460 Telecom Italia Mobile SpA di
Risp. (Non-convertible).......... 3,421,186
317,911 Telecom Italia SpA*.............. 2,340,224
80,060 Telecom Italia SpA--Rnc*......... 387,565
------------
6,718,836
------------
TEXTILE PRODUCTS -- 0.1%
160,320 Benetton Group Spa............... 332,807
4,200 Marzotto (Gaetano) & Figli SpA... 64,032
------------
396,839
------------
TIRE & RUBBER -- 0.1%
145,000 Pirelli SpA...................... 452,730
10,600 Pirelli SpA di Risp.
(Non-convertible)................ 25,344
------------
478,074
------------
27,718,873
------------
JAPAN -- 24.8%
ALUMINUM -- 0.0%
38,000 Nippon Light Metal Co., Ltd...... 43,809
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 1.6%
203,000 Matsushita Electric Industrial
Co., Ltd......................... 3,261,807
16,000 Pioneer Electronic Corp.......... 305,508
187,000 Sanyo Electric Co................ 565,911
108,000 Sharp Corp....................... 874,677
39,000 Sony Corp........................ 3,358,071
------------
8,365,974
------------
AUTOMOTIVE -- 2.7%
3,000 Autobacs Seven Co., Ltd.......... 85,816
93,000 Honda Motor Co., Ltd............. 3,310,300
241,000 Nissan Motor Co., Ltd............ 758,850
26,000... Toyoda Automatic Loom Works 458,983
367,000 Toyota Motor Corp................ 9,493,316
------------
14,107,265
------------
</TABLE>
Continued
51
<PAGE> 70
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
BANKING -- 3.1%
36,000 77 Bank.......................... $ 300,897
228,000 Asahi Bank Ltd................... 1,002,125
44,000 Ashikaga Bank Ltd................ 54,847
449,000 Bank of Tokyo -- Mitsubishi Ltd.. 4,752,538
104,000 Bank of Yokohama Ltd............. 254,783
71,000 Chiba Bank Ltd................... 245,560
300,000 Fuji Bank Ltd.................... 1,338,041
49,000 Gunma Bank Ltd................... 331,527
62,000 Hokuriku Bank.................... 80,412
265,000 Industrial Bank of Japan......... 1,661,202
85,000 Joyo Bank........................ 313,579
110,000 Mitsui Trust & Banking Co., Ltd.. 259,178
359,000 Sakura Bank Ltd.................. 931,224
77,000 Shizuoka Bank.................... 826,674
305,000 Sumitomo Bank Ltd................ 2,966,819
199,000 Tokai Bank....................... 1,095,478
18,000 Yamaguchi Bank................... 230,861
------------
16,645,745
------------
BEVERAGES & TOBACCO -- 0.3%
46,000 Asahi Breweries Ltd.............. 580,034
101,000 Kirin Brewery Co., Ltd........... 953,345
11,000 Takara Shuzo..................... 45,653
------------
1,579,032
------------
BREWERY -- 0.0%
31,000 Sapporo Breweries Ltd............ 118,608
------------
BROADCASTING & PUBLISHING -- 0.0%
16,000 Tokyo Broadcasting System........ 178,694
------------
BUILDING PRODUCTS -- 0.1%
52,000 Chichibu Onoda Cement Corp....... 94,045
17,000 Nihon Cement Co., Ltd............ 34,053
21,000 Sanwa Shutter Corp............... 92,301
23,000 Sumitomo Osaka Cement Co., Ltd... 29,499
20,000 Tostem Corp...................... 259,106
------------
509,004
------------
CHEMICALS -- 1.3%
138,000 Asahi Chemical Industry Co.,
Ltd.............................. 497,172
19,000 Daicel Chemical Industries Ltd... 40,249
72,000 Dainippon Ink & Chemicals Inc.... 220,485
27,000 Denki Kagaku Kogyo Kabushiki
Kaisha........................... 43,578
32,000 Kaneka Corp...................... 168,318
32,000 Konica Corp...................... 144,108
201,000 Mitsubishi Chemical Corp......... 363,519
45,000 Mitsubishi Gas Chemical Co....... 135,858
10,000 Nippon Shokubai Kabushiki Kaisha
Co............................... 53,680
50,000 Sekisui Chemical Co., Ltd........ 255,791
37,000 Shin-Etsu Chemical Co., Ltd...... 639,839
95,000 Showa Denko Kabushiki Kaisha..... 95,832
155,000 Sumitomo Chemical Co............. 478,005
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
89,000 Takeda Chemical Industries....... $ 2,366,322
134,000 Toray Industries Inc............. 695,176
54,000 Tosoh Corp.*..................... 93,771
76,000 Ube Industries Ltd............... 98,570
------------
6,390,273
------------
CLOTHING -- 0.0%
5,000 Tokyo Style...................... 48,997
------------
COMMERCIAL SERVICES -- 0.0%
100 Oyo Corp......................... 1,347
------------
COMPUTER SOFTWARE -- 0.0%
5,000 CSK Corp......................... 99,434
------------
CONSTRUCTION -- 0.3%
50,000 Daiwa House Industry Co., Ltd.... 441,330
35,000 Kumagai Gumi Co., Ltd............ 25,219
13,000 Okumura Corp..................... 45,617
18,000 Penta-Ocean Construction......... 41,503
68,000 Sekisui House Ltd................ 526,714
72,000 Shimizu Corp..................... 207,515
93,000 Taisei Corp...................... 201,030
------------
1,488,928
------------
CONSUMER GOODS & SERVICES -- 0.1%
22,000 Nippon Sheet Glass Co., Ltd...... 34,716
13,000 Shimano Inc...................... 329,719
34,000 Toto Ltd......................... 206,521
------------
570,956
------------
COSMETICS/PERSONAL CARE -- 0.1%
40,000 Shiseido Co., Ltd................ 454,228
------------
DATA PROCESSING & REPRODUCTION -- 0.4%
197,000 Fujitsu Ltd...................... 2,072,414
------------
DISTRIBUTION -- 0.1%
137,000 Itochu Corp...................... 296,141
------------
DIVERSIFIED -- 0.0%
18,000 Yamaha Corp...................... 175,091
------------
ELECTRIC UTILITY -- 0.9%
107,900 Kansai Electric Power Co.,
Inc.............................. 1,873,682
47,500 Tohoku Electric Power............ 699,913
132,000 Tokyo Electric Power Co.......... 2,587,023
------------
5,160,618
------------
ELECTRICAL & ELECTRONIC -- 0.6%
25,000 Casio Computer Co., Ltd.......... 232,194
18,000 Kyocera Corp..................... 879,346
206,000 Mitsubishi Electric Corp......... 473,495
35,000 Nikon Corp....................... 251,684
25,000 Omron Corp....................... 381,886
11,000 Rohm Co., Ltd.................... 1,129,445
------------
3,348,050
------------
</TABLE>
Continued
52
<PAGE> 71
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
ELECTRICAL EQUIPMENT -- 0.1%
16,000 Alps Electric Co., Ltd........... $ 190,222
6,000 SMC Corp......................... 456,101
10,000 Taiyo Yuden Co., Ltd............. 106,352
------------
752,675
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 0.9%
8,690 Advantest Corp................... 467,107
8,000 Dainippon Screen Manufacturing
Co., Ltd......................... 32,741
22,100 Fanuc Ltd........................ 764,348
3,000 Hirose Electric Co., Ltd......... 146,341
330,000 Hitachi Ltd...................... 2,151,889
153,000 NEC Corp......................... 1,425,435
23,000 Yokogawa Electric Corp........... 122,636
------------
5,110,497
------------
ELECTRONICS -- 0.0%
13,000 Nitto Denko Corp................. 195,302
------------
ENERGY -- 0.1%
57,000 Cosmo Oil Co., Ltd............... 102,677
100,000 Japan Energy Corp................ 105,919
118,000 Nippon Oil Co., Ltd.............. 380,906
------------
589,502
------------
ENGINEERING -- 0.3%
7,000 Daito Trust Construction Co.,
Ltd. ............................ 52,960
92,000 Kajima Corp. .................... 251,900
18,000 Kandenko Co., Ltd. .............. 111,410
127,000 Kawasaki Heavy Industries Ltd. .. 256,224
25,000 Kinden Corp. .................... 302,626
25,000 Nishimatsu Construction.......... 122,492
71,000 Obayashi Corp. .................. 300,811
------------
1,398,423
------------
ENTERTAINMENT -- 0.0%
1,700 Toho Co. ........................ 178,838
14,000 Tokyo Dome Corp. ................ 75,657
------------
254,495
------------
FINANCE -- 1.0%
14,000 Acom Co., Ltd. .................. 664,769
128,000 Daiwa Securities Co., Ltd. ...... 550,607
23,000 Higo Bank........................ 103,577
125,000 Mitsubishi Trust & Banking
Corp. ........................... 1,061,894
195,000 Nomura Securities Co., Ltd. ..... 2,269,157
24,000 Orient Corp. .................... 52,398
6,000 Orix Corp. ...................... 405,087
6,000 Uni-Charm........................ 222,214
100,000 Yasuda Trust & Banking........... 93,670
------------
5,423,373
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
FOOD & HOUSEHOLD PRODUCTS -- 0.3%
62,000 Ajinomoto Co., Inc. ............. $ 542,782
59,000 Kao Corp. ....................... 909,752
21,000 Nippon Meat Packers Inc. ........ 257,081
12,000 Nissin Food Products Co., Ltd. .. 214,865
------------
1,924,480
------------
FOOD PRODUCTS -- 0.1%
65,000 Daiei Inc. ...................... 152,214
10,000 House Foods Industry............. 128,328
12,000 Itoham Foods..................... 51,879
17,000 Kikkoman Corp. .................. 89,419
15,000 Meiji Milk Products Co., Ltd. ... 39,990
16,000 Nichirei Corp. .................. 32,857
8,000 QP Corp. ........................ 52,167
23,000 Snow Brand Milk Products Co.,
Ltd. ............................ 69,604
20,000 Yamazaki Baking Co., Ltd. ....... 177,253
------------
793,711
------------
FOREST PRODUCTS -- 0.2%
17,000 Mitsubishi Paper Mills........... 33,073
91,000 Nippon Paper Industries Co. ..... 378,989
99,000 Oji Paper Co., Ltd. ............. 430,853
12,000 Sumitomo Forestry Co., Ltd. ..... 67,356
------------
910,271
------------
GAS UTILITY -- 0.2%
243,000 Osaka Gas Co., Ltd. ............. 623,324
270,000 Tokyo Gas Co., Ltd. ............. 601,146
------------
1,224,470
------------
HEALTH & PERSONAL CARE -- 0.4%
22,000 Chugai Pharmaceutical Co., Ltd. . 143,935
40,000 Kyowa Hakko Kogyo Co. ........... 158,519
15,000 Lion Corp. ...................... 50,798
44,000 Sankyo Co., Ltd. ................ 1,001,837
32,000 Yamanouchi Pharmaceutical Co.,
Ltd. ............................ 666,354
------------
2,021,443
------------
HOTELS & LODGING -- 0.0%
11,000 Fujita Kanko Inc. ............... 89,563
------------
INDUSTRIAL GOODS & SERVICES -- 0.9%
88,000 Bridgestone Corp. ............... 2,079,763
97,000 Denso Corp. ..................... 1,607,522
17,000 Inax Corp. ...................... 58,429
58,000 Mitsui Engineering & Shipbuilding
Co., Ltd.*....................... 43,881
35,000 NGK Insulators Ltd. ............. 303,887
20,000 NGK Spark Plug Co., Ltd. ........ 170,047
70,000 Sumitomo Electric Industries
Ltd. ............................ 707,641
------------
4,971,170
------------
</TABLE>
Continued
53
<PAGE> 72
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
INSURANCE -- 0.5%
69,000 Mitsui Marine & Fire Insurance
Co., Ltd. ....................... $ 346,529
41,000 Nichido Fire & Marine Insurance
Co., Ltd. ....................... 214,180
53,000 Nippon Fire & Marine Insurance
Co. ............................. 216,529
64,000 Sumitomo Marine & Fire Insurance
Co. ............................. 357,848
170,000 Tokio Marine & Fire Insurance
Co. ............................. 1,746,730
------------
2,881,816
------------
JEWELRY -- 0.1%
29,000 Citizen Watch Co., Ltd. ......... 239,255
11,000 Hoya Corp. ...................... 311,489
------------
550,744
------------
LEASING -- 0.1%
7,000 Daiwa Kosho Lease Co., Ltd. ..... 29,405
38,000 Yamato Transport Co., Ltd. ...... 425,766
------------
455,171
------------
LEISURE -- 0.0%
4,000 Namco............................ 93,382
------------
MACHINE-DIVERSIFIED -- 0.0%
7,000 Komori Corp. .................... 132,903
12,000 Kurita Water Industries Ltd. .... 141,802
------------
274,705
------------
MACHINERY & EQUIPMENT -- 0.7%
27,000 Amada Co., Ltd. ................. 131,318
14,000 Brother Industries Ltd. ......... 52,253
24,000 Daikin Industries Ltd. .......... 154,599
26,000 Ebara Corp. ..................... 231,178
93,000 Komatsu Ltd. .................... 451,648
10,000 Koyo Seiko Co., Ltd. ............ 37,324
135,000 Kubota Corp. .................... 311,273
38,000 Minebea Co., Ltd. ............... 378,124
324,000 Mitsubishi Heavy Industries
Ltd. ............................ 1,223,302
5,000 Mori Seiki Co. .................. 61,210
51,000 NSK Ltd. ........................ 207,623
42,000 NTN Corp. ....................... 131,945
63,000 Sumitomo Heavy Industries Ltd. .. 143,899
16,000 Tokyo Electron Ltd. ............. 489,966
------------
4,005,662
------------
MANUFACTURING -- CAPITAL GOODS -- 0.2%
31,000 Fujikura Ltd. ................... 138,041
12,000 Kokuyo Co. ...................... 203,192
14,000 Makita Corp. .................... 161,300
23,000 Murata Manufacturing Co., Ltd. .. 745,758
8,000 Noritake Co., Ltd. .............. 37,468
7,000 Takara Standard Co. ............. 40,602
------------
1,326,361
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
MANUFACTURING -- CONSUMER GOODS -- 0.7%
88,000 Canon Inc. ...................... $ 1,997,334
54,000 Fuji Photo Film Co., Ltd. ....... 1,879,310
8,700 Sega Enterprises Ltd. ........... 150,135
------------
4,026,779
------------
MEDICAL SUPPLIES -- 0.0%
24,000 Olympus Optical Co., Ltd. ....... 208,553
------------
MERCHANDISING -- 0.5%
41,000 Ito-Yokado Co., Ltd. ............ 1,929,099
31,000 JUSCO Co., Ltd. ................. 568,469
35,000 Marui Co., Ltd. ................. 522,030
------------
3,019,598
------------
METALS -- 0.5%
42,000 Daido Steel Co., Ltd. ........... 75,354
312,000 Kawasaki Steel Corp. ............ 562,020
104,000 Mitsubishi Materials Corp. ...... 212,069
662,000 Nippon Steel Corp. .............. 1,163,872
338,000 NKK Corp. ....................... 323,911
302,000 Sumitomo Metal Industries Ltd. .. 485,254
11,000 Tokyo Steel Manufacturing Co. ... 56,591
------------
2,879,071
------------
METALS & MINING -- 0.1%
92,000 Hitachi Zosen Corp. ............. 148,489
46,000 Mitsui Mining & Smelting Co. .... 190,914
52,000 Sumitomo Metal Mining Co. ....... 210,945
------------
550,348
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.1%
113,000 Asahi Glass Co., Ltd. ........... 610,657
------------
OFFICE EQUIPMENT & SERVICES -- 0.2%
73,000 Dai Nippon Printing Co., Ltd. ... 1,165,075
------------
OIL & GAS -- 0.0%
3,100 Arabian Oil Co., Ltd. ........... 45,008
32,000 Mitsubishi Oil Co., Ltd. ........ 44,962
14,000 Teikoko Oil Co., Ltd. ........... 43,276
------------
133,246
------------
PACKAGING -- 0.0%
21,000 Toyo Seikan Kaisha Ltd. ......... 257,232
------------
PHARMACEUTICALS -- 0.3%
26,000 Dai-Ichi Pharmaceuticals......... 342,832
27,000 Eisai Co., Ltd. ................. 367,691
3,000 Kissei Pharmaceutical Co., Ltd. . 44,313
35,000 Meiji Seika Co. ................. 106,424
32,000 Shionogi & Co., Ltd. ............ 184,458
33,000 Taisho Pharmacuetical Co. ....... 615,845
------------
1,661,563
------------
</TABLE>
Continued
54
<PAGE> 73
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
REAL ESTATE -- 0.3%
124,000 Mitsubishi Estate Co., Ltd. ..... $ 1,090,031
78,000 Mitsui Fudosan Co., Ltd. ........ 615,974
------------
1,706,005
------------
RESTAURANTS -- 0.0%
5,000 Skylark Co., Ltd. ............... 49,357
------------
RETAIL STORES -- 0.1%
6,000 Aoyama Trading Co., Ltd. ........ 147,855
16,000 Hankyu Department Stores Co. .... 83,237
20,000 Isetan Co. ...................... 167,165
29,000 Mycal Corp. ..................... 183,882
28,000 Takashimaya Co., Ltd. ........... 211,031
------------
793,170
------------
RETAIL -- GENERAL MERCHANDISE -- 0.1%
15,300 Credit Saison Co., Ltd. ......... 303,167
14,000 Daimuru Inc. .................... 36,719
43,000 Mitsukoshi Ltd. ................. 123,623
------------
463,509
------------
RETAIL -- SPECIAL LINE -- 0.1%
15,000 Seiyu Ltd. ...................... 31,343
2,000 Shimachu Co. .................... 32,857
18,000 Uny Co., Ltd. ................... 291,818
------------
356,018
------------
SERVICES -- 0.2%
11,000 Secom Co., Ltd. ................. 634,867
67,000 Toppan Printing Co., Ltd. ....... 716,417
------------
1,351,284
------------
STORAGE -- 0.0%
15,000 Mitsubishi Logistics Corp. ...... 133,696
------------
TELECOMMUNICATIONS -- 2.0%
11,000 Nippon Comsys Corp. ............. 126,339
1,224 Nippon Telegraph & Telephone
Corp. ........................... 10,142,305
------------
10,268,644
------------
TEXTILE PRODUCTS -- 0.2%
12,000 Gunze Ltd. ...................... 27,409
33,000 Kuraray Co., Ltd. ............... 280,340
57,000 Mitsubishi Rayon Co., Ltd. ...... 159,354
21,000 Nisshinbo Industries Inc. ....... 83,979
15,000 Onward Kashiyama Co., Ltd. ...... 187,520
89,000 Teijin Ltd. ..................... 269,337
49,000 Toyobo Ltd. ..................... 64,258
14,000 Wacoal Corp. .................... 142,234
------------
1,214,431
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
TRANSPORTATION -- 0.9%
422 East Japan Railway Co. .......... $ 1,982,520
82,000 Hankyu Corp. .................... 336,189
171,000 Japan Airlines Co.*.............. 475,599
155,000 Kinki Nippon Railway Co. ........ 725,943
75,000 Nagoya Railroad Co., Ltd. ....... 226,970
46,000 Nankai Electric Railway Co. ..... 198,869
103,000 Nippon Express Co., Ltd. ........ 552,163
67,000 Odakyu Electric Railway Co. ..... 205,173
78,000 Tobu Railway Co., Ltd. .......... 206,261
105,000 Tokyu Corp. ..................... 318,514
------------
5,228,201
------------
TRANSPORTATION & SHIPPING -- 0.2%
25,000 Kamigumi Co., Ltd. .............. 104,478
30,000 Kawasaki Kisen Kaisha Ltd.*...... 51,879
47,000 Keihin Electric Express Railway
Co., Ltd. ....................... 136,139
101,000 Mitsui OSK Lines Ltd.*........... 171,748
113,000 Nippon Yusen Kabushiki Kaisha 382,678
8,000 Seino Transportation............. 44,385
------------
891,307
------------
WHOLESALE & INTERNATIONAL TRADE -- 0.5%
143,000 Marubeni Corp. .................. 285,413
150,000 Mitsubishi Corp. ................ 929,495
152,000 Mitsui & Co. .................... 821,414
102,000 Sumitomo Corp. .................. 490,211
------------
2,526,533
------------
WIRE & CABLE PRODUCTS -- 0.0%
60,000 Furukawa Electric Co., Ltd. ..... 201,895
------------
136,597,996
------------
MALAYSIA -- 0.6%
AGRICULTURE -- 0.1%
130,000 Golden Hope Plantations Berhad... 119,108
37,500 Highlands & Lowlands Berhad...... 26,492
52,000 IOI Corp. Berhad*................ 25,953
79,000 Kuala Lumpur Kepong Berhad....... 127,619
------------
299,172
------------
AIRLINES -- 0.0%
47,000 Malaysian Airlines............... 15,525
12,000 Malaysian Pacific................ 14,177
------------
29,702
------------
AUTOMOTIVE -- 0.0%
13,000 Ederan Otomobil.................. 12,538
19,200 Oriental Holdings................ 31,942
123,000 Tan Chong International Ltd.*.... 0
41,000 Tan Chong Motors................. 7,464
------------
51,944
------------
</TABLE>
Continued
55
<PAGE> 74
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MALAYSIA (CONTINUED)
AUTOMOTIVE PARTS -- REPLACEMENT -- 0.0%
33,000 Perusahaan Otomobil Nasional
Berhad........................... $ 21,085
------------
BANKING -- 0.2%
24,000 AMMB Holdings Berhad*............ 12,615
48,000 Commerce Asset Holdings Berhad... 17,939
343,000 Malayan Banking Berhad........... 345,688
213,600 Public Bank...................... 64,376
187,000 RHB Capital Berhad............... 76,198
------------
516,816
------------
BEVERAGES & TOBACCO -- 0.0%
18,000 Guinness Anchor.................. 19,096
------------
BUILDING PRODUCTS -- 0.0%
15,000 Jaya Tiasa Holdings Berhad....... 18,626
------------
CHEMICALS -- 0.0%
8,000 Malaysian Oxygen Berhad.......... 17,746
------------
CONSTRUCTION -- 0.0%
132,500 YTL Corp. Berhad................. 99,675
------------
DIVERSIFIED -- 0.0%
113,000 Malayan United Industries........ 13,078
58,000 Multi-Purpose Holdings Berhad*... 14,404
22,500 Perlis Plantations Berhad........ 19,530
247,040 Sime Darby Berhad................ 170,352
46,000 Time Engineering Berhard......... 6,322
------------
223,686
------------
ELECTRIC UTILITY -- 0.1%
327,000 Tenaga Nasional Berhad........... 394,214
------------
ENERGY -- 0.0%
16,000 Umw Holdings Berhard............. 7,175
------------
ENGINEERING -- 0.0%
180,000 Amsteel Corp. Berhad............. 18,228
6,300 Silverstone Berhad*.............. 0
49,326 United Engineers (Malaysia)
Ltd. ............................ 20,099
------------
38,327
------------
ENTERTAINMENT -- 0.0%
141,000 Magnum Corp. Berhad.............. 52,354
118,000 Resorts World Berhad............. 129,736
------------
182,090
------------
FINANCE -- 0.0%
48,000 MBf Capital Berhad*.............. 8,043
23,000 Rashid Hussain Berhad............ 11,313
------------
19,356
------------
FOOD PRODUCTS -- 0.0%
26,000 Nestle (Malaysia) Berhad......... 117,854
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MALAYSIA (CONTINUED)
HOME FURNISHINGS -- 0.0%
47,000 Technology Resources Industries
Berhad........................... $ 32,297
------------
LEISURE -- 0.0%
38,000 Berjaya Land Berhad.............. 20,890
------------
METALS & MINING -- 0.0%
92,400 Malaysia Mining Corp. Berhad..... 29,408
------------
OIL & GAS -- 0.0%
17,500 Shell Refining Co. (Malaysia)
Berhad........................... 24,895
------------
PRINTING & PUBLISHING -- 0.0%
11,000 New Straits Time Press........... 4,084
------------
REAL ESTATE -- 0.0%
60,000 Malaysian Resources.............. 15,190
------------
TELECOMMUNICATIONS -- 0.2%
351,000 Telekom Malaysia Berhad.......... 592,405
------------
TOBACCO -- 0.0%
15,000 RJ Reynolds...................... 20,796
29,300 Rothmans of Pall Mall (Malaysia)
Berhad........................... 203,104
------------
223,900
------------
TRANSPORTATION -- 0.0%
91,000 Malaysian International Shipping. 132,743
------------
3,132,376
------------
NETHERLANDS -- 5.2%
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.4%
24,740 Philips Electronics NV........... 2,079,685
------------
BANKING -- 0.4%
97,985 ABN Amro Holding NV.............. 2,292,811
------------
BEVERAGES & TOBACCO -- 0.1%
20,437 Heineken NV...................... 802,723
------------
BROADCASTING & PUBLISHING -- 0.1%
46,030 Elsevier NV...................... 694,674
------------
CHEMICALS -- 0.2%
5,283 Akzo Nobel NV.................... 1,174,391
------------
COMPUTER SOFTWARE -- 0.1%
6,165 Getronics NV..................... 319,733
------------
ENERGY -- 1.6%
150,288 Royal Dutch Petroleum Co. ....... 8,333,646
------------
FINANCE -- 0.8%
65,487 ING Groep NV..................... 4,288,061
------------
FOOD PRODUCTS -- 0.6%
45,024 Unilever NV-CVA.................. 3,572,311
------------
</TABLE>
Continued
56
<PAGE> 75
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NETHERLANDS (CONTINUED)
INSURANCE -- 0.0%
2,123 Stad Rotterdam NV................ $ 180,133
------------
MANUFACTURING -- CONSUMER GOODS -- 0.0%
262 Stork NV......................... 8,346
------------
PACKAGING -- 0.0%
6,620 Koninklijke KNP BT NV............ 170,852
------------
PRINTING & PUBLISHING -- 0.2%
5,124 Oce NV........................... 218,137
4,911 Wolters Kluwer CVA............... 674,042
------------
892,179
------------
RETAIL -- SPECIAL LINE -- 0.2%
38,919 Ahold............................ 1,249,328
------------
SERVICES -- 0.2%
32,787 Koninklijke Royal PTT Nederland
NV............................... 1,262,017
------------
STEEL -- 0.0%
3,036 Koninklijke Hoogovens NV......... 131,337
------------
TRANSPORTATION -- 0.3%
1,950 IHC Caland NV.................... 109,759
9,809 KLM Royal Dutch Air Lines NV..... 398,296
1,133 Pakhoed NV Kon................... 36,760
32,787 TNT Post Group NV................ 838,121
------------
1,382,936
------------
28,835,163
------------
NEW ZEALAND -- 0.2%
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.0%
8,949 Fisher & Paykel Industries Ltd. . 22,762
------------
BEVERAGES & TOBACCO -- 0.0%
41,300 Lion Nathan Ltd. ................ 91,756
------------
BUILDING PRODUCTS -- 0.0%
26,010 Fletcher Challenge Building*..... 32,403
------------
FINANCE -- 0.0%
201,800 Brierley Investments Ltd. ....... 100,562
------------
FOREST PRODUCTS -- 0.0%
130,281 Carter Holt Harvey Ltd. ......... 113,614
60,761 Fletcher Challenge Forests....... 34,063
49,122 Fletcher Challenge Paper......... 54,567
------------
202,244
------------
OIL & GAS -- 0.0%
25,761 Fletcher Challenge Energy........ 61,512
------------
TELECOMMUNICATIONS -- 0.2%
131,965 Telecom Corp. of New Zealand
Ltd. ............................ 543,900
------------
1,055,139
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NORWAY -- 0.5%
BANKING -- 0.1%
49,100 Christiania Bank Og Kreditkasse.. $ 205,395
18,100 Den norske Bank ASA.............. 94,822
------------
300,217
------------
CHEMICALS -- 0.0%
1,000 Dyno Industrier ASA.............. 17,854
------------
ELECTRIC UTILITY -- 0.0%
15,650 Hafslund ASA, Series A........... 84,638
10,326 Hafslund ASA, Series B........... 40,774
------------
125,412
------------
ENGINEERING -- 0.0%
3,050 Kvaerner ASA, Series A........... 103,342
------------
FOREST PRODUCTS -- 0.0%
3,200 Norske Skogindustrier ASA-
Class A.......................... 98,833
------------
INDUSTRIAL GOODS & SERVICES -- 0.0%
1,200 Unitor ASA....................... 17,671
------------
INSURANCE -- 0.0%
24,700 Storebrand ASA................... 218,882
------------
MANUFACTURING -- CONSUMER GOODS -- 0.1%
14,400 Orkla ASA-Class A................ 334,969
------------
OIL & GAS -- 0.2%
10,500 Aker RGI ASA, Series A........... 164,885
2,100 Aker RGI ASA, Series B........... 29,967
16,850 Norsk Hydro ASA.................. 741,102
6,600 Petroleum Geo--Services ASA...... 205,564
------------
1,141,518
------------
TRANSPORTATION -- 0.0%
9,000 Bergesen d.y. ASA-Class A........ 171,238
1,400 Bergesen d.y. ASA-Class B........ 26,181
2,200 Leif Hoegh & Co. ASA............. 32,110
------------
229,529
------------
2,588,227
------------
SINGAPORE -- 0.7%
AUTOMOTIVE -- 0.0%
1,000 Cycle & Carriage................. 2,439
------------
BANKING -- 0.2%
77,375 Development Bank Of Singapore
Ltd. ............................ 428,212
114,042 Oversea-Chinese Banking Corp.,
Ltd. ............................ 388,132
117,350 United Overseas Bank Ltd. ....... 364,661
------------
1,181,005
------------
BEVERAGES & TOBACCO -- 0.0%
47,000 Fraser & Neave Ltd. ............. 126,299
------------
ELECTRICAL EQUIPMENT -- 0.0%
5,000 Creative Technology Ltd. *....... 60,670
------------
</TABLE>
Continued
57
<PAGE> 76
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SINGAPORE (CONTINUED)
FINANCE -- 0.0%
29,600 Haw Par Brothers International
Ltd. ............................ $ 31,011
------------
HOTELS & LODGING -- 0.0%
1,400 Overseas Union Enterprise Ltd. .. 2,063
1,100 Shangri-La Hotel Ltd. ........... 1,361
------------
3,424
------------
METALS & MINING -- 0.0%
7,000 Straits Trading Co., Ltd. ....... 4,123
------------
PRINTING & PUBLISHING -- 0.1%
45,136 Singapore Press Holdings Ltd. ... 301,892
------------
REAL ESTATE -- 0.1%
69,600 City Developments Ltd. .......... 194,446
115,000 DBS Land Ltd. ................... 95,296
8,000 United Industrial Corp., Ltd. ... 2,297
52,000 United Overseas Land Ltd. ....... 28,009
------------
320,048
------------
STEEL -- 0.0%
60,750 NatSteel Ltd. ................... 58,971
------------
TELECOMMUNICATIONS -- 0.2%
635,000 Singapore Telecommunications
Ltd. ............................ 902,052
------------
TRANSPORTATION -- 0.1%
59,000 Neptune Orient Lines Ltd. *...... 20,429
133,000 Singapore Airlines Ltd. ......... 621,907
------------
642,336
------------
TRANSPORTATION & SHIPPING -- 0.0%
79,000 Keppel Corp. .................... 118,770
------------
WHOLESALE DISTRIBUTION -- 0.0%
11,000 Inchcape Berhad.................. 7,553
------------
3,760,593
------------
SPAIN -- 3.6%
AGRICULTURE -- 0.0%
400 Azucarera Ebro Agricolas SA...... 11,915
------------
BANKING -- 0.8%
32,142 Banco Central Hispanoamericano
SA............................... 1,011,983
83,822 Banco Santander SA............... 2,149,071
42,800 Corporation Bancaria De Espana
SA............................... 961,735
------------
4,122,789
------------
BANKING & FINANCE -- 0.5%
58,941 Banco Bilbao Vizcaya SA.......... 3,030,019
------------
BEVERAGES & TOBACCO -- 0.1%
1,650 El Aguila SA *................... 15,413
16,530 Tabacalera SA-Class A............ 339,044
------------
354,457
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPAIN (CONTINUED)
BUILDING PRODUCTS -- 0.0%
820 Portland Valderrivas SA.......... $ 100,645
5,400 Uralita SA....................... 77,072
------------
177,717
------------
CHEMICALS -- 0.0%
700 Ercros SA *...................... 887
------------
COMMERCIAL SERVICES -- 0.0%
500 Prosegur, CIA de Seguridad SA.... 5,961
------------
ENERGY -- 0.3%
26,198 Repsol SA........................ 1,446,032
------------
ENGINEERING -- 0.1%
22,064 Autopistas Concesionaria Espanola
SA............................... 342,290
5,800 Dragados & Construcciones SA..... 186,021
200 Urbis SA *....................... 2,796
------------
531,107
------------
FOREST PRODUCTS -- 0.0%
100 Empresa Nacional de Celulosas
SA............................... 1,764
2,498 Sarrio SA *...................... 11,748
------------
13,512
------------
GAS & ELECTRIC UTILITY -- 0.8%
90,480 Endesa--Empresa Nac Elec......... 1,982,888
5,308 Fomento de Construcciones y
Contratas SA..................... 274,259
78,524 Iberdrola SA..................... 1,277,188
26,566 Union Electrica Fenosa SA........ 342,725
------------
3,877,060
------------
INDUSTRIAL HOLDING COMPANY -- 0.0%
1,475 Corporacion Financiara Alba SA... 162,347
------------
INSURANCE -- 0.0%
5,500 Corporacion Mapfre............... 193,285
------------
MACHINERY & EQUIPMENT -- 0.0%
6,417 Zardoya Otis SA.................. 191,129
------------
METALS -- 0.0%
1,200 Acerinox SA...................... 160,063
------------
MISCELLANEOUS MATERIALS &
COMMODITIES -- 0.0%
1,221 Viscofan Industria Navarra de
Envolturas Celulosicassa SA...... 56,946
------------
NATURAL GAS UTILITY -- 0.2%
13,124 Gas Natural SDG SA............... 949,859
------------
REAL ESTATE -- 0.0%
3,669 Metrovacesa SA................... 108,079
4,361 Vallehermoso SA.................. 160,664
------------
268,743
------------
</TABLE>
Continued
58
<PAGE> 77
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPAIN (CONTINUED)
TELECOMMUNICATIONS -- 0.8%
89,209 Telefonica de Espana............. $ 4,131,503
------------
WATER UTILITY -- 0.0%
4,700 Aquas De Barcelona............... 262,493
------------
19,947,824
------------
SWEDEN -- 2.8%
AUTOMOTIVE -- 0.2%
11,300 Volvo AB, Series A............... 328,729
24,100 Volvo AB, Series B............... 717,716
------------
1,046,445
------------
BANKING & FINANCE -- 0.5%
24,700 ForeningsSparbanken AB........... 743,328
46,600 Skandiaviska Enskilda Banken,
Series A......................... 797,610
17,200 Svenska Handelsbanken, Series A.. 797,999
6,300 Svenska Handlesbanken, Series B.. 276,491
------------
2,615,428
------------
CONSUMER GOODS & SERVICES -- 0.0%
3,000 Securitas AB, Series B........... 146,898
------------
ENGINEERING -- 0.3%
53,000 ABB AB, Series A................. 750,977
28,500 ABB AB, Series B................. 396,680
9,300 Skanska AB, Series B............. 417,482
------------
1,565,139
------------
FOREST PRODUCTS -- 0.1%
21,500 Stora Kopparbergs Bergslags
Aktiebolag, Series A............. 338,341
3,250 Stora Kopparbergs Bergslags
Aktiebolag, Series B............. 51,348
16,200 Svenska Cellusoa AB, Series B.... 419,476
------------
809,165
------------
INDUSTRIAL GOODS & SERVICES -- 0.0%
4,200 Sandvik AB, Series A............. 116,126
------------
INSURANCE -- 0.1%
45,500 Skandia Forsakrings AB........... 650,412
------------
MACHINERY & EQUIPMENT -- 0.1%
10,050 Atlas Copco AB, Series A......... 274,093
500 Atlas Copco AB, Series B......... 13,636
------------
287,729
------------
MANUFACTURING--CONSUMER GOODS -- 0.1%
30,000 Electrolux AB, Series B.......... 515,364
------------
METAL FABRICATE/HARDWARE -- 0.0%
9,300 SKF AB, Series A................. 165,011
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWEDEN (CONTINUED)
METALS & MINING -- 0.1%
10,100 SKF AB, Series B................. $ 183,638
7,960 Trelleborg AB, Series B.......... 104,803
------------
288,441
------------
OFFICE EQUIPMENT & SERVICES -- 0.0%
300 Esselte AB, Series B 6,959
------------
PHARMACEUTICALS -- 0.4%
94,400 Astra AB, Series A............... 1,929,442
24,333 Astra AB, Series B............... 485,138
------------
2,414,580
------------
RETAIL--SPECIAL LINE -- 0.2%
16,500 Hennes & Mauritz AB, Series B.... 1,053,110
------------
TELECOMMUNICATIONS -- 0.7%
135,800 Telefonaktiebolaget LM Ericsson,
Series B......................... 3,967,600
------------
15,648,407
------------
SWITZERLAND -- 6.7%
AIRLINES -- 0.1%
1,100 SAirGroup........................ 361,878
------------
BUILDING PRODUCTS -- 0.2%
700 Holderbank Financiere Glarus AG-
Class A.......................... 176,060
542 Holderbank Financiere Glarus AG-
Class B.......................... 689,644
------------
865,704
------------
COMMERCIAL SERVICES -- 0.1%
1,690 Addeco SA........................ 762,099
------------
DIVERSIFIED -- 0.3%
704 ABB AG, Bearer Shares *.......... 1,039,655
579 Alusuisse-Lonza Holding AG,
Registered....................... 734,433
------------
1,774,088
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 0.1%
285 The Swatch Group AG, Bearer...... 220,212
1,100 The Swatch Group AG, Registered.. 183,477
------------
403,689
------------
FINANCE -- 1.7%
14,820 Credit Suisse Group, Registered.. 3,297,543
16,543 UBS AG, Registered............... 6,151,063
------------
9,448,606
------------
FOOD PRODUCTS -- 1.1%
2,813 Nestle SA, Registered............ 6,019,865
------------
INDUSTRIAL GOODS & SERVICES -- 0.0%
83 SGS Societe Generale de
Surveillance Holding SA.......... 140,685
------------
</TABLE>
Continued
59
<PAGE> 78
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWITZERLAND (CONTINUED)
INSURANCE -- 0.8%
929 Swiss Reinsurance Co.,
Registered....................... $ 2,349,432
2,940 Zuerich Verichrng Gesellschft Rg. 1,876,252
------------
4,225,684
------------
MANUFACTURING--CONSUMER GOODS -- 0.0%
281 Sulzer AG, Registered............ 221,753
------------
PHARMACEUTICALS -- 2.3%
578 Novartis AG, Bearer.............. 962,564
3,315 Novartis AG, Registered.......... 5,516,884
418 Roche Holding AG................. 4,104,737
133 Roche Holding AG, Bearer......... 1,970,697
------------
12,554,882
------------
36,778,933
------------
UNITED KINGDOM -- 21.1%
AEROSPACE -- 0.1%
25,464 Smiths Industries PLC............ 356,039
------------
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
136,688 British Aerospace PLC............ 1,049,095
7,300 Cobham PLC....................... 127,891
------------
1,176,986
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.1%
65,300 EMI Group PLC.................... 572,549
------------
AUTO PARTS -- 0.0%
34,514 BBA Group PLC.................... 260,292
------------
AUTOMOTIVE -- 0.1%
124,647 Rolls-Royce PLC.................. 515,255
------------
BANKING -- 2.4%
110,837 Abbey National PLC............... 1,975,071
119,828 Barclays PLC..................... 3,460,845
68,595 HSBC Holdings PLC................ 1,740,798
141,539 HSBC Holdings PLC (Hong Kong
Dollars)......................... 3,438,462
72,495 Royal Bank of Scotland Group
PLC.............................. 1,256,754
24,268 Schroders PLC.................... 623,173
------------
12,495,103
------------
BEVERAGES & TOBACCO -- 0.7%
279,142 Diageo PLC....................... 3,323,119
51,361 Scottish & Newcastle PLC......... 722,845
------------
4,045,964
------------
BREWERY -- 0.2%
62,127 Bass PLC......................... 1,160,981
73,727 Bass PLC, Class B................ 113,788
------------
1,274,769
------------
BROADCASTING/CABLE -- 0.3%
143,100 British Sky Broadcasting Group
PLC.............................. 1,030,858
48,242 Carlton Communications PLC....... 430,229
------------
1,461,087
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
BUILDING PRODUCTS -- 0.3%
61,602 Blue Circle Industries PLC....... $ 346,379
42,536 BPB PLC.......................... 260,465
21,454 RMC Group PLC.................... 372,637
50,900 Rugby Group PLC.................. 95,543
77,348 Tarmac PLC....................... 139,057
63,173 Williams PLC..................... 408,442
------------
1,622,523
------------
CHEMICALS -- 0.3%
40,448 BOC Group PLC.................... 552,048
33,804 Courtaulds PLC................... 251,271
28,860 Elementis PLC.................... 74,156
60,251 Imperial Chemical Industries
PLC.............................. 971,109
------------
1,848,584
------------
CONGLOMERATES -- 0.4%
243,883 B.A.T. Industries PLC............ 2,435,412
------------
CONSTRUCTION -- 0.0%
31,200 Taylor Woodrow PLC............... 104,635
------------
DISTRIBUTION -- 0.4%
308,609 BG PLC........................... 1,784,180
366,494 Centrica PLC *................... 620,668
------------
2,404,848
------------
ELECTRIC UTILITY -- 0.4%
121,353 National Grid Group PLC.......... 818,516
97,883 Scottish Power PLC............... 863,952
39,709 Southern Electric PLC............ 366,719
------------
2,049,187
------------
ELECTRICAL & ELECTRONIC -- 0.4%
15,800 Bowthorpe PLC.................... 138,007
35,374 Electrocomponents PLC............ 285,369
212,860 General Electric Co., PLC........ 1,834,388
------------
2,257,764
------------
ENERGY -- 1.2%
467,850 British Petroleum Co., PLC....... 6,810,811
FINANCE -- 1.2%
56,913 Cardon PLC....................... 176,625
434,219 Lloyds TSB Group PLC............. 6,064,025
22,109 Provident Financial PLC.......... 349,522
31,900 St. James's Place Capital PLC.... 173,248
------------
6,763,420
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
83,202 Cadbury Schweppes PLC............ 1,288,275
255,848 Unilever PLC..................... 2,746,991
------------
4,035,266
------------
</TABLE>
Continued
60
<PAGE> 79
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
FOOD PRODUCTS -- 0.3%
74,900 Associated British Foods PLC..... $ 704,835
37,080 Tate & Lyle PLC.................. 294,337
19,834 Unigate PLC...................... 219,738
43,459 United Biscuits (Holdings) PLC... 174,390
------------
1,393,300
------------
FOREST PRODUCTS -- 0.0%
68,504 Arjo Wiggins Appleton PLC........ 232,027
------------
GAS & ELECTRIC UTILITY -- 0.2%
100,766 National Power PLC............... 948,243
------------
HEALTH & PERSONAL CARE -- 2.2%
283,559 Glaxo Wellcome PLC............... 8,535,063
74,469 Zeneca Group PLC................. 3,199,481
------------
11,734,544
------------
INDUSTRIAL HOLDING COMPANY -- 0.3%
314,244 BTR PLC.......................... 892,649
54,127 TI Group PLC..................... 328,506
------------
1,525,673
------------
INSURANCE -- 2.5%
74,068 Boots Co., PLC................... 1,232,119
57,041 Commercial Union PLC............. 1,064,986
83,616 Great Universal Stores PLC....... 1,102,854
71,949 Guardian Royal Exchange.......... 426,467
99,807... Legal & General Group PLC........ 1,064,115
223,326 Marks & Spencer PLC.............. 2,038,231
152,133 Prudential Corp., PLC............ 2,005,290
123,473 Royal & Sun Alliance insurance
Group PLC........................ 1,259,781
148,438 Sainsbury (J) PLC................ 1,317,600
43,500 Sedgwick Group PLC............... 92,902
171,337 Tesco PLC........................ 1,670,946
------------
13,275,291
------------
LEISURE -- 0.4%
69,592 Granada Group PLC................ 1,281,903
97,672 Ladbroke Group PLC............... 539,010
68,058 Rank Group PLC................... 370,473
------------
2,191,386
------------
MACHINE -- DIVERSIFIED -- 0.0%
44,496 FK1 PLC.......................... 129,552
------------
MACHINERY & EQUIPMENT -- 0.1%
58,800 GNK PLC.......................... 744,639
------------
MANUFACTURING -- CAPITAL GOODS -- 0.1%
28,784 IMI PLC.......................... 178,417
47,392 Wolseley PLC..................... 280,909
------------
459,326
------------
MERCHANDISING -- 0.1%
90,523 Safeway PLC...................... 595,089
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
METALS -- 0.2%
169,516 British Steel PLC................ $ 374,760
89,082 Rio Tinto PLC, Registered........ 1,004,019
------------
1,378,779
------------
METALS & MINING -- 0.0%
18,004 Johnson Matthey PLC.............. 161,914
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.0%
86,232 Pilkington PLC................... 159,705
------------
OIL & GAS -- 0.1%
17,571 Burmah Castrol PLC............... 314,574
80,282 LASMO PLC........................ 322,151
------------
636,725
------------
PAPER PRODUCTS -- 0.0%
41,858 Rexam PLC........................ 183,330
------------
PHARMACEUTICALS -- 1.0%
437,464 SmithKline Beecham PLC........... 5,324,690
------------
PRINTING & PUBLISHING -- 0.6%
4,808 De La Rue PLC.................... 24,026
47,573 Pearson PLC...................... 873,132
94,996 Reed International PLC........... 858,283
114,527 Reuters Group PLC 1,310,867
------------
3,066,308
------------
RAILROADS -- 0.2%
41,900 Railtrack Group PLC.............. 1,029,778
------------
REAL ESTATE -- 0.4%
42,809 British Land Co., PLC............ 440,704
31,336 Great Portland Estates PLC....... 130,188
35,421 Hammerson PLC.................... 288,704
44,495 Land Securities PLC.............. 695,540
34,849 MEPC PLC......................... 307,590
32,472 Slough Estates PLC............... 186,649
------------
2,049,375
------------
RETAIL STORES -- 0.0%
31,126 Nect PLC......................... 267,978
------------
RETAIL -- GENERAL MERCHANDISE -- 0.2%
23,736 Argos PLC........................ 247,522
56,751 Kingfisher PLC................... 919,432
119,900 Sears PLC........................ 106,528
------------
1,273,482
------------
RETAIL -- SPECIAL LINE -- 0.1%
119,041 Lucas Varity PLC................. 476,192
------------
TELECOMMUNICATIONS -- 2.1%
499,617 British Telecommunications PLC... 6,147,888
177,851 Cable & Wireless PLC............. 2,164,753
241,321 Vodafone Group PLC............... 3,064,125
------------
11,376,766
------------
</TABLE>
Continued
61
<PAGE> 80
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
TELECOMMUNICATIONS -- EQUIPMENT -- 0.0%
22,300 Racal Electronic PLC............. $ 125,948
------------
TRANSPORTATION -- 0.3%
86,272 British Airways PLC.............. 929,165
13,207 Ocean Group PLC.................. 166,702
51,346 Peninsular & Oriental Steam
Navigation Co.................... 740,625
------------
1,836,492
------------
WATER UTILITY -- 0.3%
22,457 Anglian Water PLC................ 316,056
12,000 BPS Hyder PLC.................... 188,007
31,499 Thames Water PLC................. 574,964
44,614 United Utilities PLC............. 650,965
------------
1,729,992
------------
116,797,018
------------
TOTAL COMMON STOCKS 536,866,807
------------
(Cost $444,495,517)
CORPORATE NOTES & BONDS -- 0.0%
UNITED KINGDOM -- 0.0%
COMPUTER HARDWARE MANUFACTURING -- 0.0%
$1,793 Viglen Technology PLC, 6.94%**,
9/1/98........................... 0
------------
TOTAL CORPORATE NOTES & BONDS 0
------------
(Cost $0)
INVESTMENT COMPANIES -- 1.3%
UNITED STATES -- 1.3%
3,994,955 Dreyfus Cash Management Money
Market Fund...................... 3,994,955
3,424,723 Federated Prime Value Obligations
Money Market Fund................ 3,424,723
------------
TOTAL INVESTMENT COMPANIES....... 7,419,678
------------
(Cost $7,419,678)
PREFERRED STOCKS -- 0.8%
AUSTRALIA -- 0.2%
PRINTING & PUBLISHING -- 0.2%
132,935 News Corp., Ltd.................. 941,737
------------
AUSTRIA -- 0.0%
BANKING -- 0.0%
2,600 Bank Austria AG.................. 211,087
------------
GERMANY -- 0.6%
AUTOMOTIVE -- 0.1%
168 MAN AG Preferred................. 45,513
527 Volkswagen AG Preferred.......... 359,112
------------
404,625
------------
COMPUTER SOFTWARE -- 0.4%
3,300 SP AG Preferred.................. 2,243,226
------------
GAS & ELECTRIC UTILITY -- 0.1%
16,540 RWE AG........................... 711,069
------------
3,358,920
------------
TOTAL PREFERRED STOCKS........... 4,511,744
------------
(Cost $1,742,550)
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
RIGHTS -- FOREIGN -- 0.0%
AUSTRIA -- 0.0%
BANKING -- 0.0%
13,150 Bank Austria*.................... $ 0
------------
GERMANY -- 0.0%
AUTOMOTIVE -- 0.0%
39170 Daimler-Benz Rights*............. 43,401
------------
RETAIL STORES -- 0.0%
17,073 Metro Rights*.................... 662
------------
44,063
------------
NETHERLANDS -- 0.0%
MACHINERY & EQUIPMENT -- 0.0%
10 Stork Rights*.................... 9
------------
SWEDEN -- 0.0%
BANKING -- 0.0%
23,500 Handelsbanken Rights*............ 23,721
------------
BANKING & FINANCE -- 0.0%
24,700 Mandamus Units*.................. 7,743
------------
31,464
------------
TOTAL RIGHTS -- FOREIGN.......... 75,536
------------
(Cost $56,459)
WARRANTS -- 0.0%
HONG KONG -- 0.0%
GAS UTILITY -- 0.0%
17,412 Hong Kong & China Gas Warrants*.. 1,191
------------
REAL ESTATE -- 0.0%
33,200 Hysen Development Co.,
Warrants*........................ 274
12,500 Wharf Holdings Warrants*......... 0
------------
274
------------
TOTAL WARRANTS................... 1,465
------------
(Cost $0)
TOTAL INVESTMENTS -- 99.4%.................. 548,875,218
(Cost $453,714,204)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.6%....................... 3,513,031
------------
TOTAL NET ASSETS -- 100.0%.................. $552,388,249
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $165,238,695
Unrealized depreciation............... (70,122,681)
------------
Net unrealized appreciation........... $ 95,161,014
============
</TABLE>
* Non-income producing security.
** Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
See Notes to Financial Statements
62
<PAGE> 81
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 98.7%
ADVERTISING -- 0.2%
10,300 Interpublic Group Cos., Inc. ... $ 625,081
13,300 Omnicom Group................... 663,338
------------
1,288,419
------------
AEROSPACE & DEFENSE -- 1.1%
81,992 Boeing Co. ..................... 3,653,768
10,300 General Dynamics Corp. *........ 478,950
15,994 Lockheed Martin Corp. .......... 1,693,365
5,500 Northrop Grumman Corp. ......... 567,188
27,800 Raytheon Co. -- Class B......... 1,643,675
------------
8,036,946
------------
AGRICULTURE -- 0.1%
20,000 Pioneer Hi Bred, Inc. .......... 827,500
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.1%
7,800 Maytag Corp. ................... 385,125
6,200 Whirlpool Corp. ................ 426,250
------------
811,375
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.3%
3,100 Cummins Engine, Inc. ........... 158,875
8,600 Dana Corp. ..................... 460,100
6,300 Eaton Corp. .................... 489,825
5,920 Navistar International Corp. *.. 170,940
6,350 PACCAR, Inc. ................... 331,788
10,100 TRW, Inc. ...................... 551,712
------------
2,163,240
------------
AUTO/TRUCK -- REPLACEMENT
EQUIPMENT -- 0.1%
5,200 Echlin, Inc. ................... 255,125
14,625 Genuine Parts Co. .............. 505,477
------------
760,602
------------
AUTOMOTIVE -- 1.7%
53,238 Chrysler Corp. ................. 3,001,292
98,400 Ford Motor Co. ................. 5,805,600
58,000 General Motors Corp. ........... 3,875,125
------------
12,682,017
------------
BANKS -- MAJOR REGIONAL -- 5.5%
52,998 Banc One Corp. ................. 2,957,950
30,900 Bank of New York Co., Inc. ..... 1,875,244
23,800 BankBoston Corp. ............... 1,323,875
12,950 Comerica, Inc. ................. 857,938
23,853 First Chicago NBD Corp. ........ 2,113,972
79,370 First Union Corp. .............. 4,623,302
22,407 Fleet Financial Group, Inc. .... 1,870,985
36,000 KeyCorp......................... 1,282,500
20,900 Mellon Bank Corp. .............. 1,455,163
26,800 National City Corp. ............ 1,902,800
77,169 NationsBank..................... 5,903,428
9,200 Northern Trust Corp. ........... 701,500
62,000 Norwest Corp. .................. 2,317,250
25,000 PNC Bank Corp. ................. 1,345,313
9,000 Republic New York Corp. ........ 566,438
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- MAJOR REGIONAL (CONTINUED)
14,400 Summit Bancorp *................ $ 684,000
17,300 SunTrust Banks, Inc. ........... 1,406,706
60,362 U.S. Bancorp.................... 2,595,566
16,900 Wachovia Corp. ................. 1,428,050
7,100 Wells Fargo & Co. .............. 2,619,899
------------
39,831,879
------------
BANKS -- MIDWEST -- 0.2%
19,100 Fifth Third Bancorp............. 1,203,300
15,700 Huntington Bancshares........... 525,950
------------
1,729,250
------------
BANKS -- MONEY CENTER -- 2.6%
56,848 BankAmerica Corp. .............. 4,913,799
8,000 Bankers Trust New York Corp. ... 928,500
11,700 BB&T Corp. *.................... 791,213
69,116 Chase Manhattan Corp. .......... 5,218,258
37,500 Citicorp........................ 5,596,874
14,600 J.P. Morgan & Co., Inc. ........ 1,710,025
------------
19,158,669
------------
BANKS -- NORTHEAST -- 0.1%
13,200 State Street Corp. ............. 917,400
------------
BEVERAGES -- ALCOHOLIC -- 0.3%
3,000 Adolph Coors Co. ............... 102,000
40,170 Anheuser-Busch Co., Inc. ....... 1,895,522
5,700 Brown-Forman Corp. ............. 366,225
------------
2,363,747
------------
BEVERAGES -- SOFT DRINKS -- 3.0%
202,900 Coca-Cola Co. .................. 17,347,949
124,500 PepsiCo, Inc. .................. 5,127,844
------------
22,475,793
------------
BROADCASTING/CABLE -- 0.8%
10,100 Clear Channel Communications.... 1,102,163
28,600 Comcast Corp. Special........... 1,160,981
49,800 Media One Group *............... 2,188,087
41,646 Tele-Communications Inc.,
Class A *....................... 1,600,768
------------
6,051,999
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.2%
3,300 Armstrong World Industries,
Inc. ........................... 222,338
13,600 Masco Corp. .................... 822,800
4,400 Owens-Corning Fiberglas Corp. *. 179,575
------------
1,224,713
------------
BUILDING -- HEAVY CONSTRUCTION -- 0.1%
6,900 Fluor Corp. .................... 351,900
3,300 Foster Wheeler Corp. ........... 70,744
------------
422,644
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.0%
10,600 Ecolab, Inc. ................... 328,600
------------
</TABLE>
Continued
63
<PAGE> 82
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- MOBILE/MANUFACTURING &
RECREATIONAL VEHICLES -- 0.0%
3,000 Fleetwood Enterprises, Inc. *... $ 120,000
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.1%
4,900 Centex Corp. ................... 184,975
3,240 Kaufman & Broad Home Corp. ..... 102,870
3,500 Pulte Corp. .................... 104,563
------------
392,408
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.8%
60,031 Home Depot, Inc. ............... 4,986,324
28,600 Lowe's Cos., Inc. .............. 1,160,088
------------
6,146,412
------------
BUILDING PRODUCTS -- WOOD -- 0.1%
9,000 Louisiana-Pacific Corp. ........ 164,250
16,350 Weyerhaeuser Co. ............... 755,166
------------
919,416
------------
BUSINESS INFORMATION -- 0.2%
13,265 Cognizant Corp. *............... 835,695
13,965 Dun & Bradstreet Corp. ......... 504,486
------------
1,340,181
------------
BUSINESS SERVICES -- 0.0%
8,600 H & R Block *................... 362,275
------------
CAPITAL GOODS -- 0.2%
58,300 CBS Corp. ...................... 1,851,025
------------
CHEMICALS -- DIVERSIFIED -- 2.0%
5,900 B.F.Goodrich Co. ............... 292,788
18,600 Dow Chemical Co. ............... 1,798,387
92,800 E.I. du Pont de Nemours & Co. .. 6,925,199
6,400 Eastman Chemical Co. ........... 398,400
7,900 Hercules, Inc. ................. 324,888
48,600 Monsanto Co. ................... 2,715,524
14,600 PPG Industries, Inc. ........... 1,015,612
5,000 Rohm & Haas Co. ................ 519,688
10,100 Union Carbide Corp. ............ 539,088
6,100 W.R. Grace & Co. *.............. 104,081
------------
14,633,655
------------
CHEMICALS -- SPECIALTY -- 0.3%
19,400 Air Products & Chemical, Inc. .. 776,000
11,837 Engelhard Corp. ................ 239,699
4,900 Great Lakes Chemical Corp. ..... 193,244
10,700 Morton International, Inc. *.... 267,500
5,500 Nalco Chemical Co. ............. 193,188
12,900 Praxair, Inc. .................. 603,881
8,200 Sigma-Aldrich Corp. ............ 288,025
------------
2,561,537
------------
COMMERCIAL SERVICES -- 0.2%
66,519 Cendant Corp. .................. 1,388,584
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE -- 3.6%
5,600 Adobe Systems, Inc. *........... $ 237,650
44,818 Computer Associates
International, Inc. ............ 2,490,199
199,700 Microsoft Corp. *............... 21,642,487
80,675 Oracle Corp. *.................. 1,981,580
21,100 Parametric Technology Corp. *... 572,338
------------
26,924,254
------------
COMPUTERS -- LOCAL AREA NETWORK -- 1.3%
29,100 3COM Corp. *.................... 893,006
18,000 Bay Networks, Inc. *............ 580,500
13,000 Cabletron Systems *............. 174,688
83,500 Cisco Systems, Inc. *........... 7,687,219
28,800 Novell, Inc. *.................. 367,200
------------
9,702,613
------------
COMPUTERS -- MAINFRAME -- 1.3%
79,800 International Business Machines
Corp. .......................... 9,162,038
20,500 Unisys Corp. ................... 579,125
------------
9,741,163
------------
COMPUTERS -- MEMORY DEVICES -- 0.3%
40,700 EMC Corp. *..................... 1,823,869
19,900 Seagate Technology, Inc. *...... 473,869
------------
2,297,738
------------
COMPUTERS -- MICRO -- 1.3%
10,900 Apple Computer, Inc. *.......... 312,694
135,574 Compaq Computer Corp. .......... 3,846,912
4,000 Data General Corp. *............ 59,750
53,600 Dell Computer Corp. *........... 4,974,750
12,700 Gateway 2000, Inc. *............ 642,938
------------
9,837,044
------------
COMPUTERS -- MINI -- 0.9%
85,300 Hewlett-Packard Co. ............ 5,107,337
15,400 Silicon Graphics, Inc. *........ 186,725
31,000 Sun Microsystems, Inc. *........ 1,346,563
------------
6,640,625
------------
COMPUTERS -- SERVICES -- 0.6%
24,500 Automatic Data Processing,
Inc. ........................... 1,785,437
6,200 Ceridian Corp. *................ 364,250
12,800 Computer Science *.............. 819,200
12,300 Equifax, Inc. .................. 446,644
35,100 First Data Corp. ............... 1,169,269
2,200 Shared Medical Systems Corp. ... 161,563
------------
4,746,363
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.8%
6,000 American Greetings Corp. ....... 305,625
3,195 Jostens, Inc. .................. 77,079
13,100 Newell Cos., Inc. .............. 652,544
12,300 Rubbermaid, Inc. *.............. 408,206
5,000 Tupperware Corp. ............... 140,625
</TABLE>
Continued
64
<PAGE> 83
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS -- MISCELLANEOUS (CONTINUED)
52,500 Unilever NV, ADR................ $ 4,144,219
------------
5,728,298
------------
CONTAINERS & PACKAGING -- 0.1%
12,700 Owens-Illinois *................ 568,325
6,716 Sealed Air Corp. *.............. 246,813
------------
815,138
------------
CONTAINERS -- METAL & GLASS -- 0.1%
2,500 Ball Corp. ..................... 100,469
10,500 Crown Cork & Seal Co., Inc. .... 498,750
------------
599,219
------------
CONTAINERS -- PAPER & PLASTIC -- 0.0%
4,300 Bemis Co. ...................... 175,763
------------
COSMETICS & TOILETRIES -- 1.2%
4,700 Alberto Culver Co., Class B..... 136,300
10,800 Avon Products, Inc. ............ 837,000
91,864 Gillette Co. ................... 5,207,540
9,000 International Flavors &
Fragrances, Inc. ............... 390,938
45,640 Kimberly-Clark Corp. ........... 2,093,735
------------
8,665,513
------------
DIVERSIFIED -- 4.8%
16,020 Allegheny Teledyne, Inc. ....... 366,458
46,300 Allied Signal, Inc. ............ 2,054,563
3,750 Crane Co. ...................... 182,109
3,000 FMC Corp. *..................... 204,563
268,500 General Electric Co. (b)........ 24,433,499
9,700 ITT Industries, Inc. ........... 362,538
6,900 Johnson Controls, Inc. ......... 393,731
33,500 Minnesota Mining & Manufacturing
Co. ............................ 2,753,280
3,500 National Service Industries,
Inc. ........................... 178,063
29,200 Seagram Co., Ltd. .............. 1,195,375
14,000 Tenneco, Inc. .................. 532,875
13,500 Textron, Inc. .................. 967,781
19,100 United Technologies Corp. ...... 1,766,750
------------
35,391,585
------------
ELECTRICAL & ELECTRONIC -- 0.0%
6,900 KLA-Tencor Corp. *.............. 191,044
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 2.0%
11,600 Advanced Micro Devices, Inc. *.. 197,925
30,000 Applied Materials, Inc. *....... 885,000
134,200 Intel Corp. .................... 9,947,574
11,600 LSI Logic Corp. *............... 267,525
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL COMPONENTS -- SEMICONDUCTORS
(CONTINUED)
17,400 Micron Technology, Inc. ........ $ 431,738
13,500 National Semiconductor Corp. *.. 178,031
16,500 Rockwell International Corp. ... 793,031
32,000 Texas Instruments, Inc. ........ 1,866,000
------------
14,566,824
------------
ELECTRONIC -- CONNECTORS -- 0.1%
18,036 AMP, Inc. ...................... 619,988
4,500 Thomas & Betts Corp. ........... 221,625
------------
841,613
------------
ELECTRONIC MEASURING EQUIPMENT -- 0.0%
4,100 Tektronix, Inc. ................ 145,038
------------
ELECTRONICS -- 0.0%
7,000 Raychem Corp. .................. 206,938
------------
ENERGY -- 0.0%
8,700 Orxy Energy Co. *............... 192,488
------------
FINANCE -- 0.8%
28,427 Associates First Capital,
Class A......................... 2,185,325
20,700 Franklin Resources, Inc. ....... 1,117,800
10,800 Mercantile Bancorporation....... 544,050
16,000 Sunamerica, Inc. ............... 919,000
31,645 Washington Mutual, Inc. ........ 1,374,580
------------
6,140,755
------------
FINANCIAL -- BANKING -- 0.1%
21,500 Synovus Financial Corp. ........ 510,625
FINANCIAL -- CONSUMER LOANS -- 0.4%
4,400 Beneficial Corp. ............... 674,025
26,300 Household International, Inc. .. 1,308,425
41,087 MBNA Corp. ..................... 1,355,871
------------
3,338,321
------------
FINANCIAL --
INVESTMENT BANKER/BROKER -- 0.1%
8,400 Lehman Brothers Holding, Inc. .. 651,525
------------
FINANCIAL -- INVESTMENT BANKERS -- 0.4%
27,300 Merrill Lynch & Co., Inc. ...... 2,518,425
21,750 Schwab (Charles) Corp. ......... 706,875
------------
3,225,300
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 1.2%
38,100 American Express Co. ........... 4,343,400
48,616 Morgan Stanley, Dean Witter,
Discover & Co. ................. 4,442,287
------------
8,785,687
------------
</TABLE>
Continued
65
<PAGE> 84
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.2%
8,900 Country Wide Credit Industries,
Inc. *.......................... $ 451,675
87,000 Fannie Mae...................... 5,285,250
57,000 Freddie Mac..................... 2,682,563
11,200 Green Tree Financial Corp. ..... 479,500
------------
8,898,988
------------
FINANCIAL -- SAVINGS & LOAN -- 0.2%
4,700 Golden West Financial Corp. .... 499,669
9,000 H.F. Ahmanson & Co. ............ 639,000
------------
1,138,669
------------
FOOD -- CANNED -- 0.5%
37,400 Campbell Soup Co. .............. 1,986,875
30,000 H.J. Heinz Co. ................. 1,683,750
------------
3,670,625
------------
FOOD -- CONFECTIONARY -- 0.2%
11,700 Hershey Foods Corp. ............ 807,300
9,500 Wm. Wrigley Jr. Co. *........... 931,000
------------
1,738,300
------------
FOOD -- DIVERSIFIED -- 1.2%
23,600 Bestfoods....................... 1,370,275
39,050 ConAgra, Inc. .................. 1,237,397
13,000 General Mills, Inc. ............ 888,875
33,700 Kellogg Co. .................... 1,265,856
11,400 Quaker Oats Co. ................ 626,288
8,780 Ralston Purina Group............ 1,025,614
38,800 Sara Lee Corp. ................. 2,170,374
------------
8,584,679
------------
FOOD -- FLOUR & GRAIN -- 0.1%
46,863 Archer-Daniels-Midland Co. ..... 907,971
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
4,900 Supervalu, Inc. ................ 217,438
27,900 Sysco Corp. .................... 714,937
------------
932,375
------------
FUNERAL SERVICES -- 0.1%
20,700 Service Corp. International *... 887,513
------------
GAS & ELECTRIC UTILITY -- 0.2%
31,300 PG & E Corp..................... 987,906
19,000 Public Service Enterprises...... 654,313
------------
1,642,219
------------
GLASS PRODUCTS -- 0.1%
19,000 Corning, Inc. .................. 660,250
------------
HOTELS & LODGING -- 0.2%
20,500 Hilton Hotels Corp. ............ 584,250
20,900 Marriott International,
Class A......................... 676,638
------------
1,260,888
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSTRUMENTS -- CONTROL -- 0.1%
4,022 General Signal Corp. ........... $ 144,792
10,400 Honeywell, Inc. ................ 869,050
------------
1,013,842
------------
INSTRUMENTS -- SCIENTIFIC -- 0.1%
3,700 EG&G, Inc. ..................... 111,000
3,600 Millipore Corp. ................ 98,100
4,000 Perkin-Elmer Corp. ............. 248,750
------------
457,850
------------
INSURANCE -- 0.2%
13,500 Cincinnati Financial Corp. ..... 518,063
5,900 Progressive Corp. -- Ohio....... 831,900
------------
1,349,963
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.1%
13,800 Aon Corp. ...................... 969,450
------------
INSURANCE -- BROKERS -- 0.2%
20,850 Marsh & McLennan Cos., Inc. .... 1,260,122
------------
INSURANCE -- LIFE -- 0.7%
20,798 American General Corp. ......... 1,480,557
15,500 Conseco, Inc. .................. 724,625
8,725 Jefferson-Pilot Corp.*.......... 505,505
7,800 Providian Financial............. 612,788
11,500 Torchmark Corp. ................ 526,125
5,182 TransAmerica Corp. ............. 596,578
11,400 UNUM Corp. ..................... 632,700
------------
5,078,878
------------
INSURANCE -- MULTI-LINE -- 1.5%
12,170 Aetna, Inc. .................... 926,441
18,200 CIGNA Corp. .................... 1,255,800
9,700 Hartford Financial Services
Group, Inc. .................... 1,109,438
9,400 Loews Corp. .................... 818,975
8,000 MBIA, Inc. ..................... 599,000
9,400 MGIC Investment Corp. .......... 536,388
94,094 Travelers Group, Inc. .......... 5,704,448
------------
10,950,490
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.2%
35,199 Allstate Corp. ................. 3,222,908
57,520 American International Group.... 8,397,920
14,00 Chubb Corp. .................... 1,125,250
6,400 General Re Corp. ............... 1,622,400
8,400 Lincoln National Corp.*......... 767,550
11,600 Safeco Corp. ................... 527,075
18,934 St. Paul Cos., Inc. ............ 796,411
------------
16,459,514
------------
LEISURE & RECREATION PRODUCTS -- 0.0%
8,200 Brunswick Corp.................. 202,950
------------
</TABLE>
Continued
66
<PAGE> 85
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
LEISURE & RECREATION/GAMING -- 0.1%
8,300 Harrah's Entertainment, Inc. ... $ 192,975
14,700 Mirage Resorts *................ 313,294
------------
506,269
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.0%
3,300 Cincinnati Milacron, Inc. ...... 80,231
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.3%
30,500 Caterpillar, Inc. .............. 1,612,687
13,550 Ingersoll-Rand Co. ............. 597,047
------------
2,209,734
------------
MACHINERY -- ELECTRICAL -- 0.4%
36,400 Emerson Electric Co. ........... 2,195,375
8,200 W.W. Grainger, Inc. ............ 408,463
------------
2,603,838
------------
MACHINERY -- FARM -- 0.2%
2,000 Briggs & Stratton Corp. ........ 74,875
6,200 Case Corp. ..................... 299,150
20,500 Deere & Co. .................... 1,083,938
------------
1,457,963
------------
MACHINERY -- GENERAL INDUSTRIAL -- 0.4%
2,300 Aeroquip-Vickers Inc. .......... 134,263
9,900 Cooper Industries, Inc. ........ 543,881
18,200 Dover Corp...................... 623,350
3,922 Harnischfeger Industries, Inc. . 111,042
20,500 Illinois Tool Works, Inc. ...... 1,367,093
9,125 Parker-Hannifin Corp. .......... 347,891
------------
3,127,520
------------
MACHINERY -- MATERIAL HANDLING -- 0.0%
700 Nacco Industries, Inc. ......... 90,475
------------
MACHINERY -- THERMAL PROCESSOR -- 0.1%
13,100 Thermo Electron Corp. *......... 447,856
------------
MEDIA CONGLOMERATES -- 1.6%
47,460 Time Warner, Inc. .............. 4,054,864
29,000 ViaCom, Inc., Class B *......... 1,689,250
55,400 Walt Disney Co. ................ 5,820,462
------------
11,564,576
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
21,600 Amgen, Inc. *................... 1,412,100
------------
MEDICAL -- DRUGS -- 8.6%
125,500 Abbott Laboratories............. 5,129,813
7,000 Alza Corp. ..................... 302,750
106,600 American Home Products Corp. ... 5,516,550
81,600 Bristol-Myers Squibb Co. ....... 9,378,899
91,000 Eli Lilly & Co. ................ 6,011,688
98,300 Merck & Co., Inc. .............. 13,147,624
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL -- DRUGS (CONTINUED)
106,100 Pfizer, Inc. ................... $ 11,531,743
41,630 Pharmacia & Upjohn, Inc. ....... 1,920,184
60,100 Schering-Plough Corp. .......... 5,506,663
67,000 Warner-Lambert Co. ............. 4,648,125
------------
63,094,039
------------
MEDICAL -- HEALTH MEDICAL
ORGANIZATION -- 0.2%
13,400 Humana, Inc. *.................. 417,913
15,500 United Healthcare Corp. ........ 984,250
------------
1,402,163
------------
MEDICAL -- HOSPITAL -- 0.3%
53,149 Columbia/HCA Healthcare Corp. .. 1,547,965
25,100 Tenet Healthcare Corp. *........ 784,375
------------
2,332,340
------------
MEDICAL -- NURSING HOMES -- 0.0%
5,200 Manor Care, Inc. *.............. 199,875
------------
MEDICAL -- OUTPATIENT/HOME CARE -- 0.1%
32,300 HEALTHSOUTH Corp. *............. 862,006
------------
MEDICAL -- WHOLESALE DRUG -- 0.1%
9,000 Cardinal Health, Inc. .......... 843,750
------------
MEDICAL INSTRUMENTS -- 0.4%
9,200 Biomet, Inc. *.................. 304,175
38,400 Medtronic, Inc. ................ 2,448,000
6,900 St. Jude Medical, Inc. *........ 254,006
6,200 U.S. Surgical Corp. ............ 282,875
------------
3,289,056
------------
MEDICAL PRODUCTS -- 0.7%
5,400 Allergan, Inc. ................. 250,425
23,000 Baxter International, Inc. ..... 1,237,688
16,000 Boston Scientific Corp. *....... 1,146,000
12,400 Guidant Corp. .................. 884,275
34,600 HBO & Co. ...................... 1,219,650
6,000 Mallinckrodt, Inc. ............. 178,125
------------
4,916,163
------------
MEDICAL/DENTAL SUPPLIES -- 1.3%
4,500 Bausch & Lomb, Inc. ............ 225,563
10,000 Becton, Dickinson & Co. ........ 776,250
4,700 C.R. Bard, Inc. ................ 178,894
110,300 Johnson & Johnson............... 8,134,624
------------
9,315,331
------------
METAL -- GOLD -- 0.2%
30,600 Barrick Gold Corp. ............. 587,137
18,800 Battle Mountian Gold Co. ....... 111,625
17,300 Homestake Mining Co. ........... 179,488
12,815 Newmont Mining Corp. ........... 302,754
20,300 Placer Dome, Inc. .............. 238,525
------------
1,419,529
------------
</TABLE>
Continued
67
<PAGE> 86
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
METAL -- MISCELLANEOUS -- 0.0%
7,700 Cyprus Amax Minerals Co. ....... $ 102,025
13,700 Inco, Ltd. ..................... 186,663
------------
288,688
------------
METAL -- NON-FERROUS -- 0.3%
18,650 Alcan Aluminum, Ltd. ........... 515,206
14,100 Aluminum Co. of America......... 929,719
3,300 Asarco, Inc. ................... 73,425
15,900 Freeport-McMoran Copper & Gold,
Inc.-Class B.................... 241,481
4,800 Phelps Dodge Corp. ............. 274,500
6,100 Reynolds Metals Co. ............ 341,219
------------
2,375,550
------------
METAL -- PROCESSING & FABRICATION -- 0.0%
5,200 Timken Co....................... 160,225
7,925 Worthington Industries, Inc. ... 119,370
------------
279,595
------------
MOVIE/TELEVISION PRODUCTION &
DISTRIBUTION -- 0.0%
6,000 King World Productions, Inc. ... 153,000
------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.2%
37,300 Waste Management Inc. .......... 1,305,500
------------
OFFICE AUTOMATION & EQUIPMENT -- 0.5%
11,044 IKON Office Solutions, Inc. .... 160,828
23,800 Pitney Bowes, Inc. ............. 1,145,375
26,767 Xerox Corp. .................... 2,720,197
------------
4,026,400
------------
OFFICE SUPPLIES & FORMS -- 0.1%
8,400 Avery Dennison Corp. ........... 451,500
6,700 Deluxe Corp. ................... 239,944
7,300 Moore Corp., Ltd. .............. 96,725
------------
788,169
------------
OIL & GAS -- 0.1%
4,900 Anadarko Petroleum Corp. ....... 329,219
7,800 Apache Corp. ................... 245,700
------------
574,919
------------
OIL & GAS -- DRILLING -- 0.4%
7,100 Rowan Cos., Inc. *.............. 138,006
40,800 Schlumberger Ltd. .............. 2,787,150
------------
2,925,156
------------
OIL -- FIELD SERVICES -- 0.2%
21,500 Halliburton Co. ................ 958,093
4,500 Western Atlas *................. 381,938
------------
1,340,031
------------
OIL -- INTERNATIONAL INTEGRATED -- 4.9%
53,900 Chevron Corp. .................. 4,477,069
202,300 Exxon Corp. .................... 14,426,518
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- INTERNATIONAL INTEGRATED (CONTINUED)
64,300 Mobil Corp. .................... $ 4,926,987
175,900 Royal Dutch Petroleum Co., ADR.. 9,641,518
45,000 Texaco, Inc. ................... 2,685,938
------------
36,158,030
------------
OIL -- PRODUCTION/PIPELINE -- 0.5%
8,750 Coastal Corp. .................. 610,859
6,750 Columbia Gas System, Inc. ...... 375,469
26,900 Enron Corp. .................... 1,454,281
9,000 Sonat, Inc. .................... 347,625
33,700 Williams Co. ................... 1,137,375
------------
3,925,609
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.1%
14,465 Burlington Resources, Inc. ..... 622,899
4,100 Helmerich & Payne, Inc. ........ 91,225
20,823 Union Pacific Resources Group,
Inc. ........................... 365,704
------------
1,079,828
------------
OIL -- U.S. INTEGRATED -- 1.3%
7,500 Amerada Hess Corp. ............. 407,344
79,900 Amoco Corp. .................... 3,325,837
26,300 Atlantic Richfield Co. ......... 2,054,687
3,900 Kerr-Mcgee Corp. ............... 225,713
27,800 Occidental Petroleum Corp. ..... 750,600
3,900 Pennzoil Co. ................... 197,438
21,600 Phillips Petroleum Co. ......... 1,040,850
20,200 Unocal Corp. ................... 722,150
23,700 USX-Marathon Group.............. 813,206
------------
9,537,825
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.2%
13,900 Baker Hughes, Inc. ............. 480,419
14,400 Dresser Industries, Inc. ....... 634,499
5,000 McDermott International, Inc. .. 172,188
------------
1,287,106
------------
OIL REFINING -- 0.1%
6,200 Ashland, Inc. .................. 320,075
7,774 Sun Co., Inc. .................. 301,728
------------
621,803
------------
PAINTS & RELATED PRODUCTS -- 0.1%
14,200 Sherwin-Williams Co. ........... 470,375
------------
PAPER & RELATED PRODUCTS -- 0.6%
4,608 Boise Cascade Corp. ............ 150,912
7,900 Champion International Co. ..... 388,581
17,100 Fort James Corp. ............... 760,950
7,600 Georgia Pacific Corp. .......... 447,925
24,824 International Paper Co. ........ 1,067,432
8,600 Mead Corp. ..................... 273,050
2,400 Potlatch Corp. ................. 100,800
8,146 Stone Container Corp. *......... 127,281
4,600 Temple-Inland, Inc. ............ 247,825
</TABLE>
Continued
68
<PAGE> 87
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PAPER & RELATED PRODUCTS (CONTINUED)
5,700 Union Camp Corp. ............... $ 282,863
8,350 Westvaco Corp. ................. 235,888
9,100 Williamette Industries, Inc. ... 291,200
------------
4,374,707
------------
PHOTOGRAPHY -- 0.3%
26,700 Eastman Kodak Co. .............. 1,950,769
3,689 Polaroid Corp. ................. 131,190
------------
2,081,959
------------
POLLUTION CONTROL -- 0.1%
15,900 Browning-Ferris Industries,
Inc. ........................... 552,524
27,000 Laidlaw, Inc. .................. 329,063
10,199 Pall Corp. ..................... 209,080
------------
1,090,667
------------
PRINTING -- COMMERCIAL -- 0.1%
12,000 R.R. Donnelley & Sons Co. ...... 549,000
------------
PROTECTION -- SAFETY -- 0.4%
46,900 Tyco International Ltd. ........ 2,954,700
------------
PUBLISHING -- BOOKS -- 0.1%
8,100 McGraw-Hill Cos., Inc. ......... 660,656
------------
PUBLISHING -- NEWSPAPERS -- 0.6%
7,900 Dow Jones & Co. ................ 440,425
23,300 Gannett, Inc. .................. 1,655,756
6,900 Knight-Ridder, Inc. ............ 379,931
7,900 New York Times Co. ............. 626,075
7,300 Times Mirror Co. ............... 458,988
10,100 Tribune Co. .................... 695,006
------------
4,256,181
------------
PUBLISHING -- PERIODICALS -- 0.0%
4,300 Meredith Corp. ................. 201,831
------------
RESTAURANTS -- 0.6%
12,200 Darden Restaurants, Inc. ....... 193,675
56,500 McDonald's Corp. ............... 3,898,500
12,410 Tricon Global Restaurants *..... 393,242
10,800 Wendy's International, Inc. .... 253,800
------------
4,739,217
------------
RETAIL -- 0.0%
8,800 Consolidated Stores *........... 319,000
------------
RETAIL -- APPAREL/SHOES -- 0.5%
32,450 Gap, Inc. ...................... 1,999,731
22,078 Limited, Inc. .................. 731,334
6,300 Nordstrom, Inc. ................ 486,675
26,400 TJX Companies, Inc. *........... 636,900
11,100 Venator Group, Inc. ............ 212,288
------------
4,066,928
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.1%
8,100 Circuit City Stores, Inc. ...... 379,688
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- DISCOUNT -- 2.1%
17,550 Costco. Cos., Inc. *............ $ 1,106,747
35,900 Dayton-Hudson Corp. ............ 1,741,150
40,000 Kmart Corp. *................... 770,000
23,250 Toys 'R' Us, Inc. *............. 547,828
184,200 Wal-Mart Stores, Inc. .......... 11,190,149
------------
15,355,874
------------
RETAIL -- DRUG STORE -- 0.5%
28,200 CVS Corp.*...................... 1,098,038
3,200 Longs Drug Stores Corp. ........ 92,400
21,200 Rite Aid Corp. *................ 796,325
40,600 Walgreen Co. ................... 1,677,287
------------
3,664,050
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.7%
5,816 Harcourt General, Inc. *........ 346,052
20,500 J.C. Penney, Inc. .............. 1,482,406
19,000 May Department Stores Co. ...... 1,244,500
32,175 Sears, Roebuck & Co. ........... 1,964,686
------------
5,037,644
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
9,100 Dillards Department Stores,
Inc. ........................... 377,081
17,200 Federated Department Stores,
Inc. *.......................... 925,575
3,000 Mercantile Stores Co. .......... 236,813
------------
1,539,469
------------
RETAIL -- SUPERMARKETS -- 0.5%
20,100 Albertsons, Inc. *.............. 1,041,430
22,400 American Stores Co. ............ 541,800
4,900 Giant Food Inc. ................ 211,006
3,100 Great Atlantic & Pacific Tea
Co., Inc. ...................... 102,494
20,900 Kroger Co. *.................... 896,088
12,200 Winn-Dixie Stores, Inc. *....... 624,488
------------
3,417,306
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.1%
12,500 Autozone, Inc. *................ 399,219
5,200 Pep Boys -- Manny, Moe & Jack *. 98,475
------------
497,694
------------
RETAIL/WHOLESALE -- COMPUTERS -- 0.1%
8,528 Tandy Corp. .................... 452,517
------------
RUBBER -- TIRES -- 0.1%
6,500 Cooper Tire & Rubber Co. ....... 134,063
12,800 Goodyear Tire & Rubber Co. ..... 824,800
------------
958,863
------------
</TABLE>
Continued
69
<PAGE> 88
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SHOES & RELATED APPAREL -- 0.2%
23,800 Nike, Inc., Class B............. $ 1,158,762
4,600 Reebok International Ltd. *..... 127,363
------------
1,286,125
------------
SOAP & CLEANING PREPARATIONS -- 1.7%
8,500 Clorox, Inc. ................... 810,688
24,300 Colgate-Palmolive Co. .......... 2,138,400
110,100 Procter & Gamble Co. ........... 10,025,980
------------
12,975,068
------------
STEEL -- PRODUCERS -- 0.1%
8,900 Armoc, Inc. *................... 56,738
10,500 Bethlehem Steel Corp. *......... 130,594
7,200 Nucor Corp. .................... 331,199
7,040 USX-U.S. Steel Group, Inc. ..... 232,320
------------
750,851
------------
TECHNOLOGY -- SOFTWARE -- 0.0%
3,800 Auto Desk *..................... 146,775
------------
TELECOMMUNICATIONS -- CELLULAR -- 0.4%
46,300 Airtouch Communications, Inc. *. 2,705,656
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 2.2%
7,255 Andrew Corp. *.................. 131,043
5,800 Ascend Communications, Inc. *... 287,463
9,700 DSC Communications Corp. *...... 291,000
12,100 General Instrument Corp. *...... 328,969
6,600 Harris Corp. ................... 294,938
106,746 Lucent Technologies, Inc. ...... 8,879,932
49,000 Motorola, Inc. ................. 2,575,562
42,700 Northern TeleCom Ltd. .......... 2,423,224
6,500 Scientific-Atlanta, Inc. ....... 164,938
14,900 Tellabs, Inc. *................. 1,067,213
------------
16,444,282
------------
TEXTILE -- APPAREL -- 0.1%
6,000 Fruit of the Loom, Inc. *....... 199,125
5,500 Liz Claiborne, Inc. *........... 287,375
3,000 Russell Corp. .................. 90,563
10,000 VF Corp. ....................... 514,375
------------
1,091,438
------------
TEXTILE -- HOME FURNISHINGS -- 0.0%
1,700 Springs Industries, Inc. ....... 78,413
------------
TOBACCO -- 1.2%
14,100 Fortune Brands, Inc. ........... 541,969
198,900 Philip Morris Cos., Inc. ....... 7,831,687
15,100 U.S.T., Inc. ................... 407,700
------------
8,781,356
------------
TOOLS -- HAND HELD -- 0.1%
7,800 Black & Decker Corp. ........... 475,800
4,950 Snap-On, Inc. .................. 179,438
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
7,300 The Stanley Works............... $ 303,406
------------
958,644
------------
TOYS/GAME/HOBBY -- 0.2%
10,900 Hasbro, Inc. ................... 428,506
23,847 Mattel, Inc. ................... 1,009,026
------------
1,437,532
------------
TRANSPORTATION -- AIR FREIGHT -- 0.1%
12,060 FDX Corp. *..................... 756,765
------------
TRANSPORTATION -- AIRLINE -- 0.4%
15,000 AMR Corp. *..................... 1,248,750
6,100 Delta Air Lines, Inc. .......... 788,425
18,150 Southwest Airlines Co. ......... 537,694
7,500 US Airways Group, Inc. *........ 594,375
------------
3,169,244
------------
TRANSPORTATION -- EQUIPMENT & LEASING -- 0.0%
6,300 Ryder Systems, Inc. ............ 198,844
------------
TRANSPORTATION -- RAILROAD -- 0.5%
12,800 Burlington Northern Santa Fe
Corp. .......................... 1,256,800
17,908 CSX Corp. ...................... 814,814
30,900 Norfolk Southern Corp. ......... 921,206
20,300 Union Pacific Corp. ............ 895,738
------------
3,888,558
------------
UTILITIES -- ELECTRIC POWER -- 2.1%
11,300 Ameren Corp. ................... 449,175
15,600 American Electric Power Co. .... 707,850
12,100 Baltimore Gas & Electric Co. ... 375,856
12,300 Carolina Power & Light Co. *.... 533,513
17,400 Central & South West Corp. ..... 467,625
12,935 CINergy Corp. .................. 452,725
19,300 Consolidated Edison, Inc. ...... 889,006
11,900 Detroit Edison Co. ............. 480,463
15,850 Dominion Resources, Inc. ....... 645,888
29,506 Duke Power Co. *................ 1,748,230
31,300 Edison International............ 925,305
20,000 Entergy Corp. .................. 575,000
18,900 First Energy Corp. ............. 581,175
14,900 Florida Power & Light, Inc. .... 938,699
10,400 General Public Utilities Corp.
*............................... 393,250
23,144 Houston Industries, Inc. ....... 714,571
11,800 Niagara Mohawk Power Corp. *.... 176,263
12,200 Northern States Power Co. ...... 349,225
24,300 PacifiCorp. .................... 549,788
18,300 Peco Energy Corp. .............. 534,131
13,600 PP&L Resources, Inc. ........... 308,550
56,600 Southern Co. ................... 1,567,112
20,170 Texas Utilities Co. ............ 839,576
17,800 Unicom Corp. ................... 624,113
------------
15,827,089
------------
</TABLE>
Continued
70
<PAGE> 89
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- ELECTRIC POWER (CONTINUED)
UTILITIES -- GAS DISTRIBUTION -- 0.2%
7,800 Consolidated Natural Gas Co. *.. $ 459,224
1,700 Eastern Enterprises............. 72,888
4,000 Nicor, Inc. .................... 160,500
2,500 ONEOK, Inc. .................... 99,688
2,900 People's Energy Corp. .......... 112,013
10,226 Sempra Energy *................. 283,767
------------
1,188,080
------------
UTILITIES -- TELEPHONE -- 6.4%
15,100 Alltel Corp. ................... 702,150
89,800 Ameritech Corp. ................ 4,029,775
133,256 AT&T Corp. ..................... 7,612,248
127,440 Bell Atlantic Corp. ............ 5,814,450
81,300 BellSouth Corp. ................ 5,457,263
13,500 Frontier Corp. *................ 425,250
78,600 GTE Corp. ...................... 4,372,125
57,100 MCI Communications Corp. ....... 3,318,938
21,600 Nextel Communications, Inc. --
Class A *....................... 537,300
150,418 SBC Communications, Inc. ....... 6,016,719
35,300 Sprint Corp. ................... 2,488,650
40,960 US West, Inc. .................. 1,925,120
83,100 Worldcom, Inc. *................ 4,025,156
------------
46,725,144
------------
TOTAL COMMON STOCKS............. 732,237,509
------------
(Cost $445,894,497)
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
INVESTMENT COMPANIES -- 1.2%
4,553,156 Dreyfus Cash Management Money
Market Fund..................... $ 4,553,156
4,594,644 Federated Prime Value
Obligations Money Market Fund... 4,594,644
------------
TOTAL INVESTMENT COMPANIES...... 9,147,800
------------
(Cost $9,147,800)
TOTAL INVESTMENTS -- 99.9%.................. 741,385,309
(Cost $455,042,297)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%....................... 652,046
------------
TOTAL NET ASSETS -- 100.0%.................. $742,037,355
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $297,256,997
Unrealized depreciation............... (10,913,985)
------------
Net unrealized appreciation........... $286,343,012
============
</TABLE>
(b) Security has been deposited as initial margin on open future contracts.
* Non-income producing security.
ADR American Depositary Receipt
At June 30, 1998, the Fund's open future contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------------------- ----------------- ---------- ----------
<S> <C> <C> <C>
32 Standard & Poor's $8,848,570 $9,144,000
500, 9/17/98
</TABLE>
See Notes to Financial Statements.
71
<PAGE> 90
SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS -- 61.8%
AEROSPACE -- 4.5%
$ 6,000,000 Boeing Capital Corp., 6.83%,
05/21/01....................... $ 6,092,040
------------
AUTOMOTIVE PARTS -- REPLACEMENT -- 3.7%
5,000,000 Ford Motor Credit Co., 6.13%,
04/28/03....................... 5,000,350
------------
BANKING -- 7.4%
5,000,000 ABN Amro Bank, 6.63%,
10/31/01....................... 5,094,790
5,000,000 Bankers Trust Corp., 5.85%,
5/11/00........................ 4,995,100
------------
10,089,890
------------
BROKERS -- 7.3%
6,000,000 Morgan Stanley Group, Inc.,
6.50%, 3/30/01................. 6,092,100
3,750,000 Salomon, Inc., 6.50%, 3/1/00... 3,778,500
------------
9,870,600
------------
FINANCE -- 22.6%
5,000,000 Associates Corp. N.A., 8.19%,
11/10/99....................... 5,160,150
5,000,000 Bear Stearns Co., Inc., 6.50%,
7/5/00......................... 5,045,100
5,000,000 Household International, 7.28%,
7/22/99........................ 5,074,500
5,000,000 MCN Investment Corp., 6.89%,
1/16/02........................ 5,143,400
5,000,000 Merrill Lynch & Co., Inc.,
6.64%, 09/19/02................ 5,109,400
5,000,000 Norwest Financial, Inc., 7.88%,
2/15/02........................ 5,300,300
------------
30,832,850
------------
INDUSTRIAL GOODS & SERVICES -- 8.8%
4,375,000 Enron Corp., 6.45%, 11/15/01... 4,406,894
3,500,000 Pepsico, Inc., 6.25%, 9/1/99... 3,515,610
4,000,000 SuperValu, Inc., 7.25%,
7/15/99........................ 4,041,960
------------
11,964,464
------------
PHARMACEUTICALS -- 3.8%
5,000,000 American Home Products Corp.,
7.70%, 2/15/00................. 5,139,000
------------
UTILITIES -- 3.7%
5,000,000 Georgia Power Co., First
Mortgage, 6.13%, 9/1/99........ 5,011,750
------------
TOTAL CORPORATE NOTES & BONDS.. 84,000,944
------------
(Cost $83,433,308)
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.4%
$ 5,000,000 Federal Home Loan Bank, 5.81%,
11/4/99........................ $ 5,009,350
5,000,000 Federal National Mortgage
Assoc., 6.03%, 7/2/99.......... 5,021,850
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 10,031,200
------------
(Cost $9,993,758)
U.S. GOVERNMENT OBLIGATIONS -- 21.1%
U.S. TREASURY NOTES -- 21.1%
2,000,000 5.00%, 02/15/99................ 1,994,060
20,000,000 7.50%, 10/31/99................ 20,496,799
2,250,000 6.00%, 8/15/00................. 2,271,443
3,750,000 6.63%, 7/31/01................. 3,863,663
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 28,625,965
------------
(Cost $28,342,265)
INVESTMENT COMPANIES -- 8.1%
4,966,973 Dreyfus Cash Management Money
Market Fund.................... 4,966,973
6,091,612 Federated Prime Value
Obligations Money Market Fund.. 6,091,612
------------
TOTAL INVESTMENT COMPANIES.................. 11,058,585
------------
(Cost $11,058,585)
TOTAL INVESTMENTS -- 98.4%.................. 133,716,693
------------
(Cost $132,827,916)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%.. 2,158,254
------------
TOTAL NET ASSETS -- 100.0%.................. $135,874,947
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 1,114,076
Unrealized depreciation............... (225,299)
------------
Net unrealized appreciation........... $ 888,777
============
</TABLE>
See Notes to Financial Statements.
72
<PAGE> 91
INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS -- 27.9%
BANKING -- 9.5%
$6,000,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. $ 6,599,160
10,000,000 Bankers Trust Corp., 5.85%,
5/11/00........................ 9,990,200
10,000,000 Chase Manhattan Corp., 6.75%,
9/15/06........................ 10,391,500
8,000,000 Chase Manhattan Corp.-New,
6.50%, 1/15/09................. 8,136,160
8,000,000 Dresdner Bank New York, 7.25%,
9/15/15........................ 8,467,040
5,000,000 J.P. Morgan & Co., 7.63%,
9/15/04........................ 5,348,800
5,000,000 MBNA American Bank NA, 7.25%,
9/15/02........................ 5,163,650
5,000,000 MBNA Master Credit Card Trust,
5.77%, 8/15/05................. 5,001,550
5,000,000 NCNB Corp., 9.38%, 9/15/09..... 6,176,650
7,000,000 Societe Generale New York,
9.88%, 7/15/03................. 8,061,060
------------
73,335,770
------------
BROKERS -- 0.6%
5,000,000 Salomon, Inc., 5.64%*, 2/15/99. 5,017,000
------------
FINANCE -- 10.2%
5,000,000 Associates Corp., N.A.,
6.52%,10/11/02................. 5,113,850
5,500,000 Bear Stearns Co., 6.75%,
4/15/03........................ 5,620,505
5,000,000 First Union Institutional
Capital I, 8.04%, 12/1/26,
Callable 12/1/06 @ 104.02...... 5,372,650
10,000,000 Ford Capital Guaranteed Notes,
9.88%, 5/15/02................. 11,237,000
8,400,000 Ford Motor Credit Corp., 9.03%,
12/30/09, Callable 12/30/04 @
100............................ 9,627,912
5,000,000 General Electric Capital Corp.,
6.66%*, 5/1/18, Putable 5/1/00
@ 100.......................... 5,063,650
5,000,000 Household Finance Corp., 8.00%,
8/1/04......................... 5,427,350
8,000,000 HSBC America Capital II, 8.38%,
5/15/27, Callable 5/15/07 @
104.19......................... 8,841,040
5,000,000 Lehman Brothers, Inc., 7.38%,
1/15/07........................ 5,268,000
7,000,000 Safeco, 6.88%, 7/15/07 (b)..... 7,314,720
5,000,000 Salomon Smith Barney, 7.13%,
10/1/06........................ 5,279,550
5,100,000 Travelers Group Inc, 6.88%,
12/15/03....................... 5,211,996
------------
79,378,223
------------
INDUSTRIAL GOODS & SERVICES -- 4.1%
4,000,000 Boston Scientific, 6.63%,
3/15/05........................ 4,042,320
11,500,000 Champion International Corp.,
7.70%, 12/15/99................ 11,758,175
6,000,000 ConAgra, Inc., 6.70%, 8/1/27... 6,190,620
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS (CONTINUED)
INDUSTRIAL GOODS & SERVICES (CONTINUED)
$10,000,000 SuperValue, Inc., 7.25%,
7/15/99........................ $ 10,104,900
------------
32,096,015
------------
INSURANCE -- 0.6%
5,000,000 American Annuity Group, 6.88%,
6/1/08......................... 5,015,400
------------
TELECOMMUNICATIONS -- 0.9%
6,000,000 Bell Canada, 7.75%, 4/1/06..... 6,603,120
------------
TRANSPORTATION -- AIRLINE -- 1.3%
10,000,000 Boeing Capital Corp., 6.30%,
10/20/99....................... 10,024,800
------------
UTILITIES -- 0.7%
5,000,000 Western Resorces, Inc., 6.88%,
8/1/04......................... 5,110,950
------------
TOTAL CORPORATE NOTES & BONDS.. 216,581,278
------------
(Cost $210,496,007)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.7%
FEDERAL FARM CREDIT BANK -- 1.3%
10,000,000 6.30%, 9/23/04................. 10,278,100
------------
FEDERAL HOME LOAN BANK -- 0.7%
5,000,000 6.49%, 1/8/04.................. 5,182,800
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 1.9%
10,410,000 8.12%, 1/31/05................. 11,722,597
3,000,000 7.22%, 6/14/06................. 3,262,500
------------
14,985,097
------------
FANNIE MAE -- 5.1%
7,950,000 7.35%, 3/28/05................. 8,624,478
10,000,000 5.75%, 6/15/05................. 9,989,100
9,100,000 6.00%, 11/15/22................ 9,074,338
12,000,000 6.25%, 11/18/23................ 12,112,440
------------
39,800,356
------------
TENNESSEE VALLEY AUTHORITY: -- 0.7%
5,000,000 6.25%, 12/15/17................ 5,159,350
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 75,405,703
------------
(Cost $73,124,031)
U.S. GOVERNMENT OBLIGATIONS -- 58.0%
U.S. TREASURY BONDS -- 2.9%
19,500,000 9.13%, 5/15/09................. 22,839,375
------------
U.S. TREASURY NOTES -- 51.9%
5,800,000 5.13%, 11/30/98................ 5,795,476
5,000,000 8.88%, 2/15/99................. 5,101,550
33,000,000 6.25%, 3/31/99................. 33,190,740
62,000,000 6.38%, 5/15/99................. 62,445,780
28,250,000 7.75%, 1/31/00................. 29,185,640
23,050,000 6.88%, 3/31/00................. 23,561,480
24,000,000 8.75%, 8/15/00................. 25,530,000
33,500,000 6.25%, 8/31/00................. 33,992,115
56,000,000 6.50%, 5/31/01................. 57,434,720
13,300,000 6.25%, 10/31/01................ 13,576,374
</TABLE>
Continued
73
<PAGE> 92
INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (CONTINUED)
U.S. TREASURY NOTES (CONTINUED)
$77,000,000 7.50%, 11/15/01................ $ 81,559,940
21,700,000 7.50%, 2/15/05................. 24,019,079
6,000,000 7.00%, 7/15/06................. 6,552,180
------------
401,945,074
------------
U.S. TREASURY STRIPS -- 3.2%
36,500,000 5/15/05........................ 25,055,425
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 449,839,874
(Cost $448,462,634) ------------
YANKEE CERTIFICATES OF DEPOSIT -- 1.3%
10,000,000 Potash Corp. Saskatchewan,
7.13%, 6/15/07................. 10,401,600
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT........................ 10,401,600
(Cost $10,026,500) ------------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
INVESTMENT COMPANIES -- 1.6%
5,816,062 Dreyfus Cash Management Money
Market Fund.................... $ 5,816,062
6,705,230 Federated Prime Value
Obligations Money Market Fund.. 6,705,230
------------
TOTAL INVESTMENT COMPANIES..... 12,521,292
(Cost $12,521,292) ------------
TOTAL INVESTMENTS -- $98.6%................. 764,749,746
(Cost $754,630,464) (a)
OTHER ASSETS IN EXCESS OF LIABILITIES 1.4%.. 10,671,311
------------
TOTAL NET ASSETS -- 100.0%.................. $775,421,057
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................ $11,964,632
Unrealized depreciation................ (1,845,350)
-----------
Net unrealized appreciation............ $10,119,282
===========
</TABLE>
(b) 144a security which is restricted as to resale to institutional investors.
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
See Notes to Financial Statements.
74
<PAGE> 93
INCOME FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS -- 38.8%
AUTOMOTIVE -- 1.5%
$4,000,000 Ford Motor Co., 6.63%,
2/15/28........................ $ 4,003,320
------------
BANKING -- 14.0%
2,700,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. 2,969,622
2,000,000 Bank of New York, 8.50%,
12/15/04....................... 2,222,120
2,000,000 BankAmerica Corp., 7.20%,
4/15/06........................ 2,113,020
2,000,000 Chase Manhattan Corp., 7.13%,
3/1/05......................... 2,088,500
3,000,000 Dresdner Bank New York, 7.25%,
9/15/15........................ 3,175,140
2,000,000 Fleet/Norstar Group, 8.63%,
1/15/07........................ 2,299,600
2,000,000 Midland Bank PLC, 7.63%,
6/15/06........................ 2,138,480
3,000,000 National City Bank of
Cleveland, 7.25%, 7/15/10...... 3,276,870
5,000,000 NCNB Corp., 10.20%, 7/15/15.... 6,871,499
2,250,000 PNC Bank N.A., 7.88%,
4/15/05........................ 2,449,868
2,000,000 Republic New York Corp., 7.00%,
3/22/11........................ 2,109,420
2,000,000 Southtrust Bank NA, 6.57%,
12/15/27....................... 2,059,220
2,000,000 Swiss Bank Corp.-New York,
7.38%, 7/15/15................. 2,186,640
------------
35,959,999
------------
BROKERS -- 0.8%
2,000,000 Salomon, Inc., 6.75%,
2/15/03........................ 2,040,140
------------
FINANCE -- 8.1%
3,500,000 British Gas Finance, 6.63%,
06/01/18....................... 3,510,150
2,000,000 Discover Credit, 9.26%,
03/20/12....................... 2,548,720
2,000,000 Ford Motor Credit Corp., 9.03%,
12/30/09, Callable 12/30/04 @
100............................ 2,292,360
3,500,000 Great Western Financial Trust
II, 8.21%, 2/1/27, Callable
2/1/07 @ 104.1................. 3,822,980
2,000,000 HSBC America Capital II, 8.38%,
5/15/27, Callable 5/15/07 @
104.19......................... 2,210,260
2,000,000 Lehman Brothers Holdings, Inc.,
8.75%, 3/15/05................. 2,258,600
4,000,000 St. Paul Cos, Inc., 7.25%,
8/9/07......................... 4,347,320
------------
20,990,390
------------
GAS TRANSMISSION -- 1.0%
2,500,000 Enserch Corp., 7.13%,
6/15/05........................ 2,601,000
------------
INDUSTRIAL GOODS & SERVICES -- 6.0%
2,000,000 ConAgra, Inc., 6.70%, 8/1/27... 2,063,540
5,000,000 Cyprus Amax, 7.38%, 5/15/07.... 5,074,150
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS (CONTINUED)
INDUSTRIAL GOODS & SERVICES (CONTINUED)
$3,000,000 Engelhard Corp., 7.38%,
8/1/06......................... $ 3,198,660
2,000,000 General Motors Corp., 9.13%,
7/15/01........................ 2,158,200
2,950,000 Raytheon Co., 6.75%, 8/15/07... 3,025,019
------------
15,519,569
------------
INSURANCE -- 0.9%
2,000,000 Travelers Capital III, 7.63%,
12/1/36........................ 2,231,980
------------
OIL & GAS -- 2.4%
5,000,000 Phillips Petroleum, 9.38%,
2/15/11........................ 6,276,150
------------
RETAIL -- 1.9%
4,818,254 Fred Meyer, Inc., Lease Trust,
8.50%, 7/15/17................. 5,039,894
------------
TELECOMMUNICATIONS -- 1.4%
3,500,000 GTE Florida, Inc., 6.86%,
2/1/28......................... 3,670,100
------------
UTILITIES -- 0.8%
2,000,000 Pacific Gas & Electric, 6.25%,
3/1/04......................... 2,017,220
------------
TOTAL CORPORATE NOTES & BONDS.. 100,349,762
(Cost $95,019,530) ------------
FOREIGN GOVERNMENT AGENCIES -- 0.4%
1,000,000 Hydro-Quebec, 9.41%, 3/23/00... 1,056,300
------------
TOTAL FOREIGN GOVERNMENT
AGENCIES....................... 1,056,300
(Cost $1,059,483) ------------
MUNICIPAL BOND -- TAXABLE -- 0.8%
2,000,000 San Bernardino County,
Financing Authority Pension
Obligation Revenue, 6.99%,
8/1/10 (Insured by MBIA)....... 2,125,000
------------
TOTAL MUNICIPAL BOND --
TAXABLE........................ 2,125,000
(Cost $2,030,920) ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.5%
FEDERAL HOME LOAN MORTGAGE CORP. -- 1.1%
2,500,000 7.22%, 6/14/06................. 2,718,750
------------
FANNIE MAE -- 3.4%
5,000,000 7.40%, 7/1/04.................. 5,407,050
3,500,000 6.25%, 11/18/23................ 3,532,795
------------
8,939,845
------------
TENNESSEE VALLEY AUTHORITY -- 2.0%
5,000,000 6.25%, 12/15/17................ 5,159,350
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 16,817,945
(Cost $15,956,484) ------------
</TABLE>
Continued
75
<PAGE> 94
INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 46.7%
$29,500,000 U.S. Treasury Bond, 11.88%,
11/15/03....................... $ 38,018,125
9,500,000 U.S. Treasury Bond, 10.75%,
8/15/05........................ 12,360,355
6,230,000 U.S. Treasury Bond, 7.25%,
5/15/16........................ 7,298,819
11,000,000 U.S. Treasury Bond, 8.75%,
5/15/20........................ 15,104,320
12,200,000 U.S. Treasury Note, 6.75%,
6/30/99........................ 12,346,766
30,000,000 U.S. Treasury Note, 8.00%,
5/15/01........................ 31,940,700
7,300,000 U.S. Treasury Note, Zero
Coupon, 5/15/10................ 3,750,083
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 120,819,168
------------
(Cost $119,869,343)
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
- ------ ----------- ------
<C> <S> <C>
INVESTMENT COMPANIES -- 5.3%
6,135,328 Dreyfus Cash Management Money
Market Fund.................... $ 6,135,328
7,598,073 Federated Prime Value
Obligations Money Market Fund.. 7,598,073
------------
TOTAL INVESTMENT COMPANIES..... 13,733,401
(Cost $13,733,401) ------------
TOTAL INVESTMENTS -- $98.5%................. 254,901,575
(Cost $247,669,161) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.5%....................... 3,928,204
------------
TOTAL NET ASSETS -- 100.0%.................. $258,829,779
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................ $7,433,591
Unrealized depreciation................ (201,177)
----------
Net unrealized appreciation............ $7,232,414
==========
</TABLE>
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
76
<PAGE> 95
LIMITED TERM TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 97.6%
ALASKA -- 1.4%
$ 530,000 Alaska State Housing Finance
Corp., 4.60%, 12/1/00 (Insured
by MBIA)........................ $ 537,950
------------
ARIZONA -- 2.9%
1,000,000 Arizona State University
Revenue, 7.10%, 7/1/16,
Prerefunded 7/1/01 @ 102........ 1,103,750
------------
ARKANSAS -- 2.7%
1,000,000 Arkansas State Economic
Development, 5.00%, 2/01/03,
(Insured by AMBAC).............. 1,027,500
------------
CALIFORNIA -- 3.2%
1,000,000 University of California
Revenue, Multiple Purpose
Projects, Series B, 9.00%,
9/1/03 (Insured by MBIA)........ 1,216,250
------------
COLORADO -- 1.3%
500,000 Colorado Housing Finance
Authority, 4.50%, 11/1/05....... 498,125
------------
CONNECTICUT -- 2.8%
1,000,000 Connecticut State, GO, Series C,
5.38%, 8/15/02.................. 1,048,750
------------
DISTRICT OF COLUMBIA -- 2.7%
1,000,000 District of Columbia, GO, 5.10%,
12/1/99 (Insured by MBIA)....... 1,016,250
------------
ILLINOIS -- 7.7%
1,000,000 Chicago Metropolitan Water
Reclamation District, Working
Cash Fund, 5.90%, 12/1/04....... 1,086,250
1,000,000 Illinois Educational Facilities
Authority Revenue, Loyola
University, Series A, 6.30%,
7/1/98 (Insured by MBIA)........ 1,000,000
745,000 University of Illinois Revenue,
Health Service Facility, 4.90%,
10/1/01 (Insured by AMBAC)...... 762,694
------------
2,848,944
------------
INDIANA -- 3.0%
1,100,000 Greenwood Indiana School
Building Corp., 4.75%,
7/15/07......................... 1,122,000
------------
KENTUCKY -- 2.7%
1,000,000 Kentucky State Property &
Buildings Commission, Project
No. 53, 5.80%, 10/1/98.......... 1,005,140
------------
LOUISIANA -- 2.7%
1,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A, 7.00%,
11/15/98 (Insured by FGIC)...... 1,011,610
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN -- 19.1%
$1,235,000 Detroit, GO, 8.00%, 4/1/11,
Prerefunded 4/1/01 @ 102........ $ 1,383,200
1,050,000 Flint Michigan Hospital Building
Authority Revenue, 5.00%,
7/1/03.......................... 1,063,125
1,000,000 Michigan State Hospital Finance
Authority Revenue, Detroit
Medical Group, Series A, 5.00%,
8/15/06, (Insured by AMBAC)..... 1,030,000
1,600,000 Michigan State Hospital Finance
Authority Revenue, Sisters of
Mercy Health Corp. Bond 1993,
Series F, 4.60%, 8/15/02
(Insured by MBIA)............... 1,620,000
1,000,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, 5.15%, 10/1/00
(Insured by MBIA)............... 1,021,250
1,000,000 Michigan Strategic Fund, Dow
Chemical Project, 3.80%*,
2/1/09.......................... 1,000,000
------------
7,117,575
------------
NEVADA -- 2.9%
1,090,000 Las Vegas, GO, 6.75%, 8/1/98
(Insured by MBIA)............... 1,092,267
------------
NEW JERSEY -- 3.0%
1,000,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Series A 1994,
7.00%, 7/1/03 (Insured by
MBIA)........................... 1,125,000
------------
NEW MEXICO -- 2.7%
1,000,000 Albuquerque New Mexico Gross
Receipts Tax, 5.375%, 7/1/01,
Callable 7/1/99 @ 100 (Insured
by MBIA)........................ 1,013,930
------------
NEW YORK -- 2.7%
1,000,000 New York State Dormitory
Authority Revenue, State
University Educational
Facilities, 4.70%, 5/15/99...... 1,007,560
------------
OHIO -- 4.3%
500,000 Cleveland Airport System
Revenue, 5.50%, 1/1/04, (Insured
by FSA)......................... 528,125
565,000 Cleveland-Cuyahoga County Port
Authority, Rock & Roll Hall of
Fame, Refunding, Subordinated
Bonds, 4.30%, 12/1/98........... 566,396
500,000 Cleveland-Cuyahoga County Port
Authority, Rock & Roll Hall of
Fame, Refunding, Subordinated
Bonds, 4.90%, 12/1/00........... 507,500
------------
1,602,021
------------
</TABLE>
Continued
77
<PAGE> 96
LIMITED TERM TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
OKLAHOMA -- 3.1%
$1,115,000 Tulsa Industrial Authority
Revenue, University of Tulsa,
Series A, 5.50%, 10/1/00
(Insured by MBIA)............... $ 1,152,631
------------
PENNSYLVANIA -- 5.4%
1,000,000 Allegheny County Airport
Revenue, Pittsburgh
International Airport, 5.00%,
1/1/99 (Insured by MBIA)........ 1,005,090
1,000,000 Pennsylvania State, First
Series, GO, 5.00%, 5/1/99....... 1,011,470
------------
2,016,560
------------
TEXAS -- 5.6%
1,000,000 Houston Independent School
District, GO, Public Property
Finance Contractual Obligation,
6.25%, 7/15/99.................. 1,024,180
1,000,000 Pasadena Independent School
District, GO, 6.75%, 8/15/05,
Prerefunded 8/15/01 @ 100,
(Insured by FGIC)............... 1,077,500
------------
2,101,680
------------
UTAH -- 3.5%
1,310,000 Salt Lake City Redevelopment
Agency, Neighborhood
Redevelopment Tax, Inc.,
Series A, (AMT), 5.25%,
10/1/99......................... 1,329,650
------------
VIRGINIA -- 4.1%
1,500,000 Norfolk, GO, 5.13%, 6/1/01...... 1,541,250
------------
WISCONSIN -- 2.7%
1,000,000 Green Bay, GO, Series A, 5.10%,
4/1/00.......................... 1,020,000
------------
WYOMING -- 5.4%
1,000,000 Campbell County School District,
No. 001 Gillette, GO, 5.15%,
6/1/02.......................... 1,038,750
1,000,000 Wyoming Community Development,
(AMT), 4.45%, 6/1/99, Callable
9/1/98 @ 100, Mandatory Put
6/1/99 @ 100.................... 1,002,680
------------
2,041,430
------------
TOTAL MUNICIPAL BONDS........... 36,597,823
------------
(Cost $35,944,355)
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
INVESTMENT COMPANIES -- 0.9%
$ 350,610 Dreyfus Tax Exempt Money Market
Fund............................ $ 350,610
------------
TOTAL INVESTMENT COMPANIES...... 350,610
------------
(Cost $350,610)
TOTAL INVESTMENTS -- 98.5%.................. 36,948,432
(Cost $36,294,965) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.5%....................... 549,143
------------
TOTAL NET ASSETS -- 100.0%.................. $ 37,497,575
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 660,390
Unrealized depreciation............... (6,923)
------------
Net unrealized appreciation........... $ 653,467
============
</TABLE>
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
GO General Obligation
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
78
<PAGE> 97
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 95.6%
ALASKA -- 3.1%
$1,520,000 Alaska Municipal Bond Bank
Authority, Series A, GO, 4.75%,
10/1/99......................... $ 1,533,300
1,000,000 Anchorage Electric Utility,
Revenue Bond, Senior Lien,
5.50%, 12/1/03, Callable 6/1/03
@ 102 (Insured by MBIA)......... 1,058,750
1,000,000 Anchorage, GO, 6.30%, 7/1/99
(Insured by MBIA)............... 1,025,430
5,000,000 North Slope Boro, Series B, GO,
7.50%, 6/30/01 (Insured by
FSA)............................ 5,462,500
------------
9,079,980
------------
ARIZONA -- 4.2%
1,750,000 Phoenix, GO, Series A, 4.90%,
7/1/02.......................... 1,800,313
3,065,000 Phoenix, GO, Series A, 6.00%,
7/1/10.......................... 3,474,944
1,500,000 Pima County Unified School
District No. 1 Tucson, Series B,
GO, ETM, 6.80%, 7/1/00.......... 1,580,625
5,000,000 Salt River Project Agricultural
Improvement & Power District
Electric System, Series A,
5.63%, 1/1/06................... 5,399,999
------------
12,255,881
------------
CALIFORNIA -- 6.1%
3,400,000 California State, GO, 6.60%,
2/1/10.......................... 4,016,250
3,000,000 Orange County, Series A, 6.00%,
6/1/10 (Insured by MBIA)........ 3,382,500
2,000,000 Riverside County Transportation
Commission, Sales Tax Revenue,
Series A, 5.60%, 6/1/05 (Insured
by AMBAC)....................... 2,152,500
2,000,000 Turlock Irrigation District
Revenue, Series A, 6.00%, 1/1/06
(Insured by MBIA)............... 2,207,500
4,850,000 University of California
Revenue, Multiple Purpose
Projects, Series B, 9.00%,
9/1/03 (Insured by MBIA)........ 5,898,813
------------
17,657,563
------------
COLORADO -- 2.7%
4,000,000 Arapahoe County, School District
No. 005, Cherry Creek, Series A,
GO, 5.25%, 12/15/02............. 4,180,000
1,400,000 Boulder Valley School District,
5.50%, 12/1/07 (Insured by
FGIC)........................... 1,517,250
1,000,000 Colorado Springs Utility
Revenue, Series A, 6.50%,
11/15/03, Callable 11/15/01 @
102............................. 1,090,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
COLORADO (CONTINUED)
$1,000,000 E-470 Public Highway Authority
Revenue, Series C, 6.00%, 9/1/07
(Insured by MBIA)............... $ 1,113,750
------------
7,901,000
------------
CONNECTICUT -- 1.5%
4,000,000 Connecticut State, Series A,
6.00%, 5/15/02.................. 4,270,000
------------
FLORIDA -- 2.5%
1,000,000 Broward County School District,
GO, 5.20%, 2/15/03.............. 1,042,500
1,625,000 Florida State Board Of
Education, Series B, 6.50%,
06/01/06........................ 1,852,500
2,000,000 Lakeland Electric & Water
Revenue, 5.90%, 10/1/07......... 2,212,500
1,000,000 Tampa Guaranteed Entitlement
Revenue, 6.60%, 10/1/00 (Insured
by AMBAC)....................... 1,057,500
1,000,000 Tampa Utilities, Tax & Special
Revenue, 6.30%, 10/1/00 (Insured
by AMBAC)....................... 1,051,250
------------
7,216,250
------------
GEORGIA -- 2.9%
2,670,000 Atlanta Airport Facilities
Revenue, Series B, (AMT), 5.50%,
1/1/03 (Insured by AMBAC)....... 2,790,150
1,000,000 Georgia State Tollway Authority
Revenue, Georgia 400 Project,
6.25%, 7/1/00................... 1,045,000
4,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08................... 4,485,000
------------
8,320,150
------------
HAWAII -- 1.2%
1,025,000 Honolulu City & County,
Series A, GO, 5.60%, 1/1/05..... 1,092,906
1,000,000 Honolulu City & County,
Series D, GO, ETM, 6.50%,
12/1/00......................... 1,058,750
1,150,000 Maui County, Series A, GO,
6.80%, 12/1/03, Prerefunded
12/1/00 @ 101 (Insured by
AMBAC).......................... 1,236,250
------------
3,387,906
------------
ILLINOIS -- 6.0%
2,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 6.80%, 1/1/03,
Prerefunded 1/1/00 @ 102........ 2,117,500
3,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 5.50%,
12/1/10......................... 3,236,250
4,270,000 Du Page & Will Counties,
Community School District No.
204, GO, 4.95%, 12/30/01
(Insured by FGIC)............... 4,382,087
</TABLE>
Continued
79
<PAGE> 98
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
$4,000,000 Illinois Development Finance
Authority, Pollution Control
Revenue, Commonwealth Edison,
5.30%, 1/15/04 (Insured by
MBIA)........................... $ 4,180,000
3,135,000 Northwest Suburban Municipal
Joint Action, Water Agency,
Water Supply System, Series A,
5.25%, 5/1/04 (Insured by
MBIA)........................... 3,279,994
------------
17,195,831
------------
INDIANA -- 3.6%
1,580,000 Elberfeld JH Castle School
Building Corp., 4.50%, 7/5/04,
(Insured by MBIA)............... 1,593,825
2,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 5.88%, 1/1/10 (Insured by
MBIA)........................... 2,205,000
3,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 6.00%, 1/1/13 (Insured by
MBIA)........................... 3,348,750
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A, 5.75%, 6/1/12 (Insured
by AMBAC)....................... 1,092,500
1,000,000 Purdue University Dormitory
System Revenue, Series A, 6.40%,
7/1/99 (Insured by AMBAC)....... 1,025,210
1,000,000 Purdue University Student Fee
Revenue, Series D, 6.50%,
7/1/03, Callable 1/1/00 @ 103... 1,065,000
------------
10,330,285
------------
KANSAS -- 1.1%
3,000,000 Kansas State Department of
Transportation Highway Revenue,
5.50%, 9/1/11................... 3,240,000
------------
LOUISIANA -- 2.6%
4,000,000 Louisiana State, Series A, GO,
5.30%, 8/1/04 (Insured by
MBIA)........................... 4,205,000
3,000,000 Louisiana State, Series A, GO,
6.00%, 4/15/07 (Insured by FGIC) 3,322,500
------------
7,527,500
------------
MASSACHUSETTS -- 3.1%
5,000,000 Massachusetts Bay Transportation
Authority, Series A, 5.00%,
3/1/02.......................... 5,137,500
3,750,000 Massachusetts State, Special
Obligation Revenue, Series A,
5.25%, 6/1/08 (Insured by
AMBAC).......................... 3,942,188
------------
9,079,688
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN -- 18.6%
$2,215,000 Battle Creek Downtown
Development Authority, 6.00%,
5/1/07 (Insured by MBIA)........ $ 2,455,881
4,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 7.30%,
5/1/10, Prerefunded 5/1/04 @
102............................. 4,685,000
2,100,000 Caledonia Community Schools, GO,
6.70%, 5/1/22, Prerefunded
5/1/02 @ 102 (Insured by
AMBAC).......................... 2,328,375
3,000,000 Detroit Sewage Disposal Revenue,
Series B, 6.00%, 7/1/09 (Insured
by MBIA)........................ 3,348,750
6,000,000 Detroit Water Supply System,
Permanent Linked Bonds, 5.25%,
7/1/13, Callable 7/1/04 @ 104
(Insured by FGIC)............... 6,134,999
1,000,000 Detroit Water Supply System,
Second Lien, Series A, 5.20%,
7/1/08 (Insured by MBIA)........ 1,048,750
3,000,000 Detroit, GO, Distributable State
Aid, 5.70%, 5/1/01 (Insured by
AMBAC).......................... 3,123,750
2,840,000 Grand Ledge Public Schools
District, GO, 5.35%, 5/1/10
(Insured by MBIA)............... 3,024,600
1,700,000 Greater Detroit Resource
Recovery Authority, Series A,
5.50%, 12/13/04 (Insured by
AMBAC).......................... 1,804,125
2,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 5.35%, 5/15/06
(Insured by MBIA)............... 2,105,000
2,000,000 Michigan State Comprehensive
Transportation, Series B, 5.50%,
5/15/02......................... 2,097,500
1,000,000 Michigan State Hospital Finance
Authority Revenue, Detroit
Medical Group, Series A, 5.00%,
8/15/06, (Insured by AMBAC)..... 1,030,000
1,450,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 5.00%, 5/15/06
(Insured by AMBAC).............. 1,493,500
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue, 5.80%, 11/1/05
(Insured by MBIA)............... 1,086,250
1,000,000 Michigan State Strategic Fund,
Detroit Edison, 4.10%*, 7/1/98
(LOC Barclays) 1,000,000
</TABLE>
Continued
80
<PAGE> 99
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,300,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Ford
Motor Co. Project, Series A,
7.10%, 2/1/06................... $ 2,682,375
2,500,000 Michigan State Trunk Line,
Series A, 5.50%, 10/1/02........ 2,634,375
3,500,000 Michigan State Underground
Storage Tank Financial Assurance
Authority, Series I, 6.00%,
5/1/05 (Insured by AMBAC)....... 3,828,125
2,000,000 Northville Public Schools,
Series A, GO, 7.00%, 5/1/08..... 2,175,000
1,575,000 South Redford School District,
5.25%, 5/1/09 (Insured by
FGIC)........................... 1,647,844
2,900,000 University of Michigan Hospital
Revenue, Series A, 3.80%*,
12/1/27......................... 2,900,000
1,000,000 Western Michigan University
Revenue, GO, 5.40%, 11/15/01
(Insured by FGIC)............... 1,041,250
------------
53,675,449
------------
MINNESOTA -- 0.4%
1,000,000 Minneapolis Community
Development Agency, Tax
Increment Revenue, 7.00%, 9/1/00
(Insured by MBIA)............... 1,062,500
------------
NEVADA -- 0.9%
2,500,000 Clark County School District,
Group 2, GO, 7.20%, 5/1/01,
Prerefunded 5/1/00 @ 102
(Insured by FGIC)............... 2,687,500
------------
NEW JERSEY -- 4.0%
6,000,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Senior Lien,
7.00%, 7/1/04 (Insured by
MBIA)........................... 6,840,000
1,375,000 New Jersey State, Series D, GO,
5.25%, 2/15/01.................. 1,417,969
3,000,000 Ocean County Utilities
Authority, Wastewater Revenue,
Refunding, GO, 6.00%, 1/1/07.... 3,333,750
------------
11,591,719
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
NEW YORK -- 2.1%
$1,130,000 Metropolitan Transportation
Authority, Series M, 5.50%,
7/1/08 (Insured by FGIC)........ $ 1,218,988
1,660,000 New York State Urban Development
Corp., Refunding, Syracuse
University Center, 5.50%,
1/1/15.......................... 1,759,600
3,000,000 Triborough Bridge & Tunnel
Authority, General Purpose,
Series Y, 5.50%, 1/1/17......... 3,165,000
------------
6,143,588
------------
NORTH CAROLINA -- 0.7%
2,000,000 North Carolina Municipal Power
Agency No. 1, Catawba Electric
Revenue, 5.90%, 1/1/03 2,117,500
------------
OHIO -- 0.8%
2,125,000 Columbus, Sewer Improvement, GO,
6.30%, 9/15/99.................. 2,191,406
------------
OKLAHOMA -- 2.1%
1,990,000 Oklahoma City, GO, 5.00%,
07/01/04........................ 2,064,625
3,500,000 Tulsa Industrial Authority,
University of Tulsa, Series A,
6.00%, 10/1/16 (Insured by
MBIA)........................... 3,950,625
------------
6,015,250
------------
OREGON -- 0.5%
1,400,000 Washington County School
District, 5.25%, 6/1/09......... 1,482,250
------------
PENNSYLVANIA -- 2.9%
2,000,000 Allegheny County Airport Revenue
(AMT), 5.00%, 1/1/02 (Insured by
MBIA)........................... 2,042,500
4,310,000 Chartiers Valley Joint School,
ETM, 6.15%, 3/1/07.............. 4,751,775
1,475,000 Pennsylvania State, Series A,
GO, 7.00%, 5/1/05, Prerefunded
5/1/00 @ 101.5.................. 1,574,563
------------
8,368,838
------------
PUERTO RICO -- 1.9%
3,055,000 Puerto Rico Commonwealth
Aquaduct & Sewer Authority,
6.00%, 7/1/06................... 3,360,500
2,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority,
Highway Revenue, Series X,
4.90%, 7/1/01................... 2,040,000
------------
5,400,500
------------
</TABLE>
Continued
81
<PAGE> 100
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
RHODE ISLAND -- 2.6%
$1,000,000 Providence, GO, 6.70%, 1/15/02,
Prerefunded 1/15/00 @ 102
(Insured by MBIA)............... $ 1,060,000
3,025,000 Rhode Island State, Series A,
GO, 5.50%, 8/1/04 (Insured by
MBIA)........................... 3,221,625
2,000,000 State Depositors Economic
Protection Corp., Series A,
Special Obligation, 6.15%,
8/1/99 (Insured by MBIA)........ 2,050,420
1,000,000 State Depositors Economic
Protection Corp., Series B,
Special Obligation, 5.20%,
8/1/03 (Insured by MBIA)........ 1,041,250
------------
7,373,295
------------
TENNESSEE -- 0.5%
1,230,000 Tennessee State, Series B, GO,
6.20%, 6/1/01................... 1,303,800
------------
TEXAS -- 8.8%
1,000,000 Austin Independent School
District, GO, 6.20%, 8/1/99
(Insured by PSFG)............... 1,025,300
2,245,000 Dallas Independent School
District, GO, 5.40%, 8/15/03
(Insured by PSFG)............... 2,360,056
1,500,000 Houston Water & Sewer System
Revenue, Junior Lien, Series C,
5.75%, 12/1/03 (Insured by
MBIA)........................... 1,608,750
1,000,000 Houston Water & Sewer System
Revenue, Prior Lien, Series A,
7.00%, 12/1/01 (Insured by
AMBAC).......................... 1,091,250
3,000,000 Lower Colorado River Authority,
4.90%, 1/1/07, Callable 1/1/06 @
102............................. 3,093,750
1,050,000 Round Rock Independent School
District, GO, 5.25%, 2/15/05
(Insured by PSFG)............... 1,101,188
2,800,000 Texas Municipal Power Agency,
5.60%, 9/1/01 (Insured by
MBIA)........................... 2,926,000
5,595,000 Texas State Public Finance
Authority, Series A, GO, 6.50%,
10/1/04......................... 6,245,418
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
$4,450,000 Texas State, Series A, GO,
5.70%, 10/1/03.................. $ 4,767,062
1,015,000 University of Texas, University
Revenue, Series A, 6.60%,
8/15/02, Callable 8/15/01 @
102............................. 1,107,619
------------
25,326,393
------------
WASHINGTON -- 6.5%
1,000,000 King County School District,
4.60%, 12/1/03 (Insured by
FGIC)........................... 1,027,500
3,095,000 Snohomish County School District
No. 002, 5.50%, 12/1/10 (Insured
by MBIA)........................ 3,365,813
2,695,000 Tacoma Electric System,
Refunding, 6.00%, 1/1/06
(Insured by AMBAC).............. 2,940,919
2,000,000 Washington State Public Power
Supply System, Nuclear Project
No. 1 Bond Revenue, Series C,
7.25%, 7/1/00 (Insured by
FGIC)........................... 2,125,000
8,000,000 Washington State, Series A, GO,
5.50%, 9/1/05, Callable 9/1/04 @
100............................. 8,479,999
850,000 Washington State, Series III-H,
Motor Vehicle Fuel Tax, 5.75%,
9/1/12.......................... 936,063
------------
18,875,294
------------
WEST VIRGINIA -- 0.4%
1,095,000 West Virginia School Building
Authority Revenue, Capital
Improvement, Series A, 6.70%,
7/1/00 (Insured by MBIA)........ 1,151,119
------------
WISCONSIN -- 1.3%
1,025,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.60%,
10/1/99......................... 1,059,594
1,500,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.70%,
10/1/00......................... 1,584,375
1,000,000 Wisconsin State Public Power,
Inc., Supply System, Series A,
7.00%, 7/1/01, Callable 7/1/00 @
102 (Insured by AMBAC).......... 1,072,500
------------
3,716,469
------------
TOTAL MUNICIPAL BONDS........... 275,944,904
------------
(Cost $260,750,070)
</TABLE>
Continued
82
<PAGE> 101
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
INVESTMENT COMPANIES -- $2.9%
8,505,182 Dreyfus Tax Exempt Money Market
Fund............................ $ 8,505,182
------------
TOTAL INVESTMENT COMPANIES...... 8,505,182
------------
(Cost $8,505,182)
TOTAL INVESTMENTS -- 98.5%.................. 284,450,086
(Cost $269,255,252)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.5% 4,299,785
------------
TOTAL NET ASSETS -- 100.0%.................. $288,749,871
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation $15,205,885
Unrealized depreciation (11,051)
-----------
Net unrealized appreciation $15,194,834
===========
</TABLE>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PSFG Permanent School Fund Guarantee
See Notes to Financial Statements.
83
<PAGE> 102
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 96.5%
ARIZONA -- 1.3%
$1,500,000 Arizona State University
Revenue, 7.00%, 7/1/15,
Prerefunded 7/1/02 @ 101
(Insured by AMBAC)............. $ 1,672,500
------------
CALIFORNIA -- 9.5%
1,000,000 Anaheim Public Financing
Authority, Lease Revenue,
Public Improvements Project,
Series A, 6.00%, 9/1/24
(Insured by FSA)............... 1,131,250
1,400,000 California State, GO, 7.00%,
6/1/05......................... 1,617,000
2,000,000 California State, GO, 6.25%,
9/1/12......................... 2,307,500
3,000,000 Northern California Power
Agency Revenue, Geothermal
Project, Series A, 5.50%,
7/1/05 (Insured by AMBAC)...... 3,209,999
2,000,000 Orange County, Series A, 6.00%,
6/1/10 (Insured by MBIA)....... 2,255,000
1,380,000 Turlock Irrigation District
Revenue, Series A, 6.00%,
1/1/07 (Insured by MBIA)....... 1,533,525
------------
12,054,274
------------
COLORADO -- 2.8%
1,000,000 Colorado Housing Financial
Authority, Single Family,
Series B-2, 6.40%, 11/1/24,
Callable 5/1/08 @ 105.......... 1,097,500
1,580,000 Denver City & County Airport
Revenue, (AMT), 6.75%,
11/15/22, Prerefunded 11/1/02 @
102............................ 1,706,400
650,000 Denver City & County Airport
Revenue, Series C, (AMT),
6.75%, 11/15/22, Callable
11/15/02 @ 102................. 725,563
------------
3,529,463
------------
FLORIDA -- 2.3%
1,080,000 Lee County Florida, Revenue
Bond, Series A, 5.50%,
10/1/09........................ 1,169,100
1,400,000 Port Everglades Authority, Port
Improvement, ETM, 7.13%,
11/1/16........................ 1,697,500
------------
2,866,600
------------
GEORGIA -- 0.9%
1,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08.................. 1,121,250
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
HAWAII -- 2.6%
$2,000,000 Hawaii State, Series CB, GO,
5.75%, 1/1/07.................. $ 2,167,500
1,000,000 Honolulu City & County, Series
A, GO, 5.75%, 4/1/10........... 1,096,250
------------
3,263,750
------------
ILLINOIS -- 9.2%
2,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 5.50%,
12/1/10........................ 2,157,500
1,000,000 Chicago Public Building
Commission, Series A, ETM,
7.00%, 1/1/20 (Insured by
MBIA).......................... 1,257,500
2,000,000 Chicago School Finance
Authority, Series A, GO, 4.90%,
6/1/05, Callable 6/1/04 @ 102
(Insured by MBIA).............. 2,057,500
2,000,000 Du Page & Will Counties,
Community School District No.
204, GO, 4.95%, 12/30/01
(Insured by FGIC).............. 2,052,500
2,000,000 Illinois State Civic Center,
5.25%, 12/15/10, Special State
Obligation 12/30/01 (Insured by
FGIC)(Insured by AMBAC)........ 2,112,500
1,000,000 Illinois State Sales Tax,
Series S, 5.00%, 6/15/08....... 1,037,500
1,000,000 Will County Forest Preserve
District, GO, 5.90%, 12/1/03,
Callable 12/1/02 @ 100 (Insured
by AMBAC)...................... 1,063,750
------------
11,738,750
------------
INDIANA -- 5.3%
2,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 6.00%, 1/1/13 (Insured by
MBIA).......................... 2,232,500
2,250,000 Indiana State Office Building
Commission, Capital Complex,
Government Center Parking
Facilities, Series A, 4.80%,
7/1/03 (Insured by AMBAC)...... 2,297,813
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A, 5.75%, 6/1/12
(Insured by AMBAC)............. 1,092,500
1,000,000 Marion County Hospital
Authority Revenue, Community
Hospital, Indianapolis Project,
ETM, 6.00%, 5/1/06............. 1,083,750
------------
6,706,563
------------
</TABLE>
Continued
84
<PAGE> 103
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
IOWA -- 1.9%
$2,055,000 Iowa Finance Authority, Private
College Revenue, Drake
University Project, 6.50%,
12/1/11 (Insured by MBIA)...... $ 2,412,056
------------
KANSAS -- 2.1%
1,000,000 Kansas State Department of
Transportation Highway Revenue,
5.50%, 9/1/11.................. 1,080,000
1,600,000 Kansas State Development
Financial Authority Revenue,
4.40%, 5/1/06, Series I
Municipal Bond................. 1,596,000
------------
2,676,000
------------
KENTUCKY -- 1.0%
1,315,000 Louisville & Jefferson County,
Metropolitan Sewer District,
Sewer & Drain System Revenue,
Series A, 5.25%, 5/15/27,
Callable 5/15/07 @ 101 (Insured
by MBIA)....................... 1,324,863
------------
LOUISIANA -- 2.5%
3,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A, 7.25%,
11/15/00, Callable 11/15/99 @
102............................ 3,187,500
------------
MARYLAND -- 1.6%
2,000,000 Prince Georges County,
Consolidated Public
Improvement, GO, 5.00%, 1/1/02
(Insured by MBIA).............. 2,060,000
------------
MASSACHUSETTS -- 2.4%
1,000,000 Massachusetts State Industrial
Finance Agency, Resource
Recovery Revenue, Refusetech,
Inc. Project, Series A, 5.25%,
7/1/99 (Insured by FSA)........ 1,013,310
1,000,000 Massachusetts State Water,
Resource Authority, Series B,
5.00%, 12/1/25, Callable
12/1/05 @ 102 (Insured by
MBIA).......................... 972,500
1,000,000 Massachusetts State, Series B,
GO, 5.40%, 11/1/06............. 1,067,500
------------
3,053,310
------------
MICHIGAN -- 19.8%
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 7.30%,
5/1/10, Prerefunded 5/1/04 @
102............................ 2,342,500
1,300,000 Berkley School District, GO,
7.00%, 1/1/07 (Insured by
FGIC).......................... 1,525,875
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,000,000 Detroit Sewage Disposal
Revenue, Series B, 6.00%,
7/1/09 (Insured by MBIA)....... $ 2,232,500
1,000,000 Detroit Water Supply System,
Series B, 5.10%, 7/1/07
(Insured by MBIA).............. 1,040,000
930,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.50%, 1/1/07,
Callable 1/1/05 @ 102.......... 995,100
1,000,000 Michigan Higher Education
Facilities Authority, 5.35%,
05/1/15, Thomas................ 1,002,500
2,000,000 Michigan State Hospital Finance
Authority, Sisters of Mercy,
Series P, 5.25%, 8/15/21,
Callable 8/15/03 @ 102 (Insured
by MBIA)....................... 2,000,000
2,365,000 Michigan State Hospital Finance
Authority, Detroit Medical
Center, Series B, 5.00%,
8/15/06 (Insured by AMBAC)..... 2,435,949
2,000,000 Michigan State Hospital Finance
Authority, Henry Ford Health,
Series A, 5.25%, 11/15/20,
Callable 11/15/06 @ 102
(Insured by AMBAC)............. 2,000,000
1,300,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
5.15%, 4/1/02 (Insured by
AMBAC)......................... 1,340,625
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue, 5.80%, 11/1/05
(Insured by MBIA).............. 1,086,250
2,000,000 Michigan State Trunk Line,
5.50%, 11/1/16, Callable
11/1/06 @ 101 (Insured by
FGIC).......................... 2,090,000
1,000,000 Michigan State Underground
Storage Tank Financial
Assurance Authority, Series I,
6.00%, 5/1/05 (Insured by
AMBAC)......................... 1,093,750
2,000,000 Michigan State University
Revenue, Series A, 5.50%,
8/15/22, Callable 8/15/02 @
100............................ 2,037,500
2,000,000 University of Michigan Hospital
Revenue, Series A, 3.80%*,
12/1/27........................ 2,000,000
------------
25,222,549
------------
MISSOURI -- 0.4%
500,000 Missouri State, Health &
Education Facilities, Lake of
Ozarks General Hospital, 6.50%,
2/15/21, Callable 2/15/06 @
102............................ 540,625
------------
</TABLE>
Continued
85
<PAGE> 104
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
NEBRASKA -- 0.9%
$1,075,000 Omaha Public Power District,
5.10%, 2/1/08.................. $ 1,130,094
------------
NEVADA -- 3.4%
1,805,000 Clark County School District,
GO, 5.75%, 6/15/10, Callable
6/15/06 @ 101 (Insured by
FGIC).......................... 1,949,400
2,000,000 Nevada State, Nevada Municipal
Bond Bank, Series A, GO, 8.00%,
11/1/05........................ 2,442,500
------------
4,391,900
------------
NEW JERSEY -- 2.6%
1,500,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Senior Lien,
7.00%, 7/1/04 (Insured by
MBIA).......................... 1,710,000
1,500,000 New Jersey State Transportation
Trust Fund Authority,
Transportation System, Series
A, 6.00%, 12/15/06 (Insured by
MBIA).......................... 1,659,375
------------
3,369,375
------------
NEW YORK -- 4.6%
1,350,000 New York City, Municipal Water
& Sewer Revenue, 5.50%,
6/15/24, Callable 6/15/06 @
101............................ 1,390,500
1,500,000 New York City, Tax Revenue
Anticipation Note, Livingston
Plaza Project, 5.40%, 1/1/18... 1,593,750
1,250,000 New York Dorm Authority
Revenue, 5.00%, 2/15/01........ 1,270,313
1,000,000 New York State Thruway
Authority, Series 1997 B,
6.00%, 4/1/07.................. 1,098,750
500,000 New York State Urban
Development Corp., 7.50%,
4/1/11, Prerefunded 4/1/01 @
102............................ 553,750
------------
5,907,063
------------
OKLAHOMA -- 1.8%
1,000,000 Grand River Dam Authority,
5.75%, 6/1/08 (Insured by
FSA)........................... 1,107,500
1,000,000 Tulsa Industrial Authority,
University of Tulsa, Series A,
6.00%, 10/1/16 (Insured by
MBIA).......................... 1,128,750
------------
2,236,250
------------
PENNSYLVANIA -- 1.6%
2,000,000 Pennsylvania State, First
Series, GO, 5.38%, 5/15/16,
Callable 5/15/06 @ 101.5
(Insured by FGIC).............. 2,040,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO -- 0.8%
$1,000,000 Puerto Rico Commonwealth
Highway & Transportation
Authority, Highway Revenue,
Series X, 4.90%, 7/1/01........ $ 1,020,000
------------
RHODE ISLAND -- 0.8%
1,000,000 Convention Center Authority,
Series B, 5.00%, 5/15/09
(Insured by MBIA).............. 1,036,250
------------
SOUTH CAROLINA -- 1.0%
1,200,000 Myrtle Beach Water & Sewer
Revenue, 4.90%, 3/1/02 (Insured
by MBIA)....................... 1,230,000
------------
TENNESSEE -- 1.0%
1,225,000 Tennessee Housing Development
Agency, Mortgage Finance,
Series C, (AMT), 5.95%, 7/1/09,
Callable 7/1/05 @ 102 (Insured
by MBIA)....................... 1,309,219
------------
TEXAS -- 6.1%
1,000,000 Brownsville Utility System,
6.25%, 9/1/11 (Insured by
AMBAC)......................... 1,147,500
1,000,000 Clear Creek Texas, Zero Coupon,
2/15/03........................ 818,750
1,000,000 Harris County, Certificates of
Obligation, 6.00%, 12/15/11.... 1,136,250
2,000,000 Texas City Industrial
Development Corp., Marine
Terminal Revenue, Arco Pipeline
Co. Project, 7.38%, 10/1/20.... 2,575,000
2,000,000 Texas State, Series A, GO,
5.70%, 10/1/03................. 2,142,500
------------
7,820,000
------------
UTAH -- 2.4%
2,175,000 Intermountain Power Agency,
Utah Power Supply, Series D,
5.00%, 7/1/23, Callable 7/1/06
@ 100.......................... 2,098,875
1,000,000 St. George, Parks &
Recreational Facilities, GO,
5.38%, 8/1/21, Callable 8/1/07
@ 101 (Insured by FGIC)........ 1,020,000
------------
3,118,875
------------
</TABLE>
Continued
86
<PAGE> 105
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
WASHINGTON -- 3.8%
$1,000,000 Douglas County Public Utility
District No. 001, Electric
Distribution System, 5.90%,
1/1/11, Callable 1/1/05 @ 102
(Insured by MBIA).............. $ 1,077,500
2,500,000 Port Seattle Limited, GO,
(AMT), 5.35%, 5/1/04........... 2,612,500
1,000,000 Washington State, Motor Vehicle
Fuel Tax, R-92D, GO, 6.25%,
9/1/07......................... 1,132,500
------------
4,822,500
------------
TOTAL MUNICIPAL BONDS.......... 122,861,579
------------
(Cost $115,773,078)
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
DESCRIPTION VALUE
SHARES ----------- ------
<C> <S> <C>
INVESTMENT COMPANIES -- 2.8%
3,576,699 Dreyfus Tax Exempt Money Market
Fund........................... $ 3,576,699
------------
TOTAL INVESTMENT COMPANIES..... 3,576,699
------------
(Cost $3,576,699)
TOTAL INVESTMENTS -- 99.3%.................. 126,438,278
(Cost $119,349,777)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.7%....................... 874,835
------------
TOTAL NET ASSETS -- 100.0%.................. $127,313,113
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................. $7,092,378
Unrealized depreciation................. (3,877)
----------
Net unrealized appreciation............. $7,088,501
==========
</TABLE>
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
87
<PAGE> 106
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 99.1%
MICHIGAN -- 96.6%
$1,785,000 Allegan Sanitary Sewer System,
(AMT), 5.45%, 11/1/02........... $ 1,838,550
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 6.90%,
5/1/04.......................... 2,217,500
1,000,000 Bay City Electric Utility
Revenue, 5.15%, 1/1/07 (Insured
by AMBAC)....................... 1,045,000
560,000 Chippewa County Hospital Finance
Authority, 4.20%, 11/1/98....... 560,616
290,000 Chippewa County Hospital Finance
Authority, 4.40%, 11/1/99....... 290,725
585,000 Chippewa County Hospital Finance
Authority, 4.40%, 11/1/99....... 586,463
260,000 Chippewa County Hospital Finance
Authority, 4.60%, 11/1/00....... 260,975
1,000,000 Chippewa Valley School District,
GO, 6.38%, 5/1/05, Prerefunded
5/1/01 @ 101.5 (Insured by
FGIC)........................... 1,076,250
745,000 Chippewa Valley School District,
Series A, GO, 5.60%, 5/1/99..... 757,300
1,700,000 Clintondale Community School
District GO, 4.65%, 5/1/03...... 1,731,875
2,000,000 Dearborn School District, GO,
6.63%, 5/1/09, Prerefunded
5/1/00 @ 102 (Insured by
MBIA)........................... 2,132,500
1,000,000 Dearborn School District, GO,
6.38%, 5/1/10, Prerefunded
5/1/00 @ 102 (Insured by
MBIA)........................... 1,062,500
965,000 Dearborn Sewage Disposal System,
6.90%, 4/1/02 (Insured by
MBIA)........................... 1,055,469
2,800,000 Detroit Sewage Disposal, Series
A, 4.85%, 7/1/01 (Insured by
FGIC)........................... 2,855,999
580,000 Detroit, Distributable State
Aid, GO, 5.60%, 5/1/00 (Insured
by AMBAC)....................... 595,950
1,000,000 Detroit, GO, 5.00%, 4/1/04,
(Insured by FGIC)............... 1,032,500
750,000 Detroit, GO, 6.00%, 4/1/06,
(Insured by FGIC)............... 825,000
1,730,000 Dexter Community School
District, GO, 6.25%, 5/1/07,
(Insured by FGIC)............... 1,939,763
2,000,000 East China Township School
District, GO, 6.00%, 5/1/02,
Callable 5/1/01 @ 102........... 2,127,500
1,000,000 Eastern Michigan University, GO,
5.80%, 6/1/01 (Insured by
AMBAC).......................... 1,046,250
445,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series
A, 5.10%, 2/15/04 (Insured by
MBIA)........................... 460,019
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 470,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series
A, 5.20%, 2/15/05 (Insured by
MBIA)........................... $ 488,800
465,000 Flint Hospital Building
Authority, Hurley Medical
Center, 4.00%, 7/1/99........... 463,707
1,600,000 Flint Hospital Building
Authority, Hurley Medical
Center, Series A, 5.00%,
7/1/03.......................... 1,620,000
305,000 Flint Hospital Building
Authority, Hurley Medical
Center, Series B, 4.00%,
7/1/99.......................... 304,152
1,000,000 Grand Haven Area Public Schools,
GO, 5.45%, 5/1/04 (Insured by
MBIA)........................... 1,058,750
1,000,000 Grand Rapids Sanitary Sewer
System, Refunding & Improvement,
Series A, 4.38%, 1/1/06,
(Insured by FGIC)............... 996,250
1,250,000 Greater Detroit Resource
Recovery Authority, Series B,
5.00%, 12/13/02 (Insured by
AMBAC).......................... 1,287,500
435,000 Highland Park School District,
GO, 3.90%, 5/1/99, (Insured by
FSA)............................ 436,166
445,000 Highland Park School District,
GO, 4.00%, 5/1/00, (Insured by
FSA)............................ 445,556
485,000 Highland Park School District,
GO, 4.05%, 5/1/01, (Insured by
FSA)............................ 485,000
460,000 Highland Park School District,
GO, 4.15%, 5/1/02, (Insured by
FSA)............................ 460,575
1,000,000 Holland Electric Revenue, 6.40%,
7/1/02, Prerefunded 7/1/99 @
100............................. 1,026,880
1,100,000 Holland Electric Revenue, 6.50%,
7/1/03, Prerefunded 7/1/99 @
100............................. 1,130,085
1,250,000 Huron Valley School District,
GO, 7.10%, 5/1/08, Prerefunded
5/1/01 @ 102 (Insured by
FGIC)........................... 1,375,000
750,000 Kalamazoo Hospital Finance
Authority Revenue, Bronson
Methodist Hospital, 5.50%,
5/15/08, (Insured by MBIA)...... 800,625
1,810,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 4.95%, 5/15/02
(Insured by MBIA)............... 1,852,988
1,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 5.25%, 5/15/05
(Insured by MBIA)............... 1,043,750
1,295,000 Kenowa Hills Public Schools, GO,
5.50%, 5/1/05................... 1,382,413
</TABLE>
Continued
88
<PAGE> 107
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 500,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.25%, 1/1/04... $ 523,125
515,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 4.20%, 1/1/04,
(Insured by MBIA)............... 508,563
505,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.30%, 1/1/05... 530,250
645,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 4.30%, 1/1/05,
(Insured by MBIA)............... 636,131
1,150,000 Kent Hospital Finance Authority,
Butterworth Hospital, 4.90%,
1/15/05......................... 1,177,313
1,050,000 Kent Hospital Finance Authority,
Spectrum Health, Series A,
4.40%, 1/15/05.................. 1,044,078
2,000,000 Lake Orion Community School
District, GO, 6.20%, 5/1/04
(Insured by AMBAC).............. 2,192,500
2,707,776 Michigan Department of State
Police Lease, 4.95%, 3/10/02.... 2,731,469
1,265,000 Michigan Higher
Education--Thomas A. Cooley,
4.75%, 5/1/07, (LOC: First of
America)........................ 1,268,163
1,000,000 Michigan Hospital Finance
Authority, Sisters Of Mercy,
7.5%, 2/15/18, Prerefunded
2/15/01
@ 102........................... 1,103,750
1,020,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Qualified School,
6.35%, 5/15/01.................. 1,083,750
1,000,000 Michigan Municipal Bond
Authority, Pooled Projects,
Series B, 5.10%, 10/1/04........ 1,053,750
1,000,000 Michigan Municipal Bond
Authority, State Revolving Fund,
5.50%, 10/1/99.................. 1,021,250
2,000,000 Michigan Municipal Bond
Authority, State Revolving Fund,
5.50%, 10/1/06 2,170,000
2,000,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.30%, 1/1/00................... 2,040,000
750,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.70%, 1/1/03................... 795,938
1,000,000 Michigan State Building
Authority, Series II, 6.10%,
10/1/01......................... 1,062,500
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$3,000,000 Michigan State Comprehensive
Transportation, Series B, 5.63%,
5/15/03......................... $ 3,187,499
1,000,000 Michigan State Hospital Finance
Authority Revenue, Sisters of
Mercy Health Corp. Bond 1993,
Series F, 4.60%, 8/15/02
(Insured by MBIA)............... 1,012,500
1,855,000 Michigan State Hospital Finance
Authority, Bay Medical Center,
Series A, 5.38%, 7/1/06 (Insured
by FSA)......................... 1,957,025
750,000 Michigan State Hospital Finance
Authority, GO, Detroit Medical
Center Group A, 5.00%, 8/15/04
(Insured by AMBAC).............. 773,438
2,000,000 Michigan State Hospital Finance
Authority, Mclaren Obligated
Group, Series A, 5.75%,
10/15/03........................ 2,132,500
1,500,000 Michigan State Hospital Finance
Authority, Mercy Health
Services, Series S, 6.00%,
8/15/06......................... 1,640,625
1,060,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J, 7.15%,
2/15/99......................... 1,079,928
2,800,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J, 7.38%,
2/15/11
Prerefunded 2/15/01 @ 102....... 3,083,499
1,150,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 4.50%, 5/15/01
(Insured by AMBAC).............. 1,160,063
1,000,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 5.00%, 5/15/05
(Insured by AMBAC).............. 1,028,750
2,680,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
(AMT), 5.25%, 10/1/01 (Insured
by MBIA)........................ 2,757,049
415,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Lutheran Social Services
Project, 4.40%, 9/1/98 (LOC:
First of America)............... 415,398
2,000,000 Michigan State Underground
Storage, Tank Financial
Assurance Authority, Series I,
5.00%, 5/1/00 (Insured by
AMBAC).......................... 2,035,000
3,270,000 Michigan State Underground
Storage, Tank Financial
Assurance Authority, Series I,
6.00%, 5/1/06 (Insured by
AMBAC).......................... 3,601,087
</TABLE>
Continued
89
<PAGE> 108
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,000,000 Mount Clemens Community School
District, GO, 6.60%, 5/1/20,
Prerefunded 5/1/02 @ 102
(Insured by MBIA)............... $ 1,106,250
1,495,000 Oakland County Economic
Development Corp. Revenue,
Boardwalk Shopping Center,
Limited Obligation Revenue,
4.38%*, 7/1/98, Mandatory Put
(LOC: NBD)...................... 1,495,000
580,000 Oakland County Economic
Development Corp., Sugartree
Shopping Center, 4.38%*, 7/1/98,
Mandatory Put (LOC: NBD)........ 580,000
500,000 Oakland County Economic
Development Corp., Sugartree
Shopping Center, 4.38%*, 7/1/98,
Mandatory Put (LOC: NBD)........ 500,000
1,000,000 Oakland Washtenaw County
Community College, 6.65%,
5/1/11, Prerefunded 5/1/02 @
100............................. 1,105,000
3,000,000 Okemos Public School District,
Series I, GO, 6.90%, 5/1/11,
Prerefunded 5/1/01 @ 102........ 3,277,499
3,200,000 Plymouth--Canton Community
School District, Series B, GO,
6.80%, 5/1/17, Prerefunded
5/1/01 @ 101.................... 3,459,999
735,000 Reeths--Puffer Schools, GO,
6.75%, 5/1/01 (Insured by
FGIC)........................... 786,450
750,000 Reeths--Puffer Schools, GO,
6.25%, 5/1/02 (Insured by FGIC) 804,375
2,000,000 Rockford Public Schools, GO,
7.38%, 5/1/19, Prerefunded
5/1/00 @ 101.................... 2,137,500
1,500,000 Royal Oak Hospital Finance
Authority, 5.75%, 11/15/03 1,595,625
1,530,000 Taylor Tax Increment Finance
Authority, 4.40%, 5/1/04,
(Insured by FSA)................ 1,537,650
1,660,000 Taylor Tax Increment Finance
Authority, 4.50%, 5/1/05,
(Insured by FSA)................ 1,670,375
2,035,000 Walled Lake Consolidated School
District, GO, 4.70%, 5/1/01..... 2,070,613
2,235,000 Walled Lake Consolidated School
District, GO, 4.80%, 5/1/02..... 2,285,288
2,000,000 Walled Lake Consolidated School
District, Series II, GO, 7.10%,
5/1/05, Prerefunded 5/1/00 @
102............................. 2,147,500
1,025,000 Washtenaw Community College, GO,
4.70%, 4/1/03 (Insured by
FGIC)........................... 1,046,781
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/99.......................... $ 549,274
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/00.......................... 545,875
1,750,000 Western Michigan University,
Series A, 6.50%, 7/15/21,
Prerefunded 7/15/01 @ 102
(Insured by AMBAC).............. 1,905,313
1,000,000 Wyandotte Electric Revenue,
6.20%, 10/1/03 (Insured by
MBIA)........................... 1,093,750
1,150,000 Ypsilanti School District,
4.50%, 5/1/00 (Insured by
FGIC)........................... 1,160,063
------------
121,823,972
------------
PUERTO RICO -- 2.4%
3,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority,
Highway Revenue, Series X,
4.90%, 7/1/01................... 3,060,000
------------
TOTAL MUNICIPAL BONDS........... 124,883,972
(Cost $121,759,373) ------------
INVESTMENT COMPANIES -- 0.9%
1,105,236.. Dreyfus Tax Exempt Money Market
Fund............................ 1,105,236
------------
TOTAL INVESTMENT COMPANIES...... 1,105,236
(Cost $1,105,236) ------------
TOTAL INVESTMENTS -- 100.0%................. 125,989,208
(Cost $122,864,609)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.0%....................... 60,426
------------
TOTAL NET ASSETS -- 100.0%.................. $126,049,634
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......... $3,165,737
Unrealized depreciation.......... (41,138)
----------
Net unrealized appreciation...... $3,124,599
==========
</TABLE>
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
90
<PAGE> 109
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
BANK NOTES -- 1.9%
$5,000,000 First Union National Bank of
North Carolina, 5.50%,
7/8/98......................... $ 5,000,000
5,000,000 First Union National Bank of
North Carolina, 5.52%,
10/30/98....................... 5,000,000
------------
TOTAL BANK NOTES............... 10,000,000
(Amortized Cost $10,000,000) ------------
BANKERS ACCEPTANCES -- 1.0%
5,000,000 Corestates Bank N.A., 5.35%,
7/21/98........................ 4,985,139
------------
TOTAL BANKERS ACCEPTANCES...... 4,985,139
(Amortized Cost $4,985,139) ------------
CERTIFICATES OF DEPOSIT -- 6.4%
5,000,000 Bank Of Nova Scotia, 5.65%,
3/23/99........................ 4,994,367
3,000,000 Bankers Trust, 6.00%, 7/7/98... 3,000,142
5,000,000 Bankers Trust, 5.84%,
4/30/99........................ 4,998,411
5,000,000 Mellon Bank, 5.57%, 7/1/98..... 5,000,000
5,000,000 Mellon Bank, 5.50%, 9/21/98.... 5,000,000
5,000,000 Mellon Bank, 5.71%, 3/5/99..... 5,000,000
5,000,000 Mellon Bank, 5.75%, 6/3/99..... 5,000,000
------------
TOTAL CERTIFICATES OF
DEPOSIT........................ 32,992,920
(Amortized Cost $32,992,920) ------------
COMMERCIAL PAPER -- 31.7%
4,300,000 Armstrong World Industries,
5.60%, 7/1/98.................. 4,300,000
5,000,000 Banque National de Paris
Canada, 5.39%, 7/21/98......... 4,985,028
5,000,000 Bell South Telecommunications,
5.50%, 8/21/98................. 4,961,042
5,000,000 Cargill, Inc., 5.47%, 7/1/98... 5,000,000
5,000,000 Commonwealth Bank of Australia,
5.42%, 10/13/98................ 4,921,711
10,400,000 Daimler Benz, 6.15%, 7/1/98.... 10,399,999
5,000,000 Daimler Benz, 5.53%, 8/21/98... 4,960,829
5,000,000 Deutsche Bank Financial, 5.52%,
8/14/98........................ 4,966,267
5,000,000 Dresdner US Finance, 5.51%,
8/4/98......................... 4,973,981
5,000,000 Du Pont De Nemours & Co.,
5.36%, 8/14/98................. 4,967,244
10,000,000 Ford Motor Credit Corp., 6.0%,
7/1/98......................... 9,999,999
10,000,000 Ford Motor Credit Corp., 6.0%,
7/2/98......................... 9,998,333
5,000,000 General Electric Capital Corp.,
5.38%, 8/7/98.................. 4,972,353
5,000,000 General Electric Capital Corp.,
5.36%, 8/17/98................. 4,965,011
5,000,000 General Electric Capital Corp.,
5.43%, 8/27/98................. 4,957,013
5,000,000 GMAC, 5.43%, 8/27/98........... 4,957,013
5,000,000 GTE Corp., 5.56%, 7/2/98....... 4,999,228
5,000,000 GTE Corp., 5.53%, 7/10/98...... 4,993,088
5,000,000 GTE Funding, 5.56%, 7/22/98.... 4,983,783
5,000,000 Household Finance, 5.51%,
8/6/98......................... 4,972,450
10,000,000 JP Morgan & Co, 5.52%,
7/6/98......................... 9,992,333
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$6,875,000 Morgan Guaranty, 5.50%,
10/19/98....................... $ 6,759,462
6,500,000 Novartis Finance Corp., 5.50%,
7/8/98......................... 6,493,049
8,300,000 Novartis Finance Corp., 5.50%,
8/4/98......................... 8,256,855
5,000,000 Southern New England
Telecommunication, 5.55%,
7/20/98........................ 4,985,354
5,000,000 Toyota Motor Credit Corp.,
5.50%, 7/29/98................. 4,978,611
8,000,000 UBS Finance, Inc., 5.58%,
7/6/98......................... 7,993,800
------------
TOTAL COMMERCIAL PAPER......... 163,693,836
(Amortized Cost $163,693,836) ------------
DEMAND NOTES -- 21.9%
6,000,000 American Healthcare Funding
L.L.C., 5.70%*, 7/1/98 (LOC:
LaSalle National Bank)......... 6,000,000
4,000,000 American Mfg. Co., Inc., Series
1997, 5.70%*, 7/2/98 (LOC:
Mellon Bank)................... 4,000,000
7,500,000 Arboretum Properties, L.L.C.,
5.67%*, 7/1/98 (LOC: Michigan
National Bank)................. 7,500,000
2,400,000 Buckeye Corrugated, Inc.,
5.67%*, 7/1/98 (LOC:
Keybank)....................... 2,400,000
4,400,000 City of Cloquet, Minnesota
Taxable Industrial Bond, Series
1996B, 5.80%*, 4/1/26 (LOC:
Credit Suisse)................. 4,400,000
5,915,000 FC Bellevue, Inc., 5.69%*,
7/2/98 (LOC: National City Bank
Cleveland, Ohio)............... 5,915,000
4,830,000 First Metro Title Co., 5.68%*,
7/2/98 (LOC: Michigan National
Bank).......................... 4,830,000
4,565,000 Harry W. Albright, Jr., 5.70%*,
7/2/98......................... 4,565,000
3,500,000 HWP Co., Ltd. Project, 5.69%*,
7/2/98 (LOC: National City Bank
Cleveland, Ohio)............... 3,500,000
7,500,000 Katz Capital Corp., 5.69%*,
7/2/98 (LOC: Citizens Bank).... 7,500,000
4,730,000 Labelle Capital Funding L.L.C.,
5.70%*, 7/2/98 (LOC: First of
America Bank -- Michigan)...... 4,730,000
1,575,000 Laird's Auto Glass & Trim,
Inc., 5.75%*, 7/2/98 (LOC:
Michigan National Bank)........ 1,575,000
4,000,000 Macroe Properties, Inc.,
5.70%*, 7/2/98 (LOC: Huntington
Bank).......................... 4,000,000
5,000,000 Mississippi Business Finance
Corp., 5.70%*, 1/1/23 (LOC:
First National Bank of
Chicago)....................... 5,000,000
8,545,000 Ordeal Properties L.L.C.,
5.67%*, 7/1/98 (LOC:
Keybank)....................... 8,545,000
</TABLE>
Continued
91
<PAGE> 110
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
DEMAND NOTES (CONTINUED)
$2,500,000 Patt's Enterprises L.L.C.,
5.70%*, 7/2/98 (LOC: Huntington
National Bank)................. $ 2,500,000
5,000,000 PRA at Glenwood Hills
Corporate, Centre Limited
Liability Co., 5.66%*,......... 5,000,000
7/2/98 (LOC: First of America
Bank -- Michigan)
8,350,000 PRD Finance L.L.C., 5.66%*,
7/2/98 (LOC: First of America
Bank Michigan) --.............. 8,350,000
3,000,000 Royal Town Center L.L.C.
Project, 5.67%*, 7/2/98 (LOC:
Comerica Bank)................. 3,000,000
2,655,000 Rumpf Development Ltd., 5.67%*,
7/1/98 (LOC: Keybank).......... 2,655,000
5,000,000 Sheperd Capital L.L.C., 5.70%*,
7/2/98 (LOC: Comerica Bank).... 5,000,000
2,000,000 South Bend MAC, L.P., 5.70%*,
7/1/98 (LOC: LaSalle National
Bank).......................... 2,000,000
1,075,000.. The Economic Development Corp.
of the County of Marquette,
Pioneer 1,075,000
Laboratories, Inc. Project,
5.55%*, 7/2/98 (LOC: NBD Bank)
3,250,000 White Mountain Imaging, 5.67%*,
7/1/98 (LOC: Keybank).......... 3,250,000
5,645,000 Zeigler Realty, L.L.C., 5.70%*,
7/2/98 (LOC: First of America
Bank -- Michigan).............. 5,645,000
------------
TOTAL DEMAND NOTES............. 112,935,000
(Amortized Cost $112,935,000) ------------
EURO CERTIFICATES OF DEPOSIT -- 1.0%
5,000,000 ABN Amro, 5.55%, 7/31/98....... 5,000,000
------------
TOTAL EURO CERTIFICATES OF
DEPOSIT........................ 5,000,000
(Amortized Cost $5,000,000) ------------
FUNDING AGREEMENTS -- 3.9%
5,000,000 Allstate Financial Corp.,
5.84%*, 7/1/98 (b)............. 5,000,000
5,000,000 Allstate Financial Corp.,
5.84%*, 7/1/98 (b)............. 5,000,000
10,000,000 General American Life Insurance
Co., 5.89%*, 7/1/98 (b)........ 10,000,000
------------
TOTAL FUNDING AGREEMENTS....... 20,000,000
(Amortized Cost $20,000,000) ------------
YANKEE CERTIFICATES OF DEPOSIT -- 20.5%
5,000,000.. ABN Amro Bank, 5.82%, 7/17/98 4,999,974
5,000,000.. Bank Of New York, 5.50%,
2/17/99 4,990,622
5,000,000.. Bankers Trust Co., 5.90%,
8/10/98 4,999,738
5,000,000.. Banque National De Paris,
5.63%, 12/28/98 5,000,000
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
YANKEE CERTIFICATES OF DEPOSIT (CONTINUED)
$3,000,000.. Barclays Bank PLC, 5.85%,
8/11/98 $ 3,000,578
5,000,000.. Barclays Bank PLC, 5.65%,
3/2/99 4,998,238
5,000,000.. Canadian Imperial Bank of
Commerce, 5.46%, 7/13/98 5,000,049
5,000,000.. Canadian Imperial Bank of
Commerce, 5.86%, 8/11/98 5,001,074
5,000,000.. Canadian Imperial Bank of
Commerce, 5.55%, 2/10/99 4,995,137
5,000,000.. Commerzbank Ag, 5.65%, 2/26/99 4,996,097
4,000,000.. Commerze Bank, 5.67%, 3/5/99,
5.67%, 3/5/99 3,997,755
5,000,000.. Credit Agricole Indosuez,
5.705%, 1/7/99 4,996,410
5,000,000.. Credit Agricole Indosuez,
5.66%, 3/4/99 4,998,708
5,000,000.. Deutche Bank, 5.58%, 7/9/98 5,000,065
4,000,000.. Deutche Bank, 5.86%, 10/14/98 4,002,530
5,000,000.. National Westminster, 5.54%,
7/29/98 5,000,098
5,000,000.. Rabobank, 5.69%, 4/16/98 4,998,103
5,000,000.. Societe Generale, 5.53%, 8/5/98 5,000,047
5,000,000.. Societe Generale, 5.89%,
10/14/98 5,003,515
5,000,000.. Societe Generale, 5.70%,
3/23/99 4,998,261
5,000,000.. Societe Generale, 5.77%,
4/19/99 4,998,517
5,000,000.. Swiss Bank, 5.74%, 6/11/99 4,999,547
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT........................ 105,975,063
(Amortized Cost $105,975,063) ------------
REPURCHASE AGREEMENTS -- 8.1%
42,000,000 Donaldson, Lufkin & Jenrette
5.50%, dated 6/30/98, due
7/1/98 with a maturity value of
4,000,611 (collateralized by
$10,925,000 FNMA, Discount
Note, 7/10/98, market value
$10,898,977 and by $32,030,000
FNMA, Discount Note, 7/15/98,
market value $31,958,157)...... 42,000,000
------------
TOTAL REPURCHASE AGREEMENTS.... 42,000,000
(Amortized Cost $42,000,000) ------------
INVESTMENT COMPANIES -- 3.1%
16,147,208 Dreyfus Cash Management Money
Market Fund.................... 16,147,208
------------
TOTAL INVESTMENT COMPANIES..... 16,147,208
------------
(Amortized Cost $16,147,208)
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS -- 99.6%............... $513,729,166
(Amortized Cost $513,729,166)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES
0.4% 1,992,017
------------
TOTAL NET ASSETS -- 100.0% $515,721,183
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
(b) Illiquid security.
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
LOC Letter of Credit
See Notes to Financial Statements.
92
<PAGE> 111
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS -- 83.8%
MICHIGAN -- 78.2%
$ 440,000 Calhoun County, GO, 3.95%,
7/1/98, (Insured by AMBAC)...... $ 440,000
950,000 Clinton Township Economic
Development Corp., Pointe
Village Square, (AMT), 3.80%*,
8/1/98, (LOC: First of
America)........................ 950,000
1,000,000 Detroit Water Revenue, 7.78%,
7/1/98, Prerefunded 7/1/98 @
102, (Insured by MBIA).......... 1,000,000
700,000 Dexter Michigan Community
Schools, QSBLF, 3.80%, 5/1/99,
(Insured by FGIC)............... 700,000
390,000 Farmington Hills Michigan
Education, Marketing Displays,
(AMT), 3.80%*, 9/1/98 (LOC:
Comerica Bank).................. 390,000
9,000,000 Garden City Michigan Hospital,
3.75%*, 7/7/98, (LOC: First of
America)........................ 9,000,000
1,900,000 Genesee County Economic
Development Corp., Grand Blanc
Convalescent Center, 3.75%*,
11/1/98 (LOC: Citizens Banking
Corp.).......................... 1,900,000
1,700,000 Genesee County Michigan, Atlas
Technology, (AMT), 3.65%*,
7/7/98, (LOC: NBD Bank)......... 1,700,000
3,000,000 Grand Ledge Michigan Public
School District, 4.00%,
11/24/98........................ 3,003,138
2,060,000 Leelanau County Economic
Development Corp., American
Mutual Insurance Co., 3.85%*,
12/15/98, (LOC: First of
America)........................ 2,060,000
4,500,000 Lenawee County Economic
Development Corp., Rima Mfg. Co
Project, (AMT), 3.80%*, 7/7/98
(LOC: Keybank).................. 4,500,000
445,000 Livonia County Economic
Development Corp., American
Community Mutual Insurance Co.,
3.80%*, 11/15/98 (LOC: First of
America)........................ 445,000
1,200,000 Marquette County Economic
Development Corp., Pioneer Labs,
Inc., (AMT), 4.00%*,7/7/98,
(LOC: NBD Bank)................. 1,200,000
1,800,000 Meridian, Hannah Technology,
3.70%*, 7/30/98 (LOC: Comerica
Bank)........................... 1,800,000
1,650,000 Michigan Housing Development
Authority, Laurel Valley,
3.55%*, 7/7/98 (LOC:
Wachovia)....................... 1,650,000
7,165,000 Michigan Municipal Bond
Authority, 4.25%, 7/31/98....... 7,169,634
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,670,000 Michigan Municipal Bond
Authority, Revenue Note, Series
1997C, 4.50%, 9/18/98........... $ 1,672,087
1,000,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Series B, 6.90%, 5/1/99
(Insured by FGIC)............... 1,026,023
7,300,000 Michigan Municipal Bond
Authority, Series 1997 B,
4.50%,.......................... 7,300,124
7,000,000 Michigan State, 4.50%,
9/30/98......................... 7,012,462
2,045,000 Michigan State Building
Authority, 4.50%, 10/15/98...... 2,048,911
1,000,000 Michigan State Building
Authority, 1997 Revenue, Series
I, 4.50%, 10/1/98............... 1,001,465
1,000,000 Michigan State Comprehensive
Transportation, 5.10%,
5/15/99......................... 1,011,361
2,100,000 Michigan State Comprehensive
Transportation, Series 1998-I,
6.70%, 7/31/98.................. 2,109,812
595,000 Michigan State Hospital Finance
Authority Revenue, Mercy Health
Services, 5.00%, 8/15/98........ 595,748
2,600,000 Michigan State Hospital Finance
Authority, St. Mary's Hospital
of Livonia, Series A, 3.50%*,
7/7/98, (LOC: Comerica Bank).... 2,600,000
1,500,000 Michigan State Housing
Development Authority, Limited
Obligation Revenue, Pine Ridge,
3.55%*, 7/7/98, (LOC:
Wachovia)....................... 1,500,000
3,300,000 Michigan State Job Development
Authority, BASF Wyandotte,
3.45%*, 7/7/98 (LOC: Credit
Suisse)......................... 3,300,000
3,000,000 Michigan State Strategic Fund,
Van Andel Research Project,
3.60%*, 7/7/98 (LOC: National
Australia Bank)................. 3,000,000
2,700,000 Michigan State Strategic Fund,
AACOA Extrusions, Inc., (AMT),
3.65%*, 7/7/98, (LOC: NBD
Bank)........................... 2,700,000
2,510,000 Michigan State Strategic Fund,
Atmosphere Annealing, (AMT),
3.75%*, 7/7/98 (LOC: First of
America)........................ 2,510,000
1,160,000 Michigan State Strategic Fund,
B.K. Hardwoods, (AMT), 3.70%*,
7/7/98, (LOC: Huntington Bank).. 1,160,000
4,345,000 Michigan State Strategic Fund,
Banks Hardwoods, Inc., (AMT),
3.70%*, 7/7/98 (LOC: Bank One).. 4,345,000
2,000,000 Michigan State Strategic Fund,
Besser International Sales Co
Project, (AMT), 3.65%*, 7/7/98
(LOC: NBD Bank)................. 2,000,000
</TABLE>
Continued
93
<PAGE> 112
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$3,000,000 Michigan State Strategic Fund,
Bloomfield Valley Properties,
3.70%*, 10/1/98, (LOC: Charter
One)............................ $ 3,000,000
200,000 Michigan State Strategic Fund,
Bloomfield Valley Properties,
3.70%*, 10/1/98, (LOC: Charter
One)............................ 200,000
1,500,000 Michigan State Strategic Fund,
C-1, (AMT), 4.00%*, 7/7/98,
(LOC: Comerica Bank)............ 1,500,000
1,000,000 Michigan State Strategic Fund,
C-Tec Inc. Project, (AMT),
3.65%*, 7/7/98 (LOC: Suntrust
Bank)........................... 1,000,000
2,600,000 Michigan State Strategic Fund,
CEC Products Co. Inc. Project,
(AMT), 3.75%*, 7/7/98 (LOC:
Comerica Bank).................. 2,600,000
4,000,000 Michigan State Strategic Fund,
Creative Foam Corp. Project,
(AMT), 3.65%*, 7/7/98 (LOC: NBD
Bank)........................... 4,000,000
5,000,000 Michigan State Strategic Fund,
Dawnbreakers LLC, (AMT), 3.75%*,
7/7/98 (LOC: National City
Bank)........................... 5,000,000
2,500,000 Michigan State Strategic Fund,
Delta Containers, Inc. Project,
(AMT), 3.65%*, 7/7/98 (LOC: NBD
Bank)........................... 2,500,000
4,000,000 Michigan State Strategic Fund,
Detroit Edison, 4.10%*, 7/1/98
(LOC Barclays).................. 4,000,000
2,500,000 Michigan State Strategic Fund,
Donnelly Corp., Series B, (AMT),
3.90%*, 10/1/98 (LOC: Dresdner
Bank)........................... 2,500,000
5,000,000 Michigan State Strategic Fund,
Dow Chemical Co. Project, (AMT),
4.10%*, 7/1/98.................. 5,000,000
1,275,000 Michigan State Strategic Fund,
Enviromental Powder Co., (AMT),
3.70%*, 7/7/98 (LOC: Michigan
National Bank).................. 1,275,000
1,000,000 Michigan State Strategic Fund,
Equad Project, (AMT), 3.75%*,
7/7/98, (LOC: National City
Bank)........................... 1,000,000
2,000,000 Michigan State Strategic Fund,
Genesee Packaging Inc. Project,
(AMT), 3.70%*, 7/7/98 (LOC:
Citizens Banking Corp.)......... 2,000,000
1,500,000 Michigan State Strategic Fund,
Gollin Block & Supply Co.,
(AMT), 4.00%*, 7/7/98 (LOC:
Northern Trust)................. 1,500,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,510,000 Michigan State Strategic Fund,
Hamilton Industrial Products
Inc. Project, (AMT), 3.75%*,
7/7/98 (LOC: National Australia
Bank)........................... $ 1,510,000
2,000,000 Michigan State Strategic Fund,
I.V.C. Industrial Coatings,
Inc., (AMT), 3.70%*, 7/7/98
(LOC: Bank One)................. 2,000,000
1,700,000 Michigan State Strategic Fund,
Industrial Development, Kinder
Care, 3.70%*, 7/7/98 (LOC: Chase
Manhattan Bank)................. 1,700,000
190,000 Michigan State Strategic Fund,
Kazoo, Inc. Project, (AMT),
3.80%*, 9/15/98 (LOC: First of
America)........................ 190,000
3,005,000 Michigan State Strategic Fund,
Kerkstra Precast Project (AMT),
3.70%*, 7/7/98 (LOC: Huntington
Bank)........................... 3,005,000
1,500,000 Michigan State Strategic Fund,
Kerkstra, (AMT), 3.70%*, 7/7/98
(LOC: Huntington Bank).......... 1,500,000
630,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Tawas Bay Associates Project
(AMT), 3.80%*, 12/1/98 (LOC:
First of America)............... 630,000
1,350,000 Michigan State Strategic Fund,
Limited Obligation Revenue, John
A. Biewer Co. Inc. Project,
(AMT), 3.75%*, 9/1/98, (LOC:
National Australia Bank)........ 1,350,000
1,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Autocam Corp., (AMT), 3.70%*,
7/7/98 (LOC: Comerica Bank)..... 1,000,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Cincinnati Millacron, (AMT)
3.75%*, 7/7/98 (LOC: PNC
Bank)........................... 2,500,000
1,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Dickinson Press, Inc. Project,
(AMT) 3.70%*, 7/7/98 (LOC:
Huntington Bank)................ 1,000,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Donnelly Corp., (AMT) 3.65%*,
7/7/98 (LOC: Dresdner Bank)..... 2,500,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Eclipse Mold (AMT), 3.65%*,
7/7/98 (LOC: NBD Bank).......... 2,000,000
</TABLE>
Continued
94
<PAGE> 113
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$4,800,000 Michigan State Strategic Fund,
Limited Obligation Revenue, H.P.
Pelzer, Inc. Project, (AMT)
3.65%*, 7/7/98 (LOC: NBD
Bank)........................... $ 4,800,000
4,800,000 Michigan State Strategic Fund,
Limited Obligation Revenue, JB
Labs, Inc., (AMT) 3.70%*, 7/7/98
(LOC: Huntington Bank).......... 4,800,000
940,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Kay
Screen Printing, (AMT) 3.90%*,
7/7/98 (LOC: Comerica Bank)..... 940,000
185,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Kay
Screening (AMT), 3.90%*, 7/7/98
(LOC: Comerica Bank)............ 185,000
1,400,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Knight Industries, (AMT),
3.65%*, 7/7/98, (LOC: NBD
Bank)........................... 1,400,000
3,025,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Midbrook Products, Inc. Project,
(AMT) 3.70%*, 7/7/98 (LOC:
Comerica Bank).................. 3,025,000
715,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Patten Monument, (AMT) 3.70%*,
7/7/98 (LOC: Huntington Bank)... 715,000
1,600,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Pilot Industries, (AMT) 3.80%*,
7/7/98 (LOC: NBD Bank).......... 1,600,000
915,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Stephenson Land, (AMT) 3.70%*,
7/7/98 (LOC: Comerica Bank)..... 915,000
475,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Tom
Miller, Inc., (AMT) 3.65%*,
7/7/98 (LOC: First Union)....... 475,000
4,295,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
United Fixtures, (AMT) 3.70%*,
7/7/98 (LOC: Bankers Trust)..... 4,295,000
1,785,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Wayne, Disposal Oakland Project,
(AMT), 3.70%*, 7/7/98 (LOC:
Comerica Bank).................. 1,785,000
905,000 Michigan State Strategic Fund,
Molmec, Inc. (AMT), 3.75%*,
7/7/98, (LOC: Comerica Bank).... 905,000
1,000,000 Michigan State Strategic Fund,
Northern Pure Ice Co. Project,
(AMT), 4.00%*, 7/7/98 (LOC:
National Australia Bank)........ 1,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,000,000 Michigan State Strategic Fund,
NSF International Project,
Series 1997B, 4.00%*, 7/7/98,
(LOC: National City)............ $ 1,000,000
1,685,000 Michigan State Strategic Fund,
Omni Technical Services, Inc.,
(AMT) 3.75%*, 7/7/98 (LOC:
National City).................. 1,685,000
945,000 Michigan State Strategic Fund,
Plascore, Inc., (AMT), 3.70%*,
7/7/98, (LOC: Huntington Bank).. 945,000
3,100,000 Michigan State Strategic Fund,
Rochester Gear Project, (AMT),
3.65%*, 7/7/98, (LOC: Comerica
Bank)........................... 3,100,000
11,900,000 Michigan State Strategic Fund,
Solid Waste Disposal, Grayling
Generating Project, (AMT)
3.60%*, 7/7/98 (LOC: Barclays
Bank)........................... 11,900,001
2,200,000 Michigan State Strategic Fund,
Sunrise Windows Ltd. Project,
(AMT), 3.80%*, 7/7/98 (LOC:
Keybank)........................ 2,200,000
800,000 Michigan State Strategic Fund,
Ultimate Laser Inc. Project,
(AMT), 3.65%*, 7/7/98, (LOC: NBD
Bank)........................... 800,000
1,900,000 Michigan State Strategic Fund,
Uni Mist, Inc. Project, (AMT),
3.65%*, 7/7/98, (LOC: NBD
Bank)........................... 1,900,000
2,800,000 Michigan State Strategic Fund,
United Waste System (AMT),
3.70%*, 7/7/98, (LOC: Bank of
America)........................ 2,800,000
1,075,000 Michigan State Strategic Fund,
Wright -- Technology, Inc.,
Series 1997, (AMT), 3.75%*,
7/7/98 (LOC: National City)..... 1,075,000
2,000,000 Michigan State Strategic Fund,
Xibitz Inc. Project, (AMT),
3.65%*, 7/7/98 (LOC: NBD
Bank)........................... 2,000,000
10,000,000 Midland County Economic
Development Corp., Limited
Obligation Revenue, Dow Chemical
Project, Series A, (AMT), Series
A, 4.30%*, 7/1/98............... 10,000,000
3,000,000 Oakland County Economic
Development Corp., Cranbrook
Community, 3.55%*, 7/7/98 (LOC:
Comerica Bank).................. 3,000,000
675,000 Oakland County Economic
Development Corp., Orchard Maple
Project, 3.75%*, 11/15/98 (LOC:
National City Bank)............. 675,000
</TABLE>
Continued
95
<PAGE> 114
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 310,000 Rochester Hills Economic
Development Corp., BRG Assoc.,
4.00%*, 12/1/98 (LOC: Comerica
Bank)........................... $ 310,000
825,000 Saginaw Township School
Refunding, QSBLF, 3.90%,
12/1/98......................... 825,000
1,200,000 Scio Township Economic
Development Corp., Daycroft
School Project, 3.85%*, 7/7/98,
(LOC: National Australia
Bank)........................... 1,200,000
1,170,000 St. Clair Shores, Michigan
Education, Borman's, Inc.
Project, (AMT), 3.85%*, 10/15/98
(LOC: Michigan National Bank)... 1,170,000
760,000 University Of Michigan Hospital
Revenue, 4.00%, 12/1/98......... 760,611
5,000,000 University Of Michigan Hospital
Revenue, 3.80%*, 7/1/98......... 5,000,000
1,205,000 Warren Economic Development
Corp. (Cross Country Inn),
(AMT), 3.75%*, 11/1/98 (LOC:
Huntington Bank)................ 1,205,000
1,740,000 Warren Economic Development
Corp., CMX Corp. Project, (AMT),
3.80%*, 9/15/98 (LOC: First of
America)........................ 1,740,000
550,000 Warren Economic Development
Corp., Limited Obligation
Revenue, Elias Brothers, (AMT),
3.95%*, 12/1/98, (LOC: Comerica
Bank)........................... 550,000
4,510,000 Wayne County Airport, Detroit
Airport, Series A, (AMT),
3.60%*, 7/7/98 (LOC: Baerische
Landesbank)..................... 4,510,000
2,000,000 Whitmore Lake Michigan Public
Schools, 4.50%, 6/30/99......... 2,009,560
------------
231,960,937
------------
PUERTO RICO -- 5.6%
4,500,000 Commonwealth of Puerto Rico, Tax
& Revenue Anticipation Notes,
Series A, 4.50%, 7/30/98........ 4,502,902
2,750,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Reynolds Metals, 3.80%*, 9/1/98
(LOC: ABN/Amro)................. 2,750,000
3,000,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Abbott Labs Project, 3.55%*,
3/1/99.......................... 3,000,000
500,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Reynolds Metals, 3.80%*, 9/1/98
(LOC: ABN/Amro)................. 500,082
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,695,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Abbott Labs Project, 3.55%*,
3/1/99.......................... $ 1,695,000
4,200,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Merck, 4.00%*, 12/1/98.......... 4,200,000
------------
16,647,984
------------
TOTAL MUNICIPAL BONDS........... 248,608,921
------------
(Amortized Cost $248,608,921)
TAX FREE COMMERCIAL PAPER -- 15.1%
MICHIGAN -- 15.1%
1,100,000 Cornell Township Economic
Development Corp., Industrial
Development Revenue, Mead
Escanaba Paper Co., 3.75%*,
7/9/98 (LOC: Credit Suisse)..... 1,100,000
2,900,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series A,
3.60%*, 7/15/98 (LOC: Morgan
Guaranty)....................... 2,900,000
3,000,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series A,
3.75%*, 7/16/98 (LOC: Morgan
Guaranty)....................... 3,000,000
3,000,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., 3.55%*,
7/16/98, (LOC: Union Bank of
Switzerland).................... 3,000,000
3,840,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., 3.15%*,
8/11/98, (LOC: Union Bank of
Switzerland).................... 3,8400,000
450,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., 3.60%*,
8/11/98, (LOC: Union Bank of
Switzerland).................... 450,000
</TABLE>
Continued
96
<PAGE> 115
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
TAX FREE COMMERCIAL PAPER (CONTINUED)
MICHIGAN (CONTINUED)
9,525,000 Michigan State Building
Authority, 3.70%, 10/1/98,
(LOC:........................... $ 9,525,000
8,050,000 Michigan State Housing
Development Authority,
Multifamily, Series A, 3.75%*,
8/20/98, (LOC: Helaba).......... 8,050,000
12,780,000 Michigan State Underground Tank
Storage, 3.70%, 8/10/98, (LOC:
CIBC)........................... 12,780,000
------------
44,645,000
------------
TOTAL TAX FREE COMMERCIAL
PAPER........................... 44,645,000
------------
(Amortized Cost $44,645,000)
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
INVESTMENT COMPANIES -- 1.4%
3,315,062 Dreyfus Tax Exempt Money Market
Fund............................ $ 3,315,062
791,540 Federated Tax Exempt Money
Market.......................... 791,540
------------
TOTAL INVESTMENT COMPANIES...... 4,106,602
------------
(Amortized Cost $4,106,602)
TOTAL INVESTMENTS--100.3%................... 297,360,523
(Amortized Cost $297,360,523) (a)
LIABILITIES IN EXCESS OF OTHER ASSETS
-- (0.3)%.................................. (1,001,160)
------------
TOTAL NET ASSETS -- 100.0%.................. $296,359,363
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
QSBLF Qualified School Board Lending Fund
STP Short Term Put
</TABLE>
See Notes to Financial Statements.
97
<PAGE> 116
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
The Kent Funds (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 80.3%
FEDERAL FARM CREDIT BANK -- 7.5%
$3,550,000 5.45%, 12/14/98.................. $ 3,546,281
4,000,000 5.25%, 3/5/99.................... 3,855,917
-----------
7,402,198
-----------
FEDERAL HOME LOAN BANK -- 22.8%
5,000,000 5.55%, 7/1/98.................... 4,999,999
3,000,000 5.29%, 7/29/98................... 2,987,657
4,000,000 5.44%*, 7/30/98.................. 4,000,000
2,654,000 5.32%, 9/9/98.................... 2,626,546
3,000,000 5.25%, 2/26/99................... 2,895,000
5,000,000 5.50%, 3/26/99................... 4,997,182
-----------
22,506,384
-----------
FEDERAL HOME LOAN MORTGAGE CORP. -- 25.4%
4,000,000 5.40%, 7/2/98.................... 3,999,400
2,167,000 5.40%, 7/10/98................... 2,164,075
3,000,000 5.42%, 7/17/98................... 2,992,773
1,670,000 5.45%, 7/20/98................... 1,665,196
4,000,000 5.69%, 8/21/98................... 3,999,458
2,311,000 5.34%, 8/21/98................... 2,293,517
3,000,000 5.43%, 9/2/98.................... 2,971,493
5,000,000 5.33%, 9/18/98................... 4,941,573
-----------
25,027,485
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 24.6%
3,000,000 5.33%, 7/7/98.................... 2,997,335
3,000,000 5.26%, 7/14/98................... 2,994,302
1,062,000 5.34%, 7/30/98................... 1,057,432
5,000,000 5.44%, 8/28/98................... 4,956,178
3,352,000 5.425%, 9/4/98................... 3,319,167
4,000,000 5.61%*, 11/3/98.................. 4,000,000
5,000,000 5.50%*, 2/4/99................... 4,999,999
-----------
24,324,413
-----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS...................... 79,260,480
-----------
(Amortized Cost $79,260,480)
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
REPURCHASE AGREEMENTS -- 12.1%
$ 4,000,000 Donaldson, Lufkin & Jenrette
5.50%, dated 6/30/98, due
7/1/98 with a maturity value of
4,000,611 (collateralized by
$4,020,000 FNMA, MTN, 6.59%,
3/27/08, market value
$4,083,808).................... $ 4,000,000
4,000,000 HSBC 5.50%, dated 6/30/98, due
7/1/98 with a maturity value of
$4,000,611, (collateralized by
$2,940,000 U.S. Treasury Notes,
8.875%, 8/15/17 market value
$4,186,782).................... 4,000,000
4,000,000 Merrill Lynch 5.65%, dated
6/30/98, due 7/1/98 with a
maturity value of $4,000,628
(collateralized by $4,010,000
FNMA MTN, 6.58%, 12/17/07
market value $4,083,205)....... 4,000,000
------------
TOTAL REPURCHASE AGREEMENTS.... 12,000,000
------------
(Amortized Cost $12,000,000)
INVESTMENT COMPANIES -- 7.7%
4,090,082 Dreyfus Cash Management Money
Market Fund.................... 4,090,082
3,522,978 Federated Government
Obligations Money Market Fund.. 3,522,978
------------
TOTAL INVESTMENT COMPANIES..... 7,613,060
------------
(Amortized Cost $7,613,060)
TOTAL INVESTMENTS -- 100.1%................ 98,873,540
(Amortized Cost $98,873,540)(a)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- 0.1%.............................. (80,780)
------------
TOTAL NET ASSETS -- 100.0%.................. $ 98,792,760
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
* Variable rate security. Rate presented represents rate in effect at June 30,
1998. Maturity date reflects next rate change date.
See Notes to Financial Statements.
98
<PAGE> 117
STATEMENTS OF ASSETS AND LIABILITIES
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost.................................... $594,708,496 $642,478,988 $453,714,204 $455,042,297
Net unrealized appreciation (depreciation)............. 204,801,433 167,754,523 95,161,014 286,343,012
------------ ------------ ------------ ------------
Total investments at value............................. 799,509,929 810,233,511 548,875,218 741,385,309
Foreign currency at value (cost $0; $0; $1,028,482; $0,
respectively).......................................... -- -- 1,056,556 --
Receivable for investments sold.......................... 33,880 -- -- 146,432
Receivable for capital shares issued..................... 46,764 2,732 936 11,971
Interest and dividends receivable........................ 885,569 524,065 2,349,650 779,250
Tax reclaim receivable................................... -- -- 1,134,982 --
Prepaid expenses......................................... 23,086 20,185 20,518 28,196
------------ ------------ ------------ ------------
Total Assets........................................... 800,499,228 810,780,493 553,437,860 742,351,158
------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased........................ -- 9,557,871 219,852 --
Payable for capital shares redeemed...................... 3,445 -- -- 26,113
Foreign withholding taxes payable........................ -- -- 374,294 --
Net payable for variation margin on futures contracts.... 144,520 89,380 -- 76,790
Cash overdraft........................................... -- 1,466 -- --
Payable to adviser....................................... 451,059 444,150 334,302 148,499
Payable to administrator................................. 19,810 19,614 13,464 12,247
Payable to transfer agent................................ 19,990 15,375 16,030 3,417
Payable to distributor (Investment Shares)............... 9,327 5,239 2,347 7,264
Payable to custodian..................................... -- -- 65,540 --
Accrued expenses and other liabilities................... 37,239 40,645 23,782 39,473
------------ ------------ ------------ ------------
Total Liabilities...................................... 685,390 10,173,740 1,049,611 313,803
------------ ------------ ------------ ------------
NET ASSETS................................................. $799,813,838 $800,606,753 $552,388,249 $742,037,355
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital.......................................... $574,976,275 $579,661,898 $415,860,651 $455,156,107
Accumulated undistributed (distributions in excess of)
net investment income.................................. (738,085) 33,217 2,022,792 (4,878)
Accumulated undistributed net realized gains (losses) on
investments, foreign currency and futures contracts
sold................................................... 20,530,551 52,880,609 39,323,374 247,685
Net unrealized appreciation (depreciation) of
investments, foreign currency, forward foreign currency
exchange contracts and futures contracts............... 205,045,097 168,031,029 95,181,432 286,638,441
------------ ------------ ------------ ------------
TOTAL NET ASSETS........................................... $799,813,838 $800,606,753 $552,388,249 $742,037,355
============ ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets............................................... $753,308,043 $774,504,790 $540,202,587 $705,841,136
Shares Outstanding....................................... 44,905,451 42,376,692 31,732,755 31,564,788
Net Asset Value, offering and redemption price per
share.................................................. $ 16.78 $ 18.28 $ 17.02 $ 22.36
============ ============ ============ ============
INVESTMENT SHARES:
Net Assets............................................... $ 46,505,795 $ 26,101,963 $ 12,185,662 $ 36,196,218
Shares Outstanding....................................... 2,794,598 1,434,137 721,470 1,618,064
Net Asset Value, offering and redemption price per
share.................................................. $ 16.64 $ 18.20 $ 16.89 $ 22.37
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
99
<PAGE> 118
STATEMENTS OF ASSETS AND LIABILITIES
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Investments at cost..................................... $132,827,916 $754,630,464 $247,669,161
Net unrealized appreciation (depreciation).............. 888,777 10,119,282 7,232,414
------------ ------------ ------------
Total investments at value.............................. 133,716,693 764,749,746 254,901,575
Receivable for investments sold........................... -- 5,148,250 --
Receivable for capital shares issued...................... 8,299 8 3,500
Interest and dividends receivable......................... 2,247,340 11,214,711 4,049,071
Prepaid expenses.......................................... 24,647 15,905 22,825
------------ ------------ ------------
Total Assets............................................ 135,996,979 781,128,620 258,976,971
------------ ------------ ------------
LIABILITIES:
Payable for investments purchased......................... -- 5,254,887 --
Payable for capital shares redeemed....................... 48,384 21,079 535
Payable to adviser........................................ 56,527 358,292 125,828
Payable to administrator.................................. 3,362 19,283 6,433
Payable to transfer agent................................. 7,245 22,694 2,963
Payable to distributor (Investment Shares)................ 829 1,955 1,816
Payable to custodian...................................... 409 557 346
Accrued expenses and other liabilities.................... 5,276 28,816 9,271
------------ ------------ ------------
Total Liabilities....................................... 122,032 5,707,563 147,192
------------ ------------ ------------
NET ASSETS.................................................. $135,874,947 $775,421,057 $258,829,779
============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital........................................... $141,916,898 $772,500,514 $249,168,529
Accumulated undistributed (distributions in excess of) net
investment income....................................... 12,220 17,605 45,943
Accumulated undistributed net realized gains (losses) on
investments sold........................................ (6,942,948) (7,216,345) 2,382,893
Net unrealized appreciation (depreciation) of
investments............................................. 888,777 10,119,283 7,232,414
------------ ------------ ------------
TOTAL NET ASSETS............................................ $135,874,947 $775,421,057 $258,829,779
============ ============ ============
INSTITUTIONAL SHARES:
Net Assets................................................ $129,226,590 $765,401,799 $249,546,319
Shares Outstanding........................................ 13,277,762 76,942,692 24,032,308
Net Asset Value, offering and redemption price per
share................................................... $ 9.73 $ 9.95 $ 10.38
============ ============ ============
INVESTMENT SHARES:
Net Assets................................................ $ 6,648,357 $ 10,019,257 $ 9,283,461
Shares Outstanding........................................ 683,820 1,004,960 895,178
Net Asset Value, offering and redemption price per
share................................................... $ 9.72 $ 9.97 $ 10.37
============ ============ ============
</TABLE>
See Notes to Financial Statements
100
<PAGE> 119
STATEMENTS OF ASSETS AND LIABILITIES
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MICHIGAN
LIMITED TERM INTERMEDIATE TAX-FREE MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost..................................... $36,294,965 $269,255,252 $119,349,777 $122,864,609
Net unrealized appreciation (depreciation).............. 653,467 15,194,834 7,088,501 3,124,599
----------- ------------ ------------ ------------
Total investments at value.............................. 36,948,432 284,450,086 126,438,278 125,989,208
Receivable for investments sold........................... -- -- 5,638,880 --
Interest and dividends receivable......................... 566,035 4,431,968 1,730,912 1,615,980
Unamortized organizational costs.......................... -- -- 348 --
Prepaid expenses.......................................... 2,971 7,976 25,013 8,065
----------- ------------ ------------ ------------
Total Assets............................................ 37,517,438 288,890,030 133,833,431 127,613,253
----------- ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased......................... -- -- 6,454,070 1,495,260
Payable for capital shares redeemed....................... 2,000 -- 150 --
Payable to adviser........................................ 14,106 119,194 57,679 47,342
Payable to administrator.................................. 930 7,167 3,161 3,133
Payable to transfer agent................................. 1,205 4,200 -- 3,902
Payable to distributor (Investment Shares)................ 40 776 406 579
Accrued expenses and other liabilities.................... 1,582 8,822 4,852 13,403
----------- ------------ ------------ ------------
Total Liabilities....................................... 19,863 140,159 6,520,318 1,563,619
----------- ------------ ------------ ------------
NET ASSETS.................................................. $37,497,575 $288,749,871 $127,313,113 $126,049,634
=========== ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital........................................... $36,840,862 $273,360,177 $120,133,633 $123,034,931
Accumulated undistributed (distributions in excess of) net
investment income....................................... 3,966 61,464 8,106 10,896
Accumulated undistributed net realized gains (losses) on
investments sold........................................ (720) 133,396 82,874 (120,793)
Net unrealized appreciation (depreciation) of
investments............................................. 653,467 15,194,834 7,088,501 3,124,599
----------- ------------ ------------ ------------
TOTAL NET ASSETS............................................ $37,497,575 $288,749,871 $127,313,114 $126,049,633
=========== ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets................................................ $37,205,184 $284,980,217 $125,280,385 $121,374,091
Shares Outstanding........................................ 3,657,786 26,746,405 11,788,179 11,906,668
Net Asset Value, offering and redemption price per
share................................................... $ 10.17 $ 10.66 $ 10.63 $ 10.19
=========== ============ ============ ============
INVESTMENT SHARES:
Net Assets................................................ $ 292,391 $ 3,769,653 $ 2,032,728 $ 4,675,544
Shares Outstanding........................................ 28,633 353,745 190,840 459,165
Net Asset Value, offering and redemption price per
share................................................... $ 10.21 $ 10.66 $ 10.65 $ 10.18
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements
101
<PAGE> 120
STATEMENTS OF ASSETS AND LIABILITIES
The Kent Funds JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MICHIGAN
MUNICIPAL GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Investments in securities at amortized cost............. $471,729,166 $297,380,509 $86,873,540
Repurchase agreements (cost $42,000,000; $0; and
$12,000,000, respectively)............................ 42,000,000 -- 12,000,000
------------ ------------ -----------
Total investments at amortized cost..................... 513,729,166 297,380,509 98,873,540
Cash...................................................... -- 63,961 --
Interest and dividends receivable......................... 4,473,328 2,030,350 365,864
Prepaid expenses.......................................... 15,870 2,458 20,548
------------ ------------ -----------
Total Assets............................................ 518,218,364 299,477,278 99,259,952
------------ ------------ -----------
LIABILITIES:
Dividends payable......................................... 2,245,640 787,968 440,869
Payable for investments purchased......................... -- 2,209,560 --
Cash overdraft............................................ 48,572 -- --
Payable to adviser........................................ 176,629 98,655 17,178
Payable to administrator.................................. 8,002 4,060 1,072
Payable to transfer agent................................. 6,228 3,199 4,556
Accrued expenses and other liabilities.................... 12,110 14,473 3,517
------------ ------------ -----------
Total Liabilities....................................... 2,497,181 3,117,915 467,192
------------ ------------ -----------
NET ASSETS.................................................. $515,721,183 $296,359,363 $98,792,760
============ ============ ===========
NET ASSETS CONSIST OF:
Paid-in capital........................................... $515,710,154 $296,369,178 $98,790,546
Accumulated undistributed (distributions in excess of )net
investment income....................................... 13,072 781 2,214
Accumulated undistributed net realized gains (losses) on
investments sold........................................ (2,043) (10,596) --
------------ ------------ -----------
TOTAL NET ASSETS............................................ $515,721,183 $296,359,363 $98,792,760
============ ============ ===========
INSTITUTIONAL SHARES:
Net Assets................................................ $512,831,244 $295,970,792 $98,758,508
Shares Outstanding........................................ 512,825,420 295,958,311 98,758,504
Net Asset Value, offering and redemption price per
share................................................... $ 1.00 $ 1.00 $ 1.00
============ ============ ===========
INVESTMENT SHARES:
Net Assets................................................ $ 2,889,939 $ 388,571 $ 34,252
Shares Outstanding........................................ 2,889,928 388,549 34,252
Net Asset Value, offering and redemption price per
share................................................... $ 1.00 $ 1.00 $ 1.00
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
102
<PAGE> 121
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
The Kent Funds (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................................... $ 6,611,585 $ 4,103,028 $ 7,590,259 $ 5,269,655
Interest........................................... 2,433 31,525 113,276 925
Less: Net foreign taxes withheld................... (47,181) (1,391) (681,459) (54,262)
------------ ------------ ----------- ------------
Total Investment Income.......................... 6,566,837 4,133,162 7,022,076 5,216,318
------------ ------------ ----------- ------------
EXPENSES:
Investment advisory fees........................... 2,694,142 2,717,125 2,013,699 1,019,677
Administration fees................................ 696,608 702,563 485,481 614,693
Fund accounting fees............................... 64,105 74,075 59,967 61,899
Custodian fees..................................... 4,061 18,839 177,567 10,551
Audit fees......................................... 3,601 4,735 3,475 4,185
Legal fees......................................... 4,888 4,990 3,441 4,420
Transfer agent fees................................ 85,875 86,244 68,257 76,747
Trustees' fees and expenses........................ 3,282 2,545 2,117 2,490
Distribution fees (Investment Shares).............. 52,068 31,228 13,511 40,957
Printing expenses.................................. 13,191 12,459 8,578 11,455
Registration fees.................................. 31,782 26,279 28,138 39,610
Other expenses..................................... 6,562 6,775 4,636 5,495
------------ ------------ ----------- ------------
Total expenses before waivers.................... 3,660,165 3,687,857 2,868,867 1,892,179
Less: waivers.................................... (38,486) (38,814) (26,848) (424,777)
------------ ------------ ----------- ------------
Net Expenses..................................... 3,621,679 3,649,043 2,842,019 1,467,402
------------ ------------ ----------- ------------
NET INVESTMENT INCOME................................ 2,945,158 484,119 4,180,057 3,748,916
------------ ------------ ----------- ------------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS:
Net realized gains/(losses) on investments, foreign
currency, and foreign currency contracts......... 19,400,029 51,316,112 39,479,491 635,885
Net realized gains/(losses) on futures contracts... 1,449,280 1,843,230 -- 569,878
Net change in unrealized appreciation/
(depreciation) of futures contracts.............. 243,665 276,505 -- 295,430
Net change in unrealized appreciation/
(depreciation) of investments, foreign currency,
and foreign currency contracts.................. 94,679,191 (20,315,685) 27,986,888 103,663,727
------------ ------------ ----------- ------------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS........................................ 115,772,165 33,120,162 67,466,379 105,164,920
------------ ------------ ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $118,717,323 $ 33,604,281 $71,646,436 $108,913,836
============ ============ =========== ============
</TABLE>
See Notes to Financial Statements
103
<PAGE> 122
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
The Kent Funds (UNAUDITED)
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
---------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $ 4,424,087 $25,433,905 $ 8,587,366
Dividends................................................. 202,936 567,890 266,855
----------- ----------- -----------
Total Investment Income................................. 4,627,023 26,001,795 8,854,221
----------- ----------- -----------
EXPENSES:
Investment advisory fees.................................. 351,710 2,162,409 731,393
Administration fees....................................... 127,297 711,426 220,524
Fund accounting fees...................................... 12,764 63,373 21,633
Custodian fees............................................ 323 774 430
Audit fees................................................ 4,574 7,567 4,627
Legal fees................................................ 963 5,152 1,465
Transfer agent fees....................................... 27,755 44,016 22,387
Trustees' fees and expenses............................... 509 2,489 891
Distribution fees (Investment Shares)..................... 9,024 10,262 9,327
Printing expenses......................................... 1,244 12,746 2,414
Registration fees......................................... 7,753 12,767 7,916
Other expenses............................................ 37 7,488 2,470
----------- ----------- -----------
Total expenses before waivers........................... 543,953 3,040,469 1,025,477
Less: waivers........................................... (10,643) (39,315) (12,189)
----------- ----------- -----------
Net Expenses............................................ 533,310 3,001,154 1,013,288
----------- ----------- -----------
NET INVESTMENT INCOME....................................... 4,093,713 23,000,641 7,840,933
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON INVESTMENTS:
Net realized gains/(losses) on investments sold........... (242,985) 3,214,146 2,373,749
Net change in unrealized appreciation/(depreciation) of
investments............................................. 101,666 261,946 (102,128)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON INVESTMENTS... (141,319) 3,476,092 2,271,621
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 3,952,394 $26,476,733 $10,112,554
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
104
<PAGE> 123
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
The Kent Funds (UNAUDITED)
<TABLE>
<CAPTION>
MICHIGAN
LIMITED TERM INTERMEDIATE TAX-FREE MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................. $ 847,422 $ 7,009,662 $3,043,289 $2,961,110
Dividends............................................ 15,131 90,759 49,305 37,789
---------- ----------- ---------- ----------
Total Investment Income............................ 862,553 7,100,421 3,092,594 2,998,899
---------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees............................. 84,418 709,192 337,287 286,284
Administration fees.................................. 33,945 256,634 110,955 115,113
Distribution fees (Investment Shares)................ 525 4,645 2,333 5,720
Fund accounting fees................................. 5,750 28,932 14,352 15,799
Custodian fees....................................... 224 962 255 872
Audit fees........................................... 1,179 6,734 2,228 4,256
Legal fees........................................... 243 1,779 787 1,551
Transfer agent fees.................................. 15,024 19,996 10,803 17,670
Trustees' fees and expenses.......................... 197 949 419 526
Amortization of organization costs................... -- -- 2,200 --
Printing expenses.................................... 662 7,790 2,381 2,082
Registration fees.................................... 566 9,848 5,188 1,945
Other expenses....................................... 564 739 667 120
---------- ----------- ---------- ----------
Total expenses before waivers...................... 143,297 1,048,200 489,855 451,938
Less: waivers...................................... (2,086) (14,183) (6,132) (8,650)
---------- ----------- ---------- ----------
Net Expenses....................................... 141,211 1,034,017 483,723 443,288
---------- ----------- ---------- ----------
NET INVESTMENT INCOME.................................. 721,342 6,066,404 2,608,871 2,555,611
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS:
Net realized gains/(losses) on investments sold...... (2,861) 151,942 84,606 (51,863)
Net change in unrealized appreciation/(depreciation)
of investments..................................... (79,816) (902,594) (269,337) (217,623)
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS/(LOSSES) ON
INVESTMENTS:......................................... (82,677) (750,652) (184,731) (269,486)
---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 638,665 $ 5,315,752 $2,424,140 $2,286,125
========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements
105
<PAGE> 124
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
The Kent Funds (UNAUDITED)
<TABLE>
<CAPTION>
MICHIGAN
MUNICIPAL GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $14,160,573 $5,503,729 $2,744,115
Dividends................................................. 506,665 147,701 183,892
----------- ---------- ----------
Total Investment Income................................. 14,667,238 5,651,430 2,928,007
----------- ---------- ----------
EXPENSES:
Investment advisory fees.................................. 1,039,288 623,452 211,788
Administration fees....................................... 470,082 280,669 96,053
Fund accounting fees...................................... 40,809 25,363 8,787
Custodian fees............................................ 3,534 129 1,807
Audit fees................................................ 5,810 3,532 1,441
Legal fees................................................ 3,368 2,122 654
Transfer agent fees....................................... 37,748 18,039 20,190
Trustees' fees and expenses............................... 1,639 1,389 415
Printing expenses......................................... 14,841 6,751 876
Registration fees......................................... 15,300 20,180 18,995
Other expenses............................................ 4,966 1,826 947
----------- ---------- ----------
Total expenses before waivers........................... 1,637,385 983,452 361,953
Less: waivers........................................... (220,830) (147,491) (164,975)
----------- ---------- ----------
Net Expenses............................................ 1,416,555 835,961 196,978
----------- ---------- ----------
NET INVESTMENT INCOME....................................... 13,250,683 4,815,469 2,731,029
----------- ---------- ----------
NET REALIZED GAINS/(LOSSES) ON INVESTMENTS:................. -- 1,873 --
----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $13,250,683 $4,817,342 $2,731,029
=========== ========== ==========
</TABLE>
See Notes to Financial Statements.
106
<PAGE> 125
The Kent Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD.................. $733,315,634 $515,920,253 $742,781,688 $ 558,516,596
------------ ------------ ------------ -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................ 2,945,158 10,415,521 484,119 1,548,638
Net realized gains (losses) on investments,
foreign currency, and foreign currency
contracts...................................... 19,400,029 111,932,563 51,316,112 78,087,896
Net realized gains (losses) on futures
contracts...................................... 1,449,280 (61,005) 1,843,230 524,810
Net change in unrealized appreciation/
depreciation of futures contracts.............. 243,665 275,070 276,505 227,785
Net change in unrealized appreciation/
depreciation of investments, foreign currency,
and foreign currency contracts................. 94,679,191 15,661,888 (20,315,685) 81,347,122
------------ ------------ ------------ -------------
Net increase in net assets resulting from
operations..................................... 118,717,323 138,224,037 33,604,281 161,736,251
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
INSTITUTIONAL:
Net investment income............................ (2,891,165) (10,051,899) (444,722) (1,572,242)
In excess of net investment income............... (685,173) -- -- (570,748)
Net realized gains on investments................ (53,299,154) (58,514,755) (36,791,276) (52,695,021)
------------ ------------ ------------ -------------
Total dividends and distributions --
Institutional Shares......................... (56,875,492) (68,566,654) (37,235,998) (54,838,011)
------------ ------------ ------------ -------------
INVESTMENT:
Net investment income............................ (104,002) (322,621) -- --
In excess of net investment income............... (52,912) -- -- (36,830)
Net realized gains on investments................ (3,026,738) (2,725,491) (1,225,423) (1,565,329)
In excess of net realized gains.................. (34,095) -- -- --
------------ ------------ ------------ -------------
Total dividends and distributions -- Investment
Shares....................................... (3,217,747) (3,048,112) (1,225,423) (1,602,159)
------------ ------------ ------------ -------------
Total dividends and distributions to
shareholders................................. (60,093,239) (71,614,766) (38,461,421) (56,440,170)
------------ ------------ ------------ -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...................... 83,677,799 269,087,243 117,500,991 216,183,011
Reinvestment of distributions.................... 28,454,307 33,077,724 19,428,888 28,070,255
Cost of shares redeemed.......................... (104,257,986) (151,378,857) (74,247,674) (165,284,255)
------------ ------------ ------------ -------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS..................................... 7,874,120 150,786,110 62,682,205 78,969,011
------------ ------------ ------------ -------------
Net increase (decrease) in net assets............ 66,498,204 217,395,381 57,825,065 184,265,092
------------ ------------ ------------ -------------
NET ASSETS AT END OF PERIOD........................ $799,813,838 $733,315,634 $800,606,753 $ 742,781,688
============ ============ ============ =============
</TABLE>
See Notes to Financial Statements
107
<PAGE> 126
The Kent Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD.................. $502,378,709 $396,597,865 $618,163,526 $ 253,362,463
------------ ------------ ------------ -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................ 4,180,057 3,728,587 3,748,916 6,100,887
Net realized gains (losses) on investments,
foreign currency, and foreign currency
contracts...................................... 39,479,491 2,742,836 635,885 1,138,162
Net realized gains (losses) on futures
contracts...................................... -- -- 569,878 1,370,043
Net change in unrealized appreciation/
depreciation of futures contracts.............. -- -- 295,430 120,014
Net change in unrealized appreciation/
depreciation of investments, foreign currency,
and foreign currency contracts................. 27,986,888 4,769,670 103,663,727 98,353,714
------------ ------------ ------------ -------------
Net increase in net assets resulting from
operations..................................... 71,646,436 11,241,093 108,913,836 107,082,820
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income............................ -- (3,055,002) (3,605,275) (5,884,290)
In excess of net investment income............... -- (1,831,420) -- (65,127)
Net realized gains on investments................ (95,553) (2,401,097) (277,770) (1,613,042)
In excess of net realized gains.................. -- (341,685) -- (585,460)
------------ ------------ ------------ -------------
Total dividends and distributions --
Institutional Shares......................... (95,553) (7,629,204) (3,883,045) (8,147,919)
------------ ------------ ------------ -------------
INVESTMENT:
Net investment income............................ -- (35,702) (135,943) (215,864)
In excess of net investment income............... -- (59,234) (7,854) (9,227)
Net realized gains on investments................ (1,983) (47,965) (14,200) (88,824)
In excess of net realized gains.................. -- (6,876) -- (11,017)
------------ ------------ ------------ -------------
Total dividends and distributions -- Investment
Shares....................................... (1,983) (149,777) (157,997) (324,932)
------------ ------------ ------------ -------------
Total dividends and distributions to
shareholders................................. (97,536) (7,778,981) (4,041,042) (8,472,851)
------------ ------------ ------------ -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...................... 56,978,331 193,400,718 94,349,805 339,198,444
Reinvestment of distributions.................... 45,260 3,565,223 3,308,354 6,673,196
Cost of shares redeemed.......................... (78,562,951) (94,647,209) (78,657,124) (79,680,546)
------------ ------------ ------------ -------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS..................................... (21,539,360) 102,318,732 19,001,035 266,191,094
------------ ------------ ------------ -------------
Net increase (decrease) in net assets............ 50,009,540 105,780,844 123,873,829 364,801,063
------------ ------------ ------------ -------------
NET ASSETS AT END OF PERIOD........................ $552,388,249 $502,378,709 $742,037,355 $ 618,163,526
============ ============ ============ =============
</TABLE>
See Notes to Financial Statements
108
<PAGE> 127
The Kent Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT TERM BOND FUND INTERMEDIATE BOND FUND INCOME FUND
----------------------------- ----------------------------- -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF
PERIOD.......................... $147,171,664 $237,096,910 $769,711,501 $776,722,838 $235,388,305 $242,781,715
------------ ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income........... 4,093,713 10,326,405 23,000,641 46,719,968 7,840,933 16,498,462
Net realized gains (losses) on
investments sold.............. (242,985) (1,502,731) 3,214,146 (3,309,390) 2,373,749 3,441,169
Net change in unrealized
appreciation/depreciation of
investments................... 101,666 1,638,919 261,946 15,305,110 (102,128) 5,214,704
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations..... 3,952,394 10,462,593 26,476,733 58,715,688 10,112,554 25,154,335
------------ ------------ ------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income........... (3,879,121) (10,203,409) (22,787,131) (46,492,693) (7,573,340) (16,298,443)
Net realized gains on
investments................... -- -- -- -- (279,136) (4,496,656)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions --
Institutional Shares........ (3,879,121) (10,203,409) (22,787,131) (46,492,693) (7,852,476) (20,795,099)
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT:
Net investment income........... (186,088) (230,620) (231,320) (400,310) (221,112) (236,638)
In excess of net investment
income........................ (19,414) -- (3,682) -- (13,608) --
Net realized gains on
investments................... -- -- -- -- (8,712) (85,457)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions -- Investment
Shares...................... (205,502) (230,620) (235,002) (400,310) (243,432) (322,095)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions to
shareholders................ (4,084,623) (10,434,029) (23,022,133) (46,893,003) (8,095,908) (21,117,194)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued..... 16,308,034 55,848,711 104,996,465 201,540,137 43,595,805 67,917,967
Reinvestment of distributions... 2,479,978 6,828,762 11,974,584 25,204,467 1,881,294 4,339,793
Cost of shares redeemed......... (29,952,500) (152,631,283) (114,716,093) (245,578,626) (24,052,271) (83,688,311)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM
CAPITAL TRANSACTIONS............ (11,164,488) (89,953,810) 2,254,956 (18,834,022) 21,424,828 (11,430,551)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets........................ (11,296,717) (89,925,246) 5,709,556 (7,011,337) 23,441,474 (7,393,410)
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD....... $135,874,947 $147,171,664 $775,421,057 $769,711,501 $258,829,779 $235,388,305
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
109
<PAGE> 128
The Kent Funds
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND
---------------------------- ----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD......................... $36,497,570 $41,577,319 $279,175,752 $289,042,905
----------- ----------- ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................... 721,342 1,439,072 6,066,404 12,269,050
Net realized gains (losses) on investments sold......... (2,861) 159,864 151,942 691,582
Net change in unrealized appreciation/depreciation of
investments........................................... (79,816) 136,663 (902,594) 6,286,893
----------- ----------- ------------ ------------
Net increase in net assets resulting from operations.... 638,665 1,735,599 5,315,752 19,247,525
----------- ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income................................... (713,447) (1,432,406) (5,961,138) (12,149,068)
Net realized gains on investments....................... -- (170,851) -- (86,552)
In excess of net realized gains......................... -- -- -- (17,244)
----------- ----------- ------------ ------------
Total dividends and distributions -- Institutional
Shares.............................................. (713,447) (1,603,257) (5,961,138) (12,252,864)
----------- ----------- ------------ ------------
INVESTMENT:
Net investment income................................... (7,440) (11,595) (74,278) (135,115)
Net realized gains on investments....................... -- (2,045) -- (863)
In excess of net realized gains......................... -- -- -- (441)
----------- ----------- ------------ ------------
Total dividends and distributions -- Investment
Shares.............................................. (7,440) (13,640) (74,278) (136,419)
----------- ----------- ------------ ------------
Total dividends and distributions to shareholders..... (720,887) (1,616,897) (6,035,416) (12,389,283)
----------- ----------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. 6,372,230 9,736,272 27,474,194 44,265,909
Reinvestment of distributions........................... 11,843 27,364 132,804 207,641
Cost of shares redeemed................................. (5,301,846) (14,962,087) (17,313,215) (61,198,945)
----------- ----------- ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL TRANSACTIONS... 1,082,227 (5,198,451) 10,293,783 (16,725,395)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets................... 1,000,005 (5,079,749) 9,574,119 (9,867,153)
----------- ----------- ------------ ------------
NET ASSETS AT END OF PERIOD............................... $37,497,575 $36,497,570 $288,749,871 $279,175,752
=========== =========== ============ ============
</TABLE>
See Notes to Financial Statements
110
<PAGE> 129
The Kent Funds
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX-FREE MICHIGAN MUNICIPAL
INCOME FUND BOND FUND
---------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------------------- ------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $118,364,159 $110,883,746 $116,148,299 $155,044,170
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.................................. 2,608,871 5,050,397 2,555,611 5,042,224
Net realized gains (losses) on investments sold........ 84,606 376,069 (51,863) 49,676
Net change in unrealized appreciation/depreciation of
investments.......................................... (269,337) 4,279,292 (217,623) 1,602,539
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations... 2,424,140 9,705,758 2,286,125 6,694,439
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income.................................. (2,561,573) (5,016,230) (2,495,223) (4,914,390)
In excess of net investment income..................... -- (610) -- --
Net realized gains on investments...................... (92,723) (330,223) -- --
------------ ------------ ------------ ------------
Total dividends and distributions -- Institutional
Shares............................................. (2,654,296) (5,347,063) (2,495,223) (4,914,390)
------------ ------------ ------------ ------------
INVESTMENT:
Net investment income.................................. (36,519) (42,572) (84,147) (121,577)
In excess of net investment income..................... (1,304) (929) (5,391) --
Net realized gains on investments...................... (523) (4,346) -- --
In excess of net realized gains........................ (926) -- -- --
------------ ------------ ------------ ------------
Total dividends and distributions -- Investment
Shares............................................. (39,272) (47,847) (89,538) (121,577)
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders.... (2,693,568) (5,394,910) (2,584,761) (5,035,967)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................ 16,873,469 33,039,586 25,035,408 35,519,586
Reinvestment of distributions.......................... 82,613 116,653 87,944 131,586
Cost of shares redeemed................................ (7,737,700) (29,986,674) (14,923,381) (76,205,515)
------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS........................................... 9,218,382 3,169,565 10,199,971 (40,554,343)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.................. 8,948,954 7,480,413 9,901,335 (38,895,871)
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD.............................. $127,313,113 $118,364,159 $126,049,634 $116,148,299
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
111
<PAGE> 130
The Kent Funds
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
------------------------------- ----------------------------- -----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997(1)
----------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF
PERIOD........................ $ 475,557,215 $ 484,722,709 $ 211,971,193 $ 156,205,940 $ 94,626,461 $ --
------------- --------------- ------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income......... 13,250,683 26,741,343 4,815,469 6,381,928 2,731,029 2,952,675
Net realized gains (losses) on
investments................. -- (1,165) 1,873 (12,469) -- 4
------------- --------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations... 13,250,683 26,740,178 4,817,342 6,369,459 2,731,029 2,952,679
------------- --------------- ------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income......... (13,184,778) (26,699,476) (4,809,401) (6,369,567) (2,730,688) (2,952,603)
------------- --------------- ------------- ------------- ------------- -------------
Total dividends and
distributions --
Institutional Shares...... (13,184,778) (26,699,476) (4,809,401) (6,369,567) (2,730,688) (2,952,603)
------------- --------------- ------------- ------------- ------------- -------------
INVESTMENT:
Net investment income......... (65,905) (41,867) (6,068) (12,361) (341) (72)
------------- --------------- ------------- ------------- ------------- -------------
Total dividends and
distributions --
Investment Shares......... (65,905) (41,867) (6,068) (12,361) (341) (72)
------------- --------------- ------------- ------------- ------------- -------------
Total dividends and
distributions to
shareholders.............. (13,250,683) (26,741,343) (4,815,469) (6,381,928) (2,731,029) (2,952,675)
------------- --------------- ------------- ------------- ------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued... 606,531,858 1,153,447,515 345,849,071 279,204,632 202,383,919 328,636,541
Reinvestment of
distributions............... 1,011,593 1,731,961 144,791 205,995 2,624,219 2,413,648
Cost of shares redeemed....... (567,379,483) (1,164,343,805) (261,607,565) (223,632,905) (200,841,839) (236,423,732)
------------- --------------- ------------- ------------- ------------- -------------
TOTAL NET INCREASE (DECREASE)
FROM CAPITAL TRANSACTIONS..... 40,163,968 (9,164,329) 84,386,297 55,777,722 4,166,299 94,626,457
------------- --------------- ------------- ------------- ------------- -------------
Net increase in net assets.... 40,163,968 (9,165,494) 84,388,170 55,765,253 4,166,299 94,626,461
------------- --------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD..... $ 515,721,183 $ 475,557,215 $ 296,359,363 $ 211,971,193 $ 98,792,760 $ 94,626,461
============= =============== ============= ============= ============= =============
</TABLE>
- ---------------
(1) For the period from June 2, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
112
<PAGE> 131
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. As of
the date of this report, the Trust offered fourteen managed investment
portfolios. The accompanying financial statements and financial highlights are
those of The Kent Growth and Income Fund, The Kent Small Company Growth Fund,
The Kent International Growth Fund, The Kent Index Equity Fund, The Kent Short
Term Bond Fund, The Kent Intermediate Bond Fund, The Kent Income Fund, The Kent
Limited Term Tax-Free Fund, The Kent Intermediate Tax-Free Fund, The Kent
Tax-Free Income Fund, The Kent Michigan Municipal Bond Fund, The Kent Money
Market Fund, The Kent Michigan Municipal Money Market Fund and The Kent
Government Money Market Fund (individually, a "Fund" and collectively, the
"Funds").
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Funds with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues fourteen series of shares with two
separate classes in each series: Investment Shares and Institutional Shares.
Each share in each series or class has identical voting, dividend, liquidation
and other rights, except in matters affecting only a particular series or class,
in which case only shares of the affected series or class are entitled to vote.
Class specific expenses, if any, are currently limited to expenses directly
attributable to the Investment Shares under the Distribution Plan, shareholder
services fees and certain printing and postage expenses incurred as they relate
to a particular class of shares.
The investment objectives of the Funds are as follows:
Growth and Income Fund -- To seek long-term capital growth with current income
as a secondary goal.
Small Company Growth Fund -- To seek long-term capital appreciation by
investing in equity securities of small companies.
International Growth Fund -- To seek long-term growth of capital and
additional diversification for U.S. investors by investing in a varied portfolio
of foreign equity securities.
Index Equity Fund -- To seek investment results which mirror the capital
performance and dividend income of the Standard & Poor's 500 Composite Stock
Price Index.
Short Term Bond Fund -- To seek current income by investing primarily in a
limited range of investment quality fixed income securities.
Intermediate Bond Fund -- To seek current income by investing primarily in a
broad range of investment quality debt securities.
Income Fund -- To seek a high level of current income by investing in a broad
range of investment quality debt securities.
Limited Term Tax-Free Fund -- To seek current income, exempt from federal
income tax, while preserving capital.
Intermediate Tax-Free Fund -- To seek current income, exempt from federal
income tax, while preserving capital.
Tax-Free Income Fund -- To seek to provide as high a level of current income
exempt from federal income tax as is consistent with prudent investing, while
preserving capital.
Michigan Municipal Bond Fund -- To seek current income, exempt from federal
and State of Michigan personal income taxes, while preserving capital.
Money Market Fund -- To seek current income from short-term securities while
preserving capital and maintaining liquidity.
Michigan Municipal Money Market Fund -- To seek current income from short-term
securities that is exempt from federal and State of Michigan personal income
taxes, while preserving capital and maintaining liquidity.
Government Money Market Fund -- To seek current income from short-term United
States Government
113
<PAGE> 132
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
securities while preserving capital and maintaining liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Securities in the Money Market Fund, Government Money
Market Fund and Michigan Municipal Money Market Fund are valued utilizing the
amortized cost valuation method permitted in accordance with Rule 2a-7 under the
1940 Act, which approximates market value. This method involves valuing a
portfolio security initially at its cost on the date of purchase and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and initial cost.
In the Limited Term Tax-Free Fund, Intermediate Tax-Free Fund, Tax-Free Income
Fund, Michigan Municipal Bond Fund, Short Term Bond Fund, Intermediate Bond
Fund, and Income Fund, corporate debt securities, municipal securities and debt
securities of the U.S. government and its agencies (other than short-term
investments maturing in 60 days or less) are valued on the basis of valuations
provided by dealers or by an independent pricing service approved by the Board
of Trustees. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which constitutes fair value and approximates market value. All
other securities and other assets are appraised at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
The Growth and Income Fund, Small Company Growth Fund, International Growth
Fund and the Index Equity Fund value listed securities at the last sales price
on the principal exchange where such securities are traded. Listed securities
for which last sales prices are not available are valued at the last bid price.
Unlisted securities are valued at the mean of the current bid and asked prices
in the principal market where such securities trade. Short-term obligations that
mature in 60 days or less are valued at amortized cost, which constitutes fair
value and approximates market value. All other securities and other assets are
appraised at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
REPURCHASE AGREEMENTS: The Trust's custodian and other banks acting in a
sub-custodian capacity, take possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to determine that the value, including accrued
interest, exceeds the repurchase price. In the event of the seller's default of
the obligation to repurchase, the Funds have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of the default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings.
FOREIGN CURRENCY TRANSLATION: Investments and other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates. Realized gains and losses on
foreign investments and foreign income and expenses are converted into U.S.
dollars based upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
Foreign currency-denominated receivables and payables are "marked-to-market'
using the current exchange rate. The fluctuation between the original exchange
rate and the current exchange rate is recorded as unrealized currency gain or
loss. Upon receipt of payment, a Fund realizes a gain or loss on foreign
currency amounting to the difference between the original value and the ending
value of the receivable or payable.
FUTURES CONTRACTS: The Growth and Income Fund, Small Company Growth Fund,
International Growth Fund, Index Equity Fund, Limited Term Tax-Free Fund,
Intermediate Tax-Free Fund, Tax-Free Income Fund and Michigan Municipal Bond
Fund may invest in futures contracts. This investment involves, to varying
degrees,
114
<PAGE> 133
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
elements of market risk and risks in excess of the amount recognized in the
Statement of Assets and Liabilities. The face or contract amounts reflect the
extent of the involvement the Funds have in the particular classes of
instruments. Risks include an imperfect correlation between the movements in the
price of the instruments and the price of the underlying securities and interest
rates. Risks may also arise if there is an illiquid secondary market for the
instruments or due to the inability of counterparties to perform under the terms
of the contract.
Cash or securities are deposited with brokers in order to maintain a position.
Subsequent payments made or received daily by the Fund based on the change in
the market value of the position are recorded as an unrealized gain or loss
until the contract is closed out at which time the gain or loss is recognized.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
To the extent that the Fund enters into futures contracts on an index or group
of securities, the Fund exposes itself to an indeterminate liability and will be
required to pay or receive a sum of money measured by the change in the market
value of the index or group of securities. Upon entering into a futures
contract, the Fund is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value with a
broker. Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
The average market value of futures contracts held during the six-months ended
June 30, 1998 was as follows:
<TABLE>
<CAPTION>
AVERAGE
FUND MARKET VALUE
---- ------------
<S> <C>
Growth and Income Fund................ $15,157,100
Small Company Growth Fund............. 10,764,439
Index Equity Fund..................... 7,882,254
</TABLE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The International Growth Fund may
enter into forward foreign currency exchange contracts. The purpose of these
contracts is to hedge against fluctuation in the value of the underlying
currency of certain portfolio investments. A forward foreign currency exchange
contract is an agreement to purchase or sell a specified currency at a specified
price on a future date. Risks associated with the contract include changes in
the value of the foreign currency relative to the U.S. dollar and/or the
counterparty's potential inability to perform under the contract.
The forward foreign currency exchange contracts are valued daily using the
current exchange rate of the underlying currency with any fluctuations recorded
as unrealized gains or losses. Realized gains or losses are recognized when
entering a closing or offsetting forward foreign currency exchange contract with
the same settlement date and broker.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
and on foreign currency transactions are recorded on the basis of identified
cost. Interest income is recorded on the accrual basis and includes, where
applicable, the amortization of premiums or accretion of discounts. Dividend
income is recorded on the ex-dividend date.
The International Growth Fund, upon the purchase or sale of a security
denominated in a foreign currency, may enter into foreign currency exchange
contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of foreign currency involved in the underlying security transaction to
hedge the Fund against currency fluctuations during the settlement period. In
such cases, the Fund has not realized currency gains or losses between the trade
and settlement dates on these security transactions.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Funds declare and distribute
dividends from net investment income monthly, with the exception of the
International Growth Fund which declares and pays dividends annually. Net
investment income for this purpose consists of interest accrued, discount earned
(including both original issue and market discount), dividends earned less
amortization of any market premium and accrued expenses. Net realized capital
gains, if any, are distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income
115
<PAGE> 134
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
and capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL INCOME TAXES: For federal income tax purposes, each Fund is treated as
a separate entity for the purpose of determining its qualification as a
regulated investment company under the Internal Revenue Code (the "Code"). It is
the policy of each Fund to meet the requirements of the Code applicable to
regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required. Withholding taxes on foreign dividends have
been paid or provided for in accordance with the applicable country's tax rules
and rates.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
At December 31, 1997, the following Funds had the following capital loss
carryforwards which will expire in the years indicated:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR
---- ----------- ----
<S> <C> <C>
Short Term Bond Fund........... $ 656,100 2001
3,015,994 2002
467,881 2003
438,260 2004
1,927,928 2005
-----------
$ 6,506,163
===========
</TABLE>
<TABLE>
<CAPTION>
FUND AMOUNT YEAR
---- ----------- ----
<S> <C> <C>
Intermediate Bond Fund......... $ 6,353,600 2004
4,043,228 2005
-----------
$10,396,828
===========
Michigan Municipal Bond Fund... $ 68,930 2003
Money Market Fund.............. $ 433 1999
224 2002
194 2003
27 2004
432 2005
-----------
$ 1,310
===========
Michigan Municipal Money Market
Fund......................... $ 12,469 2005
</TABLE>
EXPENSES: Expenses directly attributable to a Fund are charged to the Fund,
while expenses which are attributable to more than one series of the Trust are
allocated among the respective series based upon relative net assets or another
appropriate basis. In addition, investors in Investment Shares will pay the
expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
ORGANIZATIONAL COSTS: The Tax-Free Income Fund bears all costs in connection
with its organization, including the fees and expenses of registering and
qualifying their initial shares for distribution under federal and state
securities laws. All such costs are amortized using the straight-line method
over a period of five years beginning with the respective Fund's commencement of
operations. In the event that any of the initial shares purchased by the Fund's
sponsors are redeemed during such period by any holder thereof, the Fund will be
reimbursed by such holder for any unamortized organization costs in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption. The other Funds bore all
costs in connection with their organization. All such costs were fully amortized
as of June 30, 1998.
116
<PAGE> 135
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
3. RELATED PARTY TRANSACTIONS
The Funds are advised by Lyon Street Asset Management Company ("Lyon Street"
or the "Investment Adviser"), a wholly-owned subsidiary of Old Kent Bank ("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. This change did not involve a change in control or management
of the investment adviser or a change in the Funds' portfolio managers. The
Investment Adviser is entitled to receive a fee, computed daily and paid
monthly, based on each Fund's average daily net assets at the following annual
rates:
<TABLE>
<S> <C>
Growth and Income Fund...................... 0.70%
Small Company Growth Fund................... 0.70%
International Growth Fund................... 0.75%
Index Equity Fund........................... 0.30%
Short Term Bond Fund........................ 0.50%
Intermediate Bond Fund...................... 0.55%
Income Fund................................. 0.60%
Limited Term Tax-Free Fund.................. 0.45%
Intermediate Tax-Free Fund.................. 0.50%
Tax-Free Income Fund........................ 0.55%
Michigan Municipal Bond Fund................ 0.45%
Money Market Fund........................... 0.40%
Government Money Market Fund................ 0.40%
Michigan Municipal Money Market Fund........ 0.40%
</TABLE>
The Index Equity Fund and Government Money Market Fund had investment advisory
fees waived by Lyon Street equal to $169,948 and $105,893, respectively.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
serves the Funds as Administrator and Distributor. BISYS Fund Services, Inc.
serves the Funds as Fund Accountant and Transfer Agent. BISYS and BISYS Fund
Services, Inc. are both wholly owned subsidiaries of The BISYS Group, Inc. The
Administrator is entitled to receive a fee computed daily and paid monthly, at
the annual rate of 0.185% of the average daily net assets of the Trust up to $5
billion; 0.165% of the average daily net assets of the Trust in excess of $5
billion up to $7.5 billion; and 0.135% of the average daily net assets of the
Trust in excess of $7.5 billion. Fund Accounting fees are computed daily and
paid monthly at the annual rate of 0.015% of the average daily net assets of the
Trust.
Gross administration fees and fees waived for the six months ended June 30,
1998 were as follows for the Funds indicated:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
- ----- ---------- -----------
<S> <C> <C>
Growth and Income Fund..... $696,608 $ --
Small Company Growth
Fund..................... 702,563 --
International Growth
Fund..................... 485,481 --
Index Equity Fund.......... 614,693 203,845
Short Term Bond Fund....... 127,297 --
Intermediate Bond Fund..... 711,426 --
Income Fund................ 220,524 --
Limited Term Tax-Free
Fund..................... 33,945 --
Intermediate Tax-Free
Fund..................... 256,634 --
Tax-Free Income Fund....... 110,955 --
Michigan Municipal Bond
Fund..................... 115,113 --
Money Market Fund.......... 470,082 181,854
Michigan Municipal Money
Market Fund.............. 280,669 124,111
Government Money Market
Fund..................... 96,053 51,140
</TABLE>
Beginning June 1, 1997, Old Kent provided certain administrative services to
the Trust pursuant to a Sub-Administration Agreement between Old Kent and BISYS.
BISYS 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.
Sub-administration fees for each Fund for the six months ended June 30,1998
are as follows:
<TABLE>
<CAPTION>
FUNDS SUB-ADMINISTRATION FEES
----- -----------------------
<S> <C>
Growth and Income Fund........ $188,950
Small Company Growth Fund..... 190,662
International Growth Fund..... 131,901
Index Equity Fund............. 166,552
Short Term Bond Fund.......... 27,716
Intermediate Bond Fund........ 154,689
Income Fund................... 47,855
Limited Term Tax-Free Fund.... 7,379
Intermediate Tax-Free Fund.... 55,765
Tax-Free Income Fund.......... 24,092
</TABLE>
117
<PAGE> 136
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
FUNDS SUB-ADMINISTRATION FEES
----- -----------------------
<S> <C>
Michigan Municipal Bond Fund.. 25,010
Money Market Fund............. 102,113
Michigan Municipal Money
Market Fund................. 45,902
Government Money Market
Fund........................ 26,056
</TABLE>
Fund Accounting Fees and fees waived for each Fund for the six months ended
June 30, 1998 are as follows:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
- ----- ---------- -----------
<S> <C> <C>
Growth and Income Fund..... $57,732 $38,486
Small Company Growth
Fund..................... 58,224 38,814
International Growth
Fund..................... 40,274 26,848
Index Equity Fund.......... 50,984 50,984
Short Term Bond Fund....... 10,551 7,034
Intermediate Bond Fund..... 58,975 39,315
Income Fund................ 18,285 12,189
Limited Term Tax-Free
Fund..................... 2,814 1,876
Intermediate Tax-Free
Fund..................... 21,276 14,183
Tax-Free Income Fund....... 9,199 6,132
Michigan Municipal Bond
Fund..................... 9,543 6,362
Money Market Fund.......... 38,976 38,976
Michigan Municipal Money
Market Fund.............. 23,380 23,380
Government Money Market
Fund..................... 7,942 7,942
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Funds for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Funds pursuant to Rule 12b-1 of the 1940 Act. The Plan
provides for payments to the Distributor of up to 0.25% of the average daily net
assets of the Investment Shares of the Funds. Although the Money Market Fund,
the Michigan Municipal Money Market Fund, and the Government Money Market Fund
are authorized to pay 12b-1 fees of up to 0.25% in connection with the sale of
Investment Shares, none currently intends to pay such fees.
Gross distribution fees and fees waived for each of Fund for the six months
ended June 30, 1998 are as follows:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
- ----- ---------- -----------
<S> <C> <C>
Growth and Income Fund..... $52,068 $ --
Small Company Growth
Fund..................... 31,228 --
International Growth
Fund..................... 13,511 --
Index Equity Fund.......... 40,957 --
Short Term Bond Fund....... 9,024 3,609
Intermediate Bond Fund..... 10,262 --
Income Fund................ 9,327 --
Limited Term Tax-Free
Fund..................... 525 210
Intermediate Tax-Free
Fund..................... 4,645 --
Tax-Free Income Fund....... 2,333 --
Michigan Municipal Bond
Fund..................... 5,720 2,288
Money Market Fund.......... -- --
Michigan Municipal Money
Market Fund.............. -- --
Government Money Market
Fund..................... -- --
</TABLE>
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath LLP.
A partner of that firm serves as Assistant Secretary of the Trust.
118
<PAGE> 137
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
---------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.............................. $ 74,213,556 $ 249,081,909 $112,376,511 $ 208,702,084
Reinvestment of distributions.............. 25,311,874 30,110,268 18,225,651 26,503,462
Shares redeemed............................ (99,766,393) (147,058,160) (71,502,921) (161,953,808)
------------ ------------- ------------ -------------
Net increase (decrease) from
Institutional shares transactions...... $ (240,963) $ 132,134,017 $ 59,099,241 $ 73,251,738
------------ ------------- ------------ -------------
INVESTMENT:
Shares issued.............................. $ 9,464,243 $ 20,005,334 $ 5,124,481 $ 7,480,927
Reinvestment of distributions.............. 3,142,433 2,967,456 1,203,237 1,566,793
Shares redeemed............................ (4,491,593) (4,320,697) (2,744,754) (3,330,447)
------------ ------------- ------------ -------------
Net increase (decrease) from Investment
shares transactions.................... $ 8,115,083 $ 18,652,093 $ 3,582,964 $ 5,717,273
------------ ------------- ------------ -------------
Total net increase (decrease) from shares
transactions........................... $ 7,874,120 $ 150,786,110 $ 62,682,205 $ 78,969,011
============ ============= ============ =============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued.............................. 4,546,510 16,279,124 6,070,971 11,956,401
Reinvestment of distributions.............. 1,563,327 1,971,493 957,845 1,547,774
Shares redeemed............................ (6,086,340) (9,401,038) (3,801,230) (9,131,520)
------------ ------------- ------------ -------------
Net increase (decrease) from
Institutional shares transactions...... 23,497 8,849,579 3,227,586 4,372,655
------------ ------------- ------------ -------------
INVESTMENT:
Shares issued.............................. 585,779 1,283,992 273,920 419,135
Reinvestment of distributions.............. 195,654 195,172 63,462 91,169
Shares redeemed............................ (276,347) (280,261) (146,262) (191,859)
------------ ------------- ------------ -------------
Net increase (decrease) from Investment
shares transactions.................... 505,086 1,198,903 191,120 318,445
------------ ------------- ------------ -------------
Total net increase (decrease) from shares
transactions........................... 528,583 10,048,482 3,418,706 4,691,100
============ ============= ============ =============
</TABLE>
119
<PAGE> 138
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
-------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued................................... $ 53,043,793 $189,937,844 $ 88,620,020 $323,258,744
Reinvestment of distributions................... 43,310 3,418,753 3,154,022 6,357,380
Shares redeemed................................. (75,622,614) (92,021,615) (76,028,296) (77,077,375)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions......................... $(22,535,511) $101,334,982 $ 15,745,746 $252,538,749
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued................................... $ 3,934,537 $ 3,462,874 $ 5,729,786 $ 15,939,700
Reinvestment of distributions................... 1,951 146,470 154,332 315,816
Shares redeemed................................. (2,940,336) (2,625,594) (2,628,829) (2,603,171)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions................................ $ 996,152 $ 983,750 $ 3,255,289 $ 13,652,345
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions................................ $(21,539,359) $102,318,732 $ 19,001,035 $266,191,094
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued................................... 3,261,560 12,562,555 4,302,815 18,391,993
Reinvestment of distributions................... 2,527 230,973 149,083 353,825
Shares redeemed................................. (4,620,989) (5,990,183) (3,721,984) (4,462,155)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions......................... (1,356,902) 6,803,345 729,914 14,283,663
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued................................... 239,973 227,807 278,345 915,280
Reinvestment of distributions................... 115 9,962 7,288 17,611
Shares redeemed................................. (180,002) (175,388) (125,609) (149,114)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions................................ 60,086 62,381 160,024 783,777
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions................................ (1,296,816) 6,865,726 889,938 15,067,440
============ ============ ============ ============
</TABLE>
120
<PAGE> 139
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
--------------------------------- -------------------------------- ----------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED)
----------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued...................... $ 15,429,132 $ 48,001,662 $ 100,788,121 $ 199,760,848 $ 39,138,174
Reinvestment of distributions...... 2,278,463 6,604,162 11,764,434 24,873,643 1,649,425
Shares redeemed.................... (28,098,105) (150,317,030) (113,314,910) (243,018,554) (22,982,323)
------------ ------------- ------------- ------------- ------------
Net increase (decrease) from
Institutional shares
transactions................... $(10,390,510) $ (95,711,206) $ (762,355) $ (18,384,063) $ 17,805,276
------------ ------------- ------------- ------------- ------------
INVESTMENT:
Shares issued...................... $ 878,903 $ 7,847,049 $ 4,208,343 $ 1,779,289 $ 4,457,631
Reinvestment of distributions...... 201,515 224,600 210,150 330,824 231,869
Shares redeemed.................... (1,854,396) (2,314,253) (1,401,182) (2,560,072) (1,069,948)
------------ ------------- ------------- ------------- ------------
Net increase (decrease) from
Investment shares
transactions................... $ (773,978) $ 5,757,396 $ 3,017,311 $ (449,959) $ 3,619,552
------------ ------------- ------------- ------------- ------------
Total net increase (decrease)
from shares transactions....... $(11,164,488) $ (89,953,810) $ 2,254,956 $ (18,834,022) $ 21,424,828
============ ============= ============= ============= ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued...................... 1,579,207 4,932,559 10,127,341 20,424,141 3,775,897
Reinvestment of distributions...... 234,165 681,245 1,187,148 2,553,873 160,208
Shares redeemed.................... (2,874,459) (15,426,349) (11,382,133) (24,790,453) (2,217,308)
------------ ------------- ------------- ------------- ------------
Net increase (decrease) from
Institutional shares
transactions................... (1,061,087) (9,812,545) (67,644) (1,812,439) 1,718,797
------------ ------------- ------------- ------------- ------------
INVESTMENT:
Shares issued...................... 89,796 806,758 421,709 180,929 430,540
Reinvestment of distributions...... 20,731 23,130 21,156 33,899 22,551
Shares redeemed.................... (190,071) (237,636) (140,347) (261,548) (103,388)
------------ ------------- ------------- ------------- ------------
Net increase (decrease) from
Investment shares
transactions................... (79,544) 592,252 302,518 (46,720) 349,703
------------ ------------- ------------- ------------- ------------
Total net increase (decrease)
from shares transactions....... (1,140,631) (9,220,293) 234,874 (1,859,159) 2,068,500
============ ============= ============= ============= ============
<CAPTION>
INCOME FUND
------------
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued...................... $ 64,474,285
Reinvestment of distributions...... 4,044,114
Shares redeemed.................... (82,779,834)
------------
Net increase (decrease) from
Institutional shares
transactions................... $(14,261,435)
------------
INVESTMENT:
Shares issued...................... $ 3,443,682
Reinvestment of distributions...... 295,679
Shares redeemed.................... (908,477)
------------
Net increase (decrease) from
Investment shares
transactions................... $ 2,830,884
------------
Total net increase (decrease)
from shares transactions....... $(11,430,551)
============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued...................... 6,376,298
Reinvestment of distributions...... 400,874
Shares redeemed.................... (8,087,197)
------------
Net increase (decrease) from
Institutional shares
transactions................... (1,310,025)
------------
INVESTMENT:
Shares issued...................... 338,211
Reinvestment of distributions...... 29,196
Shares redeemed.................... (89,859)
------------
Net increase (decrease) from
Investment shares
transactions................... 277,548
------------
Total net increase (decrease)
from shares transactions....... (1,032,477)
============
</TABLE>
121
<PAGE> 140
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND
-------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued................................... $ 6,308,730 $ 9,059,260 $ 26,535,651 $ 43,176,593
Reinvestment of distributions................... 4,403 13,903 81,819 124,001
Shares redeemed................................. (5,049,801) (14,638,082) (16,571,106) (60,115,232)
----------- ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions......................... $ 1,263,332 $(5,564,919) $ 10,046,364 $(16,814,638)
----------- ------------ ------------ ------------
INVESTMENT:
Shares issued................................... $ 63,500 $ 677,012 $ 938,543 $ 1,089,316
Reinvestment of distributions................... 7,440 13,461 50,985 83,640
Shares redeemed................................. (252,045) (324,005) (742,109) (1,083,713)
----------- ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions................................ $ (181,105) $ 366,468 $ 247,419 $ 89,243
----------- ------------ ------------ ------------
Total net increase (decrease) from shares
transactions................................ $ 1,082,227 $(5,198,451) $ 10,293,783 $(16,725,395)
=========== ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued................................... 617,952 888,774 2,481,303 4,110,419
Reinvestment of distributions................... 433 1,369 7,685 11,820
Shares redeemed................................. (495,055) (1,435,754) (1,551,627) (5,717,526)
----------- ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions......................... 123,330 (545,611) 937,361 (1,595,287)
----------- ------------ ------------ ------------
INVESTMENT:
Shares issued................................... 6,213 66,418 87,785 103,878
Reinvestment of distributions................... 728 1,317 4,788 7,978
Shares redeemed................................. (24,682) (31,731) (69,781) (104,039)
----------- ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions................................ (17,741) 36,004 22,792 7,817
----------- ------------ ------------ ------------
Total net increase (decrease) from share
transactions................................ 105,589 (509,607) 960,153 (1,587,470)
=========== ============ ============ ============
</TABLE>
122
<PAGE> 141
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE MICHIGAN MUNICIPAL
INCOME FUND BOND FUND
--------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.................................. $16,109,076 $31,815,166 $ 24,379,464 $ 32,654,052
Reinvestment of distributions.................. 45,861 76,956 27,079 70,141
Shares redeemed................................ (7,263,010) (29,459,976) (14,476,540) (75,229,474)
----------- ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions........................ $ 8,891,927 $ 2,432,146 $ 9,930,003 $(42,505,281)
----------- ------------ ------------ ------------
INVESTMENT:
Shares issued.................................. $ 764,393 $ 1,224,420 $ 655,944 $ 2,865,534
Reinvestment of distributions.................. 36,752 39,697 60,864 61,445
Shares redeemed................................ (474,690) (526,698) (446,840) (976,041)
----------- ------------ ------------ ------------
Net increase (decrease) from Investment
shares transactions........................ $ 326,455 $ 737,419 $ 269,968 $ 1,950,938
----------- ------------ ------------ ------------
Total net increase (decrease) from shares
transactions............................... $ 9,218,382 $ 3,169,565 $ 10,199,971 $(40,554,343)
=========== ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued.................................. 1,511,065 3,066,893 2,376,723 3,222,928
Reinvestment of distributions.................. 4,323 7,401 2,654 6,941
Shares redeemed................................ (681,484) (2,828,842) (1,417,285) (7,426,189)
----------- ------------ ------------ ------------
Net increase (decrease) from Institutional
shares transactions........................ 833,904 245,452 962,092 (4,196,320)
----------- ------------ ------------ ------------
INVESTMENT:
Shares issued.................................. 71,491 116,872 64,231 283,459
Reinvestment of distributions.................. 3,456 3,802 5,977 6,073
Shares redeemed................................ (44,471) (51,267) (43,757) (97,266)
----------- ------------ ------------ ------------
Net increase (decrease) from Investment
shares transactions........................ 30,476 69,407 26,451 192,266
----------- ------------ ------------ ------------
Total net increase (decrease) from share
transactions............................... 864,380 314,859 988,543 (4,004,054)
=========== ============ ============ ============
</TABLE>
123
<PAGE> 142
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL
MONEY MARKET FUND MONEY MARKET FUND
--------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
---------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C>
SHARE AMOUNTS
(AT $1.00 PER SHARE)
INSTITUTIONAL:
Shares issued..................... 595,011,645 1,151,538,209 342,780,178 279,013,482
Reinvestment of distributions..... 954,568 1,693,047 138,858 192,298
Shares redeemed................... (557,512,743) (1,162,770,823) (258,632,293) (222,935,437)
------------ -------------- ------------ ------------
Net increase (decrease) from
Institutional shares
transactions.................. 38,453,470 (9,539,567) 84,286,743 56,270,343
------------ -------------- ------------ ------------
INVESTMENT:
Shares issued..................... 11,520,214 1,909,306 3,068,893 191,150
Reinvestment of distributions..... 57,025 38,916 5,933 13,697
Shares redeemed................... (9,866,741) (1,572,981) (2,975,272) (697,468)
------------ -------------- ------------ ------------
Net increase from Investment
shares transactions........... 1,710,498 375,241 99,554 (492,621)
------------ -------------- ------------ ------------
Total net increase (decrease)
from shares transactions...... 40,163,968 (9,164,326) 84,386,297 55,777,722
============ ============== ============ ============
<CAPTION>
GOVERNMENT
MONEY MARKET FUND
--------------------------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
----------------- ------------
<S> <C> <C>
SHARE AMOUNTS
(AT $1.00 PER SHARE)
INSTITUTIONAL:
Shares issued..................... 202,345,837 328,632,081
Reinvestment of distributions..... 2,624,012 2,413,585
Shares redeemed................... (200,835,789) (236,421,222)
------------ ------------
Net increase (decrease) from
Institutional shares
transactions.................. 4,134,060 94,624,444
------------ ------------
INVESTMENT:
Shares issued..................... 38,083 4,460
Reinvestment of distributions..... 206 63
Shares redeemed................... (6,050) (2,510)
------------ ------------
Net increase from Investment
shares transactions........... 32,239 2,013
------------ ------------
Total net increase (decrease)
from shares transactions...... 4,166,299 94,626,457
============ ============
</TABLE>
- ---------------
(1) From the period June 2, 1997 (commencement of operations) through December
31, 1997.
See Notes to Financial Statements
124
<PAGE> 143
The Kent Funds
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the six months ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---- ------------ ------------
<S> <C> <C>
Growth and Income
Fund................. $111,596,658 $ 81,174,114
Small Company Growth
Fund................. 255,691,482 221,367,560
International Growth
Fund................. 84,783,430 87,259,925
Index Equity Fund...... 25,132,934 8,414,319
Short Term Bond Fund... 53,649,592 73,432,319
Intermediate Bond
Fund................. 486,912,246 477,517,170
Income Fund............ 124,710,448 108,129,102
Limited Term Tax-Free
Fund................. 8,735,943 8,816,633
Intermediate Tax-Free
Fund................. 36,475,323 32,758,043
Tax-Free Income Fund... 31,294,752 23,832,515
Michigan Municipal Bond
Fund................. 41,813,803 31,391,636
</TABLE>
6. RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES
The Growth and Income Fund, Small Company Growth Fund, the International
Growth Fund, and the Index Equity Fund can purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers.
The risks include devaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign issuers and their
markets may be less liquid and their prices more volatile than those of
securities of comparable U.S. issuers.
7. CONCENTRATION OF CREDIT RISK
The Michigan Municipal Money Market Fund and Michigan Municipal Bond Fund
invest primarily in debt obligations issued by the State of Michigan and its
respective political subdivisions, agencies and public authorities to obtain
funds for various public purposes. The Funds are more susceptible to economic
and political factors adversely affecting issuers of Michigan specific municipal
securities than are municipal bond funds that are not concentrated in these
issuers to the same extent.
The Limited Term Tax-Free Fund, the Intermediate Tax-Free Fund, the Tax-Free
Income Fund, the Michigan Municipal Bond Fund and the Michigan Municipal Money
Market Fund had the following concentrations by industry sector at June 30, 1998
(as a percentage of total investments):
<TABLE>
<CAPTION>
MICHIGAN
LIMITED MICHIGAN MUNICIPAL
TERM INTERMEDIATE TAX-FREE MUNICIPAL MONEY
TAX-FREE TAX-FREE INCOME BOND MARKET
FUND FUND FUND FUND FUND
-------- ------------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Airport.............. 4.15% 1.70% 2.71% 1.74% 1.51%
Development.......... 17.84% 7.27% 8.76% 5.73% 60.83%
Education............ 16.82% 5.55% 8.21% 4.23% 1.93%
Environmental........ -- 2.10% 0.80% 1.02% 8.39%
General Obligation... 30.37% 32.80% 29.30% 15.34% 13.94%
Medical.............. 10.05% 1.63% 7.38% 21.09% 4.72%
Multifamily
Housing............ -- -- 2.10% 2.19% 3.74%
Mutual Funds......... 0.95% 2.99% 2.83% 0.88% 1.37%
Sewer................ -- -- -- 5.35% --
Power................ -- 9.61% 8.59% 5.66% --
School District...... 8.50% 13.78% 6.65% 30.94% 2.19%
Single Family
Housing............ 8.28% -- 0.87% -- --
Transportation....... 3.04% 11.17% 12.35% 4.96% 1.04%
Utilities............ -- 7.72% 7.86% 0.87% --
Water................ -- 3.68% 1.59% -- 0.34%
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
See Notes to Financial Statements
125
<PAGE> 144
The Kent Funds
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 15.55 $ 13.90 $ 13.25 $ 10.50 $ 10.91 $ 10.31
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.06 0.25 0.30 0.33 0.31 0.27
Net realized and unrealized gains (losses)
on investments and futures contracts..... 2.47 3.04 2.16 3.28 (0.26) 0.95
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations...... 2.53 3.29 2.46 3.61 0.05 1.22
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income...................... (0.06) (0.25) (0.30) (0.33) (0.31) (0.27)
In excess of net investment income......... (0.02) -- -- -- ** (0.01)
Net realized gains on investments and
futures contracts........................ (1.22) (1.39) (1.51) (0.53) (0.15) (0.34)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions........ (1.30) (1.64) (1.81) (0.86) (0.46) (0.62)
-------- -------- -------- -------- -------- --------
Net change in net asset value................ 1.23 1.65 0.65 2.75 (0.41) 0.60
-------- -------- -------- -------- -------- --------
Net asset value, end of period............... $ 16.78 $ 15.55 $ 13.90 $ 13.25 $ 10.50 $ 10.91
======== ======== ======== ======== ======== ========
Total return................................. 16.62%++ 24.14% 19.47% 34.91% 0.51% 11.98%
Ratios/Supplemental Data:
Net Assets, end of period (000's)............ $753,308 $697,973 $500,857 $401,371 $308,825 $180,864
Ratio of expenses to average net assets.... 0.93%+ 0.92% 0.95% 0.94% 0.98% 1.03%
Ratio of net investment income to average
net assets............................... 0.78%+ 1.61% 2.18% 2.73% 3.04% 2.61%
Ratio of expenses to average net assets*... 0.94%+ 0.93% 0.95% *** *** ***
Ratio of net investment income to average
net assets*.............................. 0.77%+ 1.60% 2.18% *** *** ***
Portfolio turnover rate(1)................. 11% 88% 39% 58% 28% 54%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
126
<PAGE> 145
The Kent Funds
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 15.44 $ 13.81 $ 13.19 $ 10.46 $10.87 $10.29
------- ------- ------- ------- ------ ------
Income from Investment Operations:
Net investment income............................. 0.04 0.21 0.26 0.30 0.32 0.27
Net realized and unrealized gains (losses) on
investments and futures contracts............... 2.44 3.02 2.15 3.26 (0.27) 0.93
------- ------- ------- ------- ------ ------
Total Income from Investment Operations............. 2.48 3.23 2.41 3.56 0.05 1.20
------- ------- ------- ------- ------ ------
Less Dividends and Distributions from:
Net investment income............................. (0.04) (0.21) (0.26) (0.30) (0.31) (0.23)
In excess of net investment income................ (0.02) -- (0.02) -- ** (0.05)
Net realized gains on investments and futures
contracts....................................... (1.21) (1.39) (1.51) (0.53) (0.15) (0.20)
In excess of net realized gains................... (0.01) -- -- -- -- (0.14)
------- ------- ------- ------- ------ ------
Total Dividends and Distributions............... (1.28) (1.60) (1.79) (0.83) (0.46) (0.62)
------- ------- ------- ------- ------ ------
Net change in net asset value....................... 1.20 1.63 0.62 2.73 (0.41) 0.58
------- ------- ------- ------- ------ ------
Net asset value, end of period...................... $ 16.64 $ 15.44 $ 13.81 $ 13.19 $10.46 $10.87
======= ======= ======= ======= ====== ======
Total return(1)..................................... 16.40%++ 23.89% 19.14% 34.61% 0.50% 11.81%
Ratios/Supplemental Data:
Net Assets, end of period (000's)................... $46,506 $35,343 $15,063 $11,079 $8,005 $4,607
Ratio of expenses to average net assets........... 1.18%+ 1.17% 1.09% 1.18% 0.98% 1.22%
Ratio of net investment income to average net
assets.......................................... 0.53%+ 1.31% 1.77% 2.48% 3.03% 2.43%
Ratio of expenses to average net assets*.......... 1.19%+ 1.18% 1.09% *** *** ***
Ratio of net investment income to average net
assets*......................................... 0.52%+ 1.30% 1.77% *** *** ***
Portfolio turnover rate(2)........................ 11% 88% 39% 58% 28% 54%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Calculation does not include sales charge. Effective May 1,
1997, the Investment Shares were not assessed a sales
charge.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
127
<PAGE> 146
The Kent Funds
SMALL COMPANY GROWTH FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 18.39 $ 15.65 $ 13.82 $ 11.99 $ 12.50 $ 10.85
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.01 0.04 0.12 0.10 0.10 0.08
Net realized and unrealized gains (losses)
on investments and futures contracts..... 0.82 4.19 2.55 2.64 (0.10) 1.76
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations...... 0.83 4.23 2.67 2.74 -- 1.84
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income...................... (0.01) (0.04) (0.12) (0.10) (0.09) (0.08)
In excess of net investment income......... -- (0.02) -- -- (0.01) (0.01)
Net realized gains on investments and
futures contracts........................ (0.93) (1.43) (0.72) (0.81) (0.41) (0.10)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions........ (0.94) (1.49) (0.84) (0.91) (0.51) (0.19)
-------- -------- -------- -------- -------- --------
Net change in net asset value................ (0.11) 2.74 1.83 1.83 (0.51) 1.65
-------- -------- -------- -------- -------- --------
Net asset value, end of period............... $ 18.28 $ 18.39 $ 15.65 $ 13.82 $ 11.99 $ 12.50
======== ======== ======== ======== ======== ========
Total return................................. 4.31%++ 27.94% 19.56% 23.75% (0.06%) 17.04%
Ratios/Supplemental Data:
Net Assets, end of period (000's)............ $774,505 $719,998 $544,081 $450,072 $304,179 $252,401
Ratio of expenses to average net assets.... 0.93%+ 0.93% 0.96% 0.97% 0.98% 1.06%
Ratio of net investment income to average
net assets............................... 0.13%+ 0.24% 0.78% 0.83% 0.79% 0.74%
Ratio of expenses to average net assets*... 0.94%+ 0.94% 0.96% *** *** ***
Ratio of net investment income to average
net assets*.............................. 0.12%+ 0.23% 0.78% *** *** ***
Portfolio turnover rate(1)................. 29% 32% 16% 30% 20% 14%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
128
<PAGE> 147
The Kent Funds
SMALL COMPANY GROWTH FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 18.33 $ 15.61 $ 13.81 $ 11.98 $12.49 $10.86
------- ------- ------- ------- ------ ------
Income (Loss) from Investment Operations:
Net investment income............................. (0.01) -- 0.07 0.07 0.10 0.08
Net realized and unrealized gains (losses) on
investments and futures contracts............... 0.81 4.19 2.54 2.64 (0.11) 1.74
------- ------- ------- ------- ------ ------
Total Income (Loss) from Investment Operations...... 0.80 4.19 2.61 2.71 (0.01) 1.82
------- ------- ------- ------- ------ ------
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....................................... (0.93) (1.43) (0.72) (0.81) (0.41) (0.10)
------- ------- ------- ------- ------ ------
Total Dividends and Distributions............... (0.93) (1.47) (0.81) (0.88) (0.50) (0.19)
------- ------- ------- ------- ------ ------
Net change in net asset value....................... (0.13) 2.72 1.80 1.83 (0.51) 1.63
------- ------- ------- ------- ------ ------
Net asset value, end of period...................... $ 18.20 $ 18.33 $ 15.61 $ 13.81 $11.98 $12.49
======= ======= ======= ======= ====== ======
Total return(1)..................................... 4.15%++ 27.71% 19.16% 23.47% (0.08%) 16.84%
Ratios/Supplemental Data:
Net Assets, end of period (000's)................... $26,102 $22,784 $14,436 $10,955 $8,433 $5,345
Ratio of expenses to average net assets........... 1.18%+ 1.18% 1.21% 1.20% 0.98% 1.25%
Ratio of net investment income (loss) to average
net assets...................................... (0.12%)+ (0.01%) 0.53% 0.59% 0.79% 0.59%
Ratio of expenses to average net assets*.......... 1.19%+ 1.19% 1.21% *** *** ***
Ratio of net investment income (loss) to average
net assets*..................................... (0.13%)+ (0.02%) 0.53% *** *** ***
Portfolio turnover rate(2)........................ 29% 32% 16% 30% 20% 14%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Calculation does not include sales charge. Effective May 1,
1997, the Investment Shares were not assessed a sales
charge.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
129
<PAGE> 148
The Kent Funds
INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 14.89 $ 14.75 $ 14.18 $ 13.06 $ 12.84 $ 10.01
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.13 0.11 0.13 0.13 0.12 0.09
Net realized and unrealized gains (losses)
on investments and foreign currency...... 2.00 0.26 0.70 1.54 0.61 2.95
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations...... 2.13 0.37 0.83 1.67 0.73 3.04
-------- -------- -------- -------- -------- --------
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)
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)
-------- -------- -------- -------- -------- --------
Net change in net asset value................ 2.13 0.14 0.57 1.12 0.22 2.83
-------- -------- -------- -------- -------- --------
Net asset value, end of period............... $ 17.02 $ 14.89 $ 14.75 $ 14.18 $ 13.06 $ 12.84
======== ======== ======== ======== ======== ========
Total return................................. 14.33%++ 2.54% 5.87% 13.00% 5.73% 30.32%
Ratios/Supplemental Data:
Net Assets, end of period (000's)............ $540,203 $492,598 $387,799 $286,545 $178,186 $157,716
Ratio of expenses to average net assets.... 1.05%+ 1.05% 1.09% 1.17% 1.22% 1.33%
Ratio of net investment income to average
net assets............................... 1.56%+ 0.80% 0.97% 1.35% 0.87% 0.86%
Ratio of expenses to average net assets*... 1.06%+ 1.06% 1.09% *** *** ***
Ratio of net investment income to average
net assets*.............................. 1.55%+ 0.79% 0.97% *** *** ***
Portfolio turnover rate(1)............... 16% 3% 13% 6% 20% 5%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
130
<PAGE> 149
The Kent Funds
INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 14.79 $14.69 $14.13 $13.00 $12.81 $10.03
------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income................................ 0.11 0.08 0.12 0.14 0.14 0.13
Net realized and unrealized gains on securities and
foreign currency................................... 1.99 0.25 0.66 1.50 0.56 2.85
------- ------ ------ ------ ------ ------
Total Income from Investment Operations................ 2.10 0.33 0.78 1.64 0.70 2.98
------- ------ ------ ------ ------ ------
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 securities 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.......................... 2.10 0.10 0.56 1.13 0.19 2.78
------- ------ ------ ------ ------ ------
Net asset value, end of period......................... $ 16.89 $14.79 $14.69 $14.13 $13.00 $12.81
======= ====== ====== ====== ====== ======
Total return(1)........................................ 14.22%++ 2.25% 5.57% 12.86% 5.51% 29.67%
Ratios/Supplemental Data:
Net Assets, End of period (000's)...................... $12,186 $9,780 $8,799 $7,548 $6,539 $3,202
Ratio of expenses to average net assets.............. 1.30%+ 1.30% 1.34% 1.40% 1.25% 1.43%
Ratio of net investment income to average net
assets............................................. 1.35%+ 0.53% 0.74% 1.11% 0.81% 0.32%
Ratio of expenses to average net assets*............. 1.31%+ 1.31% 1.34% *** *** ***
Ratio of net investment income to average net
assets*............................................ 1.34%+ 0.52% 0.74% *** *** ***
Portfolio turnover rate(2)........................... 16% 3% 13% 6% 20% 5%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Calculation does not include sales charge. Effective May 1,
1997, the Investment Shares were not assessed a sales
charge.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
131
<PAGE> 150
The Kent Funds
INDEX EQUITY FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 19.14 $ 14.71 $ 12.56 $ 10.68 $ 11.04 $ 10.41
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.12 0.25 0.26 0.26 0.25 0.23
Net realized and unrealized gains
(losses) on investments and futures
contracts.............................. 3.23 4.50 2.47 3.44 (0.15) 0.71
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations.... 3.35 4.75 2.73 3.70 0.10 0.94
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income.................... (0.12) (0.25) (0.26) (0.25) (0.26) (0.23)
In excess of net investment income....... -- -- -- -- -- **
Net realized gains on investments and
futures contracts...................... (0.01) (0.05) (0.28) (1.57) (0.20) (0.08)
In excess of net realized gains.......... -- (0.02) (0.04) -- -- --
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions...... (0.13) (0.32) (0.58) (1.82) (0.46) (0.31)
-------- -------- -------- -------- -------- --------
Net change in net asset value.............. 3.22 4.43 2.15 1.88 (0.36) 0.63
-------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 22.36 $ 19.14 $ 14.71 $ 12.56 $ 10.68 $ 11.04
======== ======== ======== ======== ======== ========
Total return............................... 17.52%++ 32.55% 22.18% 36.23% 0.86% 9.11%
Ratios/Supplemental Data:
Net Assets, end of period (000's).......... $705,841 $590,241 $243,438 $183,877 $245,550 $233,451
Ratio of expenses to average net
assets................................. 0.42%+ 0.43% 0.49% 0.56% 0.58% 0.65%
Ratio of net investment income to average
net assets............................. 1.11%+ 1.44% 1.91% 2.14% 2.32% 2.18%
Ratio of expenses to average net
assets*................................ 0.54%+ 0.54% 0.59% 0.56% 0.58% 0.65%
Ratio of net investment income to average
net assets*............................ 0.99%+ 1.33% 1.81% 2.14% 2.32% 2.18%
Portfolio turnover rate(1)............... 1% 1% 2% 3% 50% 1%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
132
<PAGE> 151
The Kent Funds
INDEX EQUITY FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 19.15 $ 14.72 $12.57 $10.70 $11.07 $10.44
------- ------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income............................... 0.09 0.20 0.22 0.23 0.26 0.22
Net realized and unrealized gains (losses) on
investments and futures contracts................. 3.23 4.51 2.48 3.44 (0.17) 0.72
------- ------- ------ ------ ------ ------
Total Income from Investment Operations............... 3.32 4.71 2.70 3.67 0.09 0.94
------- ------- ------ ------ ------ ------
Less Dividends and Distributions from:
Net investment income............................... (0.09) (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......................................... (0.01) (0.06) (0.32) (1.57) (0.20) (0.06)
In excess of net realized gains..................... -- (0.01) -- -- -- (0.02)
------- ------- ------ ------ ------ ------
Total Dividends and Distributions................. (0.10) (0.28) (0.55) (1.80) (0.46) (0.31)
------- ------- ------ ------ ------ ------
Net change in net asset value......................... 3.22 4.43 2.15 1.87 (0.37) 0.63
------- ------- ------ ------ ------ ------
Net asset value, end of period........................ $ 22.37 $ 19.15 $14.72 $12.57 $10.70 $11.07
======= ======= ====== ====== ====== ======
Total return(1)....................................... 17.37%++ 32.24% 21.92% 35.81% 0.75% 9.09%
Net Assets, end of period (000's)..................... $36,196 $27,922 $9,925 $6,612 $4,736 $3,776
Ratio of expenses to average net assets............. 0.67%+ 0.68% 0.74% 0.80% 0.60% 0.86%
Ratio of net investment income to average net
assets............................................ 0.86%+ 1.20% 1.67% 1.86% 2.30% 2.04%
Ratio of expenses to average net assets*............ 0.79%+ 0.79% 0.84% 0.81% 0.60% 0.86%
Ratio of net investment income to average net
assets*........................................... 0.74%+ 1.09% 1.57% 1.85% 2.30% 2.04%
Portfolio turnover rate(2).......................... 1% 1% 2% 3% 50% 1%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Calculation does not include sales charge. Effective May 1,
1997, the Investment Shares were not assessed a sales
charge.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
133
<PAGE> 152
The Kent Funds
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 9.75 $ 9.75 $ 9.96 $ 9.52 $ 9.91 $ 9.99
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.28 0.61 0.61 0.55 0.48 0.42
Net realized and unrealized gains
(losses) on investments................ -- -- (0.21) 0.43 (0.38) (0.09)
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations.... 0.28 0.61 0.40 0.98 0.10 0.33
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income.................... (0.30) (0.61) (0.61) (0.54) (0.49) (0.41)
In excess of net investment income....... -- -- -- -- ** --
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions...... (0.30) (0.61) (0.61) (0.54) (0.49) (0.41)
-------- -------- -------- -------- -------- --------
Net change in net asset value.............. (0.02) 0.00 (0.21) 0.44 (0.39) (0.08)
-------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 9.73 $ 9.75 $ 9.75 $ 9.96 $ 9.52 $ 9.91
======== ======== ======== ======== ======== ========
Total return............................... 2.74%++ 6.42% 4.22% 10.53% 1.03% 3.36%
Ratios/Supplemental Data:
Net Assets, end of period (000's).......... $129,227 $139,739 $235,430 $310,680 $176,765 $255,892
Ratio of expenses to average net
assets................................. 0.75%+ 0.72% 0.70% 0.77% 0.73% 0.81%
Ratio of net investment income to average
net assets............................. 5.83%+ 6.04% 6.17% 5.60% 4.75% 4.24%
Ratio of expenses to average net
assets*................................ 0.76%+ 0.73% 0.70% *** *** ***
Ratio of net investment income to average
net assets*............................ 5.82%+ 6.03% 6.17% *** *** ***
Portfolio turnover rate(1)............... 41% 89% 32% 75% 56% 50%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
134
<PAGE> 153
The Kent Funds
SHORT TERM BOND FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 9.74 $ 9.74 $ 9.95 $ 9.52 $ 9.91 $ 10.02
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................... 0.28 0.57 0.59 0.52 0.47 0.38
Net realized and unrealized gains
(losses) on investments............... -- 0.02 (0.20) 0.44 (0.37) (0.08)
-------- -------- -------- -------- -------- --------
Total Income from Investment Operations... 0.28 0.59 0.39 0.96 0.10 0.30
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................... (0.27) (0.59) (0.54) (0.53) (0.48) (0.41)
In excess of net investment income...... (0.03) -- (0.06) -- (0.01) --
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions..... (0.30) (0.59) (0.60) (0.53) (0.49) (0.41)
-------- -------- -------- -------- -------- --------
Net change in net asset value............. (0.02) 0.00 (0.21) 0.43 (0.39) (0.11)
-------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 9.72 $ 9.74 $ 9.74 $ 9.95 $ 9.52 $ 9.91
======== ======== ======== ======== ======== ========
Total return(1)........................... 2.68%++ 6.26% 4.06% 10.30% 1.01% 3.04%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....... $ 6,648 $ 7,433 $ 1,667 $ 1,634 $ 1,649 $ 1,427
Ratio of expenses to average net
assets................................ 0.90%+ 0.88% 0.85% 0.91% 0.74% 1.24%
Ratio of net investment income to
average net assets.................... 5.68%+ 5.75% 6.02% 5.40% 4.79% 3.91%
Ratio of expenses to average net
assets*............................... 1.01%+ 0.99% 0.96% *** *** ***
Ratio of net investment income to
average net assets*................... 5.57%+ 5.64% 5.91% *** *** ***
Portfolio turnover rate(2).............. 41% 89% 32% 75% 56% 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
135
<PAGE> 154
The Kent Funds
INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED DECEMBER 31,
MONTHS ENDED --------------------------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 9.90 $ 9.76 $ 10.12 $ 9.29 $ 10.18 $ 10.00
-------- -------- -------- -------- -------- --------
Income (Loss) from Investment Operations:
Net investment income................... 0.29 0.59 0.60 0.65 0.56 0.51
Net realized and unrealized gains
(losses) on investments............... 0.05 0.14 (0.32) 0.81 (0.88) 0.32
-------- -------- -------- -------- -------- --------
Total Income (Loss) from Investment
Operations.............................. 0.34 0.73 0.28 1.46 (0.32) 0.83
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................... (0.29) (0.59) (0.61) (0.63) (0.54) (0.51)
In excess of net investment income...... -- -- (0.03) -- (0.01) **
Net realized gains on investments....... -- -- -- -- (0.02) (0.14)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions..... (0.29) (0.59) (0.64) (0.63) (0.57) (0.65)
-------- -------- -------- -------- -------- --------
Net change in net asset value............. 0.05 0.14 (0.36) 0.83 (0.89) 0.18
-------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 9.95 $ 9.90 $ 9.76 $ 10.12 $ 9.29 $ 10.18
======== ======== ======== ======== ======== ========
Total return.............................. 3.48%++ 7.80% 3.01% 16.18% (3.19%) 8.42%
Ratios/Supplemental Data:
Net Assets, end of period (000's)......... $765,402 $762,740 $769,395 $854,801 $977,865 $434,264
Ratio of expenses to average net
assets................................ 0.76%+ 0.75% 0.77% 0.77% 0.80% 0.85%
Ratio of net investment income to
average net assets.................... 5.85%+ 6.03% 6.18% 6.50% 6.03% 5.03%
Ratio of expenses to average net
assets*............................... 0.77%+ 0.76% 0.78% *** *** ***
Ratio of net investment income to
average net assets*................... 5.84%+ 6.02% 6.17% *** *** ***
Portfolio turnover rate(1).............. 64% 114% 135% 166% 124% 126%
</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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
136
<PAGE> 155
The Kent Funds
INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.93 $ 9.78 $ 10.14 $ 9.32 $ 10.19 $ 10.03
-------- -------- -------- -------- -------- --------
Income (Loss) from Investment
Operations:
Net investment income................. 0.27 0.57 0.58 0.61 0.57 0.47
Net realized and unrealized gains
(losses) on investments............. 0.05 0.15 (0.32) 0.82 (0.87) 0.34
-------- -------- -------- -------- -------- --------
Total Income (Loss) from Investment
Operations............................ 0.32 0.72 0.26 1.43 (0.30) 0.81
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................. (0.27) (0.57) (0.57) (0.61) (0.54) (0.46)
In excess of net investment income.... (0.01) -- (0.05) -- (0.01) (0.05)
Net realized gains on investments..... -- -- -- -- (0.02) (0.14)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions... (0.28) (0.57) (0.62) (0.61) (0.57) (0.65)
-------- -------- -------- -------- -------- --------
Net change in net asset value........... 0.04 0.15 (0.36) 0.82 (0.87) 0.16
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 9.97 $ 9.93 $ 9.78 $ 10.14 $ 9.32 $ 10.19
======== ======== ======== ======== ======== ========
Total return(1)......................... 3.24%++ 7.62% 2.76% 15.76% (3.01%) 8.19%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....... $ 10,019 $ 6,972 $ 7,327 $ 6,862 $ 9,196 $ 4,966
Ratio of expenses to average net
assets.............................. 1.01%+ 1.00% 1.02% 1.01% 0.81% 1.13%
Ratio of net investment income to
average net assets.................. 5.60%+ 5.79% 5.92% 6.24% 5.94% 4.75%
Ratio of expenses to average net
assets*............................. 1.02%+ 1.01% 1.03% *** *** ***
Ratio of net investment income to
average net assets*................. 5.59%+ 5.78% 5.91% *** *** ***
Portfolio turnover rate(2)............ 64% 114% 135% 166% 124% 126%
</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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
137
<PAGE> 156
The Kent Funds
INCOME FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------
(UNAUDITED) 1997 1996 1995(1)
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.30 $ 10.16 $ 10.84 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.33 0.68 0.66 0.55
Net realized and unrealized gains (losses) on
investments............................................. 0.09 0.34 (0.56) 0.92
-------- -------- -------- --------
Total Income from Investment Operations..................... 0.42 1.02 0.10 1.47
-------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.33) (0.68) (0.65) (0.54)
In excess of net investment income........................ -- -- (0.10) --
Net realized gains on investments......................... (0.01) (0.20) (0.03) (0.09)
-------- -------- -------- --------
Total Dividends and Distributions....................... (0.34) (0.88) (0.78) (0.63)
-------- -------- -------- --------
Net change in net asset value............................... 0.08 0.14 (0.68) 0.84
-------- -------- -------- --------
Net asset value, end of period.............................. $ 10.38 $ 10.30 $ 10.16 $ 10.84
======== ======== ======== ========
Total return................................................ 4.14%++ 10.55% 1.19% 15.05%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $249,546 $229,778 $240,060 $126,056
Ratio of expenses to average net assets................... 0.82%+ 0.82% 0.83% 0.91%+
Ratio of net investment income to average net assets...... 6.44%+ 6.65% 6.57% 6.65%+
Ratio of expenses to average net assets*.................. 0.83%+ 0.83% 0.83% **
Ratio of net investment income to average net assets*..... 6.43%+ 6.64% 6.57% **
Portfolio turnover rate(2)................................ 47% 84% 102% 50%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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 March 20,
1995.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
138
<PAGE> 157
The Kent Funds
INCOME FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------
(UNAUDITED) 1997 1996 1995(1)
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.29 $ 10.16 $ 10.82 $ 10.00
------- ------- ------- -------
Income from Investment Operations:
Net investment income..................................... 0.32 0.63 0.66 0.52
Net realized and unrealized gains (losses) on
investments............................................. 0.09 0.35 (0.56) 0.91
------- ------- ------- -------
Total Income from Investment Operations..................... 0.41 0.98 0.10 1.43
------- ------- ------- -------
Less Dividends and Distributions from:
Net investment income..................................... (0.30) (0.65) (0.64) (0.52)
In excess of net investment income........................ (0.02) -- (0.09) --
Net realized gains on investments......................... (0.01) (0.20) (0.03) (0.09)
------- ------- ------- -------
Total Dividends and Distributions....................... (0.33) (0.85) (0.76) (0.61)
------- ------- ------- -------
Net change in net asset value............................... 0.08 0.13 (0.66) 0.82
------- ------- ------- -------
Net asset value, end of period.............................. $ 10.37 $ 10.29 $ 10.16 $ 10.82
======= ======= ======= =======
Total return(2)............................................. 4.02%++ 10.19% 1.16% 14.63%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 9,283 $ 5,611 $ 2,722 $ 1,961
Ratio of expenses to average net assets................... 1.07%+ 1.07% 1.08% 1.14%+
Ratio of net investment income to average net assets...... 6.19%+ 6.38% 6.31% 6.40%+
Ratio of expenses to average net assets*.................. 1.08%+ 1.08% 1.08% **
Ratio of net investment income to average net assets*..... 6.18%+ 6.37% 6.31% **
Portfolio turnover rate(3)................................ 47% 84% 102% 50%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ 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) Calculation does not include sales charge. Effective May 1,
1997, the Investment Shares were not assessed a sales
charge.
(3) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
139
<PAGE> 158
The Kent Funds
LIMITED TERM TAX-FREE FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1)
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 10.19 $ 10.16 $ 10.22 $ 9.80 $ 10.00
------- ------- ------- ------- -------
Income (Loss) from Investment Operations:
Net investment income.................................. 0.19 0.40 0.39 0.39 0.13
Net realized and unrealized gains (losses) on
investments.......................................... (0.02) 0.08 (0.04) 0.42 (0.21)
------- ------- ------- ------- -------
Total Income (Loss) from Investment Operations........... 0.17 0.48 0.35 0.81 (0.08)
------- ------- ------- ------- -------
Less Dividends and Distributions from:
Net investment income.................................. (0.19) (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.................... (0.19) (0.45) (0.41) (0.39) (0.12)
------- ------- ------- ------- -------
Net change in net asset value............................ (0.02) 0.03 (0.06) 0.42 (0.20)
------- ------- ------- ------- -------
Net asset value, end of period........................... $ 10.17 $ 10.19 $ 10.16 $ 10.22 $ 9.80
======= ======= ======= ======= =======
Total return............................................. 1.72%++ 4.78% 3.54% 8.43% (0.77%)++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $37,205 $36,023 $41,472 $55,347 $43,497
Ratio of expenses to average net assets................ 0.75%+ 0.76% 0.75% 0.69% 0.79%+
Ratio of net investment income to average net assets... 3.85%+ 3.86% 3.84% 3.87% 3.81%+
Ratio of expenses to average net assets*............... 0.76%+ 0.77% 0.75% 0.74% 0.96%+
Ratio of net investment income to average net
assets*.............................................. 3.84%+ 3.85% 3.84% 3.82% 3.64%+
Portfolio turnover rate(2)............................. 24% 29% 32% 51% 10%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced
and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been
as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on September 1,
1994.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
140
<PAGE> 159
The Kent Funds
LIMITED TERM TAX-FREE FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ---------------------------------------
(UNAUDITED) 1997 1996 1995 1994(1)
------------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 10.23 $ 10.20 $ 10.24 $ 9.81 $ 9.87
------- ------- ------- ------ ------
Income from Investment Operations:
Net investment income.................................. 0.19 0.38 0.37 0.37 0.06
Net realized and unrealized gains (losses) on
investments.......................................... (0.02) 0.08 (0.02) 0.44 (0.06)
------- ------- ------- ------ ------
Total Income from Investment Operations.................. 0.17 0.46 0.35 0.81 --
------- ------- ------- ------ ------
Less Dividends and Distributions from:
Net investment income.................................. (0.19) (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.................... (0.19) (0.43) (0.39) (0.38) (0.06)
------- ------- ------- ------ ------
Net change in net asset value............................ (0.02) 0.03 (0.04) 0.43 (0.06)
------- ------- ------- ------ ------
Net asset value, end of period........................... $ 10.21 $ 10.23 $ 10.20 $10.24 $ 9.81
======= ======= ======= ====== ======
Total return(2).......................................... 1.63%++ 4.61% 3.51% 8.40% 0.03%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $ 292 $ 474 $ 106 $ 54 $ 7
Ratio of expenses to average net assets................ 0.90%+ 0.93% 0.87% 0.84% 0.87%+
Ratio of net investment income to average net assets... 3.70%+ 3.67% 3.69% 3.69% 3.86%+
Ratio of expenses to average net assets*............... 1.01%+ 1.04% 0.97% 0.85% 0.98%+
Ratio of net investment income to average net
assets*.............................................. 3.59%+ 3.56% 3.59% 3.69% 3.75%+
Portfolio turnover rate(3)............................. 24% 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.
(1) The Investment Class date of initial public investment was November 1, 1994.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
141
<PAGE> 160
The Kent Funds
INTERMEDIATE TAX-FREE FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 10.68 $ 10.42 $ 10.52 $ 9.74 $ 10.45 $ 10.02
Income (Loss) from Investment Operations:
Net investment income................... 0.23 0.45 0.44 0.45 0.40 0.37
Net realized and unrealized gains
(losses) on investments............... (0.02) 0.26 (0.08) 0.79 (0.71) 0.47
-------- -------- -------- -------- -------- --------
Total Income (Loss) from Investment
Operations.............................. 0.21 0.71 0.36 1.24 (0.31) 0.84
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................... (0.23) (0.45) (0.46) (0.45) (0.39) (0.36)
In excess of net investment income...... -- -- ** (0.01) (0.01) --
Net realized gains on investments....... -- -- -- -- -- (0.05)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions..... (0.23) (0.45) (0.46) (0.46) (0.40) (0.41)
Net change in net asset value............. (0.02) 0.26 (0.10) 0.78 (0.71) 0.43
-------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 10.66 $ 10.68 $ 10.42 $ 10.52 $ 9.74 $ 10.45
======== ======== ======== ======== ======== ========
Total return.............................. 1.84%++ 7.07% 3.41% 12.90% (3.00%) 8.51%
Ratios/Supplemental Data:
Net Assets, end of period (000's)......... $284,980 $275,641 $285,674 $283,733 $380,715 $135,862
Ratio of expenses to average net
assets................................ 0.73%+ 0.72% 0.73% 0.72% 0.78% 0.84%
Ratio of net investment income to
average net assets.................... 4.28%+ 4.31% 4.34% 4.39% 4.07% 3.62%
Ratio of expenses to average net
assets*............................... 0.74%+ 0.73% 0.73% 0.72% 0.78% 0.84%
Ratio of net investment income to
average net assets*................... 4.27%+ 4.30% 4.34% 4.39% 4.07% 3.62%
Portfolio turnover rate(1).............. 12% 23% 35% 6% 36% 14%
</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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
142
<PAGE> 161
The Kent Funds
INTERMEDIATE TAX-FREE FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $10.68 $10.42 $10.52 $ 9.74 $10.45 $10.04
------ ------ ------ ------ ------ ------
Income (Loss) from Investment Operations:
Net investment income............................. 0.21 0.43 0.42 0.42 0.40 0.36
Net realized and unrealized gains (losses) on
investments..................................... (0.02) 0.26 (0.09) 0.79 (0.71) 0.46
------ ------ ------ ------ ------ ------
Total Income (Loss) from Investment Operations...... 0.19 0.69 0.33 1.21 (0.31) 0.82
------ ------ ------ ------ ------ ------
Less Dividends and Distributions from:
Net investment income............................. (0.21) (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............... (0.21) (0.43) (0.43) (0.43) (0.40) (0.41)
------ ------ ------ ------ ------ ------
Net change in net asset value....................... (0.02) 0.26 (0.10) 0.78 (0.71) 0.41
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $10.66 $10.68 $10.42 $10.52 $ 9.74 $10.45
====== ====== ====== ====== ====== ======
Total return(1)..................................... 1.80%++ 6.80% 3.17% 12.66% (3.03%) 8.29%
Ratios/Supplemental Data:
Net Assets, end of period (000's)................... $3,770 $3,534 $3,368 $3,807 $4,505 $3,307
Ratio of expenses to average net assets........... 0.98%+ 0.97% 0.98% 0.97% 0.79% 1.08%
Ratio of net investment income to average net
assets.......................................... 4.03%+ 4.06% 4.09% 4.13% 3.99% 3.44%
Ratio of expenses to average net assets*.......... 0.99%+ 0.98% 0.98% 0.97% 0.79% 1.08%
Ratio of net investment income to average net
assets*......................................... 4.02%+ 4.05% 4.09% 4.13% 3.99% 3.44%
Portfolio turnover rate(2)........................ 12% 23% 35% 6% 36% 14%
</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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
143
<PAGE> 162
The Kent Funds
TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------
JUNE 30, 1998 1997 1996 1995(1)
------------- --------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.65 $ 10.27 $ 10.49 $ 10.00
-------- --------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.23 0.45 0.46 0.36
Net realized and unrealized gains (losses) on investments
and futures contracts:.................................. (0.02) 0.41 (0.06) 0.49
-------- --------- -------- --------
Total Income from Investment Operations..................... 0.21 0.86 0.40 0.85
-------- --------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.22) (0.45) (0.46) (0.36)
Net realized gains on investments and futures contracts... (0.01) (0.03) (0.16) --
-------- --------- -------- --------
Total Dividends and Distributions....................... (0.23) (0.48) (0.62) (0.36)
-------- --------- -------- --------
Net change in net asset value............................. (0.02) 0.38 (0.22) 0.49
-------- --------- -------- --------
Net asset value, end of period............................ $ 10.63 $ 10.65 $ 10.27 $ 10.49
======== ========= ======== ========
Total return................................................ 2.01%++ 8.59% 3.92% 8.64%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $125,280 $ 116,652 $109,948 $121,855
Ratio of expenses to average net assets................... 0.78%+ 0.79% 0.82% 0.73%+
Ratio of net investment income to average net assets...... 4.26%+ 4.32% 4.38% 4.44%+
Ratio of expenses to average net assets*.................. 0.79%+ 0.80% 0.82% 0.91%+
Ratio of net investment income to average net assets*..... 4.25%+ 4.31% 4.38% 4.26%+
Portfolio turnover rate(2)................................ 20% 16% 40% 10%
</TABLE>
- ---------------
<TABLE>
<C> <S>
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced
and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been
as indicated.
(1) The Institutional Class commenced operations on March 20,
1995.
(2) Portfolio turnover is calculated on the basis of the
Portfolio as a whole without distinguishing between the
classes of shares issued.
</TABLE>
See Notes to Financial Statements
144
<PAGE> 163
The Kent Funds
TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ---------------------------
(UNAUDITED) 1997 1996 1995(1)
------------- ------ ------ -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.67 $10.29 $10.52 $10.00
------ ------ ------ ------
Income from Investment Operations:
Net investment income..................................... 0.21 0.42 0.41 0.31
Net realized and unrealized gains (losses) on investments
and futures contracts:................................. (0.01) 0.42 (0.05) 0.51
------ ------ ------ ------
Total Income from Investment Operations..................... 0.20 0.84 0.36 0.82
------ ------ ------ ------
Less Dividends and Distributions from:
Net investment income..................................... (0.20) (0.42) (0.43) (0.30)
In excess of net investment income........................ (0.01) (0.01) -- --
Net realized gains on investments and futures contracts... ** (0.03) (0.12) --
In excess of net realized gains........................... (0.01) -- (0.04) --
------ ------ ------ ------
Total Dividends and Distributions........................... (0.22) (0.46) (0.59) (0.30)
------ ------ ------ ------
Net change in net asset value............................... (0.02) 0.38 (0.23) 0.52
------ ------ ------ ------
Net asset value, end of period.............................. $10.65 $10.67 $10.29 $10.52
====== ====== ====== ======
Total return(2)............................................. 1.89%++ 8.32% 3.53% 8.34%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $2,033 $1,712 $ 936 $ 529
Ratio of expenses to average net assets................... 1.03%+ 1.04% 1.07% 0.95%+
Ratio of net investment income to average net assets...... 4.01%+ 4.05% 4.14% 4.25%+
Ratio of expenses to average net assets*.................. 1.04%+ 1.05% 1.07% 1.17%+
Ratio of net investment income to average net assets*..... 4.00%+ 4.04% 4.14% 4.03%+
Portfolio turnover rate(3)................................ 20% 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.
** Amount is less than $0.005.
(1) The Investment Class date of the initial public investment was March 31,
1995.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
145
<PAGE> 164
The Kent Funds
MICHIGAN MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(1)
------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 10.21 $ 10.08 $ 10.12 $ 9.72 $ 10.06 $ 10.00
-------- -------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income.................. 0.20 0.41 0.39 0.39 0.37 0.23
Net realized and unrealized gains
(losses) on investments.............. (0.02) 0.13 (0.04) 0.39 (0.34) 0.07
-------- -------- -------- -------- -------- -------
Total Income from Investment
Operations............................. 0.18 0.54 0.35 0.78 0.03 0.30
-------- -------- -------- -------- -------- -------
Less Dividends and Distributions from:
Net investment income.................. (0.20) (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.... (0.20) (0.41) (0.39) (0.38) (0.37) (0.24)
-------- -------- -------- -------- -------- -------
Net change in net asset value............ (0.02) 0.13 (0.04) 0.40 (0.34) 0.06
-------- -------- -------- -------- -------- -------
Net asset value, end of period........... $ 10.19 $ 10.21 $ 10.08 $ 10.12 $ 9.72 $ 10.06
======== ======== ======== ======== ======== =======
Total return............................. 1.82%++ 5.52% 3.51% 8.20% 0.36% 3.06%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........ $121,374 $111,735 $152,623 $185,466 $118,485 $74,647
Ratio of expenses to average net
assets............................... 0.69%+ 0.69% 0.70% 0.69% 0.49% 0.24%+
Ratio of net investment income to
average net assets................... 4.02%+ 4.04% 3.83% 3.81% 3.74% 3.34%+
Ratio of expenses to average net
assets*.............................. 0.70%+ 0.70% 0.70% 0.70% 0.74% 0.84%+
Ratio of net investment income to
average net assets*.................. 4.01%+ 4.03% 3.83% 3.80% 3.50% 2.74%+
Portfolio turnover rate(2)............. 25% 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 Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
146
<PAGE> 165
The Kent Funds
MICHIGAN MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993(1)
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.20 $ 10.07 $ 10.11 $ 9.72 $ 10.08 $ 10.02
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................. 0.20 0.39 0.38 0.37 0.35 0.21
Net realized and unrealized gains
(losses) on investments............. (0.02) 0.14 (0.05) 0.40 (0.34) 0.07
-------- -------- -------- -------- -------- --------
Total Income from Investment
Operations............................ 0.18 0.53 0.33 0.77 0.01 0.28
-------- -------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................. (0.19) (0.40) (0.35) (0.37) (0.34) (0.21)
In excess of net investment income.... (0.01) -- (0.02) (0.01) (0.03) **
Net realized gains on investments..... -- -- -- -- -- (0.01)
-------- -------- -------- -------- -------- --------
Total Dividends and Distributions... (0.20) (0.40) (0.37) (0.38) (0.37) (0.22)
-------- -------- -------- -------- -------- --------
Net change in net asset value........... (0.02) 0.13 (0.04) 0.39 (0.36) 0.06
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.18 $ 10.20 $ 10.07 $ 10.11 $ 9.72 $ 10.08
======== ======== ======== ======== ======== ========
Total return(2)......................... 1.75%++ 5.38% 3.36% 8.01% 0.16% 2.85%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....... $ 4,676 $ 4,413 $ 2,422 $ 1,900 $ 1,980 $ 283
Ratio of expenses to average net
assets.............................. 0.84%+ 0.84% 0.85% 0.83% 0.49% 0.25%+
Ratio of net investment income to
average net assets.................. 3.87%+ 3.88% 3.68% 3.68% 3.80% 3.43%+
Ratio of expenses to average net
assets*............................. 0.95%+ 0.95% 0.95% 0.85% 0.68% 1.08%+
Ratio of net investment income to
average net assets*................. 3.76%+ 3.77% 3.58% 3.67% 3.61% 2.60%+
Portfolio turnover rate(3)............ 25% 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 May 11, 1993.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements
147
<PAGE> 166
The Kent Funds
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................. 0.025 0.051 0.050 0.050 0.040 0.030
-------- -------- -------- -------- -------- --------
Less Dividends from:
Net investment income................. (0.025) (0.051) (0.050) (0.050) (0.040) (0.030)
-------- -------- -------- -------- -------- --------
Net change in net asset value........... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total return............................ 2.56%++ 5.23% 5.06% 5.58% 3.75% 2.68%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....... $512,831 $474,378 $483,919 $424,815 $323,539 $359,624
Ratio of expenses to average net
assets.............................. 0.55%+ 0.52% 0.52% 0.55% 0.60% 0.60%
Ratio of net investment income to
average net assets.................. 5.10%+ 5.11% 4.95% 5.45% 3.65% 2.65%
Ratio of expenses to average net
assets*............................. 0.63%+ 0.62% 0.62% 0.63% 0.65% 0.68%
Ratio of net investment income to
average net assets*................. 5.02%+ 5.01% 4.85% 5.37% 3.59% 2.57%
</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.
See Notes to Financial Statements
148
<PAGE> 167
The Kent Funds
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................... 0.025 0.051 0.050 0.050 0.040 0.030
-------- -------- -------- -------- -------- --------
Less Dividends from:
Net investment income................... (0.025) (0.051) (0.050) (0.050) (0.040) (0.030)
-------- -------- -------- -------- -------- --------
Net change in net asset value............. -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total return.............................. 2.56%++ 5.23% 5.06% 5.56% 3.71% 2.67%
Ratios/Supplemental Data:
Net Assets, end of period (000's)......... $ 2,890 $ 1,179 $ 804 $ 1,227 $ 369 $ 593
Ratio of expenses to average net
assets................................ 0.55%+ 0.52% 0.52% 0.55% 0.63% 0.63%
Ratio of net investment income to
average net assets.................... 5.10%+ 5.11% 4.94% 5.41% 3.58% 2.63%
Ratio of expenses to average net
assets*............................... 0.63%+ 0.62% 0.62% 0.62% 0.68% 4.49%
Ratio of net investment income (loss) to
average net assets*................... 5.02%+ 5.01% 4.84% 5.33% 3.53% (1.24%)
</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.
See Notes to Financial Statements
149
<PAGE> 168
The Kent Funds
MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................... 0.015 0.033 0.030 0.030 0.020 0.020
-------- -------- -------- -------- -------- --------
Less Dividends from:
Net investment income.................... (0.015) (0.033) (0.030) (0.030) (0.020) (0.020)
-------- -------- -------- -------- -------- --------
Net change in net asset value.............. -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total return............................... 1.55%++ 3.31% 3.11% 3.50% 2.40% 2.00%
Ratios/Supplemental Data:
Net Assets, end of period (000's).......... $295,971 $211,682 $155,424 $145,215 $128,164 $183,366
Ratio of expenses to average net
assets................................. 0.54%+ 0.52% 0.54% 0.56% 0.60% 0.60%
Ratio of net investment income to average
net assets............................. 3.09%+ 3.27% 3.06% 3.45% 2.33% 1.96%
Ratio of expenses to average net
assets*................................ 0.63%+ 0.63% 0.64% 0.65% 0.70% 0.69%
Ratio of net investment income to average
net assets*............................ 3.00%+ 3.16% 2.96% 3.36% 2.23% 1.87%
</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.
See Notes to Financial Statements
150
<PAGE> 169
The Kent Funds
MICHIGAN MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income............................ 0.015 0.033 0.030 0.030 0.020 0.020
------------- ------ ------ ------ ------ ------
Less Dividends from:
Net investment income............................ (0.015) (0.033) (0.030) (0.030) (0.020) (0.020)
------------- ------ ------ ------ ------ ------
Net change in net asset value...................... -- -- -- -- -- --
Net asset value, end of period..................... $ 1.000 $1.000 $1.000 $1.000 $1.000 $1.000
============= ====== ====== ====== ====== ======
Total return....................................... 1.55%++ 3.31% 3.11% 3.48% 2.38% 1.98%
Ratios/Supplemental Data:
Net Assets, end of period (000's).................. $ 389 $ 289 $ 782 1,603 379 149
Ratio of expenses to average net assets.......... 0.54%+ 0.52% 0.54% 0.54% 0.63% 0.63%
Ratio of net investment income to average net
assets......................................... 3.09%+ 3.22% 3.06% 3.48% 2.47% 2.01%
Ratio of expenses to average net assets *........ 0.63%+ 0.63% 0.64% 0.62% 0.73% 3.77%
Ratio of net investment income (loss) to average
net assets *................................... 3.00%+ 3.11% 2.96% 3.39% 2.37% (1.13)%
</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.
See Notes to Financial Statements
151
<PAGE> 170
The Kent Funds
GOVERNMENT MONEY MARKET
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR THE SIX PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
------------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 1.000 $ 1.000
------- -------
Income from Investment Operations:
Net investment income..................................... 0.026 0.031
------- -------
Less Dividends from:
Net investment income..................................... (0.026) (0.031)
------- -------
Net change in net asset value............................... -- --
------- -------
Net asset value, end of period.............................. $ 1.000 $ 1.000
======= =======
Total return................................................ 2.58%++ 3.10%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $98,759 $94,624
Ratio of expenses to average net assets................... 0.37%+ 0.35%+
Ratio of net investment income to average net assets...... 5.16%+ 5.23%+
Ratio of expenses to average net assets*.................. 0.68%+ 0.50%+
Ratio of net investment income to average net assets*..... 4.85%+ 5.08%+
</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.
See Notes to Financial Statements
152
<PAGE> 171
The Kent Funds
GOVERNMENT MONEY MARKET
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
FOR THE SIX PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
------------- ------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 1.000 $ 1.000
------- -------
Income from Investment Operations:
Net investment income..................................... 0.026 0.030
------- -------
Less Dividends from:
Net investment income..................................... (0.026) (0.030)
------- -------
Net change in net asset value............................... -- --
------- -------
Net asset value, end of period.............................. $ 1.000 $ 1.000
======= =======
Total return................................................ 2.58%++ 3.06%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 34 $ 2
Ratio of expenses to average net assets................... 0.37%+ 0.43%+
Ratio of net investment income to average net assets...... 5.16%+ 5.17%+
Ratio of expenses to average net assets*.................. 0.68%+ 0.57%+
Ratio of net investment income to average net assets*..... 4.85%+ 5.03%+
</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.
See Notes to Financial Statements
153
<PAGE> 172
Audited Financial Statements
for the Fiscal Year Ended December 31, 1997
<PAGE> 173
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 97.8%
ADVERTISING -- 0.1%
15,200 Interpublic Group Companies
Inc............................. $ 757,150
------------
AEROSPACE & DEFENSE -- 1.2%
104,274 Boeing Co....................... 5,102,908
21,300 Lockheed Martin Corp............ 2,098,050
1 Raytheon Co. -- Class A......... 19
29,000 Raytheon Co. -- Class B......... 1,464,500
------------
8,665,477
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.2%
25,200 Maytag Corp..................... 940,275
14,900 Whirlpool Corp.................. 819,500
------------
1,759,775
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.2%
15,000 Dana Corp....................... 712,500
16,800 TRW Inc......................... 896,700
------------
1,609,200
------------
AUTO/TRUCK -- REPLACEMENT
EQUIPMENT -- 0.1%
24,550 Genuine Parts Co................ 833,166
------------
AUTOMOTIVE -- 1.6%
121,500 Ford Motor Co................... 5,915,531
100,100 General Motors Corp............. 6,068,563
------------
11,984,094
------------
BANKS -- MAJOR REGIONAL -- 6.1%
69,200 Banc One Corp................... 3,758,425
36,300 Bank of New York Co., Inc....... 2,098,594
17,100 BankBoston Corp................. 1,606,331
10,400 Comerica, Inc................... 938,600
18,500 Corestates Financial Corp....... 1,481,156
17,000 Fifth Third Bancorp............. 1,389,750
27,900 First Chicago NBD Corp.......... 2,329,650
52,900 First Union Corp................ 2,711,125
23,500 Fleet Financial Group, Inc...... 1,761,031
19,300 Huntington Bancshares........... 694,800
31,500 KeyCorp......................... 2,230,594
29,900 Mellon Bank Corp................ 1,812,688
20,300 National City Corp.............. 1,334,725
63,000 NationsBank..................... 3,831,187
100,000 Norwest Corp.................... 3,862,499
42,500 PNC Bank Corp................... 2,425,156
6,900 Republic New York Corp.......... 787,894
15,900 State Street Corp............... 925,181
20,800 SunTrust Banks, Inc............. 1,484,600
23,300 U.S. Bancorp.................... 2,608,144
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- MAJOR REGIONAL (CONTINUED)
24,000 Wachovia Corp................... $ 1,947,000
8,400 Wells Fargo & Co................ 2,851,275
------------
44,870,405
------------
BANKS -- MONEY CENTER -- 2.4%
67,300 BankAmerica Corp................ 4,912,900
8,900 Bankers Trust New York Corp..... 1,000,694
40,800 Chase Manhattan Corp............ 4,467,600
44,500 Citicorp........................ 5,626,468
16,400 J.P. Morgan & Co., Inc.......... 1,851,150
------------
17,858,812
------------
BEVERAGES -- ALCOHOLIC -- 0.7%
70,200 Anheuser-Busch Co., Inc......... 3,088,800
53,300 Seagram Co., Ltd................ 1,722,256
------------
4,811,056
------------
BEVERAGES -- SOFT DRINKS -- 3.0%
227,200 Coca-Cola Co.................... 15,137,199
181,600 PepsiCo, Inc.................... 6,617,050
------------
21,754,249
------------
BROADCASTING/CABLE -- 0.5%
14,200 Clear Channel Communications*... 1,128,013
31,700 Comcast Corp. Special........... 1,000,531
55,795 Tele-Communications Inc.*....... 1,558,773
------------
3,687,317
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.3%
9,900 Armstrong World Industries,
Inc............................. 740,025
24,200 Masco Corp...................... 1,231,175
------------
1,971,200
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.2%
11,600 Centex Corp..................... 730,075
18,600 Pulte Corp...................... 777,713
------------
1,507,788
------------
BUILDING PRODUCTS --
RETAIL/WHOLESALE -- 0.7%
69,200 Home Depot, Inc................. 4,074,150
17,300 Lowe's Cos., Inc................ 824,994
------------
4,899,144
------------
BUILDING PRODUCTS -- WOOD -- 0.1%
18,600 Weyerhaeuser Co................. 912,563
------------
CHEMICALS -- DIVERSIFIED -- 1.9%
32,500 Dow Chemical Co................. 3,298,749
109,200 E.I. du Pont de Nemours & Co.... 6,558,824
22,600 Hercules, Inc................... 1,131,413
37,100 PPG Industries, Inc............. 2,119,338
23,700 Union Carbide Corp.............. 1,017,619
------------
14,125,943
------------
</TABLE>
Continued
27
<PAGE> 174
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CHEMICALS -- SPECIALTY -- 0.3%
25,700 Great Lakes Chemical Corp....... $ 1,153,287
27,500 Nalco Chemical Co............... 1,087,969
------------
2,241,256
------------
COMPUTER SOFTWARE -- 2.5%
12,400 Adobe Systems, Inc.............. 511,500
115,800 Microsoft Corp.................. 14,967,149
27,700 Nextlevel Systems Inc.*......... 495,138
97,800 Oracle Corp.*................... 2,182,162
------------
18,155,949
------------
COMPUTERS -- LOCAL AREA NETWORK -- 0.9%
19,400 Cabletron Systems*.............. 291,000
99,750 Cisco Systems, Inc.*............ 5,561,063
60,200 Novell, Inc.*................... 451,500
------------
6,303,563
------------
COMPUTERS -- MAINFRAME -- 1.4%
94,800 International Business Machines
Corp............................ 9,912,525
------------
COMPUTERS -- MEMORY DEVICES -- 0.1%
45,800 Seagate Technology, Inc......... 881,650
------------
COMPUTERS -- MICRO -- 1.0%
80,800 Compaq Computer Corp............ 4,560,150
33,600 Dell Computer Corp.*............ 2,822,400
------------
7,382,550
------------
COMPUTERS -- MINI -- 1.3%
32,100 Digital Equipment Corp.*........ 1,187,700
101,000 Hewlett-Packard Co.............. 6,312,499
34,500 Silicon Graphics, Inc.*......... 429,094
36,100 Sun Microsystems, Inc.*......... 1,439,488
------------
9,368,781
------------
COMPUTERS -- SERVICES -- 0.7%
57,100 Automatic Data Processing,
Inc............................. 3,504,512
15,800 Ceridian Corp.*................. 723,838
30,000 First Data Corp................. 877,500
------------
5,105,850
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.6%
13,500 American Greetings Corp......... 528,188
60,800 Unilever NV, ADR................ 3,796,200
------------
4,324,388
------------
CONTAINERS & PACKAGING -- 0.1%
20,500 Owens-Illinois*................. 777,719
------------
CONTAINERS -- METAL & GLASS -- 0.1%
26,100 Ball Corp....................... 921,656
------------
COSMETICS & TOILETRIES -- 0.7%
4,700 Alberto Culver Co., Class B..... 150,694
52,600 Gillette Co..................... 5,283,012
------------
5,433,706
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED -- 4.9%
54,600 Allied Signal, Inc.............. $ 2,125,988
314,200 General Electric Co............. 23,054,424
23,900 Johnson Controls, Inc........... 1,141,225
38,800 Minnesota Mining &
Manufacturing Co................ 3,184,025
49,700 Rockwell International Corp..... 2,596,825
24,900 Tenneco, Inc.................... 983,550
22,700 Textron, Inc.,.................. 1,418,750
22,500 United Technologies Corp........ 1,638,281
------------
36,143,068
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 2.0%
160,200 Intel Corp...................... 11,254,049
28,200 LSI Logic Corp.*................ 556,950
38,800 Micron Technology, Inc.*........ 1,008,800
39,200 Texas Instruments, Inc.......... 1,764,000
------------
14,583,799
------------
ELECTRONIC -- CONNECTORS -- 0.3%
46,500 AMP, Inc........................ 1,953,000
9,000 Thomas & Betts Corp............. 425,250
------------
2,378,250
------------
ELECTRONIC MEASURING EQUIPMENT -- 0.2%
40,900 Tektronix, Inc.................. 1,623,219
------------
ELECTRONIC MEASURING MACHINES -- 0.2%
40,600 Applied Materials, Inc.*........ 1,223,075
------------
ELECTRONICS -- 0.0%
3,600 Raychem Corp.................... 155,025
------------
FINANCIAL -- CONSUMER LOANS -- 0.1%
6,100 Beneficial Corp................. 507,063
------------
FINANCIAL -- INVESTMENT BANKERS -- 0.6%
38,800 Merrill Lynch & Co., Inc........ 2,829,975
31,300 Schwab (Charles) Corp........... 1,312,644
------------
4,142,619
------------
FINANCIAL -- LEASING COMPANY -- 0.0%
10,000 Ryder Systems, Inc.............. 327,500
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 1.0%
44,800 American Express Co............. 3,998,400
56,300 Morgan Stanley, Dean Witter,
Discover & Co................... 3,328,738
------------
7,327,138
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.2%
100,100 Fannie Mae...................... 5,711,956
66,400 Freddie Mac..................... 2,784,650
------------
8,496,606
------------
FINANCIAL -- SAVINGS & LOAN -- 0.1%
11,400 H.F. Ahmanson & Co.............. 763,088
------------
</TABLE>
Continued
28
<PAGE> 175
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOOD -- CANNED -- 0.6%
42,600 Campbell Soup Co................ $ 2,476,125
44,900 H.J. Heinz Co................... 2,281,481
------------
4,757,606
------------
FOOD -- CONFECTIONARY -- 0.1%
12,600 Hershey Foods Corp.............. 780,413
------------
FOOD -- DIVERSIFIED -- 1.5%
45,500 ConAgra, Inc.................... 1,492,969
13,300 CPC International, Inc.......... 1,433,075
23,300 General Mills, Inc.............. 1,668,863
38,100 Kellogg Co...................... 1,890,713
20,300 Quaker Oats Co.................. 1,070,825
10,400 Ralston Purina Group............ 966,550
46,300 Sara Lee Corp................... 2,607,268
------------
11,130,263
------------
FOOD -- FLOUR & GRAIN -- 0.2%
54,000 Archer-Daniels-Midland Co....... 1,171,125
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
24,100 Supervalu, Inc.................. 1,009,188
------------
FOREST PRODUCTS -- 0.1%
28,400 Fort James Corporation.......... 1,086,300
------------
GAMING -- 0.1%
16,500 Mirage Resorts*................. 375,375
------------
GAS & ELECTRIC UTILITY -- 1.2%
82,000 PG & E Corp..................... 2,495,875
192,400 Public Service Enterprises...... 6,096,675
------------
8,592,550
------------
HOTELS & LODGING -- 0.4%
40,000 Hilton Hotels Corp.............. 1,190,000
10,700 ITT Corp.*...................... 886,763
12,600 Marriott International, Inc..... 872,550
------------
2,949,313
------------
INSTRUMENTS -- CONTROL -- 0.2%
9,800 General Signal Corp............. 413,438
12,800 Honeywell, Inc.................. 876,800
------------
1,290,238
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.2%
19,600 Aon Corp........................ 1,149,050
------------
INSURANCE -- BROKERS -- 0.2%
15,100 Marsh & McLennan Cos., Inc...... 1,125,894
------------
INSURANCE -- LIFE -- 0.7%
48,100 American General Corp........... 2,600,406
27,500 Torchmark Corp.................. 1,156,719
12,400 TransAmerica Corp............... 1,320,600
------------
5,077,725
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- MULTI-LINE -- 1.9%
15,100 Aetna, Inc...................... $ 1,065,494
13,700 CIGNA Corp...................... 2,370,956
11,000 Hartford Financial Services
Group, Inc...................... 1,029,188
20,000 Loews Corp...................... 2,122,500
10,800 MBIA, Inc....................... 721,575
123,904 Travelers Group, Inc............ 6,675,328
------------
13,985,041
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.4%
48,000 Allstate Corp................... 4,362,000
67,800 American International Group.... 7,373,249
9,300 Chubb Corp...................... 703,313
11,800 General Re Corp................. 2,501,600
14,200 Lincoln National Corp........... 1,109,375
21,700 Safeco Corp..................... 1,057,875
28,000 USF&G Corp...................... 617,750
------------
17,725,162
------------
LEISURE & RECREATION/GAMING -- 0.0%
11,700 Harrah's Entertainment, Inc.*... 220,838
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.2%
48,200 Cincinnati Milacron, Inc........ 1,250,188
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.2%
36,900 Caterpillar, Inc................ 1,791,956
------------
MACHINERY -- ELECTRICAL -- 0.5%
41,500 Emerson Electric Co............. 2,342,156
10,800 W.W. Grainger, Inc.............. 1,049,625
------------
3,391,781
------------
MACHINERY -- FARM -- 0.3%
19,900 Briggs & Stratton Corp.......... 966,394
24,500 Deere & Co...................... 1,428,656
------------
2,395,050
------------
MACHINERY -- GENERAL INDUSTRIAL -- 0.2%
34,500 Cooper Industries, Inc.......... 1,690,500
------------
MACHINERY -- THERMAL PROCESSOR -- 0.2%
26,500 Thermo Electron Corp.*.......... 1,179,250
------------
MEDIA CONGLOMERATES -- 1.4%
56,100 Time Warner, Inc................ 3,478,200
67,400 Walt Disney Co.................. 6,676,813
------------
10,155,013
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
25,400 Amgen, Inc...................... 1,374,775
------------
MEDICAL -- DRUGS -- 8.4%
73,700 Abbott Laboratories............. 4,831,956
5,800 Alza Corp.*..................... 184,513
64,400 American Home Products Corp..... 4,926,600
118,500 Bristol-Myers Squibb Co......... 11,213,062
131,300 Eli Lilly & Co.................. 9,141,763
125,800 Merck & Co., Inc................ 13,366,249
124,700 Pfizer, Inc..................... 9,297,944
</TABLE>
Continued
29
<PAGE> 176
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL -- DRUGS (CONTINUED)
47,600 Pharmacia & Upjohn, Inc......... $ 1,743,350
70,600 Schering-Plough Corp............ 4,386,025
26,500 Warner-Lambert Co............... 3,286,000
------------
62,377,462
------------
MEDICAL -- HEALTH MEDICAL
ORGANIZATION -- 0.1%
21,500 Humana, Inc.*................... 446,125
------------
MEDICAL -- HOSPITAL -- 0.2%
61,000 Columbia/HCA Healthcare Corp.... 1,807,125
------------
MEDICAL -- WHOLESALE DRUG -- 0.2%
14,900 Cardinal Health, Inc............ 1,119,363
------------
MEDICAL INSTRUMENTS -- 0.1%
42,700 Biomet, Inc..................... 1,094,188
------------
MEDICAL PRODUCTS -- 0.3%
4,600 Allergan, Inc................... 154,388
38,000 Baxter International, Inc....... 1,916,625
8,500 Mallinckrodt, Inc............... 323,000
------------
2,394,013
------------
MEDICAL/DENTAL SUPPLIES -- 1.5%
20,000 Becton, Dickinson & Co.......... 1,000,000
56,800 C.R. Bard, Inc.................. 1,778,550
127,900 Johnson & Johnson............... 8,425,413
------------
11,203,963
------------
METAL -- GOLD -- 0.6%
151,500 Barrick Gold Corp............... 2,821,687
50,500 Newmont Mining Corp............. 1,483,438
------------
4,305,125
------------
METAL -- MISCELLANEOUS -- 0.2%
76,800 Cyprus Amax Minerals Co......... 1,180,800
------------
METAL -- NON-FERROUS -- 0.5%
30,000 Asarco, Inc..................... 673,125
18,500 Phelps Dodge Corp............... 1,151,625
25,000 Reynolds Metals Co.............. 1,500,000
------------
3,324,750
------------
OFFICE AUTOMATION & EQUIPMENT -- 0.3%
20,900 Pitney Bowes, Inc............... 1,879,694
------------
OFFICE SUPPLIES & FORMS -- 0.2%
29,100 IKON Office Solutions, Inc...... 818,438
62,500 Moore Corp., Ltd................ 945,312
------------
1,763,750
------------
OIL & GAS -- DRILLING -- 0.6%
50,200 Schlumberger Ltd................ 4,041,100
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- INTERNATIONAL INTEGRATED -- 3.5%
64,000 Chevron Corp.................... $ 4,928,000
242,400 Exxon Corp...................... 14,831,849
77,200 Mobil Corp...................... 5,572,875
------------
25,332,724
------------
OIL -- PRODUCTION/PIPELINE -- 0.1%
9,600 Columbia Gas System, Inc........ 754,200
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.1%
20,000 Union Pacific Resources Group,
Inc............................. 485,000
------------
OIL -- U.S. INTEGRATED -- 4.4%
144,700 Amoco Corp...................... 12,317,587
92,900 Atlantic Richfield Co........... 7,443,612
13,100 Kerr-Mcgee Corp................. 829,394
15,900 Pennzoil Co..................... 1,062,319
76,000 Phillips Petroleum Co........... 3,695,499
95,100 Unocal Corp..................... 3,691,069
88,500 USX-Marathon Group.............. 2,986,875
------------
32,026,355
------------
OIL REFINING -- 0.4%
30,900 Ashland, Inc.................... 1,658,944
35,680 Sun Co., Inc.................... 1,500,790
------------
3,159,734
------------
PAPER & RELATED PRODUCTS -- 0.6%
12,600 Georgia Pacific Corp............ 765,450
39,900 International Paper Co.......... 1,720,687
20,000 Mead Corp....................... 560,000
19,700 Union Camp Corp................. 1,057,644
10,000 Westvaco Corp................... 314,375
------------
4,418,156
------------
PHOTOGRAPHY -- 0.2%
26,500 Polaroid Corp................... 1,290,219
------------
POLLUTION CONTROL -- 0.1%
38,600 Safety-Kleen Corp............... 1,059,088
------------
PROTECTION -- SAFETY -- 0.4%
60,800 Tyco International Ltd.......... 2,739,800
------------
PUBLISHING -- BOOKS -- 0.1%
14,000 McGraw-Hill Cos., Inc........... 1,036,000
------------
PUBLISHING -- NEWSPAPERS -- 0.8%
9,200 Dow Jones & Co.................. 493,925
40,700 Gannett, Inc.................... 2,515,769
14,600 Knight-Ridder, Inc.............. 759,200
10,000 New York Times Co............... 661,250
9,400 Times Mirror Co................. 578,100
17,900 Tribune Co...................... 1,114,275
------------
6,122,519
------------
</TABLE>
Continued
30
<PAGE> 177
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RESTAURANTS -- 0.5%
66,100 McDonald's Corp................. $ 3,156,275
20,000 Wendy's International, Inc...... 481,250
------------
3,637,525
------------
RETAIL -- APPAREL/SHOES -- 0.5%
59,100 Gap, Inc........................ 2,094,356
58,700 Limited, Inc.................... 1,496,850
------------
3,591,206
------------
RETAIL -- DISCOUNT -- 2.4%
31,300 Dayton-Hudson Corp.............. 2,112,750
38,500 Toys 'R' Us, Inc.*.............. 1,210,344
365,600 Wal-Mart Stores, Inc. (b)....... 14,418,349
------------
17,741,443
------------
RETAIL -- DRUG STORE -- 0.2%
49,300 Walgreen Co..................... 1,546,788
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.6%
30,400 J.C. Penney, Inc................ 1,833,500
23,100 May Department Stores Co........ 1,217,081
37,600 Sears, Roebuck & Co............. 1,701,400
------------
4,751,981
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
20,000 Dillards Department Stores,
Inc............................. 705,000
20,500 Federated Department Stores,
Inc.*........................... 882,781
------------
1,587,781
------------
RETAIL -- SUPERMARKETS -- 0.1%
34,600 American Stores Co.............. 711,463
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.2%
38,300 Autozone, Inc.*................. 1,110,700
------------
RUBBER -- TIRES -- 0.2%
17,400 Goodyear Tire & Rubber Co....... 1,107,075
------------
SHOES & RELATED APPAREL -- 0.1%
14,200 Nike, Inc....................... 557,350
3,200 Reebok International Ltd.*...... 92,200
------------
649,550
------------
SOAP & CLEANING PREPARATIONS -- 1.4%
127,200 Procter & Gamble Co............. 10,152,150
------------
STEEL -- PRODUCERS -- 0.2%
36,000 USX-U.S. Steel Group, Inc....... 1,125,000
------------
TELECOMMUNICATIONS -- 0.2%
59,400 US West Media Group*............ 1,715,175
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 2.2%
16,000 Harris Corp..................... 734,000
64,200 Lucent Technologies, Inc........ 5,127,975
181,600 Motorola, Inc................... 10,362,549
------------
16,224,524
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TEXTILE -- APPAREL -- 0.1%
20,000 VF Corp......................... $ 918,750
------------
TOBACCO -- 1.9%
286,500 Philip Morris Cos., Inc......... 12,982,031
29,000 U.S.T., Inc..................... 1,071,188
------------
14,053,219
------------
TOOLS -- HAND HELD -- 0.1%
12,500 Snap-On, Inc.................... 545,312
9,700 The Stanley Works............... 457,719
------------
1,003,031
------------
TOYS/GAME/HOBBY -- 0.4%
33,800 Hasbro, Inc..................... 1,064,700
47,600 Mattel, Inc..................... 1,773,100
------------
2,837,800
------------
TRANSPORTATION -- AIR FREIGHT -- 0.1%
14,900 Federal Express Corp.*.......... 909,831
------------
TRANSPORTATION -- AIRLINE -- 0.4%
9,100 AMR Corp.*...................... 1,169,350
7,300 Delta Air Lines, Inc............ 868,700
43,900 Southwest Airlines Co........... 1,081,038
------------
3,119,088
------------
TRANSPORTATION -- RAILROAD -- 0.7%
35,000 CSX Corp........................ 1,890,001
34,500 Norfolk Southern Corp........... 1,063,031
29,500 Union Pacific Corp.............. 1,841,906
------------
4,794,938
------------
UTILITIES -- ELECTRIC POWER -- 3.0%
67,700 Baltimore Gas & Electric Co..... 2,306,031
129,200 Consolidated Edison Co. of New
York, Inc....................... 5,297,199
33,700 Detroit Edison Co............... 1,168,969
64,600 Dominion Resources, Inc......... 2,749,537
30,000 Entergy Corp.................... 898,125
92,300 First Energy Corp.*............. 2,676,700
16,800 Florida Power & Light, Inc...... 994,350
19,400 Houston Industries, Inc......... 517,738
15,400 Northern States Power Co........ 897,050
65,700 PacifiCorp...................... 1,794,431
44,600 PECO Energy Corp................ 1,081,550
35,100 Texas Utilities Co.............. 1,458,844
9,700 Union Electric Co............... 419,525
------------
22,260,049
------------
UTILITIES -- GAS DISTRIBUTION -- 0.2%
20,000 Eastern Enterprises............. 900,000
8,700 ONEOK Inc....................... 351,263
------------
1,251,263
------------
</TABLE>
Continued
31
<PAGE> 178
THE KENT FUNDS
GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- TELEPHONE -- 5.3%
293,200 AT&T Corp....................... $ 17,958,499
73,000 Bell Atlantic Corp.............. 6,643,000
94,700 BellSouth Corp.................. 5,332,794
87,901 SBC Communications, Inc......... 6,438,748
49,100 U.S. West, Inc.................. 2,215,638
------------
38,588,679
------------
TOTAL COMMON STOCKS............. 716,892,238
(Cost $607,045,067) ------------
COMMERCIAL PAPER -- 2.1%
AUTOMOTIVE -- 2.1%
$15,500,886 General Motors Acceptance Corp.,
5.65%, 1/2/98................... 15,500,886
------------
TOTAL COMMERCIAL PAPER 15,500,886
(Cost $15,500,886) ------------
TOTAL INVESTMENTS -- 99.9%.................. 732,393,124
(Cost $622,545,953)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%....................... 922,510
------------
TOTAL NET ASSETS -- 100.0%.................. $733,315,634
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of $72,274.
Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $119,844,634
Unrealized depreciation...............
(10,069,737)
------------
Net unrealized appreciation...........
$109,774,897
============
</TABLE>
(b) Security has been deposited as initial margin on open futures contracts.
* Non-income producing security
ADR American Depositary Receipt
At December 31, 1997, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ------------------ ----------- -----------
<S> <C> <C> <C>
58 Standard & Poor's $13,921,880 $14,196,950
500, 3/19/98
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 179
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 97.3%
ADVERTISING -- 0.6%
53,400 Catalina Market Corp.*.......... $ 2,469,750
66,300 True North Communications....... 1,640,925
------------
4,110,675
------------
AEROSPACE & DEFENSE -- 0.3%
35,800 Alliant Techsystems, Inc.*...... 1,995,850
------------
AEROSPACE/DEFENSE EQUIPMENT -- 1.2%
47,500 AAR Corp........................ 1,840,624
57,800 Aviall, Inc.*................... 863,388
69,100 Banner Aerospace, Inc.*......... 764,419
30,000 Curtiss-Wright Corp............. 1,089,375
48,800 Fairchild Corp., Class A*....... 1,213,900
100,000 Hexcel Corp.*................... 2,493,749
16,800 Whitehall Corp.*................ 302,400
32,600 Whittaker Corp.*................ 358,600
------------
8,926,455
------------
AGRICULTURAL OPERATIONS -- 0.0%
27,900 Orange Co., Inc................. 224,944
------------
AGRICULTURE -- 0.1%
18,600 Delta Pine & Land Co............ 567,300
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.3%
119,900 Fedders Corp.................... 749,375
20,800 National Presto Industries,
Inc............................. 822,900
69,400 Royal Appliance Manufacturing
Co.*............................ 459,775
------------
2,032,050
------------
AUDIO/VIDEO PRODUCTION -- 0.4%
48,280 Harman International Industries,
Inc............................. 2,048,883
182,369 Zenith Electronics Corp.*....... 991,631
------------
3,040,514
------------
AUTO PARTS -- 0.0%
6,900 Tower Automotive, Inc.*......... 290,231
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 1.2%
61,800 Arvin Industries, Inc........... 2,058,712
71,500 Detroit Diesel Corp.*........... 1,698,125
54,800 Smith (A.O.) Corp............... 2,315,299
21,200 Sparton Corp.*.................. 215,975
48,700 Standard Products Co............ 1,247,938
64,975 Titan International Inc......... 1,303,561
------------
8,839,610
------------
AUTO/TRUCK --
REPLACEMENT EQUIPMENT -- 0.3%
38,000 Standard Motor Products, Inc.... 857,375
41,225 Wynn's International, Inc....... 1,314,047
------------
2,171,422
------------
AUTOMOTIVE -- 0.0%
10,300 Polaris Industries, Inc......... 314,794
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKING -- 1.3%
57,800 BancorpSouth, Inc............... $ 2,731,049
50,900 CNB Bancshares, Inc............. 2,452,743
42,900 Commerce Bancorp, Inc........... 2,187,900
57,200 Hubco, Inc...................... 2,237,950
7,500 Irwin Financial Corp............ 314,063
------------
9,923,705
------------
BANKING & FINANCE -- 0.2%
44,400 Capmac Holdings, Inc............ 1,542,900
------------
BANKS -- NORTHEAST -- 0.4%
72,600 First Commonwealth Financial.... 2,545,538
21,800 Sterling Bancorp................ 523,200
------------
3,068,738
------------
BANKS -- SOUTHEAST -- 0.3%
5,300 Colonial Bancgroup, Inc......... 182,519
62,300 F & M National Corp............. 2,137,669
------------
2,320,188
------------
BROADCASTING/CABLE -- 0.5%
53,500 BET Holdings, Inc.*............. 2,922,438
12,000 Gray Communications Systems,
Inc............................. 315,000
35,600 Spelling Entertainment Group*... 249,200
------------
3,486,638
------------
BUILDING -- 0.9%
65,400 Calmat Co....................... 1,823,025
62,400 Centex Construction Products,
Inc............................. 1,879,800
40,800 Dravo Corp.*.................... 448,800
32,700 Lone Star Industries, Inc....... 1,737,188
15,500 Puerto Rican Cement Co.......... 777,906
------------
6,666,719
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.4%
11,200 Ameron International Corp....... 708,400
37,050 Elcor Corp...................... 889,200
11,600 International Aluminum Co....... 362,500
32,800 Nortek, Inc.*................... 871,250
44,000 Robertson-Ceco Corp.*........... 429,000
------------
3,260,350
------------
BUILDING -- HEAVY CONSTRUCTION -- 0.5%
24,600 Dycom Industries, Inc.*......... 530,438
143,000 Morrison Knudsen Corp.*......... 1,394,250
37,700 Stone & Webster, Inc............ 1,767,187
------------
3,691,875
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.2%
57,800 ABM Industries Inc.............. 1,766,513
------------
BUILDING -- MOBILE/MANUFACTURING &
RECREATIONAL VEHICLES -- 0.5%
30,500 Cavalier Homes, Inc............. 297,375
45,100 Coachmen Industries, Inc........ 972,468
28,600 Skyline Corp.................... 786,500
</TABLE>
Continued
33
<PAGE> 180
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- MOBILE/MANUFACTURING &
RECREATIONAL VEHICLES (CONTINUED)
24,400 Thor Industries, Inc............ $ 837,225
68,900 Winnebago Industries, Inc....... 611,488
------------
3,505,056
------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 1.0%
21,000 Beazer Homes USA, Inc.*......... 418,688
19,600 Continental Home Holding Corp... 788,900
107,000 Kaufman & Broad Home Corp....... 2,400,812
23,900 M/I Schottenstein Homes,
Inc.*........................... 448,125
52,900 MDC Holdings, Inc............... 796,806
44,800 Ryland Group, Inc............... 1,058,400
84,500 Standard-Pacific Corp........... 1,330,875
------------
7,242,606
------------
BUILDING PRODUCTS -- 0.1%
33,760 Republic Gypsum Co.............. 552,820
------------
BUILDING PRODUCTS -- AIR CONDITIONING/
HEAT -- 0.2%
24,100 Mestek, Inc.*................... 451,875
41,975 Watsco, Inc..................... 1,036,258
------------
1,488,133
------------
BUILDING PRODUCTS -- DOORS & TRUSSES -- 0.1%
103,900 Premdor, Inc.*.................. 961,075
------------
BUILDING PRODUCTS -- LIGHTING/FIXTURES -- 0.1%
45,000 Thomas Industries, Inc.......... 888,750
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.3%
59,900 Hughes Supply, Inc.............. 2,092,756
------------
BUSINESS INFORMATION -- 0.6%
17,000 Duff & Phelps Credit Rating
Co.............................. 690,625
60,800 Metromail Corp.*................ 1,086,800
68,800 Primark Corp.*.................. 2,799,300
------------
4,576,725
------------
BUSINESS SERVICES -- 1.3%
72,600 ADVO, Inc.*..................... 1,415,700
52,400 Caribiner International,
Inc.*........................... 2,331,800
38,300 Fair Issac & Co., Inc........... 1,275,869
61,700 Franklin Covey Co.*............. 1,357,400
101,200 Interim Services, Inc.*......... 2,618,549
17,100 Union Corp.*.................... 537,581
------------
9,536,899
------------
CAPITAL GOODS -- 0.1%
18,600 Watts Industries Inc Class A.... 526,613
------------
CHEMICALS -- DIVERSIFIED -- 0.6%
44,222 B.F. Goodrich Co................ 1,832,470
60,700 ChemFirst, Inc.................. 1,714,775
57,413 Schawk, Inc., Class A........... 645,896
------------
4,193,141
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CHEMICALS -- PLASTIC -- 0.7%
68,300 Geon Co......................... $ 1,596,513
76,600 Spartech Corp................... 1,158,575
34,945 Tredegar Industries, Inc........ 2,302,001
------------
5,057,089
------------
CHEMICALS -- SPECIALTY -- 1.1%
55,600 Bush Boake Allen, Inc.*......... 1,456,025
28,500 Chemed Corp..................... 1,180,969
38,600 LeaRonal, Inc................... 907,100
67,200 Lilly Industries, Inc........... 1,386,000
30,300 McWhorter Technologies, Inc.*... 780,225
137,000 NL Industries, Inc.*............ 1,866,624
18,500 Oil-Dri Corp.................... 305,250
------------
7,882,193
------------
COAL -- 0.2%
85,300 Zeigler Coal Holding Co......... 1,391,456
------------
COMMERCIAL SERVICES -- 0.4%
20,300 Affiliated Computer Services --
Class A*........................ 534,144
10,800 CDI Corp.*...................... 494,100
11,400 Norrell Corp.................... 226,575
19,800 NOVA Corp.*..................... 495,000
86,700 Paymentech, Inc.*............... 1,278,825
------------
3,028,644
------------
COMPUTER SOFTWARE -- 1.8%
60,700 Bell & Howell Co.*.............. 1,468,181
210,000 Computervision Corp.*........... 800,625
60,000 Excalibur Technologies Corp.*... 513,750
17,100 Factset Research Systems*....... 525,825
129,500 Learning Co., Inc.*............. 2,080,093
44,900 Media 100, Inc.*................ 224,500
87,000 Microprose, Inc.*............... 190,313
18,300 National Data Corp.............. 661,088
135,000 Physician Computer Network,
Inc.*........................... 540,000
68,400 Platinum Software, Inc.*........ 803,700
29,400 Project Software & Development,
Inc.*........................... 690,900
25,100 Rainbow Technologies, Inc.*..... 727,900
15,800 Software Spectrum, Inc.*........ 187,625
88,500 SPS Transaction Services,
Inc.*........................... 1,996,780
41,200 State of the Art, Inc.*......... 669,500
114,300 Vanstar Corp.*.................. 1,293,019
27,700 Vmark Software, Inc.*........... 221,600
------------
13,595,399
------------
COMPUTERS -- GRAPHICS -- 0.1%
105,366 Chyron Corp.*................... 467,562
19,200 STB Systems, Inc.*.............. 422,400
------------
889,962
------------
COMPUTERS -- INTEGRATED SYSTEMS -- 0.3%
90,200 Cerner Corp.*................... 1,905,475
------------
</TABLE>
Continued
34
<PAGE> 181
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS -- MEMORY DEVICES -- 0.3%
68,911 Applied Magnetics Corp.*........ $ 766,635
49,300 Hutchinson Technology, Inc.*.... 1,078,438
49,400 Syquest Technology, Inc.*....... 165,181
------------
2,010,254
------------
COMPUTERS -- MICRO -- 0.2%
105,700 Data General Corp.*............. 1,843,144
------------
COMPUTERS -- OPTICAL RECOGNITION -- 0.2%
54,200 BancTec, Inc.*.................. 1,453,238
------------
COMPUTERS -- PERIPHERAL EQUIPMENT -- 0.8%
35,700 Analogic Corp................... 1,356,599
35,550 Davox Corp.*.................... 1,159,819
31,100 ENCAD, Inc.*.................... 855,250
24,300 MICROS Systems, Inc.*........... 1,093,500
69,500 Mylex Corp.*.................... 625,500
28,500 Par Technology Corp.*........... 258,281
24,200 Printronix, Inc.*............... 409,888
12,462 TransAct Technologies, Inc.*.... 138,640
12,400 Tridex Corp.*................... 60,450
------------
5,957,927
------------
COMPUTERS -- SERVICES -- 1.1%
61,800 Analysts International Corp..... 2,132,099
24,500 Broadway & Seymour, Inc.*....... 235,813
20,400 BTG, Inc.*...................... 201,450
64,950 Computer Horizons Corp.*........ 2,922,749
57,600 Computer Task Group, Inc........ 2,048,400
106,300 PSINet, Inc.*................... 544,788
------------
8,085,299
------------
CONSUMER GOODS & SERVICES -- 0.2%
102,100 Carter-Wallace Inc.............. 1,722,938
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.6%
61,200 Department 56, Inc.*............ 1,759,499
49,900 Ekco Group, Inc.*............... 386,725
21,300 Jostens, Inc.................... 491,231
60,600 Mikasa, Inc..................... 882,488
47,550 Oneida, Ltd..................... 1,268,991
------------
4,788,934
------------
CONTAINERS -- METAL & GLASS -- 0.3%
37,400 United States Can Corp.*........ 631,125
43,700 Zero Corp....................... 1,294,613
------------
1,925,738
------------
CONTAINERS -- PAPER & PLASTIC -- 0.3%
77,300 ACX Technologies, Inc.*......... 1,889,019
------------
COSMETICS & TOILETRIES -- 0.4%
143,000 Playtex Products, Inc.*......... 1,465,750
54,400 Windmere-Durable Holding,
Inc............................. 1,227,400
------------
2,693,150
------------
DATA PROCESSING & REPRODUCTION -- 0.2%
67,700 Pegasystems, Inc.*.............. 1,366,694
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED -- 1.7%
41,850 Allied Products Corp............ $ 1,004,400
29,400 Bairnco Corp.................... 292,163
45,600 Clarcor, Inc.................... 1,350,900
17,700 Craig Corp.*.................... 359,531
90,800 Gencorp, Inc.................... 2,269,999
95,700 Griffon Corp.*.................. 1,399,613
52,850 Manitowoc Co., Inc.............. 1,717,625
19,500 Nashua Corp.*................... 229,125
41,500 Standex International Corp...... 1,462,875
99,300 Triarc Cos., Inc.*.............. 2,705,924
------------
12,792,155
------------
ELECTRICAL & ELECTRONIC -- 0.4%
22,800 Ametek, Inc..................... 615,600
28,500 Berg Electronics Corp.*......... 648,375
39,000 Integrated Process Equipment*... 614,250
9,600 MDU Resources Group, Inc........ 303,600
28,500 MEMC Electronic Materials,
Inc.*........................... 434,625
------------
2,616,450
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 1.4%
60,800 Cypress Semiconductor Corp.*.... 516,800
70,600 Dallas Semi-Conductors Corp..... 2,876,949
65,800 General Semiconductor, Inc.*.... 760,813
34,100 Integrated Circuit Systems,
Inc.*........................... 971,850
84,300 PMC-Sierra, Inc.*............... 2,613,299
66,200 Unitrode Corp.*................. 1,423,300
65,900 Zilog, Inc.*.................... 1,256,219
------------
10,419,230
------------
ELECTRICAL EQUIPMENT -- 0.3%
8,800 C&D Technologies, Inc........... 424,600
39,600 United Illuminating Co.......... 1,819,125
------------
2,243,725
------------
ELECTRONIC -- MANUFACTURING &
MACHINERY -- 0.5%
55,300 Kulicke & Soffa Industries,
Inc.*........................... 1,029,963
40,800 PRI Automation, Inc.*........... 1,178,100
34,600 SpeedFam International, Inc.*... 916,900
27,600 Watkins-Johnson Co.............. 715,875
------------
3,840,838
------------
ELECTRONIC -- MILITARY -- 0.1%
34,800 ESCO Electronics Corp.*......... 587,250
36,100 United Industrial Corp.......... 392,588
------------
979,838
------------
ELECTRONIC -- MISCELLANEOUS
COMPONENTS -- 2.1%
24,100 ACT Manufacturing, Inc.*........ 340,413
67,300 BMC Industries, Inc............. 1,085,213
46,800 California Amplifier, Inc.*..... 99,450
64,900 Computer Products, Inc.*........ 1,468,362
44,256 CTS Corp........................ 1,413,425
24,100 Del Global Technologies
Corp.*.......................... 241,000
</TABLE>
Continued
35
<PAGE> 182
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC -- MISCELLANEOUS COMPONENTS
(CONTINUED)
30,900 Hadco Corp.*.................... $ 1,398,225
34,200 Innovex, Inc.................... 784,463
56,700 Littlefuse, Inc.*............... 1,410,413
61,300 Oak Industries, Inc.*........... 1,819,843
47,500 OEA, Inc........................ 1,374,531
37,700 Park Electrochemical Corp....... 1,069,738
68,600 Photronics Corp.*............... 1,663,549
35,200 Plexus Corp.*................... 523,600
23,500 RadiSys Corp.*.................. 875,375
17,900 Reptron Electronics, Inc.*...... 185,713
------------
15,753,313
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 0.3%
29,400 Cable Design Technologies*...... 1,142,925
35,100 International Rectifier
Corp.*.......................... 414,619
31,400 Technitrol Inc.................. 942,000
------------
2,499,544
------------
ELECTRONIC MEASURING MACHINES -- 0.5%
58,200 Fluke Corp...................... 1,516,838
78,300 Genrad, Inc.*................... 2,363,680
32,500 Microtest, Inc.*................ 150,313
------------
4,030,831
------------
ELECTRONIC PARTS -- DISTRIBUTION -- 0.6%
29,418 Bell Industries, Inc.*.......... 404,498
74,900 Kent Electronics Corp.*......... 1,881,862
51,500 Marshall Industries*............ 1,545,000
29,200 Nu Horizons Electronics
Corp.*.......................... 182,500
23,501 Sterling Electronics Corp.*..... 490,583
------------
4,504,443
------------
ELECTRONIC PRODUCTS -- MISCELLANEOUS -- 0.7%
43,900 Aeroflex, Inc.*................. 384,125
23,500 American Precision
Industries*..................... 489,094
31,300 Electronic Retailing Systems
International, Inc.*............ 136,938
26,400 Franklin Electronic Publishers,
Inc.*........................... 330,000
31,700 Kollmorgen Corp................. 580,506
27,500 Kopin Corp.*.................... 462,344
80,600 MagneTek, Inc.*................. 1,571,700
43,100 Recoton Corp.*.................. 581,850
19,700 SL Industries, Inc.............. 232,706
25,300 Three-Five Systems, Inc.*....... 417,450
------------
5,186,713
------------
ENERGY -- ALTERNATIVE SOURCES -- 0.1%
33,600 Trigen Energy Corp.............. 663,600
------------
ENGINEERING -- RESEARCH & DEVELOPMENT
SERVICES -- 0.1%
17,800 Corrpro Companies, Inc.*........ 262,550
26,490 URS Corp.*...................... 412,251
------------
674,801
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ENTERTAINMENT -- 0.1%
19,200 Vail Resorts, Inc.*............. $ 498,000
------------
FERTILIZERS -- 0.2%
63,636 Mississippi Chemical Corp....... 1,161,357
------------
FINANCE -- 1.1%
20,000 Aames Financial Corp............ 258,750
31,000 CB Commercial Real Estate
Services Group, Inc.*........... 997,813
41,700 Everen Capital Corp............. 1,980,750
109,100 Imperial Credit Industries,
Inc.*........................... 2,236,549
39,500 National Discount Brokers
Group*.......................... 525,844
14,100 Oppenheimer Capital, L.P........ 426,525
7,500 Trans Financial, Inc............ 291,563
75,100 United Cos. Financial Corp...... 1,164,050
------------
7,881,844
------------
FINANCIAL -- CONSUMER LOANS -- 0.4%
123,500 Arcadia Financial Ltd.*......... 918,531
45,400 Student Loan Corp............... 2,241,625
------------
3,160,156
------------
FINANCIAL -- INVESTMENT BANKERS -- 1.8%
28,200 Advest Group, Inc............... 696,188
38,750 Inter-Regional Financial Group,
Inc............................. 2,673,749
17,900 Interstate/Johnson Lane, Inc.... 474,350
69,800 Jefferies Group, Inc............ 2,857,437
59,300 McDonald & Co. Investments,
Inc............................. 1,682,638
100,325 Morgan Keegan, Inc.............. 2,539,476
61,500 Piper Jaffray Cos., Inc......... 2,240,906
------------
13,164,744
------------
FINANCIAL -- INVESTMENT MANAGEMENT
COS. -- 0.5%
26,400 Atlanta Sosnoff Capital Corp.... 316,800
107,300 Insignia Financial Group,
Inc.*........................... 2,467,900
144,500 Phoenix Duff & Phelps Corp...... 1,156,000
------------
3,940,700
------------
FINANCIAL -- LEASING COMPANY -- 0.6%
36,200 DVI, Inc.*...................... 669,700
81,250 Interpool, Inc.................. 1,203,516
92,930 National Auto Credit, Inc.*..... 493,691
123,100 Rollins Truck Leasing Corp...... 2,200,412
------------
4,567,319
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 0.2%
13,600 Hallwood Group, Inc.*........... 506,600
20,200 Stewart Information Services
Corp............................ 585,800
28,500 Transmedia Network, Inc......... 147,844
------------
1,240,244
------------
FINANCIAL -- SAVINGS & LOAN -- 1.9%
83,475 Commercial Federal Corp......... 2,968,579
87,130 Downey Financial Corp........... 2,477,759
25,826 First Republic Bancorp, Inc.*... 824,818
50,650 Firstbank Puerto Rico........... 1,725,266
</TABLE>
Continued
36
<PAGE> 183
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- SAVINGS & LOAN (CONTINUED)
34,700 Firstfed Financial Corp.*....... $ 1,344,625
69,033 New York Bancorp, Inc........... 2,739,746
18,100 PonceBank....................... 341,638
80,273 Westcorp........................ 1,354,607
------------
13,777,038
------------
FINANCIAL -- SMALL BUSINESS INVESTMENT
CO. & COMMERCIAL -- 0.5%
61,200 PEC Israel Economic Corp.*...... 1,323,450
82,000 Safeguard Scientifics, Inc...... 2,572,750
------------
3,896,200
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.1%
12,300 Dominick's Supermarkets,
Inc.*........................... 448,950
------------
FOOD -- DIVERSIFIED -- 0.5%
54,400 Earthgrains Co.................. 2,556,800
41,500 Smucker (J.M.) Co............... 954,500
------------
3,511,300
------------
FOOD -- FLOUR & GRAIN -- 0.2%
50,600 International Multi-Foods
Corp............................ 1,432,613
------------
FOOD -- MEAT PRODUCTS -- 0.4%
85,600 Hudson Foods, Inc., Class A..... 1,760,150
77,500 Pilgrim's Pride Corp............ 1,206,094
------------
2,966,244
------------
FOOD PRODUCTS -- 90.1%
8,000 Suiza Foods Corp.*.............. 476,500
------------
FURNITURE -- 0.3%
40,387 Bush Industries, Inc............ 1,050,062
16,800 Chromcraft Revington, Inc.*..... 537,600
36,250 Rowe Furniture Corp............. 290,000
24,900 Shelby Williams Industries,
Inc............................. 410,850
------------
2,288,512
------------
GLASS PRODUCTS -- 0.2%
43,800 Libbey, Inc..................... 1,658,925
------------
HEALTH CARE -- 0.8%
47,600 Apria Healthcare Group, Inc.*... 639,625
23,700 Harborside Health*.............. 468,075
40,800 Orthodontic Centers of
America*........................ 678,300
165,400 Paracelsus Health*.............. 558,225
142,692 Paragon Health Network*......... 2,791,412
23,100 Renal Treatment Centers,
Inc.*........................... 834,488
------------
5,970,125
------------
HOTELS & LODGING -- 1.0%
9,200 Capstar Hotel Co.*.............. 315,675
84,450 Marcus Corp..................... 1,557,047
107,500 Prime Hospitality Corp.*........ 2,190,312
79,900 Red Roof Inns, Inc.*............ 1,223,469
54,000 Wyndham Hotel*.................. 2,180,250
------------
7,466,753
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HOUSEHOLD PRODUCTS -- 0.0%
7,100 La-Z-Boy Inc.................... $ 306,188
------------
INDUSTRIAL -- AUTOMOTIVE/ROBOTICS -- 0.4%
28,400 Esterline Technologies Corp.*... 1,022,400
76,000 Gerber Scientific, Inc.......... 1,510,500
35,500 Medar, Inc.*.................... 190,813
------------
2,723,713
------------
INDUSTRIAL GOODS & SERVICES -- 0.5%
63,800 Genl Chemical................... 1,706,650
25,500 Terra Industries Inc............ 333,094
77,400 U S Rentals, Inc.*.............. 1,818,900
------------
3,858,644
------------
INSTRUMENTS -- CONTROL -- 0.2%
9,400 Flowserve Corp.................. 262,613
39,600 Pacific Scientific Co........... 950,400
------------
1,213,013
------------
INSTRUMENTS -- SCIENTIFIC -- 0.6%
33,600 Dionex Corp.*................... 1,688,400
50,300 Dynatech Corp.*................. 2,357,813
31,700 EG&G, Inc....................... 659,756
------------
4,705,969
------------
INSURANCE -- 1.7%
77,300 Allied Group, Inc............... 2,212,713
29,855 Amerus Life Holdings Inc........ 1,100,887
50,200 CNA Surety Corp.*............... 774,963
32,900 Highlands Insurance Group*...... 933,538
62,900 Lasalle Re Holdings Ltd......... 2,225,087
43,100 Mid Atlantic Medical Services,
Inc.*........................... 549,525
46,900 NAC Re Corp..................... 2,289,305
62,500 Nationwide Financial Services... 2,257,812
9,100 PXRE Corp....................... 302,006
------------
12,645,836
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.4%
54,200 Penncorp Financial Group,
Inc............................. 1,934,263
25,550 RLI Corp........................ 1,272,709
------------
3,206,972
------------
INSURANCE -- BROKERS -- 0.6%
58,500 Arthur J. Gallagher & Co........ 2,014,593
43,300 Blanch (E.W.) Holdings, Inc..... 1,491,144
43,800 Hilb, Rogal & Hamilton Co....... 845,888
------------
4,351,625
------------
INSURANCE -- LIFE -- 1.5%
111,700 American Annuity Group, Inc..... 2,457,400
45,100 American Heritage Life
Investment Corp................. 1,623,600
51,510 Delphi Financial Group*......... 2,317,950
76,800 John Alden Financial Corp....... 1,843,200
41,800 Life Re Corp.................... 2,724,837
------------
10,966,987
------------
</TABLE>
Continued
37
<PAGE> 184
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- MULTI-LINE -- 1.3%
46,500 Enhance Financial Services
Group, Inc...................... $ 2,766,749
62,100 FBL Financial Group Inc., Class
A............................... 2,491,763
51,600 Fidelity National Financial,
Inc............................. 1,606,047
100,000 Mutual Risk Management Ltd...... 2,993,749
------------
9,858,308
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.7%
49,600 Acceptance Insurance Cos.*...... 1,199,700
42,200 Capital Re Corp................. 2,619,037
32,600 Executive Risk, Inc............. 2,275,887
37,300 First American Financial
Corp............................ 2,755,537
77,380 Frontier Insurance Group,
Inc............................. 1,770,068
93,500 HCC Insurance Holdings, Inc..... 1,986,875
39,100 MMI Cos., Inc................... 982,388
33,400 Nymagic, Inc.................... 920,588
16,392 USF&G Corp...................... 361,643
49,050 Vesta Insurance Group, Inc...... 2,912,343
58,300 Zenith National Insurance Co.... 1,501,225
------------
19,285,291
------------
LASERS -- SYSTEMS/COMPONENTS -- 0.4%
27,900 Coherent, Inc.*................. 979,988
12,700 Cyberoptics Corp.*.............. 288,925
28,600 Electro Scientific Industries,
Inc.*........................... 1,086,800
37,800 VISX, Inc.*..................... 836,325
------------
3,192,038
------------
LEISURE -- 0.0%
20,900 Coleman*........................ 335,706
------------
LEISURE & RECREATION PRODUCTS -- 0.5%
25,200 Coastcast Corp.*................ 349,650
38,000 Huffy Corp...................... 513,000
47,530 K2, Inc......................... 1,081,308
76,400 Sturm, Ruger & Co., Inc......... 1,408,625
------------
3,352,583
------------
LEISURE & RECREATION SERVICES -- 0.3%
32,100 Carmike Cinemas, Inc.*.......... 920,869
314,300 Cineplex Odeon Corp.*........... 392,875
22,300 GC Cos., Inc.*.................. 1,056,462
------------
2,370,206
------------
LEISURE & RECREATION/GAMING -- 0.9%
129,900 Aztar Corp.*.................... 811,875
173,400 Boyd Gaming Corp.*.............. 1,148,775
121,550 Grand Casinos, Inc.*............ 1,656,119
27,900 Harveys Casino Resorts*......... 578,925
25,300 Jackpot Enterprises, Inc........ 286,206
26,400 Midway Games, Inc.*............. 480,150
46,200 Showboat, Inc................... 1,357,125
68,700 Trump Hotels & Casino Resorts,
Inc.*........................... 459,431
------------
6,778,606
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
LINEN SUPPLY & RELATED -- 0.3%
26,000 Angelica Corp................... $ 588,250
58,200 Unifirst Corp................... 1,633,238
------------
2,221,488
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.5%
37,700 Applied Power, Inc.............. 2,601,300
23,600 Brown & Sharpe Manufacturing
Co.*............................ 240,425
30,400 Gleason Corp.................... 818,900
------------
3,660,625
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.4%
14,600 Christiana Cos., Inc.*.......... 578,525
55,400 CMI Corp., Class A.............. 287,388
44,050 Commercial Intertech Corp....... 914,038
40,600 Terex Corp.*.................... 954,099
------------
2,734,050
------------
MACHINERY -- ELECTRICAL -- 0.2%
40,157 Kuhlman Corp.................... 1,571,143
------------
MACHINERY -- FARM -- 0.1%
27,400 Alamo Group Inc................. 594,238
------------
MACHINERY -- GENERAL INDUSTRIAL -- 1.3%
40,500 Chart Industries, Inc........... 923,906
64,400 Global Industrial Technologies,
Inc.*........................... 1,090,775
49,325 Graco, Inc...................... 1,840,438
65,025 Idex Corp....................... 2,267,746
23,700 Katy Industries, Inc............ 482,888
101,266 Paxar Corp.*.................... 1,500,003
29,800 Scotsman Industries, Inc........ 728,238
10,100 Sequa Corp., Class B*........... 747,400
7,400 Twin Disc, Inc.................. 242,350
------------
9,823,744
------------
MACHINERY -- MATERIAL HANDLING -- 0.4%
62,600 Interlake Corp.*................ 293,438
23,700 Nacco Industries, Inc........... 2,540,343
------------
2,833,781
------------
MANUFACTURING -- CAPITAL GOODS -- 0.1%
17,200 Imation Corp.*.................. 275,200
21,300 Roper Industries, Inc........... 601,725
------------
876,925
------------
MATERIALS -- 0.1%
17,600 Longview Fibre Co............... 267,300
7,500 OM Group, Inc................... 274,688
------------
541,988
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
41,600 Diagnostic Products Corp........ 1,154,400
52,889 Molecular Biosystems, Inc.*..... 449,557
------------
1,603,957
------------
</TABLE>
Continued
38
<PAGE> 185
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL -- BIOTECHNOLOGY -- 0.1%
29,800 Cryolife, Inc.*................. $ 406,025
------------
MEDICAL -- DRUGS -- 0.3%
65,400 Alpharma, Inc................... 1,422,450
42,060 Vitalink Pharmacy Services,
Inc.*........................... 1,014,698
------------
2,437,148
------------
MEDICAL -- HEALTH MEDICAL
ORGANIZATION -- 0.5%
41,200 PHP Healthcare Corp.*........... 620,575
53,500 Sierra Health Services, Inc.*... 1,798,938
41,400 United Wisconsin Services,
Inc............................. 1,066,050
------------
3,485,563
------------
MEDICAL -- HOSPITAL -- 0.4%
45,200 Healthplan Services Corp........ 949,200
46,900 Pediatrix Medical Group,
Inc.*........................... 2,004,975
------------
2,954,175
------------
MEDICAL -- HOSPITAL MANAGEMENT &
SERVICES -- 0.0%
82,100 Physicians Resource Group,
Inc.*........................... 359,188
------------
MEDICAL -- HOSPITAL SERVICES -- 0.3%
26,700 Magellan Health Services,
Inc.*........................... 574,050
89,400 Quest Diagnostics, Inc.*........ 1,508,625
------------
2,082,675
------------
MEDICAL -- NURSING HOMES -- 0.2%
58,100 Integrated Health Services,
Inc............................. 1,811,994
------------
MEDICAL -- OUTPATIENT/HOME CARE -- 0.6%
126,900 Coram Healthcare Corp.*......... 428,288
78,700 Genesis Health Ventures,
Inc.*........................... 2,075,713
165,100 NovaCare, Inc.*................. 2,156,618
------------
4,660,619
------------
MEDICAL -- WHOLESALE DRUG -- 0.1%
35,300 Bindley Western Industries,
Inc............................. 1,089,888
------------
MEDICAL EQUIPMENT & SUPPLIES -- 0.0%
27,700 Oakley, Inc.*................... 251,031
------------
MEDICAL INSTRUMENTS -- 0.5%
84,700 Acuson Corp.*................... 1,402,844
46,560 Elscint, Ltd.*.................. 372,480
72,690 Graham-Field Health Products,
Inc.*........................... 1,213,014
38,800 OEC Medical Systems, Inc.*...... 773,575
------------
3,761,913
------------
MEDICAL PRODUCTS -- 0.5%
45,800 BEC Group, Inc.*................ 271,938
83,200 Haemonetics Corp.*.............. 1,164,800
24,800 Maxxim Medical, Inc.*........... 539,400
96,200 Owens & Minor, Inc.............. 1,394,900
------------
3,371,038
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL SUPPLIES -- 0.1%
22,700 Sola International, Inc.*....... $ 737,750
------------
MEDICAL/DENTAL SUPPLIES -- 0.8%
82,000 Ballard Medical Products........ 1,988,500
35,500 Cooper Cos, Inc.*............... 1,451,063
57,100 Sunrise Medical, Inc.*.......... 881,481
50,000 West Co., Inc................... 1,487,500
------------
5,808,544
------------
METAL -- GOLD -- 0.2%
107,800 Agnico-Eagle Mines, Ltd......... 586,163
73,800 Glamis Gold, Ltd................ 272,138
148,100 Hecla Mining Co.*............... 731,243
------------
1,589,544
------------
METAL -- IRON -- 0.4%
34,000 Cleveland Cliffs, Inc........... 1,557,625
125,300 National Steel Corp.*........... 1,448,781
------------
3,006,406
------------
METAL -- MISCELLANEOUS -- 0.3%
47,200 Brush Wellman, Inc.............. 1,156,400
21,400 Tremont Corp.*.................. 1,118,150
1 Zemex Corp.*.................... 1
------------
2,274,551
------------
METAL -- NON-FERROUS -- 0.2%
131,400 Kaiser Aluminum Corp.*.......... 1,157,963
------------
METAL -- PROCESSING & FABRICATION -- 0.7%
25,000 Amcast Industrial Corp.......... 573,438
26,300 Ampco-Pittsburgh Corp........... 514,494
29,200 Chase Industries, Inc.*......... 744,600
44,533 Commercial Metals Co............ 1,405,572
24,600 Huntco, Inc., Class A........... 415,125
6,000 Mueller Industries, Inc.*....... 354,000
41,100 Wolverine Tube, Inc.*........... 1,274,100
------------
5,281,329
------------
METAL -- SILVER -- 0.1%
63,400 Coeur d'Alene Mines Corp.*...... 570,600
516,672 Sunshine Mining & Refining
Co.*............................ 516,672
------------
1,087,272
------------
METAL PRODUCTS -- DISTRIBUTION -- 0.4%
53,925 Applied Industrial Technology,
Inc............................. 1,442,493
45,450 Reliance Steel & Aluminum Co.... 1,352,138
------------
2,794,631
------------
METAL PRODUCTS -- FASTENERS -- 0.3%
34,500 SPS Technologies, Inc.*......... 1,505,062
13,800 TransTechnology Corp............ 390,713
------------
1,895,775
------------
</TABLE>
Continued
39
<PAGE> 186
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OFFICE AUTOMATION & EQUIPMENT -- 0.3%
17,000 Daisytek International Corp.*... $ 590,750
34,300 In Focus Systems, Inc.*......... 1,041,863
9,200 Standard Register Co............ 319,700
------------
1,952,313
------------
OFFICE SUPPLIES & FORMS -- 0.7%
46,600 American Business Products,
Inc............................. 1,007,725
29,700 BT Office Products
International*.................. 230,175
31,500 CSS Industries, Inc.*........... 1,004,063
46,700 Ennis Business Forms, Inc....... 431,975
43,400 Hunt Manufacturing Corp......... 1,028,038
42,500 New England Business Service,
Inc............................. 1,434,374
------------
5,136,350
------------
OIL & GAS -- 0.1%
9,600 Barrett Resources Corp.*........ 290,400
5,400 Seacor Holdings, Inc.*.......... 325,350
------------
615,750
------------
OIL & GAS -- DRILLING -- 0.4%
180,200 Parker Drilling Co.*............ 2,196,188
89,020 Zapata Corp..................... 600,885
------------
2,797,073
------------
OIL -- PRODUCTION/PIPELINE -- 0.5%
88,400 Aquila Gas Pipeline Corp........ 1,138,150
101,200 Kaneb Services, Inc.*........... 524,975
7,900 Northern Border Partners,
L.P............................. 268,600
80,000 Western Gas Resources, Inc...... 1,770,000
------------
3,701,725
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 2.5%
66,000 Berry Petroleum Co.............. 1,150,875
68,700 Cabot Oil & Gas Corp............ 1,335,356
75,700 Cross Timers Oil Co............. 1,887,769
53,000 HS Resources, Inc.*............. 732,063
71,900 KCS Energy, Inc................. 1,491,925
83,600 Louis Dreyfus Natural Gas*...... 1,562,275
97,700 Newfield Exploration Co.*....... 2,277,630
32,000 Nuevo Energy Co.*............... 1,304,000
86,000 Snyder Oil Corp................. 1,569,500
36,000 Stone Energy Corp.*............. 1,206,000
50,036 Swift Energy Co.*............... 1,053,883
103,800 Vintage Petroleum, Inc.......... 1,972,199
77,400 Wainoco Oil Corp.*.............. 614,363
24,700 Wiser Oil Co.................... 348,888
------------
18,506,726
------------
OIL -- U.S. INTEGRATED -- 0.1%
13,600 Howell Corp..................... 235,450
26,100 USX-Delhi Group................. 535,050
------------
770,500
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.1%
51,300 Daniel Industries, Inc.......... 987,525
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL REFINING -- 0.7%
38,100 Getty Realty Corp............... $ 842,963
33,500 Giant Industries, Inc........... 636,500
107,900 Quaker State Corp............... 1,537,575
80,600 Tesoro Petroleum Corp.*......... 1,249,300
21,600 Tokheim Corp.*.................. 446,850
37,050 World Fuel Services Corp........ 778,050
------------
5,491,238
------------
OIL-FIELD SERVICES -- 0.6%
72,600 Oceaneering International,
Inc.*........................... 1,433,850
87,600 RPC Energy Services, Inc........ 1,034,775
64,600 Seitel, Inc.*................... 1,106,275
73,800 Unit Corp.*..................... 710,325
------------
4,285,225
------------
PAPER & RELATED PRODUCTS -- 0.2%
6,500 Buckeye Technologies, Inc.*..... 300,625
8,000 Chesapeake Corp................. 275,000
35,100 Paragon Trade Brands, Inc.*..... 451,913
38,700 Pope & Talbot, Inc.............. 582,918
------------
1,610,456
------------
PHOTOGRAPHY -- 0.1%
39,900 CPI Corp........................ 902,738
------------
POLLUTION CONTROL -- 0.9%
114,700 Calgon Carbon Corp.............. 1,233,025
61,300 Dames & Moore, Inc.............. 812,225
34,700 Imco Recycling, Inc............. 557,369
171,400 Laidlaw Environmental Services,
Inc.*........................... 835,575
51,100 Lydall, Inc.*................... 996,450
76,600 OHM Corp.*...................... 584,075
41,200 Osmonics, Inc.*................. 651,475
35,500 Zurn Industries, Inc............ 1,116,031
------------
6,786,225
------------
PRECIOUS METALS -- JEWELRY -- 0.2%
38,100 Handy & Harman.................. 1,314,450
------------
PRINTING & PUBLISHING -- 0.0%
17,100 Journal Register Co.*........... 359,100
------------
PRINTING -- COMMERCIAL -- 0.0%
51,800 American Banknote Corp.*........ 259,000
------------
PROTECTION -- SAFETY -- 0.5%
63,200 Borg-Warner Security Corp.*..... 1,113,900
41,725 Wackenhut Corp., Class A........ 967,498
64,100 Wackenhut Corrections Corp.*.... 1,722,688
------------
3,804,086
------------
PUBLISHING -- BOOKS -- 0.4%
46,200 John Wiley & Sons, Inc.......... 2,506,350
46,300 Thomas Nelson, Inc.............. 535,344
------------
3,041,694
------------
</TABLE>
Continued
40
<PAGE> 187
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING -- PERIODICALS -- 0.2%
117,400 American Media, Inc.*........... $ 909,850
57,100 Playboy Enterprises, Inc.*...... 895,756
------------
1,805,606
------------
REAL ESTATE -- 0.3%
65,100 Grubb & Ellis Co.*.............. 891,056
58,300 Webb -- (Del) Corp.............. 1,515,800
------------
2,406,856
------------
RESTAURANTS -- 0.9%
30,600 Cooker Restaurant Corp.......... 292,613
116,400 Foodmaker, Inc.*................ 1,753,274
69,700 Luby's Cafeteria, Inc........... 1,224,106
19,000 Morton's Restaurant Group,
Inc.*........................... 384,750
31,000 Piccadilly Cafeterias, Inc...... 406,875
60,200 Sbarro, Inc..................... 1,584,013
78,000 Sizzler International, Inc.*.... 209,625
73,900 TCBY Enterprises, Inc........... 558,869
33,775 UNO Restaurant Corp.*........... 232,203
------------
6,646,328
------------
RETAIL -- 0.2%
10,100 Brylane, Inc.*.................. 497,425
17,700 Footstar, Inc.*................. 475,688
23,600 Heilig Meyers Co................ 283,200
6,800 MSC Industrial Direct Co. --
Class A*........................ 288,150
13,400 Talbots Inc..................... 242,875
------------
1,787,338
------------
RETAIL -- APPAREL/SHOES -- 0.8%
75,700 Ann Taylor Stores Corp.*........ 1,012,487
132,480... Burlington Coat Factory
Warehouse Corp.................. 2,177,639
147,000 CML Group, Inc.*................ 486,938
40,000 Cole (Kenneth) Productions,
Inc.*........................... 642,500
28,300 Gottschalks, Inc.*.............. 237,013
97,700 Hartmarx Corp.*................. 744,963
81,800 Starter Corp.*.................. 250,513
52,200 Syms Corp.*..................... 619,875
------------
6,171,928
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.1%
98,900 Handleman Co.*.................. 686,119
27,500 Rex Stores Corp.*............... 281,875
------------
967,994
------------
RETAIL -- DISCOUNT -- 1.0%
16,100 Alexander's, Inc.*.............. 1,462,081
66,800 Mac Frugal's Bargains --
Close-Outs, Inc.*............... 2,747,150
87,000 Shopko Stores, Inc.*............ 1,892,250
62,600 Smart & Final, Inc.............. 1,126,800
------------
7,228,281
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- GENERAL MERCHANDISE -- 1.7%
83,600 AmeriCredit Corp.*.............. $ 2,314,674
85,900 Cash America Intl., Inc......... 1,111,331
35,200 Cole National Corp.*............ 1,053,800
54,700 Fabri-Centers of America,
Inc.*........................... 1,220,494
126,800 Furniture Brands International,
Inc.*........................... 2,599,399
63,500 Hancock Fabrics, Inc............ 920,750
67,500 Jenny Craig, Inc.*.............. 510,469
64,350 Russ Berrie & Co., Inc.......... 1,689,188
95,550 The Sports Authority, Inc.*..... 1,409,363
------------
12,829,468
------------
RETAIL -- HOME FURNISHINGS -- 0.1%
111,500 Bombay Co., Inc.*............... 515,688
------------
RETAIL -- JEWELRY -- 0.4%
118,800 Claire's Stores, Inc............ 2,309,175
20,300 Zale Corp.*..................... 466,900
------------
2,776,075
------------
RETAIL -- MAIL ORDER -- 0.2%
72,800 National Media Corp.*........... 236,600
52,900 Stanhome Inc.................... 1,358,869
------------
1,595,469
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.3%
48,900 Carson Pirie Scott & Co.*....... 2,451,113
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.1%
93,500 Value City Department Stores,
Inc.*........................... 829,813
------------
RETAIL -- SPECIAL LINE -- 0.2%
8,500 Budget Group, Inc. -- Class
A*.............................. 293,781
15,400 Global Directmail, Inc.*........ 266,613
8,000 Linens 'n Things, Inc.*......... 349,000
26,900 Ruddick Corp.................... 469,069
------------
1,378,463
------------
RETAIL -- SUPERMARKETS -- 0.0%
32,100 Penn Traffic Co.*............... 264,825
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.1%
48,900 Discount Auto Parts, Inc.*...... 935,213
------------
RUBBER & PLASTICS -- 0.2%
51,800 Furon Co........................ 1,081,325
36,100 Lamson & Sessions Co.*.......... 209,831
------------
1,291,156
------------
RUBBER -- TIRES -- 0.0%
25,400 China Tire Holdings, Ltd........ 206,375
------------
SCHOOLS -- 0.3%
27,100 Berlitz International, Inc.*.... 704,600
77,200 ITT Educational Services,
Inc.*........................... 1,722,525
------------
2,427,125
------------
</TABLE>
Continued
41
<PAGE> 188
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SHOES & RELATED APPAREL -- 0.5%
25,175 Barry(R.G.) Corp.*.............. $ 292,659
49,800 Brown Group, Inc................ 662,963
45,300 Converse, Inc.*................. 271,800
72,500 Genesco, Inc.*.................. 924,375
29,900 Timberland Co., Class A*........ 1,736,069
------------
3,887,866
------------
SOAP & CLEANING PREPARATIONS -- 0.4%
54,800 Church & Dwight Co., Inc........ 1,537,825
21,600 NCH Corp........................ 1,414,800
------------
2,952,625
------------
STEEL -- PIPES & TUBES -- 0.2%
40,000 NS Group, Inc.*................. 685,000
40,000 Quanex Corp..................... 1,125,000
------------
1,810,000
------------
STEEL -- PRODUCERS -- 0.9%
308,600 Armco, Inc.*.................... 1,523,713
82,900 Birmingham Steel Corp........... 1,305,675
6,600 Carpenter Technology............ 317,213
83,100 Chaparral Steel Co.............. 1,282,856
16,600 Inland Steel Industries, Inc.... 284,275
63,200 Rouge Industries Inc............ 766,300
116,700 Weirton Steel Corp.*............ 313,631
72,600 WHX Corp.*...................... 862,125
------------
6,655,788
------------
STEEL -- SPECIALTY -- 0.8%
112,000 J & L Specialty Steel, Inc...... 1,127,000
42,800 Lukens, Inc..................... 1,222,475
45,300 Material Sciences Corp.*........ 552,094
76,100 Oregon Steel Mills, Inc......... 1,621,881
58,630 RMI Titanium Co.*............... 1,172,600
------------
5,696,050
------------
TECHNOLOGY -- 0.1%
41,300 DBT Online, Inc.*............... 1,029,919
------------
TELECOMMUNICATIONS -- 0.1%
14,100 Boston Technology, Inc.*........ 354,263
12,800 Mastec, Inc.*................... 292,800
------------
647,063
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 1.3%
70,300 American Mobile Satelllite
Corp.*.......................... 492,100
37,200 C-Cor Electronics, Inc.......... 571,950
27,600 Centigram Communications
Corp.*.......................... 467,475
42,000 CommNet Cellular, Inc.*......... 1,493,625
68,100 General DataComm Industries,
Inc.*........................... 319,219
57,300 InterVoice, Inc.*............... 429,750
69,400 Network Equipment Technologies,
Inc.*........................... 1,014,975
57,800 Plantronics, Inc.*.............. 2,311,999
24,000 Superior Telecom Inc.*.......... 829,500
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- EQUIPMENT (CONTINUED)
20,300 Tech-Sym Corp.*................. $ 516,381
35,200 Telco Systems, Inc.*............ 341,000
100,500 Telular Corp.*.................. 244,969
45,900 Titan Corp.*.................... 286,875
------------
9,319,818
------------
TELECOMMUNICATIONS -- SERVICES AND
EQUIPMENT -- 0.4%
75,800 Allen Telecom Inc.*............. 1,397,563
25,800 Federal Signal Corp............. 557,925
36,100 Smartalk Teleservices, Inc.*.... 821,275
------------
2,776,763
------------
TEXTILE -- APPAREL -- 0.8%
63,000 Authentic Fitness Corp.......... 1,161,563
21,700 Burlington Industries, Inc.*.... 299,731
26,500 Chic by H.I.S., Inc.*........... 193,781
66,500 Delta Woodside Industries,
Inc............................. 324,188
57,650 Kellwood Co..................... 1,729,499
24,700 Oxford Industries, Inc.......... 802,750
75,900 Phillips-Van Heusen Corp........ 1,081,575
81,000 Tultex Corp.*................... 329,063
39,200 Worldtex, Inc.*................. 311,150
------------
6,233,300
------------
TEXTILE -- HOME FURNISHINGS -- 0.4%
29,800 Cort Business Services Corp.*... 1,186,413
21,700 Crown Crafts, Inc............... 339,063
47,700 O' Sullivan Industries*......... 477,000
37,013 Pillowtex Corp.................. 1,290,838
------------
3,293,314
------------
TEXTILE -- PRODUCTS -- 0.6%
75,300 Cone Mills Corp.*............... 583,575
38,500 Dyersburg Corp.................. 437,938
33,700 Galey & Lord, Inc.*............. 602,388
61,550 Guilford Mills, Inc............. 1,684,930
90,800 Polymer Group, Inc.*............ 862,600
------------
4,171,431
------------
TOBACCO -- 0.6%
50,300 Brooke Group, Ltd............... 433,838
10,800 Consolidated Cigar Holdings
Inc.*........................... 297,675
63,446 General Cigar Holdings*......... 1,352,193
45,100 Schweitzer-Mauduit
International................... 1,679,974
25,740 Standard Commercial Corp........ 426,319
------------
4,189,999
------------
TOOLS -- HAND HELD -- 0.3%
20,000 Starrett (L.S.) Co.............. 731,250
35,200 Toro Co......................... 1,500,400
------------
2,231,650
------------
TOYS/GAME/HOBBY -- 0.1%
49,700 Galoob (Lewis) Toys, Inc.*...... 506,319
------------
</TABLE>
Continued
42
<PAGE> 189
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 0.2%
5,000 Florida East Coast Industries... $ 480,624
19,800 Overseas Shipholding Group...... 431,888
5,900 Xtra Corp....................... 345,888
------------
1,258,400
------------
TRANSPORTATION -- AIR FREIGHT -- 0.2%
58,900 Pittston Burlington Group....... 1,546,125
------------
TRANSPORTATION -- AIRLINE -- 0.3%
44,000 Alaska Airgroup, Inc.*.......... 1,705,000
17,300 America West Holding Corp. --
Class B*........................ 322,213
------------
2,027,213
------------
TRANSPORTATION -- EQUIPMENT & LEASING -- 0.5%
43,000 Greenbrier Cos., Inc............ 744,438
102,300 Westinghouse Air Brake Co....... 2,621,437
------------
3,365,875
------------
TRANSPORTATION -- SHIPPING -- 0.6%
20,250 International Shipholding
Corp............................ 349,313
35,500 Maritrans, Inc.................. 346,125
129,900 OMI Corp.*...................... 1,193,456
40,700 Sea Containers, Ltd............. 1,289,681
47,200 Teekay Shipping Corp............ 1,584,150
------------
4,762,725
------------
UTILITIES -- ELECTRIC POWER -- 2.5%
15,000 Baldor Electric Co.............. 325,313
40,600 Black Hills Corp................ 1,431,150
49,400 Central Hudson Gas & Electric
Corp............................ 2,167,424
91,200 Central Maine Power Co.......... 1,390,800
31,500 Central Vermont Public Service
Corp............................ 480,375
38,200 CILCORP, Inc.................... 1,867,024
60,500 Commonwealth Energy Systems
Co.............................. 2,011,624
46,100 Empire District Electric Co..... 904,713
13,100 Green Mountain Power Corp....... 239,894
27,100 Interstate Power Co............. 1,014,556
50,100 Northwestern Public Service
Co.............................. 1,152,300
38,400 Orange & Rockland Utilities..... 1,788,000
14,000 Public Service New Mexico....... 331,625
21,100 St. Joseph Light & Power Co..... 375,844
36,600 TNP Enterprises, Inc............ 1,216,950
90,320 Tucson Electric Power Co.*...... 1,637,050
10,300 WPL Holdings, Inc............... 341,188
------------
18,675,830
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- GAS DISTRIBUTION -- 3.0%
45,150 Atmos Energy Corp............... $ 1,365,787
37,800 Bay State Gas Co................ 1,403,324
25,950 Cascade Natural Gas Corp........ 486,563
10,100 Chesapeake Utilities Corp....... 207,050
25,400 Connecticut Energy Corp......... 765,175
29,900 Connecticut Natural Gas Corp.... 779,269
6,800 Eastern Enterprises............. 306,000
31,600 Energen Corp.................... 1,256,100
8,700 Energynorth, Inc................ 250,669
63,500 Indiana Energy, Inc............. 2,091,530
49,400 Laclede Gas Co.................. 1,386,287
50,800 New Jersey Resources Corp....... 2,035,174
18,500 North Carolina Natural Gas...... 642,875
31,200 NUI Corp........................ 895,050
29,000 Pennsylvania Enterprises,
Inc............................. 732,250
53,900 Public Service Co. of North
Carolina........................ 1,246,438
30,200 South Jersey Industries, Inc.... 915,438
50,405 Southern Union Co.*............. 1,203,425
74,900 Southwest Gas Corp.............. 1,399,693
69,500 Southwestern Energy Co.......... 894,813
11,000 UGI Corp........................ 322,438
6,200 Wicor Inc....................... 287,913
29,400 Yankee Energy System, Inc....... 784,613
------------
21,657,874
------------
UTILITIES -- WATER SUPPLY -- 0.9%
19,600 Aquarion Co..................... 677,425
17,700 California Water Service Co..... 1,045,406
21,700 E'Town Corp..................... 872,069
54,450 Philadelphia Suburban Corp...... 1,602,872
22,500 Southern California Water....... 565,313
96,600 United Water Resources, Inc..... 1,889,737
------------
6,652,822
------------
WHOLESALE DISTRIBUTION -- 0.3%
69,437 JP Foodservice, Inc.*........... 2,564,825
------------
WIRE & CABLE PRODUCTS -- 0.4%
32,600 Anixter International, Inc.*.... 537,900
56,900 Barnes Group, Inc............... 1,294,475
14,100 Belden, Inc..................... 497,025
13,200 General Cable Corp.............. 477,675
24,680 Keystone Consolidated
Industries*..................... 296,160
------------
3,103,235
------------
TOTAL COMMON STOCKS............. 722,778,366
------------
(Cost $534,978,452)
</TABLE>
Continued
43
<PAGE> 190
THE KENT FUNDS
SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 2.5%
AUTOMOTIVE -- 2.5%
$18,251,221 General Motors Acceptance Corp.,
5.65%, 1/2/98................... $ 18,251,221
------------
TOTAL COMMERCIAL PAPER.......... 18,251,221
(Cost $18,251,221) ------------
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
1,000,000 U.S. Treasury Bills,
5.05** 3/26/98 (b).............. 988,100
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS..................... 988,100
(Cost $987,890) ------------
TOTAL INVESTMENTS -- 99.9%.................. 742,017,687
(Cost $554,217,563) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%....................... 764,001
------------
TOTAL NET ASSETS -- 100.0%.................. $742,781,688
============
</TABLE>
- ---------------
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax of $22,800. Cost for
federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $222,533,317
Unrealized depreciation...............
(34,755,993)
------------
Net unrealized appreciation...........
$187,777,324
============
</TABLE>
(b) Security has been deposited as initial margin on open futures contracts.
* Non-income producing security
** Annualized yield at time of purchase
At December 31, 1997, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ------------------ ----------- -----------
<S> <C> <C> <C>
84 Standard & $20,291,015 $20,561,100
Poor's............
500, 3/19/98
</TABLE>
See Notes to Financial Statements.
44
<PAGE> 191
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 97.3%
AUSTRALIA -- 2.7%
BANKING -- 0.7%
142,787 National Australia Bank Ltd...... $ 1,993,744
191,512 Westpac Banking Corp., Ltd....... 1,224,867
------------
3,218,611
------------
BEVERAGES & TOBACCO -- 0.1%
85,167 Coca-Cola Amatil Ltd............. 636,271
------------
BREWERY -- 0.1%
178,336 Fosters Brewing Group Ltd........ 339,297
------------
BROADCASTING & PUBLISHING -- 0.2%
197,062 News Corp., Ltd.................. 1,087,539
------------
BUILDING PRODUCTS -- 0.1%
105,708 Boral Ltd........................ 267,238
34,780 Hardie (James) Industries Ltd.... 101,365
80,788 Pioneer International Ltd........ 220,556
------------
589,159
------------
CHEMICALS -- 0.0%
22,970 ICI Australia Ltd................ 160,890
------------
CLOSED END FUNDS -- 0.0%
28,285 Stockland Trust Group............ 65,554
------------
DIVERSIFIED -- 0.1%
16,044 Smith (Howard Ltd.).............. 133,181
53,703 Southcorp Holdings Ltd........... 177,754
------------
310,935
------------
ENERGY -- 0.5%
207,143 Broken Hill Proprietary Co.
Ltd.............................. 1,923,286
------------
ENGINEERING -- 0.0%
22,400 Leighton Holdings Ltd............ 78,230
------------
ENTERTAINMENT -- 0.0%
62,916 Crown Ltd. *..................... 27,876
40,300 Sydney Harbour Casino Holdings
Ltd. *........................... 38,206
26,100 TABCORP Holdings Ltd............. 122,442
------------
188,524
------------
FOOD PRODUCTS -- 0.0%
39,301 Burns, Philp & Co., Ltd.......... 6,146
108,833 Goodman Fielder Ltd.............. 173,025
------------
179,171
------------
GAS UTILITY -- 0.0%
25,100 Australian Gas Light Co., Ltd.... 174,991
------------
INDUSTRIAL GOODS & SERVICES -- 0.1%
91,818 CSR Ltd. 311,093
88,700 Pacific Dunlop Ltd............... 187,830
------------
498,923
------------
INSURANCE -- 0.1%
53,074 GIO Australia Holdings Ltd....... 135,662
32,135 QBE Insurance Group Ltd.......... 144,620
------------
280,282
------------
MANUFACTURING-CAPITAL GOODS -- 0.0%
25,575 Email Ltd........................ 60,390
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUSTRALIA (CONTINUED)
METALS -- 0.0%
142,760 M.I.M. Holdings Ltd.............. $ 87,436
15,796 RGC Ltd.......................... 24,084
------------
111,520
------------
METALS & MINING -- 0.2%
68,058 Australian National Industries
Ltd.............................. 62,525
16,145 Great Central Mines Ltd.......... 17,357
17,377 Newcrest Mining Ltd. *........... 18,908
143,578 Normandy Mining Ltd.............. 139,390
61,905 North Ltd........................ 163,035
11,700 Plutonic Resources Ltd........... 32,628
48,055 QCT Resources Ltd................ 38,826
29,836 Rio Tinto Ltd.................... 348,037
103,907 WMC Ltd.......................... 362,208
------------
1,182,914
------------
OIL & GAS -- 0.0%
52,241 Santos Ltd....................... 215,123
------------
PACKAGING -- 0.1%
58,093 Amcor Ltd........................ 255,497
------------
PHARMACEUTICALS -- 0.0%
10,369 Faulding (F.H.) & Co., Ltd....... 51,887
------------
REAL ESTATE -- 0.2%
105,816 General Property Trust Units..... 187,534
24,339 Lend Lease Corp., Ltd............ 475,754
101,055 Westfield Trust Units............ 192,923
------------
856,211
------------
REAL ESTATE INVESTMENT TRUST -- 0.0%
14,411 Schroders Property Fund.......... 22,272
------------
RETAIL STORES -- 0.1%
115,528 Coles Myer Ltd................... 554,771
------------
SERVICES -- 0.1%
20,119 Brambles Industries Ltd.......... 399,165
------------
TOBACCO -- 0.0%
8,400 Rothmans Holdings Ltd............ 44,333
------------
13,485,746
------------
AUSTRIA -- 1.6%
AIRLINES -- 0.0%
9,000 Austrian Airlines *.............. 191,371
------------
BANKING -- 0.2%
23,650 Bank Austria AG.................. 1,196,441
100 Bank Austria AG, Participating
Certificates..................... 2,688
------------
1,199,129
------------
BEVERAGES & TOBACCO -- 0.0%
3,100 Oesterreichische
Brau-Beteiligungs AG............. 154,622
------------
BUILDING PRODUCTS -- 0.1%
3,433 Wienerberger Baustoffindustrie
AG............................... 658,061
------------
CHEMICALS -- 0.0%
600 Lenzing AG *..................... 35,523
------------
</TABLE>
Continued
45
<PAGE> 192
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUSTRIA (CONTINUED)
CONSTRUCTION -- 0.0%
1,455 Bau Holding AG................... $ 90,860
------------
ELECTRIC UTILITY -- 0.4%
12,669 Oesterreichische
Elektrizitaetswirtschafts AG,
Class A.......................... 1,341,923
------------
ELECTRICAL EQUIPMENT -- 0.0%
1,000 Austria Mikro Systeme
International AG................. 50,590
------------
ENGINEERING -- 0.2%
6,100 VA Technologie AG................ 924,824
------------
INSURANCE -- 0.1%
2,780 EA-Generali AG................... 729,344
------------
MANUFACTURING-CONSUMER GOODS -- 0.0%
100 Steyr-Daimler-Puch AG............ 2,680
------------
METALS & MINING -- 0.0%
4,775 Radex-Heraklith
Industriebeteiligungs AG......... 164,189
------------
OIL & GAS -- 0.4%
11,140 OMV AG........................... 1,541,003
------------
PAPER PRODUCTS -- 0.0%
4,100 Mayr-Melnhof Karton AG........... 220,413
------------
STEEL -- 0.1%
4,400 Boehler-Uddeholm AG.............. 257,548
------------
TRANSPORTATION -- 0.1%
7,400 Flughafen Wien AG................ 293,640
------------
7,855,720
------------
BELGIUM -- 1.3%
BANKING -- 0.2%
1,583 Generale de Banque SA............ 688,959
1,252 Kredietbank NV................... 525,470
------------
1,214,429
------------
BUILDING PRODUCTS -- 0.0%
1,925 Cimenteries CBR Cementbedrijven.. 173,017
------------
CHEMICALS -- 0.1%
8,510 Solvay SA........................ 535,178
------------
ELECTRIC UTILITY -- 0.1%
6,840 Tractebel........................ 596,309
------------
ENERGY -- 0.2%
2,297 PetroFina SA..................... 847,815
------------
GAS & ELECTRIC UTILITY -- 0.4%
5,500 Electrabel SA.................... 1,272,204
------------
INDUSTRIAL HOLDING COMPANY -- 0.1%
2,000 Groupe Bruxelles Lambert SA...... 289,340
------------
INSURANCE -- 0.2%
4,100 Fortis AG........................ 855,415
1,350 Royale Belge..................... 384,414
------------
1,239,829
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BELGIUM (CONTINUED)
MERCHANDISING -- 0.0%
4,400 Delhaize-Le Lion SA.............. $ 223,266
------------
TECHNOLOGY -- 0.0%
1,000 Barco NV......................... 183,536
------------
TRANSPORTATION -- 0.0%
1,422 Union Miniere SA *............... 98,638
------------
6,673,561
------------
DENMARK -- 2.4%
AGRICULTURE -- 0.0%
1,185 Korn-OG Foderstof Kompagniet AS.. 32,882
2,780 Superfos AS...................... 70,320
------------
103,202
------------
BANKING & FINANCE -- 0.5%
10,147 Den Danske Bank.................. 1,352,991
9,693 Unidanmark AS, Class A........... 712,053
------------
2,065,044
------------
BEVERAGES & TOBACCO -- 0.1%
6,360 Carlsberg AS, Class A............ 344,017
5,205 Carlsberg AS, Class B............ 279,740
------------
623,757
------------
COMMERCIAL SERVICES -- 0.1%
2,190 ISS International Service System
AS, Series B*.................... 80,599
327 Sophus Berendsen AS -- Class A... 54,019
3,506 Sophus Berendsen AS -- Class B... 578,598
------------
713,216
------------
DIVERSIFIED -- 0.0%
6,974 Ostasiatiske Kompagni AS *....... 63,148
------------
ELECTRICAL & ELECTRONIC -- 0.0%
111 NKT Holding AS................... 8,844
------------
ENGINEERING -- 0.0%
8,215 FLS Industries AS -- Class B..... 196,041
------------
FOOD PRODUCTS -- 0.1%
28 Aarhus Oliefabrk AS -- Class A... 1,247
9 Aarhus Oliefabrk AS -- Class B... 401
10,095 Danisco AS....................... 560,243
------------
561,891
------------
MEDICAL SUPPLIES -- 0.0%
84 Radiometer AS -- Class B......... 3,410
------------
PHARMACEUTICALS -- 0.5%
14,846 Novo Nordisk AS, Class B......... 2,124,819
------------
TELECOM EQUIPMENT -- 0.0%
210 GN Store Nord AS................. 3,527
------------
TELECOMMUNICATIONS -- 0.3%
26,100 Tele Danmark AS, Class B......... 1,620,003
------------
</TABLE>
Continued
46
<PAGE> 193
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DENMARK (CONTINUED)
TRANSPORTATION & SHIPPING -- 0.8%
39 D/S 1912, Class B................ $ 1,799,857
29 D/S Svendborg AS, Class B........ 1,905,885
134 Lauritzen (J.) Holding AS *...... 11,253
320 SAS Danmark AS................... 4,673
------------
3,721,668
------------
11,808,570
------------
FINLAND -- 0.4%
BANKING & FINANCE -- 0.0%
36,906 Merita Ltd., Class A............. 201,965
------------
DIVERSIFIED -- 0.0%
800 Amer Group Ltd. *................ 15,352
1,500 Instrumentarium Group, Series
B................................ 52,337
------------
67,689
------------
ENGINEERING -- 0.0%
8,200 Metra AB......................... 192,747
------------
FOOD PRODUCTS -- 0.0%
1,300 Cultor OY, Series 2.............. 70,425
------------
FOREST PRODUCTS -- 0.1%
15,560 UPM-Kymmene Corp................. 311,458
------------
INSURANCE -- 0.0%
800 Pohjola Insurance Group, Class
B................................ 29,676
------------
MACHINERY & EQUIPMENT -- 0.0%
500 Kone Corp. -- Class B............ 60,601
------------
RETAIL-GENERAL MERCHANDISE -- 0.0%
750 Stockmann AB -- Class B.......... 46,828
------------
TELECOMMUNICATIONS -- 0.3%
11,600 Nokia AB, Class A................ 824,390
5,900 Nokia AB, Class K................ 422,552
------------
1,246,942
------------
2,228,331
------------
FRANCE -- 9.0%
ADVERTISING -- 0.1%
8,378 Havas SA......................... 603,018
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.0%
3,050 Moulinex *....................... 75,390
------------
AUTO PARTS -- 0.1%
7,267 Valeo SA......................... 493,095
------------
AUTOMOTIVE -- 0.1%
5,162 PSA Peugeot Citroen.............. 651,271
------------
BANKING -- 0.7%
22,474 Banque Nationale de Paris........ 1,195,079
13,164 Compagnie Financiere de
Paribas -- Class A............... 1,144,436
9,947 Societe Generale................. 1,355,839
------------
3,695,354
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
BEVERAGES & TOBACCO -- 0.4%
9,220 LVMH (Moet Hennessy Louis
Vuitton)......................... $ 1,531,082
5,400 Pernod Ricard.................... 317,760
------------
1,848,842
------------
BROADCASTING/CABLE -- 0.1%
3,136 Canal Plus....................... 583,322
------------
BUILDING PRODUCTS -- 0.2%
1,195 Imetal SA........................ 148,584
9,721 Lafarge SA....................... 638,117
------------
786,701
------------
CHEMICALS -- 0.6%
7,673 L'Air Liquide.................... 1,201,485
35,514 Rhone-Poulenc SA................. 1,591,555
------------
2,793,040
------------
COMMERCIAL SERVICES -- 0.1%
78 Sodexho *........................ 40,777
710 Sodexho SA....................... 380,383
------------
421,160
------------
CONSTRUCTION -- 0.0%
1,466 Bouygues......................... 166,196
------------
DEFENSE -- 0.1%
200 Sagem SA......................... 89,098
12,325 Thomson CSF...................... 388,648
------------
477,746
------------
DIVERSIFIED -- 0.1%
498 Chargeurs International SA....... 29,801
12,106 Lagardere SCA.................... 400,457
1,350 Nord-Est SA...................... 26,929
------------
457,187
------------
ELECTRICAL & ELECTRONIC -- 0.7%
17,137 Alcatel Alsthom.................. 2,179,206
2,800 Legrand SA....................... 558,058
14,200 Schneider SA..................... 771,387
------------
3,508,651
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 0.1%
25,100 Unisor Sacilor SA................ 362,573
------------
ENERGY -- 1.3%
28,967 Elf Aquitane SA.................. 3,370,572
25,700 Total SA, Class B................ 2,798,186
------------
6,168,758
------------
ENGINEERING -- 0.0%
200 Groupe Gtm....................... 13,464
------------
FINANCE -- 0.4%
13,618 Compagnie Generale des Eaux...... 1,901,493
523 CPR (Compagnie Parisenne de
Reescompte)...................... 42,599
844 Credit National.................. 49,244
192 Eurafrance....................... 78,193
------------
2,071,529
------------
</TABLE>
Continued
47
<PAGE> 194
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
FOOD & HOUSEHOLD PRODUCTS -- 0.1%
2,600.... Eridania Beghin-Say SA $ 406,692
------------
FOOD PRODUCTS -- 0.3%
7,621 Groupe Danone.................... 1,361,829
------------
HEALTH & PERSONAL CARE -- 0.8%
7,109 L'OREAL.......................... 2,782,925
11,023 Sanofi SA........................ 1,227,656
------------
4,010,581
------------
INDUSTRIAL GOODS & SERVICES -- 0.1%
14,090 Michelin Class B, Registered..... 709,669
------------
INDUSTRIAL HOLDING COMPANY -- 0.3%
14,280 Lyonnaise des Eaux SA............ 1,580,901
------------
INSURANCE -- 0.5%
34,100 Axa -- UAP....................... 2,639,750
------------
LEISURE -- 0.1%
3,650 Accor SA......................... 678,930
500 Club Mediterranee SA *........... 35,332
------------
714,262
------------
MACHINE-DIVERSIFIED -- 0.0%
1,600 Sidel SA......................... 106,119
------------
MEDIA -- 0.0%
498 Pathe SA......................... 96,688
------------
MEDICAL SUPPLIES -- 0.0%
500 Essilor International............ 149,605
------------
MERCHANDISING -- 0.9%
4,098 Carrefour SA..................... 2,138,965
6,600 Etablissements Economiques du
Casino Guichard-Perrachon........ 367,528
2,248 Pinault-Printemps-Redoute SA..... 1,199,883
1,950 Promodes......................... 809,385
------------
4,515,761
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.3%
9,133 Compagnie de Saint Gobain........ 1,298,021
------------
OFFICE EQUIPMENT & SERVICES -- 0.1%
5,700 Bic.............................. 416,235
------------
OIL & GAS -- 0.0%
50 Cie Gen Geophysiq *.............. 6,400
1,300 Primagaz Cie..................... 108,696
------------
115,096
------------
REAL ESTATE -- 0.1%
2,600 SEFIMEG.......................... 129,657
918 Simco SA......................... 61,802
800 Unibail.......................... 79,922
572 Union Immobiliere de France...... 41,551
------------
312,932
------------
RETAIL-SPECIAL LINE -- 0.0%
320 Comptoirs Modernes............... 163,834
------------
TELECOMMUNICATIONS-SERVICES &
EQUIPMENT -- 0.3%
35,000 France Telecom *................. 1,270,059
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
TEXTILE PRODUCTS -- 0.0%
1,050 Dollfus-Mieg & Cie *............. $ 18,676
------------
TOBACCO -- 0.0%
3,200 SEITA............................ 114,896
------------
45,178,903
------------
GERMANY -- 11.4%
AIRLINES -- 0.1%
34,680 Lufthansa AG *................... 651,922
------------
AUTOMOTIVE -- 1.2%
58,970 Daimler-Benz AG.................. 4,165,189
761 MAN AG........................... 219,872
3,093 Volkswagen AG.................... 1,728,805
------------
6,113,866
------------
BANKING -- 2.3%
80,840 Bayer AG......................... 3,001,080
26,228 Bayerische Vereinsbank AG........ 1,692,089
57,260 Deutsche Bank AG................. 4,006,193
50,960 Dresdner Bank AG................. 2,318,369
------------
11,017,731
------------
BANKING & FINANCE -- 0.2%
23,320 Bayerische Hypotheken-und
Weschel-Bank AG.................. 1,131,603
------------
BUILDING PRODUCTS -- 0.1%
4,070 Heidelberger Zement AG........... 285,436
------------
CHEMICALS -- 0.6%
69,880 BASF AG.......................... 2,495,100
7,320 Degussa AG....................... 362,327
------------
2,857,427
------------
CLOTHING -- 0.1%
4,100 Adidas AG........................ 542,701
------------
COMPUTER SOFTWARE -- 0.3%
5,500 SAP AG........................... 1,668,620
------------
CONSTRUCTION -- 0.0%
4,730 Hochtief AG...................... 194,667
------------
DIVERSIFIED -- 1.1%
1,331 Preussag AG...................... 409,358
55,990 VEBA AG.......................... 3,814,577
2,312 Viag AG.......................... 1,266,555
------------
5,490,490
------------
ELECTRICAL & ELECTRONIC -- 0.8%
64,170 Siemens AG....................... 3,872,235
------------
ENGINEERING -- 0.4%
2,040 AGIV-AG *........................ 39,596
2,970 Bilfinger & Berger Bau AG........ 93,822
4,080 Mannesmann AG.................... 2,049,028
------------
2,182,446
------------
GAS & ELECTRIC UTILITY -- 0.4%
38,650 RWE AG........................... 2,074,325
------------
HEALTH & PERSONAL CARE -- 0.1%
7,860 Beiersdorf AG, Series ABC........ 334,414
------------
</TABLE>
Continued
48
<PAGE> 195
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
HEALTH CARE -- 0.1%
6,200 Schering AG...................... $ 598,262
------------
INSURANCE -- 2.2%
1,780 Aachener & Muenchener............ 196,013
25,970 Allianz AG....................... 6,701,775
3,660 Amb Aachener & Muenchener........ 403,038
9,160 Muenchener Rueckver.............. 3,484,589
------------
10,785,415
------------
MACHINERY & EQUIPMENT -- 0.1%
3,830 Kloeckner-Humbolt-Deutz AG *..... 28,330
765 Linde AG......................... 464,180
------------
492,510
------------
METALS & MINING -- 0.1%
2,480 FAG Kugelfischer Georg Schaefer
AG............................... 32,413
2,834 Thyssen AG....................... 605,245
------------
637,658
------------
PHARMACEUTICALS -- 0.1%
15,600 Merck KGaA....................... 524,904
------------
RETAIL STORES -- 0.2%
791 Karstadt AG...................... 273,632
19,773 Metro AG......................... 701,606
------------
975,238
------------
RETAIL-GENERAL MERCHANDISE -- 0.0%
1,630 Douglas Holding AG............... 49,406
------------
TELECOMMUNICATIONS -- 0.9%
251,800 Deutsche Telekom AG.............. 4,663,370
------------
TIRE & RUBBER -- 0.0%
4,870 Continental AG................... 109,694
------------
57,254,340
------------
HONG KONG -- 2.4%
AIRLINES -- 0.0%
12,600 Hong Kong Aircraft Engineering
Co., Ltd......................... 31,710
------------
BANKING -- 0.3%
96,666 Bank of East Asia Ltd............ 226,436
135,800 Hang Seng Bank Ltd............... 1,310,106
------------
1,536,542
------------
BANKING & FINANCE -- 0.0%
20,995 Wing Lung Bank................... 100,528
------------
BROADCASTING & PUBLISHING -- 0.0%
130,000 South China Morning Post Holdings
Ltd.............................. 91,439
30,000 Television Broadcasts Ltd........ 85,568
------------
177,007
------------
DISTRIBUTION -- 0.0%
18,000 Dickson Concepts Intl............ 26,251
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HONG KONG (CONTINUED)
DIVERSIFIED -- 0.2%
111,000 Swire Pacific Ltd., Class A...... $ 608,846
163,000 Wharf Holdings Ltd............... 357,628
------------
966,474
------------
ELECTRIC UTILITY -- 0.2%
175,400 China Light & Power Co., Ltd..... 973,405
------------
ELECTRICAL & ELECTRONIC -- 0.0%
31,200 Johnson Electric Holdings Ltd.... 89,796
------------
ELECTRICAL EQUIPMENT -- 0.0%
65,000 Elec & Eltek International
Holdings Ltd..................... 16,107
------------
FINANCE -- 0.0%
44,000 Peregrine Investment Holdings.... 31,233
------------
GAS UTILITY -- 0.1%
258,250 Hong Kong & China Gas Co., Ltd... 499,951
------------
HOTELS & LODGING -- 0.0%
82,500 Hong Kong & Shanghai Hotels
Ltd.............................. 68,144
41,000 Miramar Hotel & Investment
Ltd.............................. 69,319
284,714 Regal Hotels International....... 54,016
------------
191,479
------------
INDUSTRIAL HOLDING COMPANY -- 0.5%
307,000 Hutchison Whampoa Ltd. 1,925,617
------------
MANUFACTURING-CONSUMER GOODS -- 0.0%
20,000 Varitronix International Ltd..... 34,330
------------
PRINTING & PUBLISHING -- 0.0%
102,000 Oriental Press Group Ltd......... 30,936
------------
REAL ESTATE -- 0.7%
162,000 Cheung Kong Holdings Ltd......... 1,061,076
136,000 Chinese Estates Ltd.............. 60,117
310,000 Hopewell Holdings Ltd............ 77,217
72,000 Hysan Development Co., Ltd....... 143,568
26,000 Kumagai Gumi (Hong Kong)......... 19,798
135,462 New World Development Co., Ltd... 468,541
112,000 Shagri-La Asia Ltd............... 94,679
214,000 Sino Land Company................ 129,119
168,100 Sun Hung Kai Properties Ltd...... 1,171,539
43,270 Tai Cheung Holdings Ltd.......... 17,172
------------
3,242,826
------------
REAL ESTATE INVESTMENT TRUST -- 0.0%
95,100 Hang Lung Development Co......... 133,783
------------
RETAIL STORES -- 0.0%
50,000 Giordano International Ltd....... 17,262
------------
TELECOMMUNICATIONS -- 0.4%
872,032 Hong Kong Telecommunications
Ltd.............................. 1,795,100
------------
TRANSPORTATION -- 0.0%
242,000 Cathay Pacific Airways........... 196,767
106,258 Shun Tak Holdings Ltd............ 28,456
------------
225,223
------------
12,045,560
------------
</TABLE>
Continued
49
<PAGE> 196
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ITALY -- 4.8%
AGRICULTURE -- 0.0%
134,100 Parmalat Finanziaria SpA......... $ 191,897
------------
AUTO PARTS -- 0.0%
38,500 Magneti Marelli SpA.............. 65,873
------------
AUTOMOTIVE -- 0.3%
413,138 Fiat SpA......................... 1,202,262
69,740 Fiat SpA di Risp
(Non-convertible)................ 115,379
------------
1,317,641
------------
BANKING -- 0.5%
162,400 Banca Commerciale Italiana....... 564,911
54,694 Banco Ambrosiano Veneto SpA...... 209,434
38,900 Banco Ambrosiano Veneto SpA di
Risp, (Non-convertible).......... 75,908
18,400 Banco Popolare de Milano......... 115,521
202,900 Credito Italiano SpA............. 626,030
76,900 Istituto Bancario San Paolo di
Torino........................... 735,075
10,923 Riunione Adriatica di Sicurta SpA
di Risp, (Non-convertible)....... 74,138
------------
2,401,017
------------
BROADCASTING & PUBLISHING -- 0.1%
106,400 Mediaset SpA..................... 522,974
------------
BUILDING PRODUCTS -- 0.0%
1,900 Cementir SpA..................... 1,805
15,350 Italcementi SpA.................. 107,051
900 Italcementi SpA di Risp, (Non-
convertible)..................... 2,698
------------
111,554
------------
CHEMICALS -- 0.1%
451,862 Montedison SpA................... 406,115
12,800 Montedison SpA di Risp, (Non-
convertible)..................... 8,405
62,600 Snia BPD SpA..................... 64,441
900 Snia BPD SpA di Risp, (Non-
convertible)..................... 718
------------
479,679
------------
ENGINEERING -- 0.0%
7,900 Impregilo SpA *.................. 6,028
------------
FINANCE -- 0.2%
54,300 Istituto Mobiliare Italiano
SpA.............................. 644,968
43,075 Mediobanca SpA................... 338,412
------------
983,380
------------
GAS & ELECTRIC UTILITY -- 0.1%
57,400 Edison SpA....................... 347,388
------------
GAS UTILITY -- 0.0%
59,900 Italgas SpA...................... 247,325
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ITALY (CONTINUED)
INSURANCE -- 0.8%
100,763 Assicurazioni Generali........... $ 2,476,335
457,400 Istituto Nazionale delle
Assicurazioni.................... 927,479
29,762 Riuniune Adriatici de Sicurta
SpA.............................. 292,065
10,800 Societa Assicuratrice Industriale
(SAI) SpA........................ 120,340
------------
3,816,219
------------
JEWELRY -- 0.0%
26,000 Bulgari SpA...................... 132,353
------------
OFFICE EQUIPMENT & SERVICES -- 0.0%
210,496 Olivetti SpA *................... 127,274
------------
OIL & GAS -- 1.0%
914,900 ENI SpA.......................... 5,190,309
------------
PAPER PRODUCTS -- 0.0%
11,300 Burgo (Cartiere) SpA............. 67,589
------------
PRINTING & PUBLISHING -- 0.0%
11,400 Mondadori (Arnoldo) Editore SpA.. 89,627
------------
RETAIL STORES -- 0.0%
16,800 La Rinascente SpA................ 125,430
------------
STEEL -- 0.0%
10,400 Falck, Acciaierie & Ferriere
Lombarde SpA..................... 47,588
------------
TELECOMMUNICATIONS -- 1.5%
19,400 Sirti SpA........................ 117,410
141,660 Telecom Italia Mobile SpA........ 403,027
759,260 Telecom Italia Mobile SpA di Risp
(Non-convertible)................ 3,506,430
421,811 Telecom Italia SpA*.............. 2,695,970
82,360 Telecom Italia SpA-Rnc*.......... 363,354
------------
7,086,191
------------
TEXTILE PRODUCTS -- 0.1%
16,432 Benetton Group SpA............... 269,065
------------
TIRE & RUBBER -- 0.1%
132,900 Pirelli SpA...................... 355,554
20,900 Pirelli SpA di Risp, (Non-
convertible)..................... 37,946
------------
393,500
------------
24,019,901
------------
JAPAN -- 26.5%
ALUMINUM -- 0.0%
38,000 Nippon Light Metal Co., Ltd...... 55,530
13,000 Sankyo Aluminum Industry Co...... 11,598
------------
67,128
------------
</TABLE>
Continued
50
<PAGE> 197
THE KENT FUNDS
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
APPLIANCES & HOUSEHOLD PRODUCTS -- 1.6%
193,000 Matsushita Electric Industrial
Co., Ltd......................... $ 2,835,155
16,000 Pioneer Electronic Corp.......... 247,344
179,000 Sanyo Electric Co................ 468,078
103,000 Sharp Corp....................... 711,377
36,000 Sony Corp........................ 3,211,787
------------
7,473,741
------------
AUTOMOTIVE -- 3.0%
2,000 Autobacs Seven Co., Ltd.......... 57,683
89,000 Honda Motor Co., Ltd............. 3,278,776
1,000 Nippon Sharyo Ltd................ 2,792
230,000 Nissan Motor Co., Ltd............ 955,230
26,000 Toyoda Automatic Loom Works...... 479,922
349,000 Toyota Motor Corp................ 10,038,833
------------
14,813,236
------------
BANKING -- 3.5%
35,000 77 Bank.......................... 250,344
213,000 Asahi Bank Ltd................... 868,244
44,000 Ashikaga Bank Ltd................ 71,065
428,000 Bank of Tokyo -- Mitsubishi
Ltd.............................. 5,925,193
104,000 Bank of Yokohama Ltd............. 275,155
71,000 Chiba Bank Ltd................... 221,156
266,000 Fuji Bank, Ltd................... 1,080,194
47,000 Gunma Bank Ltd................... 307,258
49,000 Hokuriku Bank.................... 64,067
233,000 Industrial Bank of Japan......... 1,666,576
81,000 Joyo Bank........................ 286,569
110,000 Mitsui Trust & Banking Co.,
Ltd.............................. 214,042
314,000 Sakura Bank Ltd.................. 900,792
73,000 Shizuoka Bank.................... 786,026
288,000 Sumitomo Bank Ltd................ 3,300,388
186,000 Tokai Bank....................... 869,767
18,000 Yamaguchi Bank................... 221,503
------------
17,308,339
------------
BEVERAGES & TOBACCO -- 0.3%
43,000 Asahi Breweries Ltd.............. 628,360
96,000 Kirin Brewery Co., Ltd........... 701,424
11,000 Takara Shuzo..................... 41,032
------------
1,370,816
------------
BREWERY -- 0.0%
31,000 Sapporo Breweries Ltd............ 97,753
------------
BROADCASTING & PUBLISHING -- 0.0%
16,000 Tokyo Broadcasting System........ 203,044
------------
BUILDING PRODUCTS -- 0.1%
52,000 Chichibu Onoda Cement Corp....... 95,984
17,000 Nihon Cement Co., Ltd............ 35,171
16,000 Sanwa Shutter Corp............... 80,725
23,000 Sumitomo Osaka Cement Co., Ltd... 29,011
20,000 Tostem Corp...................... 215,350
------------
456,241
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
CHEMICALS -- 1.1%
132,000 Asahi Chemical Industry Co.,
Ltd.............................. $ 448,727
19,000 Daicel Chemical Industries
Ltd.............................. 24,842
72,000 Dainippon Ink & Chemicals,
Inc.............................. 182,740
27,000 Denki Kagaku Kogyo Kabushiki
Kaisha........................... 40,909
32,000 Kaneka Corp...................... 144,961
32,000 Konica Corp...................... 147,668
201,000 Mitsubishi Chemical Corp......... 289,084
35,000 Mitsubishi Gas Chemical Co....... 92,331
10,000 Nippon Shokubai Kabushiki Kaisha
Co............................... 40,686
50,000 Sekisui Chemical Co., Ltd........ 254,959
34,000 Shin-Etsu Chemical Co., Ltd...... 651,125
95,000 Showa Denko Kabushiki Kaisha..... 83,294
148,000 Sumitomo Chemical Co............. 341,483
80,000 Takeda Chemical Industries....... 2,288,860
128,000 Toray Industries, Inc............ 575,907
42,000 Tosoh Corp. *.................... 70,742
76,000 Ube Industries Ltd............... 97,030
------------
5,775,348
------------
CLOTHING -- 0.0%
5,000 Tokyo Style...................... 45,377
------------
COMMERCIAL SERVICES -- 0.0%
1,155 Oyo Corp. 16,700
------------
COMPUTER SOFTWARE -- 0.0%
5,000 CSK Corp......................... 128,441
------------
CONSTRUCTION -- 0.2%
22,000 Aoki Corp. *..................... 7,107
48,000 Daiwa House Industry Co., Ltd.... 254,728
32,000 Haseko *......................... 16,490
35,000 Kumagai Gumi Co., Ltd............ 19,112
13,000 Okumura Corp..................... 30,995
18,000 Penta-Ocean Construction......... 25,334
65,000 Sekisui House Ltd................ 419,433
72,000 Shimizu Corp..................... 167,234
93,000 Taisei Corp...................... 153,067
------------
1,093,500
------------
CONSUMER GOODS & SERVICES -- 0.1%
22,000 Nippon Sheet Glass Co., Ltd...... 30,795
12,000 Shimano, Inc..................... 221,502
34,000 Toto Ltd......................... 218,088
------------
470,385
------------
COSMETICS/PERSONAL CARE -- 0.1%
38,000 Shiseido Co., Ltd................ 520,223
------------
DATA PROCESSING & REPRODUCTION -- 0.4%
170,000 Fujitsu Ltd...................... 1,830,472
------------
DISTRIBUTION -- 0.0%
130,000 Itochu Corp...................... 204,967
------------
DIVERSIFIED -- 0.0%
18,000 Yamaha Corp...................... 204,890
------------
</TABLE>
Continued
51
<PAGE> 198
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
ELECTRIC UTILITY -- 0.9%
88,900 Kansai Electric Power Co.,
Inc.............................. $ 1,511,055
45,500 Tohoku Electric Power............ 692,888
124,000 Tokyo Electric Power Co.......... 2,269,785
------------
4,473,728
------------
ELECTRICAL & ELECTRONIC -- 0.6%
25,000 Casio Computer Co., Ltd.......... 179,971
17,000 Kyocera Corp..................... 774,028
197,000 Mitsubishi Electric Corp......... 506,056
33,000 Nikon Corp....................... 327,408
24,000 Omron Corp....................... 376,554
10,000 Rohm Co., Ltd.................... 1,022,912
------------
3,186,929
------------
ELECTRICAL EQUIPMENT -- 0.1%
16,000 Alps Electric Co., Ltd........... 151,360
5,000 SMC Corp......................... 442,236
------------
593,596
------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 1.1%
7,940 Advantest Corp................... 451,896
8,000 Dainippon Screen Manufacturing
Co., Ltd......................... 36,917
21,100 Fanuc Ltd........................ 801,670
3,000 Hirose Electric Co., Ltd......... 153,898
306,000 Hitachi Ltd...................... 2,188,722
146,000 NEC Corp......................... 1,560,824
23,000 Yokogawa Electric Corp........... 142,577
------------
5,336,504
------------
ELECTRONICS -- 0.0%
13,000 Nitto Denko Corp................. 224,964
------------
ENERGY -- 0.1%
51,000 Cosmo Oil Co., Ltd............... 77,664
100,000 Japan Energy Corp................ 94,600
112,000 Nippon Oil Co., Ltd.............. 290,292
------------
462,556
------------
ENGINEERING -- 0.2%
7,000 Daito Trust Construction Co.,
Ltd.............................. 42,908
25,000 Fujita Corp...................... 9,037
9,000 JGC Corp......................... 19,035
88,000 Kajima Corp...................... 222,672
14,000 Kandenko Co., Ltd................ 71,711
127,000 Kawasaki Heavy Industries Ltd.... 197,306
24,000 Kinden Corp...................... 256,575
5,000 Maeda Road Construction.......... 19,997
19,000 Nishimatsu Construction.......... 59,913
68,000 Obayashi Corp.................... 232,208
13,000 Sato Kogyo Co., Ltd.............. 8,099
------------
1,139,461
------------
ENTERTAINMENT -- 0.1%
1,700 Toho Co.......................... 181,740
11,000 Tokyo Dome Corp.................. 73,434
22,000 Tokyotokeiba..................... 28,426
------------
283,600
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
FINANCE -- 1.1%
13,000 Acom Co., Ltd.................... $ 719,883
123,000 Daiwa Securities Co., Ltd........ 425,700
23,000 Higo Bank........................ 116,750
119,000 Mitsubishi Trust & Banking
Corp............................. 1,198,959
17,000 Nippon Shinpan Co................ 19,220
180,000 Nomura Securities Co., Ltd....... 2,408,840
24,000 Orient Corp...................... 38,948
5,000 Orix Corp........................ 349,943
6,000 Uni-Charm........................ 213,196
83,000 Yasuda Trust & Banking........... 82,987
------------
5,574,426
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.4%
59,000 Ajinomoto Co., Inc............... 576,291
56,000 Kao Corp......................... 809,714
20,000 Nippon Meat Packers, Inc......... 273,802
12,000 Nissin Food Products Co., Ltd.... 218,734
------------
1,878,541
------------
FOOD PRODUCTS -- 0.2%
65,000 Daiei, Inc....................... 269,956
10,000 House Foods Industry............. 130,748
12,000 Itoham Foods..................... 57,037
10,000 Kikkoman Corp.................... 50,838
15,000 Meiji Milk Products Co., Ltd..... 38,994
16,000 Nichirei Corp.................... 34,456
8,000 QP Corp.......................... 48,915
23,000 Snow Brand Milk Products Co.,
Ltd.............................. 62,090
20,000 Yamazaki Baking Co., Ltd......... 195,353
------------
888,387
------------
FOREST PRODUCTS -- 0.2%
17,000 Mitsubishi Paper Mills........... 23,927
87,000 Nippon Paper Industries Co....... 342,591
94,000 Oji Paper Co., Ltd............... 375,215
12,000 Sumitomo Forestry Co., Ltd....... 58,606
------------
800,339
------------
GAS UTILITY -- 0.2%
232,000 Osaka Gas Co., Ltd............... 531,729
258,000 Tokyo Gas Co., Ltd............... 587,351
------------
1,119,080
------------
HEALTH & PERSONAL CARE -- 0.4%
22,000 Chugai Pharmaceutical Co.,
Ltd.............................. 113,366
40,000 Kyowa Hakko Kogyo Co............. 173,818
15,000 Lion Corp........................ 44,531
42,000 Sankyo Co., Ltd.................. 952,923
30,000 Yamanouchi Pharmaceutical Co.,
Ltd.............................. 646,049
------------
1,930,687
------------
HOTELS & LODGING -- 0.0%
8,000 Fujita Kanko, Inc................ 86,140
------------
</TABLE>
Continued
52
<PAGE> 199
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
INDUSTRIAL GOODS & SERVICES -- 0.9%
75,000 Bridgestone Corp................. $ 1,632,427
82,000 Denso Corp....................... 1,482,067
17,000 Inax Corp........................ 49,554
58,000 Mitsui Engineering & Shipbuilding
Co., Ltd.*....................... 37,025
34,000 NGK Insulators Ltd............... 303,335
20,000 NGK Spark Plug Co., Ltd.......... 113,828
66,000 Sumitomo Electric Industries
Ltd.............................. 903,546
------------
4,521,782
------------
INSURANCE -- 0.5%
66,000 Mitsui Marine & Fire Insurance
Co., Ltd......................... 338,068
41,000 Nichido Fire & Marine Insurance
Co., Ltd......................... 214,427
53,000 Nippon Fire & Marine Insurance
Co............................... 199,329
60,000 Sumitomo Marine & Fire Insurance
Co............................... 318,410
142,000 Tokio Marine & Fire Insurance
Co............................... 1,616,353
------------
2,686,587
------------
JEWELRY -- 0.1%
29,000 Citizen Watch Co., Ltd........... 195,161
10,000 Hoya Corp........................ 315,333
------------
510,494
------------
LEASING -- 0.1%
7,000 Daiwa Kosho Lease Co., Ltd....... 28,534
36,000 Yamato Transport Co., Ltd........ 484,537
------------
513,071
------------
LEISURE -- 0.0%
4,000 Namco............................ 116,596
------------
MACHINE-DIVERSIFIED -- 0.0%
4,000 Komori Corp...................... 59,683
12,000 Kurita Water Industries Ltd...... 122,749
------------
182,432
------------
MACHINERY & EQUIPMENT -- 0.8%
27,000 Amada Co., Ltd................... 100,714
14,000 Brother Industries Ltd........... 32,087
10,000 Chiyoda Corp..................... 10,767
5,000 Daifuku Co., Ltd................. 24,419
22,000 Daikin Industries Ltd............ 83,248
26,000 Ebara Corp....................... 275,955
90,000 Komatsu Ltd...................... 453,389
10,000 Koyo Seiko Co., Ltd.............. 40,147
129,000 Kubota Corp...................... 341,298
36,000 Minebea Co., Ltd................. 387,630
309,000 Mitsubishi Heavy Industries
Ltd.............................. 1,292,837
5,000 Mori Seiki Co.................... 51,915
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
MACHINERY & EQUIPMENT (CONTINUED)
51,000 NSK Ltd.......................... $ 127,479
42,000 NTN Corp......................... 97,553
7,000 Okuma Corp....................... 24,981
63,000 Sumitomo Heavy Industries,
Ltd.............................. 193,330
15,000 Tokyo Electron Ltd............... 482,230
------------
4,019,979
------------
MANUFACTURING-CAPITAL GOODS -- 0.2%
31,000 Fujikura Ltd..................... 205,997
12,000 Kokuyo Co........................ 207,659
14,000 Makita Corp...................... 134,594
21,000 Murata Manufacturing Co., Ltd.... 529,759
8,000 Noritake Co., Ltd................ 38,271
7,000 Takara Standard Co............... 34,456
------------
1,150,736
------------
MANUFACTURING-CONSUMER GOODS -- 0.8%
79,000 Canon, Inc....................... 1,847,085
47,000 Fuji Photo Film Co., Ltd......... 1,807,399
8,700 Sega Enterprises Ltd............. 157,913
------------
3,812,397
------------
MEDICAL SUPPLIES -- 0.0%
24,000 Olympus Optical Co., Ltd. 166,311
------------
MERCHANDISING -- 0.6%
38,000 Ito-Yokado Co., Ltd.............. 1,943,531
29,000 JUSCO Co., Ltd................... 410,395
33,000 Marui Co., Ltd................... 515,224
------------
2,869,150
------------
METALS -- 0.4%
42,000 Daido Steel Co., Ltd............. 52,976
298,000 Kawasaki Steel Corp.............. 407,965
104,000 Mitsubishi Materials Corp........ 167,973
633,000 Nippon Steel Corp................ 939,609
323,000 NKK Corp......................... 258,358
288,000 Sumitomo Metal Industries Ltd.... 369,909
11,000 Tokyo Steel Manufacturing Co..... 37,309
------------
2,234,099
------------
METALS & MINING -- 0.1%
92,000 Hitachi Zosen Corp............... 147,884
46,000 Mitsui Mining & Smelting Co...... 185,385
52,000 Sumitomo Metal Mining Co......... 171,972
------------
505,241
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.1%
107,000 Asahi Glass Co., Ltd............. 510,225
------------
OFFICE EQUIPMENT & SERVICES -- 0.3%
69,000 Dai Nippon Printing Co., Ltd..... 1,300,174
------------
OIL & GAS -- 0.0%
3,100 Arabian Oil Co., Ltd............. 47,208
32,000 Mitsubishi Oil Co., Ltd.......... 47,500
14,000 Teikoko Oil Co., Ltd............. 36,609
------------
131,317
------------
</TABLE>
Continued
53
<PAGE> 200
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
PACKAGING -- 0.1%
19,600 Toyo Seikan Kaisha Ltd........... $ 280,385
------------
PHARMACEUTICALS -- 0.4%
25,000 Dai-Ichi Pharmaceuticals......... 282,646
25,000 Eisai Co., Ltd................... 382,630
3,000 Kissei Pharmaceutical Co.,
Ltd.............................. 43,378
35,000 Meiji Seika Co................... 116,827
32,000 Shionogi & Co., Ltd.............. 147,176
31,000 Taisho Pharmacuetical Co......... 793,949
------------
1,766,606
------------
REAL ESTATE -- 0.4%
119,000 Mitsubishi Estate Co., Ltd....... 1,299,636
74,000 Mitsui Fudosan Co., Ltd.......... 717,114
------------
2,016,750
------------
RESTAURANTS -- 0.0%
5,000 Skylark Co., Ltd................. 48,069
------------
RETAIL STORES -- 0.1%
6,000 Aoyama Trading Co., Ltd.......... 107,521
13,000 Hankyu Department Stores Co...... 72,488
15,000 Isetan Co........................ 62,874
29,000 Mycal Corp....................... 243,115
28,000 Takashimaya Co., Ltd............. 170,126
------------
656,124
------------
RETAIL-GENERAL MERCHANDISE -- 0.1%
14,300 Credit Saison Co., Ltd........... 354,143
14,000 Daimuru, Inc..................... 33,164
34,000 Mitsukoshi Ltd................... 90,739
------------
478,046
------------
RETAIL-SPECIAL LINE -- 0.1%
15,000 Seiyu Ltd........................ 47,531
2,000 Shimachu Co...................... 31,533
17,000 Uny Co., Ltd..................... 234,039
------------
313,103
------------
SERVICES -- 0.3%
10,000 Secom Co., Ltd................... 641,434
64,000 Toppan Printing Co., Ltd......... 836,788
------------
1,478,222
------------
STORAGE -- 0.0%
15,000 Mitsubishi Logistics Corp........ 156,898
------------
TELECOMMUNICATIONS -- 2.1%
11,000 Nippon Comsys Corp............... 136,209
1,171 Nippon Telegraph & Telephone
Corp............................. 10,086,979
------------
10,223,188
------------
TEXTILE PRODUCTS -- 0.2%
12,000 Gunze Ltd........................ 19,935
26,000 Kanebo Ltd. *.................... 18,997
31,000 Kuraray Co., Ltd................. 257,497
57,000 Mitsubishi Rayon Co., Ltd........ 140,285
16,000 Nisshinbo Industries, Inc........ 67,681
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
15,000 Onward Kashiyama Co., Ltd........ $ 174,203
89,000 Teijin Ltd....................... 186,870
49,000 Toyobo Ltd....................... 59,544
25,000 Unitika Ltd. *................... 13,459
14,000 Wacoal Corp...................... 139,977
------------
1,078,448
------------
TRANSPORTATION -- 1.0%
368 East Japan Railway Co............ 1,667,052
78,000 Hankyu Corp...................... 366,541
163,000 Japan Airlines Co. *............. 445,043
148,000 Kinki Nippon Railway Co.......... 793,379
75,000 Nagoya Railroad Co., Ltd......... 258,420
46,000 Nankai Electric Railway Co....... 201,660
98,000 Nippon Express Co., Ltd.......... 489,921
67,000 Odakyu Electric Railway Co....... 290,630
78,000 Tobu Railway Co., Ltd............ 244,760
100,000 Tokyu Corp....................... 387,629
------------
5,145,035
------------
TRANSPORTATION & SHIPPING -- 0.1%
13,000 Kamigumi Co., Ltd................ 38,594
30,000 Kawasaki Kisen Kaisha Ltd. *..... 36,456
47,000 Keihin Electric Express Railway
Co., Ltd......................... 164,473
101,000 Mitsui OSK Lines, Ltd. *......... 140,600
108,000 Nippon Yusen Kabushiki Kaisha.... 297,367
8,000 Seino Transportation............. 40,055
------------
717,545
------------
WHOLESALE & INTERNATIONAL TRADE -- 0.6%
137,000 Marubeni Corp.................... 241,292
143,000 Mitsubishi Corp.................. 1,132,816
145,000 Mitsui & Co...................... 860,937
97,000 Sumitomo Corp.................... 544,604
------------
2,779,649
------------
WHOLESALE DISTRIBUTION -- 0.0%
1,000 Nagse & Co....................... 2,923
------------
WIRE & CABLE PRODUCTS -- 0.1%
60,000 Furukawa Electric Co., Ltd....... 257,958
------------
132,689,079
------------
MALAYSIA -- 0.8%
AGRICULTURE -- 0.1%
130,000 Golden Hope Plantations Berhad... 150,294
37,500 Highlands & Lowlands Berhad...... 38,344
52,000 IOI Corporated Berhad............ 16,833
72,000 Kuala Lumpur Kepong Berhad....... 154,457
------------
359,928
------------
AIRLINES -- 0.0%
47,000 Malaysian Airlines............... 37,673
12,000 Malaysian Pacific................ 28,826
------------
66,499
------------
</TABLE>
Continued
54
<PAGE> 201
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MALAYSIA (CONTINUED)
AUTOMOTIVE -- 0.0%
13,000 Ederan Otomobil.................. $ 26,552
19,200 Oriental Holdings................ 23,480
41,000 Tan Chong Motors................. 17,907
------------
67,939
------------
AUTOMOTIVE PARTS-REPLACEMENT -- 0.0%
33,000 Perusahaan Otomobil Nasional
Berhad........................... 32,217
------------
BANKING -- 0.1%
24,000 AMMB Holdings Berhad............. 15,723
48,000 Commerce Asset Holdings Berhad... 22,937
31,000 Ekran Berhad *................... 21,902
115,500 Malayan Banking Berhad........... 335,310
123,600 Public Bank...................... 42,551
104,000 RHB Capital Berhad............... 50,232
------------
488,655
------------
BEVERAGES & TOBACCO -- 0.0%
18,000 Guinness Anchor.................. 22,197
------------
BUILDING PRODUCTS -- 0.0%
15,000 Hume Ind Malaysia................ 15,723
15,000 Jaya Tiasa Holdings Berhad....... 27,554
25,000 Kedah Cement Holdings............ 4,592
25,000 Malayan Cement................... 17,021
46,000 Pan-Malaysia Cement Works
Berhad........................... 17,727
------------
82,617
------------
CHEMICALS -- 0.0%
8,000 Malaysian Oxygen Berhad.......... 17,881
------------
CONSTRUCTION -- 0.0%
77,400 YTL Corp. Berhad................. 104,397
------------
DIVERSIFIED -- 0.1%
54,000 Berjaya Group Berhad............. 10,960
113,000 Malayan United Industries........ 19,741
64,000 Mulpha International Berhad...... 7,481
58,000 Multi-Purpose Holdings Berhad.... 14,901
22,500 Perlis Plantations Berhad........ 31,793
235,040 Sime Darby Berhad................ 225,840
46,000 Time Engineering Berhard......... 11,818
------------
322,534
------------
ELECTRIC UTILITY -- 0.2%
313,000 Tenaga Nasional Berhad........... 667,434
------------
ENERGY -- 0.0%
16,000 Umw Holdings Berhard............. 12,126
------------
ENGINEERING -- 0.0%
180,000 Amsteel Corp. Berhad............. 31,446
49,326 United Engineers (Malaysia)
Ltd.............................. 41,059
------------
72,505
------------
ENTERTAINMENT -- 0.0%
94,000 Magnum Corp. Berhad.............. 56,511
110,000 Resorts World Berhad............. 185,106
------------
241,617
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MALAYSIA (CONTINUED)
FINANCE -- 0.0%
48,000 MBf Capital Berhad............... $ 11,160
23,000 Rashid Hussain Berhad............ 17,846
------------
29,006
------------
FOOD PRODUCTS -- 0.0%
15,000 Nestle (Malaysia) Berhad......... 69,367
------------
HOME FURNISHINGS -- 0.0%
47,000 Technology Resources Industries
Berhad........................... 27,772
------------
INVESTMENT COMPANIES -- 0.0%
13,000 Hong Leong Industries............ 13,226
44,000 Ta Enterprise Berhad............. 8,930
------------
22,156
------------
LEISURE -- 0.0%
38,000 Berjaya Land Berhad.............. 23,235
------------
MANUFACTURING-CAPITAL GOODS -- 0.0%
11,000 Sugei Way Holdings............... 3,561
------------
METALS & MINING -- 0.0%
92,400 Malaysia Mining Corp. Berhad..... 36,320
------------
OIL & GAS -- 0.0%
17,500 Shell Refining Co. (Malaysia)
Berhad........................... 27,425
------------
PRINTING & PUBLISHING -- 0.0%
11,000 New Straits Time Press........... 13,622
------------
REAL ESTATE -- 0.0%
43,000 Hong Leong Properties............ 7,844
60,000 Malaysian Resources.............. 13,873
51,000 Metroplex Berhad................. 13,037
51,000 Selangor Properties Berhad....... 15,592
------------
50,346
------------
TELECOMMUNICATIONS -- 0.3%
303,000 Telekom Malaysia Berhad.......... 895,213
------------
TOBACCO -- 0.0%
15,000 RJ Reynolds...................... 24,471
28,300 Rothmans of Pall Mall (Malaysia)
Berhad........................... 219,937
------------
244,408
------------
TRANSPORTATION -- 0.0%
101,000 Malaysian International
Shipping......................... 147,905
------------
4,148,882
------------
NETHERLANDS -- 3.5%
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.2%
16,840 Philips Electronics NV........... 1,010,121
------------
BANKING -- 0.3%
67,585 ABN Amro Holding NV.............. 1,316,876
------------
</TABLE>
Continued
55
<PAGE> 202
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NETHERLANDS (CONTINUED)
BEVERAGES & TOBACCO -- 0.1%
2,670 Heineken NV...................... $ 464,926
------------
BROADCASTING & PUBLISHING -- 0.1%
38,430 Elsevier NV...................... 621,787
------------
CHEMICALS -- 0.2%
4,383 Akzo Nobel NV.................... 755,859
------------
COMPUTER SOFTWARE -- 0.0%
2,952 Getronics NV..................... 94,069
------------
ENERGY -- 1.4%
126,588 Royal Dutch Petroleum Co......... 6,950,008
------------
FINANCE -- 0.3%
40,887 ING Groep NV..................... 1,722,427
------------
FOOD PRODUCTS -- 0.4%
36,124 Unilever NV-CVA.................. 2,227,427
------------
INSURANCE -- 0.0%
1,117 Stad Rotterdam NV................ 60,775
------------
MANUFACTURING-CONSUMER GOODS -- 0.0%
255 Stork NV......................... 8,805
------------
OFFICE EQUIPMENT & SERVICES -- 0.0%
981 Oce Van Griten................... 106,945
------------
PACKAGING -- 0.0%
5,120 Kniniklijke KNP BT NV............ 117,946
------------
PRINTING & PUBLISHING -- 0.1%
3,211 Wolters Kluwer CVA............... 414,833
------------
RETAIL-SPECIAL LINE -- 0.1%
19,619 Ahold............................ 511,953
------------
SERVICES -- 0.2%
23,687 Koninklijke Royal PTT Nederland
NV............................... 988,503
------------
STEEL -- 0.0%
1,305 Koninklijke Hoogovens NV......... 53,495
------------
TRANSPORTATION -- 0.1%
1,950 IHC Caland NV.................... 101,192
3,909 KLM Royal Dutch Air Lines NV..... 144,619
1,133 Pakhoed NV Kon................... 32,695
------------
278,506
------------
17,705,261
------------
NEW ZEALAND -- 0.4%
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.0%
13,249 Fisher & Paykel Industries
Ltd.............................. 42,312
------------
BEVERAGES & TOBACCO -- 0.0%
62,000 Lion Nathan Ltd.................. 138,962
------------
BUILDING PRODUCTS -- 0.0%
36,983 Fletcher Challenge Building...... 75,590
------------
FINANCE -- 0.0%
303,100 Brierley Investments Ltd......... 216,475
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NEW ZEALAND (CONTINUED)
FOREST PRODUCTS -- 0.1%
195,881 Carter Holt Harvey Ltd........... $ 302,546
93,679 Fletcher Challenge Forests....... 77,785
72,922 Fletcher Challenge Paper......... 95,271
------------
475,602
------------
OIL & GAS -- 0.0%
37,968 Fletcher Challenge Energy........ 132,939
------------
TELECOMMUNICATIONS -- 0.3%
204,065 Telecom Corp. of New Zealand
Ltd.............................. 989,402
------------
2,071,282
------------
NORWAY -- 1.3%
BANKING -- 0.0%
61,300 Christiania Bank Og
Kreditkasse...................... 247,788
------------
CHEMICALS -- 0.0%
1,000 Dyno Industrier ASA.............. 19,262
------------
ELECTRIC UTILITY -- 0.0%
15,650 Hafslund ASA, Series A........... 95,528
10,326 Hafslund ASA, Series B........... 49,304
------------
144,832
------------
ENGINEERING -- 0.1%
8,950 Kvaerner ASA, Series A........... 456,472
------------
FOREST PRODUCTS -- 0.0%
3,200 Norske Skogindustrier ASA --
Class A.......................... 92,890
------------
INDUSTRIAL GOODS & SERVICES -- 0.0%
1,200 Unitor ASA....................... 14,650
------------
INSURANCE -- 0.1%
73,500 Storebrand ASA *................. 518,435
------------
MANUFACTURING-CONSUMER GOODS -- 0.2%
10,500 Orkla ASA, Series A.............. 904,412
------------
OIL & GAS -- 0.8%
10,500 Aker RGI ASA, Series A........... 189,428
2,100 Aker RGI ASA, Series B........... 34,183
60,850 Norsk Hydro ASA.................. 2,967,310
8,300 Petroleum Geo-Services ASA *..... 523,521
------------
3,714,442
------------
TRANSPORTATION -- 0.1%
14,100 Bergesen d.y. ASA -- Class A..... 332,791
1,400 Bergesen d.y. ASA -- Class B..... 32,663
2,200 Leif Hoegh & Co. ASA............. 44,763
------------
410,217
------------
6,523,400
------------
SINGAPORE -- 0.8%
AUTOMOTIVE -- 0.0%
1,000 Cycle & Carriage................. 4,125
------------
</TABLE>
Continued
56
<PAGE> 203
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SINGAPORE (CONTINUED)
BANKING -- 0.3%
48,750 Development Bank Of Singapore
Ltd.............................. $ 416,632
86,042 Oversea-Chinese Banking Corp.,
Ltd.............................. 500,439
70,350 United Overseas Bank Ltd......... 390,384
------------
1,307,455
------------
BEVERAGES & TOBACCO -- 0.0%
21,000 Fraser & Neave Ltd............... 90,983
------------
ELECTRICAL EQUIPMENT -- 0.0%
3,000 Creative Technology Ltd. *....... 60,892
------------
FINANCE -- 0.0%
29,600 Haw Par Brothers International
Ltd.............................. 38,297
------------
HOTELS & LODGING -- 0.0%
1,000 Overseas Union Enterprise Ltd.... 2,397
1,100 Shangri-La Hotel Ltd............. 2,011
------------
4,408
------------
METALS & MINING -- 0.0%
7,000 Straits Trading Co., Ltd......... 8,309
------------
PRINTING & PUBLISHING -- 0.1%
28,320 Singapore Press Holdings......... 354,643
------------
REAL ESTATE -- 0.1%
56,600 City Developments Ltd............ 262,015
72,000 DBS Land Ltd..................... 110,247
8,000 United Industrial Corp., Ltd..... 3,134
52,000 United Overseas Land Ltd......... 43,824
------------
419,220
------------
STEEL -- 0.0%
60,750 NatSteel Ltd..................... 82,205
------------
TELECOMMUNICATIONS -- 0.2%
471,000 Singapore Telecommunications
Ltd.............................. 877,741
------------
TRANSPORTATION -- 0.1%
59,000 Neptune Orient Lines Ltd......... 23,286
91,000 Singapore Airlines Ltd........... 594,087
------------
617,373
------------
TRANSPORTATION & SHIPPING -- 0.0%
49,000 Keppel Corp...................... 140,753
------------
WHOLESALE DISTRIBUTION -- 0.0%
11,000 Inchcape Berhad.................. 16,909
------------
4,023,313
------------
SPAIN -- 2.7%
BANKING -- 0.6%
25,342 Banco Central Hispanoamericano
SA............................... 616,859
45,096 Banco Santander SA............... 1,506,007
10,100 Corporacion Bancaria de Espana
SA............................... 614,288
------------
2,737,154
------------
BANKING & FINANCE -- 0.4%
63,441 Banco Bilbao Vizcaya SA.......... 2,052,051
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPAIN (CONTINUED)
BEVERAGES & TOBACCO -- 0.0%
1,650 El Aguila SA *................... $ 6,474
2,806 Tabacalera SA, Class A........... 227,366
------------
233,840
------------
BUILDING PRODUCTS -- 0.0%
820 Portland Valderrivas SA.......... 73,707
5,400 Uralita SA....................... 61,647
------------
135,354
------------
CHEMICALS -- 0.0%
700 Ercros SA *...................... 680
------------
COMMERCIAL SERVICES -- 0.0%
500 Prosegur, CIA de Seguridad SA.... 5,019
------------
ENERGY -- 0.2%
28,298 Repsol SA........................ 1,206,814
------------
ENGINEERING -- 0.1%
18,613 Autopistas Concesionaria Espanola
SA............................... 249,735
3,400 Dragados & Construcciones SA..... 72,388
200 Urbis SA *....................... 1,890
------------
324,013
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.0%
400 Ebro Agricolas, Compania de
Alimentacion SA.................. 7,033
------------
FOREST PRODUCTS -- 0.0%
100 Empresa Nacional de Celulosas
SA............................... 1,361
2,498 Sarrio SA........................ 9,047
------------
10,408
------------
GAS & ELECTRIC UTILITY -- 0.7%
97,880 Endesa-Empresa Nac Elec.......... 1,737,131
3,008 Fomento de Construcciones y
Contratas SA..................... 114,466
86,924 Iberdrola SA..................... 1,143,471
23,666 Union Electrica Fenosa SA........ 226,699
------------
3,221,767
------------
INDUSTRIAL HOLDING COMPANY -- 0.0%
675 Corporacion Financiara Alba SA... 71,080
------------
INSURANCE -- 0.0%
4,600 Corporacion Mapfre............... 121,930
------------
METALS -- 0.0%
400 Acerinox SA...................... 59,233
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.0%
1,221 Viscofan Industria Navarra de
Envolturas Celulosicassa SA...... 30,642
------------
NATURAL GAS UTILITY -- 0.1%
13,824 Gas Natural SDG SA............... 716,526
------------
REAL ESTATE -- 0.0%
247 Inmobiliaria Metropolitana Vasco
Central SA....................... 11,133
2,361 Vallehermoso SA.................. 72,341
------------
83,474
------------
</TABLE>
Continued
57
<PAGE> 204
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPAIN (CONTINUED)
TELECOMMUNICATIONS -- 0.6%
88,875 Telefonica de Espana............. $ 2,536,530
------------
WATER UTILITY -- 0.0%
3,442 Aquas De Barcelona............... 141,821
------------
13,695,369
------------
SWEDEN -- 1.4%
AUTOMOTIVE -- 0.1%
19,000 Volvo AB, Series B............... 510,060
------------
BANKING & FINANCE -- 0.0%
6,300 Svenska Handlesbanken, Class B... 202,871
------------
BUILDING PRODUCTS -- 0.0%
4,400 Scancem AB -- Class A............ 180,229
------------
ENGINEERING -- 0.2%
39,000 ABB AB, Series A................. 462,042
28,500 ABB AB, Series B................. 335,849
100 Skanska AB, Series B............. 4,102
------------
801,993
------------
FOREST PRODUCTS -- 0.1%
14,500 Stora Kopparbergs Bergslags
Aktiebolag, Series A............. 182,749
3,250 Stora Kopparbergs Bergslags
Aktiebolag, Series B............. 40,347
3,800 Svenska Cellusoa AB, Series B.... 85,489
------------
308,585
------------
INSURANCE -- 0.1%
12,000 Skandia Forsakrings AB........... 566,397
------------
MACHINERY & EQUIPMENT -- 0.1%
8,250 Atlas Copco AB, Series A......... 246,428
500 Atlas Copco AB, Series B......... 14,904
------------
261,332
------------
MANUFACTURING-CONSUMER GOODS -- 0.1%
3,700 Electrolux AB, Series B.......... 256,946
------------
METAL FABRICATE/HARDWARE -- 0.0%
9,300 SKF AB, Series A................. 186,367
------------
METALS & MINING -- 0.1%
10,100 SKF AB, Series B................. 215,128
7,960 Trelleborg AB, Series B.......... 100,323
------------
315,451
------------
OFFICE EQUIPMENT & SERVICES -- 0.0%
300 Esselte AB, Series B............. 6,087
------------
PHARMACEUTICALS -- 0.3%
76,400 Astra AB, Series A............... 1,323,987
13,333 Astra AB, Series B............... 224,335
------------
1,548,322
------------
TELECOMMUNICATIONS -- 0.3%
54,600 Telefonaktiebolaget LM Ericsson,
Series B......................... 2,054,115
------------
7,198,755
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWITZERLAND -- 5.2%
AIRLINES -- 0.1%
220 Sairgroup........................ $ 301,669
------------
BANKING -- 0.3%
4,380 Swiss Bank Corp.................. 1,363,353
------------
BUILDING PRODUCTS -- 0.1%
436 Holderbank Financiere Glarus
AG............................... 356,321
------------
COMMERCIAL SERVICES -- 0.0%
390 Addeco SA........................ 113,239
------------
81 SGS Societe Generale de
Surveillance Holding SA.......... 155,497
------------
268,736
------------
DIVERSIFIED -- 0.2%
450 ABB AG, Bearer Shares *.......... 566,144
225 Alusuisse-Lonza Holding AG,
Registered....................... 216,431
------------
782,575
------------
ENGINEERING -- 0.0%
15 Schindler Holding AG,
Participating Certificates....... 15,653
------------
FINANCE -- 0.7%
11,720 Credit Suisse Group,
Registered....................... 1,815,994
1,179 UBS -- Union Bank of Switzerland,
Bearer........................... 1,707,207
------------
3,523,201
------------
FOOD PRODUCTS -- 0.7%
2,468 Nestle SA, Registered............ 3,703,985
------------
INSURANCE -- 0.5%
715 Swiss Reinsurance Co.,
Registered....................... 1,339,261
2,350 Zuerich Verichrng Gesellschft
Rg............................... 1,121,387
------------
2,460,648
------------
MANUFACTURING-CONSUMER GOODS -- 0.0%
182 Sulzer AG, Registered............ 115,548
------------
METAL FABRICATE/HARDWARE -- 0.0%
30 Fischer (George) AG, Bearer...... 41,137
------------
METALS -- 0.0%
40 Alusuisse-Lonza Holding AG,
Bearer........................... 38,202
------------
PHARMACEUTICALS -- 2.6%
461 Novartis AG, Bearer.............. 750,659
3,879 Novartis AG, Registered.......... 6,303,638
439 Roche Holding AG................. 4,365,768
94 Roche Holding AG, Bearer......... 1,450,069
------------
12,870,134
------------
RETAIL-GENERAL MERCHANDISE -- 0.0%
65 Jelmoli Holding AG, Bearer....... 56,151
260 Valora Holding AG................ 54,904
------------
111,055
------------
RETAIL-SPECIAL LINE -- 0.0%
325 Jelmoli Holding AG, Registered... 54,369
------------
</TABLE>
Continued
58
<PAGE> 205
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWITZERLAND (CONTINUED)
TRANSPORTATION -- 0.0%
5 Danzas Holding AG, Registered.... $ 984
------------
26,007,570
------------
UNITED KINGDOM -- 18.7%
AEROSPACE -- 0.1%
21,664 Smiths Industries PLC............ 308,516
------------
AEROSPACE & MILITARY TECHNOLOGY -- 0.2%
30,897 British Aerospace PLC............ 885,090
800 Cobham PLC....................... 11,011
------------
896,101
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.1%
56,200 EMI Group PLC.................... 484,782
------------
AUTO PARTS -- 0.1%
19,014 BBA Group PLC.................... 127,646
3,446 Laird Group PLC.................. 25,147
39,582 T & N PLC........................ 165,425
------------
318,218
------------
AUTOMOTIVE -- 0.1%
3,101 Lex Service PLC.................. 23,803
106,709 Rolls-Royce PLC.................. 403,832
------------
427,635
------------
BANKING -- 2.3%
100,737 Abbey National PLC............... 1,738,748
109,128 Barclays PLC..................... 2,899,886
67,568 HSBC Holdings PLC................ 1,746,584
140,367 HSBC Holdings PLC (Hong Kong
Dollars)......................... 3,478,260
60,801 Royal Bank of Scotland Group
PLC.............................. 778,328
13,979 Schroders PLC.................... 431,270
------------
11,073,076
------------
BEVERAGES & TOBACCO -- 0.6%
288,938 Guinness Giageo PLC.............. 2,655,217
44,161 Scottish & Newcastle PLC......... 534,434
------------
3,189,651
------------
BREWERY -- 0.2%
67,527 Bass PLC......................... 1,039,981
------------
BROADCASTING/CABLE -- 0.2%
122,800 British Sky Broadcasting Group
PLC.............................. 917,332
43,042 Carlton Communications PLC....... 331,444
------------
1,248,776
------------
BUILDING PRODUCTS -- 0.3%
53,502 Blue Circle Industries PLC....... 313,176
37,736 BPB PLC.......................... 209,867
27,842 Hepworth PLC..................... 100,556
8,499 Marley PLC....................... 13,355
9,467 Meyer International PLC.......... 59,660
18,454 RMC Group PLC.................... 260,525
77,228 Rugby Group PLC.................. 173,452
55,474 Tarmac PLC....................... 104,512
54,273 Williams PLC..................... 300,051
------------
1,535,154
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
CHEMICALS -- 0.3%
34,748 BOC Group PLC.................... $ 575,461
21,004 Courtaulds PLC................... 102,816
51,551 Imperial Chemical Industries
PLC.............................. 797,328
------------
1,475,605
------------
COMPUTER HARDWARE MANUFACTURING -- 0.0%
1,793 Viglen Technology PLC............ 0
------------
CONGLOMERATES -- 0.4%
237,175 B.A.T. Industries PLC............ 2,163,927
40,924 Lonrho PLC....................... 62,623
------------
2,226,550
------------
CONSTRUCTION -- 0.0%
56,510 Taylor Woodrow PLC............... 165,972
------------
DISTRIBUTION -- 0.4%
399,610 BG PLC........................... 1,801,601
315,594 Centrica PLC *................... 456,966
------------
2,258,567
------------
ELECTRIC UTILITY -- 0.3%
122,969 National Grid Group PLC.......... 587,273
84,283 Scottish Power PLC............... 744,015
34,209 Southern Electric PLC............ 284,815
------------
1,616,103
------------
ELECTRICAL & ELECTRONIC -- 0.3%
25,643 Bowthorpe PLC.................... 158,857
32,574 Electrocomponents PLC............ 242,260
198,960 General Electric Co., PLC........ 1,306,203
------------
1,707,320
------------
ELECTRICAL EQUIPMENT -- 0.0%
6,722 Delta PLC........................ 29,089
------------
ENERGY -- 1.2%
441,578 British Petroleum Co., PLC....... 5,816,222
------------
ENGINEERING -- 0.0%
10,902 AMEC PLC......................... 21,078
171 Barratt Developments PLC......... 651
------------
21,729
------------
FINANCE -- 1.3%
56,913 Cardon PLC....................... 165,751
418,478 Lloyds TSB Group PLC............. 5,412,119
13,726 Mercury Asset Management Group
PLC.............................. 383,490
19,913 Provident Financial PLC.......... 261,136
25,910 St. James's Place Capital PLC.... 72,049
------------
6,294,545
------------
FOOD & HOUSEHOLD PRODUCTS -- 0.6%
71,702 Cadbury Schweppes PLC............ 713,771
248,748 Unilever PLC..................... 2,132,404
------------
2,846,175
------------
</TABLE>
Continued
59
<PAGE> 206
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
FOOD PRODUCTS -- 0.2%
64,400 Associated British Foods PLC..... $ 552,072
23,280 Tate & Lyle PLC.................. 192,291
9,334 Unigate PLC...................... 92,380
34,759 United Biscuits (Holdings) PLC... 128,111
------------
964,854
------------
FOREST PRODUCTS -- 0.0%
43,404 Arjo Wiggins Appleton PLC........ 116,410
------------
GAS & ELECTRIC UTILITY -- 0.2%
86,766 National Power PLC............... 860,159
------------
HEALTH & PERSONAL CARE -- 1.8%
271,959 Glaxo Wellcome PLC............... 6,434,792
72,169 Zeneca Group PLC................. 2,541,187
------------
8,975,979
------------
HOMEBUILDERS -- 0.0%
30,094 George Wimpey PLC................ 52,488
31,929 Wilson Connolly Holdings PLC..... 81,956
------------
134,444
------------
INDUSTRIAL HOLDING COMPANY -- 0.3%
26,483 BICC Group PLC................... 74,949
292,639 BTR PLC.......................... 898,015
42,127 Hanson PLC....................... 188,886
34,133 TI Group PLC..................... 261,717
------------
1,423,567
------------
INSURANCE -- 2.2%
65,168 Boots Co., PLC................... 946,820
49,041 Commercial Union PLC............. 724,616
72,016 Great Universal Stores PLC....... 888,715
65,046 Guardian Royal Exchange PLC...... 347,837
89,407 Legal & General Group PLC........ 782,628
215,326 Marks & Spencer PLC.............. 2,122,244
137,833 Prudential Corp., PLC............ 1,602,277
110,873 Royal & Sun Alliance Insurance
Group PLC........................ 1,112,827
133,038 Sainsbury (J) PLC................ 1,115,301
16,318 Sedgwick Group PLC............... 37,858
157,137 Tesco PLC........................ 1,266,913
28,938 Willis Corroon Group PLC......... 70,708
------------
11,018,744
------------
LEISURE -- 0.3%
62,992 Granada Group PLC................ 971,175
84,471 Ladbroke Group PLC............... 366,930
56,900 Rank Group PLC................... 317,383
------------
1,655,488
------------
MACHINE-DIVERSIFIED -- 0.0%
21,296 FKI PLC.......................... 67,278
------------
MACHINERY & EQUIPMENT -- 0.1%
25,300 GKN PLC.......................... 519,110
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
MANUFACTURING-CAPITAL GOODS -- 0.1%
18,984 IMI PLC.......................... $ 126,663
40,592 Wolseley PLC..................... 322,597
------------
449,260
------------
MERCHANDISING -- 0.1%
78,023 Safeway PLC...................... 442,908
------------
METALS -- 0.2%
145,916 British Steel PLC................ 316,319
76,682 Rio Tinto PLC, Registered........ 890,149
------------
1,206,468
------------
METALS & MINING -- 0.0%
24,630 English China Clays PLC.......... 109,016
10,804 Johnson Matthey PLC.............. 96,262
------------
205,278
------------
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.0%
15,900 Harrisons & Crosfield PLC........ 36,627
30,432 Pilkington PLC................... 64,093
11,415 Vickers PLC...................... 44,514
------------
145,234
------------
OIL & GAS -- 0.1%
9,771 Burmah Castrol PLC............... 169,936
69,182 LASMO PLC........................ 307,917
------------
477,853
------------
PAPER PRODUCTS -- 0.0%
24,358 Rexam PLC........................ 119,635
------------
PHARMACEUTICALS -- 0.9%
425,140 SmithKline Beecham PLC........... 4,375,538
------------
PRINTING & PUBLISHING -- 0.5%
4,808 De La Rue PLC.................... 31,328
40,873 Pearson PLC...................... 531,295
81,796 Reed International PLC........... 797,430
120,955 Reuters Holdings PLC............. 1,330,447
------------
2,690,500
------------
RAILROADS -- 0.1%
35,800 Railtrack Group PLC.............. 569,615
------------
REAL ESTATE -- 0.3%
34,009 British Land Co., PLC............ 372,123
2,436 Great Portland Estates PLC....... 9,620
35,421 Hammerson PLC.................... 275,382
37,045 Land Securities PLC.............. 597,348
13,249 MEPC PLC......................... 111,071
23,972 Slough Estates PLC............... 135,489
------------
1,501,033
------------
RETAIL STORES -- 0.1%
26,826 Next PLC......................... 305,446
------------
RETAIL-GENERAL MERCHANDISE -- 0.2%
12,736 Argos PLC........................ 115,467
48,507 Kingfisher PLC................... 676,818
83,403 Sears PLC........................ 72,047
------------
864,332
------------
</TABLE>
Continued
60
<PAGE> 207
The Kent INTERNATIONAL GROWTH FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
RETAIL-SPECIAL LINE -- 0.1%
101,624 LucasVarity PLC.................. $ 359,507
------------
TELECOMMUNICATIONS -- 1.4%
480,466 British Telecommunications PLC... 3,792,712
172,196 Cable & Wireless PLC............. 1,514,408
219,768 Vodafone Group PLC............... 1,603,726
------------
6,910,846
------------
TELECOMMUNICATIONS-EQUIPMENT -- 0.0%
16,186 Racal Electronic PLC............. 70,576
------------
TEXTILE PRODUCTS -- 0.0%
36,816 Coats Viyella PLC................ 55,428
3,534 Courtaulds Textiles PLC.......... 20,730
------------
76,158
------------
TRANSPORTATION -- 0.3%
74,172 British Airways PLC.............. 727,986
13,207 Ocean Group PLC.................. 128,429
44,646 Peninsular & Oriental Steam
Navigation Co.................... 510,184
23,478 Transport Development Group PLC.. 79,193
------------
1,445,792
------------
WATER UTILITY -- 0.2%
19,357 Anglian Water PLC................ 257,985
27,099 Thames Water PLC................. 406,204
38,414 United Utilities PLC............. 496,171
------------
1,160,360
------------
94,092,139
------------
TOTAL COMMON STOCKS.............. 488,705,682
(Cost $423,047,484) ------------
PREFERRED STOCKS -- 0.7%
AUSTRALIA -- 0.2%
PRINTING & PUBLISHING -- 0.2%
175,105 News Corp. Ltd................... 866,419
------------
AUSTRIA -- 0.1%
BANKING -- 0.1%
2,600 Bank Austria AG -- Vorguz........ 123,312
7,244 Bank Austria Preferred *......... 321,807
------------
445,119
------------
GERMANY -- 0.4%
AUTOMOTIVE -- 0.1%
168 MAN AG Preferred................. 38,121
527 Volkswagen AG Preferred.......... 225,978
------------
264,099
------------
COMPUTER SOFTWARE -- 0.2%
3,800 SAP AG Preferred................. 1,234,653
------------
GAS & ELECTRIC UTILITY -- 0.1%
19,640 RWE AG........................... 841,070
------------
2,339,822
------------
ITALY -- 0.0%
AUTOMOTIVE -- 0.0%
90,420 Fiat SpA Preferred............... 138,085
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
PREFERRED STOCKS (CONTINUED)
TOTAL PREFERRED STOCKS........... $ 3,789,445
(Cost $2,471,524) ------------
RIGHTS -- 0.1%
AUSTRALIA -- 0.0%
ENTERTAINMENT -- 0.0%
22,876 Crown Ltd. Rights *.............. 1,938
------------
ITALY -- 0.1%
BANKING -- 0.1%
38,900 Banco Ambrosiano Veneto SpA*..... 48,625
54,694 Banco Ambrosiano Veneto SpA*..... 34,648
54,694 Banco Ambrosiano Veneto SpA*..... 232,789
38,900 Banco Ambrosiano Veneto SpA*..... 5,259
------------
321,321
MALAYSIA -- 0.0%
BANKING -- 0.0%
103,000 Public Bank...................... 0
------------
TOTAL RIGHTS..................... 323,259
(Cost $94,665) ------------
WARRANTS -- 0.0%
BELGIUM -- 0.0%
BANKING -- 0.0%
568 Generale Banque Warrants *....... 1,456
------------
FRANCE -- 0.0%
FINANCE -- 0.0%
12,918 Compagnie Generale des Eaux *.... 8,783
------------
TOTAL WARRANTS................... 10,239
(Cost $0) ------------
COMMERCIAL PAPER -- 1.1%
UNITED STATES -- 1.1%
AUTOMOTIVE -- 1.1%
$5,714,579 General Motors Acceptance Corp... 5,714,579
------------
TOTAL COMMERCIAL PAPER........... 5,714,579
(Cost $5,714,579) ------------
TOTAL INVESTMENTS -- 99.2%.................. 498,543,204
(Cost $431,328,252) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.8%....................... 3,835,505
------------
TOTAL NET ASSETS -- 100.0%.................. $502,378,709
============
</TABLE>
- ---------------
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of mark to market adjustment
for passive foreign investment companies of $2,685,051. Cost for federal
income tax purposes differs from value by net unrealized appreciation of
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $128,496,401
Unrealized depreciation............... (63,966,500)
------------
Net unrealized appreciation........... $ 64,529,901
============
</TABLE>
* Non-income producing security.
61
<PAGE> 208
The Kent Funds
INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
At December 31, 1997, the International Growth Fund's open forward foreign
currency exchange contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
DELIVERY CONTRACT CONTRACT CONTRACT MARKET APPRECIATION
CURRENCY DATE PRICE** AMOUNT** VALUE VALUE (DEPRECIATION)
- -------------------------------- ------------- -------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Short Contracts:
Austrian Schilling............ 1/5/98 12.5990 $(9,723,653) $ (771,780) $ (768,617) $(3,163)
Belgian Franc................. 1/15/98 36.9860 (5,695,549) (153,992) (153,726) 266
British Pound................. 1/6/98 0.5970 (443,342) (742,598) (729,476) 13,122
British Pound................. 1/7/98 0.6035 (131,207) (217,410) (215,888) 1,522
German Marks.................. 1/8/98 1.7910 (444,121) (247,974) (247,002) 971
French Franc.................. 1/30/98 5.9620 (2,976,299) (499,212) (494,742) 4,470
New Zealand Dollar............ 1/8/98 1.5267 (7.537) (4,937) (4,377) 560
Singapore Dollars............. 1/6/98 1.6790 (101,293) (60,329) (60,117) 213
Japanese Yen.................. 1/7/98 130.1000 (7,866,538) (60,465) (60,502) (37)
----------- ----------- -------
Total Short Contracts: $(2,758,697) $(2,734,447) $24,250
=========== =========== =======
Long Contracts:
U.S. Dollar................... 1/5/98 1.0000 $ 771,780 $ 771,780 $ 771,780 $ 0
U.S. Dollar................... 1/6/98 1.0000 802,927 802,927 802,927 0
U.S. Dollar................... 1/7/98 1.0000 277,875 277,875 277,875 0
U.S. Dollar................... 1/8/98 1.0000 252,911 252,911 252,911 0
U.S. Dollar................... 1/15/98 1.0000 153,992 153,992 153,992 0
U.S. Dollar................... 1/30/98 1.0000 499,212 499,212 499,212 0
----------- ----------- -------
Total Long Contracts: $ 2,758,697 $ 2,758,697 $ 0
=========== =========== =======
</TABLE>
- ---------------
** Contract price is in local currency.
See Notes to Financial Statements.
62
<PAGE> 209
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 98.8%
ADVERTISING -- 0.1%
10,200 Interpublic Group Companies
Inc............................. $ 508,088
6,600 Omnicom Group................... 279,675
------------
787,763
------------
AEROSPACE & DEFENSE -- 1.3%
80,892 Boeing Co....................... 3,958,653
5,100 General Dynamics Corp........... 440,831
15,694 Lockheed Martin Corp............ 1,545,859
5,400 Northrop Grumman Corp........... 621,000
1 Raytheon Co. -- Class A......... 20
27,500 Raytheon Co. -- Class B......... 1,388,750
------------
7,955,113
------------
AGRICULTURE -- 0.1%
5,300 Pioneer Hi Bred, Inc............ 568,425
------------
APPLIANCES & HOUSEHOLD PRODUCTS -- 0.1%
7,900 Maytag Corp..................... 294,769
6,100 Whirlpool Corp.................. 335,500
------------
630,269
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.4%
3,100 Cummins Engine, Inc............. 183,094
8,500 Dana Corp....................... 403,750
6,200 Eaton Corp...................... 553,349
6,120 Navistar International Corp.*... 151,853
6,250 PACCAR Inc...................... 328,125
10,000 TRW Inc......................... 533,750
------------
2,153,921
------------
AUTO/TRUCK -- REPLACEMENT EQUIPMENT -- 0.1%
5,100 Echlin, Inc..................... 184,556
14,425 Genuine Parts Co................ 489,549
------------
674,105
------------
AUTOMOTIVE -- 1.6%
53,838 Chrysler Corp................... 1,894,425
97,100 Ford Motor Co................... 4,727,556
58,200 General Motors Corp............. 3,528,375
------------
10,150,356
------------
BANKS -- MAJOR REGIONAL -- 5.8%
47,544 Banc One Corp................... 2,582,233
30,500 Bank of New York Co., Inc....... 1,763,281
11,800 BankBoston Corp................. 1,108,463
15,900 Barnett Banks, Inc.............. 1,142,813
8,500 Comerica, Inc................... 767,125
16,200 Corestates Financial Corp....... 1,297,013
12,500 Fifth Third Bancorp............. 1,021,875
23,553 First Chicago NBD Corp.......... 1,966,675
50,850 First Union Corp................ 2,606,062
20,207 Fleet Financial Group, Inc...... 1,514,262
15,500 Huntington Bancshares........... 558,000
17,800 KeyCorp......................... 1,260,463
20,600 Mellon Bank Corp................ 1,248,875
17,300 National City Corp.............. 1,137,475
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- MAJOR REGIONAL (CONTINUED)
57,588 NationsBank..................... $ 3,502,069
61,100 Norwest Corp.................... 2,359,987
24,700 PNC Bank Corp................... 1,409,444
4,400 Republic New York Corp.......... 502,425
13,000 State Street Corp............... 756,438
17,100 SunTrust Banks, Inc............. 1,220,513
19,854 U.S. Bancorp.................... 2,222,406
16,500 Wachovia Corp................... 1,338,563
7,000 Wells Fargo & Co................ 2,376,062
------------
35,662,522
------------
BANKS -- MONEY CENTER -- 2.5%
56,148 BankAmerica Corp................ 4,098,804
7,900 Bankers Trust New York Corp..... 888,256
11,100 BB&T Corp....................... 711,094
34,058 Chase Manhattan Corp............ 3,729,351
37,000 Citicorp........................ 4,678,187
14,400 J.P. Morgan & Co., Inc.......... 1,625,400
------------
15,731,092
------------
BEVERAGES -- ALCOHOLIC -- 0.5%
3,000 Adolph Coors Co................. 99,750
39,670 Anheuser-Busch Co., Inc......... 1,745,480
5,600 Brown-Forman Corp............... 309,400
29,600 Seagram Co., Ltd................ 956,450
------------
3,111,080
------------
BEVERAGES -- SOFT DRINKS -- 2.9%
200,100 Coca-Cola Co.................... 13,331,662
122,800 PepsiCo, Inc.................... 4,474,525
------------
17,806,187
------------
BROADCASTING/CABLE -- 0.4%
7,900 Clear Channel Communications*... 627,556
28,200 Comcast Corp. Special........... 890,063
41,046 Tele-Communications Inc.*....... 1,146,722
------------
2,664,341
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.2%
3,300 Armstrong World Industries,
Inc............................. 246,675
13,400 Masco Corp...................... 681,725
4,300 Owens-Corning Fiberglass
Corp............................ 146,738
------------
1,075,138
------------
BUILDING -- HEAVY CONSTRUCTION -- 0.1%
6,800 Fluor Corp...................... 254,150
3,300 Foster Wheeler Corp............. 89,306
------------
343,456
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.1%
5,200 Ecolab, Inc..................... 288,275
------------
BUILDING -- MOBILE/MANUFACTURING &
RECREATIONAL VEHICLES -- 0.0%
2,900 Fleetwood Enterprises, Inc...... 123,069
------------
</TABLE>
Continued
63
<PAGE> 210
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.1%
2,400 Centex Corp..................... $ 151,050
3,140 Kaufman & Broad Home Corp....... 70,454
1,700 Pulte Corp...................... 71,081
------------
292,585
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.7%
59,231 Home Depot, Inc................. 3,487,225
14,100 Lowe's Cos., Inc................ 672,394
------------
4,159,619
------------
BUILDING PRODUCTS -- WOOD -- 0.2%
8,900 Louisiana-Pacific Corp.......... 169,100
16,150 Weyerhaeuser Co................. 792,359
------------
961,459
------------
BUSINESS INFORMATION -- 0.2%
13,165 Cognizant Corp.................. 586,665
13,765 Dun & Bradstreet Corp........... 425,855
------------
1,012,520
------------
BUSINESS SERVICES -- 0.1%
8,400 H & R Block..................... 376,425
------------
CAPITAL GOODS -- 0.3%
57,000 CBS Corp........................ 1,677,938
------------
CHEMICALS -- DIVERSIFIED -- 2.0%
4,400 B.F. Goodrich Co................ 182,325
18,300 Dow Chemical Co................. 1,857,450
91,600 E.I. du Pont de Nemours & Co.... 5,501,724
6,300 Eastman Chemical Co............. 375,244
7,900 Hercules, Inc................... 395,494
48,000 Monsanto Co..................... 2,016,000
14,400 PPG Industries, Inc............. 822,600
5,000 Rohm & Haas Co.,................ 478,750
10,000 Union Carbide Corp.............. 429,375
6,000 W.R. Grace & Co................. 482,625
------------
12,541,587
------------
CHEMICALS -- SPECIALTY -- 0.4%
8,900 Air Products & Chemical Inc..... 732,025
11,737 Engelhard Corp.................. 203,930
4,800 Great Lakes Chemical Corp....... 215,400
11,200 Morton International, Inc....... 385,000
5,400 Nalco Chemical Co............... 213,638
12,800 Praxair, Inc.................... 576,000
8,100 Sigma-Aldrich Corp.............. 321,975
------------
2,647,968
------------
COMPUTER SOFTWARE -- 2.9%
5,900 Adobe Systems, Inc.............. 243,375
44,218 Computer Associates
International, Inc.............. 2,338,026
97,600 Microsoft Corp.*................ 12,614,799
12,000 Nextlevel Systems Inc.*......... 214,500
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE (CONTINUED)
79,375 Oracle Corp.*................... $ 1,771,055
10,300 Parametric Technology Corp.*.... 487,963
------------
17,669,718
------------
COMPUTERS -- LOCAL AREA NETWORK -- 1.0%
28,000 3COM Corp.*..................... 978,250
17,100 Bay Networks, Inc.*............. 437,119
12,800 Cabletron Systems*.............. 192,000
81,400 Cisco Systems, Inc.*............ 4,538,050
28,300 Novell, Inc.*................... 212,250
------------
6,357,669
------------
COMPUTERS -- MAINFRAME -- 1.4%
78,700 International Business Machines
Corp............................ 8,229,069
14,200 Unisys Corp..................... 197,025
------------
8,426,094
------------
COMPUTERS -- MEMORY DEVICES -- 0.2%
40,100 EMC Corp.*...................... 1,100,244
19,800 Seagate Technology, Inc.*....... 381,150
------------
1,481,394
------------
COMPUTERS -- MICRO -- 1.0%
10,300 Apple Computer, Inc.*........... 135,188
61,267 Compaq Computer Corp............ 3,457,756
3,900 Data General Corp.*............. 68,006
26,400 Dell Computer Corp.*............ 2,217,600
------------
5,878,550
------------
COMPUTERS -- MINI -- 1.2%
12,200 Digital Equipment Corp.*........ 451,400
84,200 Hewlett-Packard Co.............. 5,262,500
15,200 Silicon Graphics, Inc.*......... 189,050
30,300 Sun Microsystems, Inc.*......... 1,208,213
------------
7,111,163
------------
COMPUTERS -- SERVICES -- 0.6%
23,700 Automatic Data Processing,
Inc............................. 1,454,587
6,400 Ceridian Corp.*................. 293,200
6,300 Computer Science*............... 526,050
12,200 Equifax, Inc.................... 432,338
35,400 First Data Corp................. 1,035,450
2,000 Shared Medical Systems Corp..... 132,000
------------
3,873,625
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.7%
6,000 American Greetings Corp......... 234,750
3,195 Jostens, Inc.................... 73,685
12,900 Newell Cos., Inc................ 548,250
12,100 Rubbermaid, Inc................. 302,500
4,900 Tupperware Corp................. 136,588
51,800 Unilever NV, ADR................ 3,234,262
------------
4,530,035
------------
CONTAINERS & PACKAGING -- 0.1%
11,400 Owens-Illinois*................. 432,488
------------
</TABLE>
Continued
64
<PAGE> 211
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CONTAINERS -- METAL & GLASS -- 0.1%
2,400 Ball Corp....................... $ 84,750
10,400 Crown Cork & Seal Co., Inc...... 521,300
------------
606,050
------------
CONTAINERS -- PAPER & PLASTIC -- 0.0%
4,300 Bemis Co........................ 189,469
------------
COSMETICS & TOILETRIES -- 0.9%
4,500 Alberto Culver Co., Class B..... 144,281
10,700 Avon Products, Inc.............. 656,713
45,332 Gillette Co..................... 4,553,033
8,800 International Flavors &
Fragrances, Inc................. 453,200
------------
5,807,227
------------
DIVERSIFIED -- 4.7%
14,120 Allegheny Teledyne, Inc......... 365,355
45,600 Allied Signal, Inc.............. 1,775,550
3,750 Crane Co........................ 162,656
3,000 FMC Corp.*...................... 201,938
264,800 General Electric Co. (b)........ 19,429,699
9,600 ITT Industries, Inc............. 301,200
6,800 Johnson Controls, Inc........... 324,700
33,200 Minnesota Mining & Manufacturing
Co.............................. 2,724,475
3,600 National Service Industries,
Inc............................. 178,425
16,900 Rockwell International Corp..... 883,025
13,800 Tenneco, Inc.................... 545,100
13,300 Textron, Inc.,.................. 831,250
18,900 United Technologies Corp........ 1,376,156
8,200 Whittman Corp................... 213,713
------------
29,313,242
------------
ELECTRICAL & ELECTRONIC -- 0.0%
6,800 KLA-Tencor Corp.*............... 262,650
------------
ELECTRICAL COMPONENTS --
SEMICONDUCTORS -- 1.9%
11,500 Advanced Micro Devices, Inc.*... 206,281
132,400 Intel Corp...................... 9,301,099
11,500 LSI Logic Corp.*................ 227,125
17,100 Micron Technology, Inc.*........ 444,600
13,200 National Semiconductor Corp.*... 342,375
31,600 Texas Instruments, Inc.......... 1,422,000
------------
11,943,480
------------
ELECTRONIC -- CONNECTORS -- 0.2%
17,836 AMP, Inc........................ 749,112
4,500 Thomas & Betts Corp............. 212,625
------------
961,737
------------
ELECTRONIC MEASURING EQUIPMENT -- 0.0%
4,100 Tektronix, Inc.................. 162,719
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC MEASURING MACHINES -- 0.1%
29,500 Applied Materials, Inc.*........ $ 888,688
------------
ELECTRONICS -- 0.1%
7,000 Raychem Corp.................... 301,438
------------
ENERGY -- 0.0%
8,600 Orxy Energy Co.*................ 219,300
------------
FINANCE -- 0.3%
15,800 Sunamerica, Inc................. 675,450
20,830 Washington Mutual, Inc.......... 1,329,214
------------
2,004,664
------------
FINANCIAL -- BANKING -- 0.1%
14,200 Synovus Financial Corp.......... 465,050
------------
FINANCIAL -- CONSUMER LOANS -- 0.4%
4,300 Beneficial Corp................. 357,438
8,700 Household International, Inc.... 1,109,794
40,587 MBNA Corp....................... 1,108,532
------------
2,575,764
------------
FINANCIAL -- INVESTMENT BANKERS -- 0.5%
27,000 Merrill Lynch & Co., Inc........ 1,969,313
21,450 Schwab (Charles) Corp........... 899,559
------------
2,868,872
------------
FINANCIAL -- LEASING COMPANY -- 0.0%
6,200 Ryder Systems, Inc.............. 203,050
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 1.0%
37,600 American Express Co............. 3,355,800
47,916 Morgan Stanley, Dean Witter,
Discover & Co................... 2,833,034
------------
6,188,834
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.3%
8,700 Country Wide Credit Industries,
Inc............................. 373,013
85,900 Fannie Mae...................... 4,901,668
56,200 Freddie Mac..................... 2,356,887
11,000 Green Tree Financial Corp....... 288,063
------------
7,919,631
------------
FINANCIAL -- SAVINGS & LOAN -- 0.2%
4,600 Golden West Financial Corp...... 449,938
7,800 H.F. Ahmanson & Co.............. 522,112
------------
972,050
------------
FOOD -- CANNED -- 0.6%
37,000 Campbell Soup Co................ 2,150,625
29,700 H.J. Heinz Co................... 1,509,131
------------
3,659,756
------------
FOOD -- CONFECTIONARY -- 0.2%
11,600 Hershey Foods Corp.............. 718,475
9,400 Wm. Wrigley Jr. Co.............. 747,888
------------
1,466,363
------------
</TABLE>
Continued
65
<PAGE> 212
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOOD -- DIVERSIFIED -- 1.4%
38,150 ConAgra, Inc.................... $ 1,251,797
11,600 CPC International, Inc.......... 1,249,900
12,800 General Mills, Inc.............. 916,800
33,300 Kellogg Co...................... 1,652,513
11,200 Quaker Oats Co.................. 590,800
8,580 Ralston Purina Group............ 797,404
38,800 Sara Lee Corp................... 2,184,924
------------
8,644,138
------------
FOOD -- FLOUR & GRAIN -- 0.2%
45,163 Archer-Daniels-Midland Co....... 979,473
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
4,900 Supervalu, Inc.................. 205,188
13,900 Sysco Corp...................... 633,318
------------
838,506
------------
FOREST PRODUCTS -- 0.1%
16,900 Fort James Corporation.......... 646,425
------------
FUNERAL SERVICES -- 0.1%
20,400 Service Corp. International..... 753,525
------------
GAMING -- 0.1%
14,500 Mirage Resorts*................. 329,875
------------
GAS & ELECTRIC UTILITY -- 0.3%
35,500 PG & E Corp..................... 1,080,531
18,800 Public Service Enterprises...... 595,725
------------
1,676,256
------------
GLASS PRODUCTS -- 0.1%
18,700 Corning, Inc.................... 694,238
------------
HOTELS & LODGING -- 0.3%
20,300 Hilton Hotels Corp.............. 603,925
9,400 ITT Corp.*...................... 779,025
10,300 Marriott International, Inc..... 713,275
------------
2,096,225
------------
INSTRUMENTS -- CONTROL -- 0.1%
4,022 General Signal Corp............. 169,678
10,300 Honeywell, Inc.................. 705,550
------------
875,228
------------
INSTRUMENTS -- SCIENTIFIC -- 0.1%
3,700 EG&G, Inc....................... 77,006
3,500 Millipore Corp.................. 118,781
3,600 Perkin-Elmer Corp............... 255,826
------------
451,613
------------
INSURANCE -- 0.2%
4,400 Cincinnati Financial Corp....... 619,300
5,800 Progressive Corp-Ohio........... 695,275
------------
1,314,575
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.1%
13,600 Aon Corp........................ 797,300
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- BROKERS -- 0.2%
13,700 Marsh & McLennan Cos., Inc...... $ 1,021,506
------------
INSURANCE -- LIFE -- 0.7%
19,798 American General Corp........... 1,070,330
15,200 Conseco, Inc.................... 690,650
5,750 Jefferson-Pilot Corp............ 447,781
7,700 Providian Financial............. 347,944
11,300 Torchmark Corp.................. 475,306
5,082 TransAmerica Corp............... 541,233
11,200 UNUM Corp....................... 609,000
------------
4,182,244
------------
INSURANCE -- MULTI-LINE -- 1.6%
12,070 Aetna, Inc...................... 851,689
6,000 CIGNA Corp...................... 1,038,375
9,600 Hartford Financial Services
Group, Inc...................... 898,200
9,300 Loews Corp...................... 986,963
7,200 MBIA, Inc....................... 481,050
9,200 MGIC Investment Corp............ 611,800
92,794 Travelers Group, Inc............ 4,999,277
------------
9,867,354
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.2%
34,699 Allstate Corp................... 3,153,271
56,720 American International Group.... 6,168,299
13,800 Chubb Corp...................... 1,043,625
6,400 General Re Corp................. 1,356,800
8,300 Lincoln National Corp........... 648,438
11,400 Safeco Corp..................... 555,750
6,800 St. Paul Cos., Inc.............. 558,025
9,100 USF&G Corp...................... 200,769
------------
13,684,977
------------
LEISURE & RECREATION PRODUCTS -- 0.0%
8,100 Brunswick Corp.................. 245,531
------------
LEISURE & RECREATION/GAMING -- 0.0%
8,200 Harrah's Entertainment, Inc.*... 154,775
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.0%
3,200 Cincinnati Milacron, Inc........ 83,000
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.3%
30,100 Caterpillar, Inc................ 1,461,731
13,350 Ingersoll-Rand Co............... 540,675
------------
2,002,406
------------
MACHINERY -- ELECTRICAL -- 0.4%
35,900 Emerson Electric Co............. 2,026,106
4,000 W.W. Grainger, Inc.............. 388,750
------------
2,414,856
------------
MACHINERY -- FARM -- 0.3%
2,000 Briggs & Stratton Corp.......... 97,125
6,100 Case Corp....................... 368,669
20,400 Deere & Co...................... 1,189,575
------------
1,655,369
------------
</TABLE>
Continued
66
<PAGE> 213
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MACHINERY -- GENERAL INDUSTRIAL -- 0.5%
2,300 Aeroquip-Vickers Inc............ $ 112,844
9,800 Cooper Industries, Inc.......... 480,200
18,000 Dover Corp...................... 650,250
4,022 Harnischfeger Industries,
Inc............................. 142,027
20,200 Illinois Tool Works, Inc........ 1,214,525
9,025 Parker-Hannifin Corp............ 414,022
------------
3,013,868
------------
MACHINERY -- MATERIAL HANDLING -- 0.0%
700 Nacco Industries, Inc........... 75,031
------------
MACHINERY -- THERMAL PROCESSOR -- 0.1%
12,200 Thermo Electron Corp.*.......... 542,900
------------
MEDIA CONGLOMERATES -- 1.5%
45,260 Time Warner, Inc................ 2,806,120
28,600 Viacom, Inc.*................... 1,185,113
54,600 Walt Disney Co.................. 5,408,812
------------
9,400,045
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
21,300 Amgen, Inc...................... 1,152,863
------------
MEDICAL -- DRUGS -- 7.8%
61,900 Abbott Laboratories............. 4,058,319
6,900 Alza Corp.*..................... 219,506
52,600 American Home Products Corp..... 4,023,900
80,500 Bristol-Myers Squibb Co......... 7,617,313
89,800 Eli Lilly & Co.................. 6,252,325
97,000 Merck & Co., Inc................ 10,306,249
104,700 Pfizer, Inc..................... 7,806,693
41,030 Pharmacia & Upjohn, Inc......... 1,502,724
59,200 Schering-Plough Corp............ 3,677,800
22,000 Warner-Lambert Co............... 2,728,000
------------
48,192,829
------------
MEDICAL -- HEALTH MEDICAL
ORGANIZATION -- 0.2%
13,300 Humana, Inc.*................... 275,975
15,200 United Healthcare Corp.......... 755,250
------------
1,031,225
------------
MEDICAL -- HOSPITAL -- 0.4%
52,449 Columbia/HCA Healthcare Corp.... 1,553,801
24,700 Tenet Healthcare Corp.*......... 818,188
------------
2,371,989
------------
MEDICAL -- NURSING HOMES -- 0.0%
5,100 Manor Care, Inc................. 178,500
------------
MEDICAL -- OUTPATIENT/HOME CARE -- 0.1%
31,900 HEALTHSOUTH Corp.*.............. 885,225
------------
MEDICAL -- WHOLESALE DRUG -- 0.1%
8,800 Cardinal Health, Inc............ 661,100
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL INSTRUMENTS -- 0.4%
9,000 Biomet, Inc..................... $ 230,625
38,000 Medtronic, Inc.................. 1,987,875
7,400 St. Jude Medical, Inc........... 225,700
6,100 U.S. Surgical Corp.............. 178,806
------------
2,623,006
------------
MEDICAL PRODUCTS -- 0.6%
5,300 Allergan, Inc................... 177,881
22,700 Baxter International, Inc....... 1,144,931
15,700 Boston Scientific Corp.*........ 720,238
12,000 Guidant Corp.................... 747,000
16,200 HBO & Co........................ 777,600
5,900 Mallinckrodt, Inc............... 224,200
------------
3,791,850
------------
MEDICAL/DENTAL SUPPLIES -- 1.3%
4,500 Bausch & Lomb, Inc.............. 178,313
9,900 Becton, Dickinson & Co.......... 495,000
4,600 C.R. Bard, Inc.................. 144,038
108,800 Johnson & Johnson............... 7,167,199
------------
7,984,550
------------
METAL -- GOLD -- 0.2%
30,200 Barrick Gold Corp............... 562,474
18,600 Battle Mountian Gold Co......... 109,275
11,300 Echo Bay Mines Ltd.............. 27,544
11,900 Homestake Mining Co............. 105,613
12,615 Newmont Mining Corp............. 370,565
19,400 Placer Dome, Inc................ 246,138
------------
1,421,609
------------
METAL -- MISCELLANEOUS -- 0.1%
7,600 Cyprus Amax Minerals Co......... 116,850
13,500 Inco, Ltd....................... 229,500
------------
346,350
------------
METAL -- NON-FERROUS -- 0.4%
18,350 Alcan Aluminum, Ltd............. 506,919
14,000 Aluminum Co. of America......... 985,249
3,400 Asarco, Inc..................... 76,288
15,900 Freeport-McMoran Copper &
Gold, Inc. -- Class B........... 250,425
4,800 Phelps Dodge Corp............... 298,800
6,000 Reynolds Metals Co.............. 360,000
------------
2,477,681
------------
METAL -- PROCESSING & FABRICATION -- 0.1%
5,100 Timken Co....................... 175,312
7,825 Worthington Industries, Inc..... 129,113
------------
304,425
------------
MOVIE/TELEVISION PRODUCTION &
DISTRIBUTION -- 0.0%
2,950 King World Productions, Inc..... 170,363
------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.2%
36,800 Waste Management Inc............ 1,012,000
------------
</TABLE>
Continued
67
<PAGE> 214
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OFFICE AUTOMATION & EQUIPMENT -- 0.5%
11,700 Pitney Bowes, Inc............... $ 1,052,269
26,367 Xerox Corp...................... 1,946,214
------------
2,998,483
------------
OFFICE SUPPLIES & FORMS -- 0.2%
8,300 Avery Dennison Corp............. 371,425
6,600 Deluxe Corp..................... 227,700
10,744 IKON Office Solutions, Inc...... 302,175
2,500 John H. Harland Co.............. 52,500
7,200 Moore Corp., Ltd................ 108,900
------------
1,062,700
------------
OIL & GAS -- 0.1%
4,800 Anadarko Petroleum Corp......... 291,300
7,300 Apache Corp..................... 255,956
------------
547,256
------------
OIL & GAS -- DRILLING -- 0.6%
7,000 Rowan Cos., Inc.*............... 213,500
40,100 Schlumberger Ltd................ 3,228,050
------------
3,441,550
------------
OIL -- FIELD SERVICES -- 0.2%
21,200 Halliburton Co.................. 1,101,075
4,400 Western Atlas*.................. 325,600
------------
1,426,675
------------
OIL -- INTERNATIONAL INTEGRATED -- 5.6%
53,100 Chevron Corp.................... 4,088,700
199,500 Exxon Corp...................... 12,206,905
63,500 Mobil Corp...................... 4,583,906
173,500 Royal Dutch Petroleum Co., ADR.. 9,401,531
44,300 Texaco, Inc..................... 2,408,813
------------
32,689,855
------------
OIL -- PRODUCTION/PIPELINE -- 0.5%
8,550 Coastal Corp.................... 529,566
4,500 Columbia Gas System, Inc........ 353,531
25,700 Enron Corp...................... 1,068,156
6,900 Sonat, Inc...................... 315,675
25,800 Williams Co..................... 732,075
------------
2,999,003
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.2%
14,265 Burlington Resources, Inc....... 639,250
2,000 Helmerich & Payne, Inc.......... 135,750
20,523 Union Pacific Resources Group,
Inc............................. 497,683
------------
1,272,683
------------
OIL -- U.S. INTEGRATED -- 1.6%
7,400 Amerada Hess Corp............... 406,075
39,400 Amoco Corp...................... 3,353,924
26,000 Atlantic Richfield Co........... 2,083,249
3,900 Kerr-Mcgee Corp................. 246,919
27,400 Occidental Petroleum Corp....... 803,163
3,800 Pennzoil Co..................... 253,888
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- U.S. INTEGRATED (CONTINUED)
21,300 Phillips Petroleum Co........... $ 1,035,713
19,900 Unocal Corp..................... 772,369
23,300 USX-Marathon Group.............. 786,375
------------
9,741,675
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.2%
13,700 Baker Hughes, Inc............... 597,662
14,200 Dresser Industries, Inc......... 595,513
4,500 McDermott International, Inc.... 164,813
------------
1,357,988
------------
OIL REFINING -- 0.1%
6,100 Ashland, Inc.................... 327,494
5,774 Sun Co., Inc.................... 242,869
------------
570,363
------------
PAINTS & RELATED PRODUCTS -- 0.1%
14,000 Sherwin-Williams Co............. 388,500
------------
PAPER & RELATED PRODUCTS -- 0.9%
4,508 Boise Cascade Corp.............. 136,367
7,800 Champion International Co....... 353,438
7,500 Georgia Pacific Corp............ 455,625
24,424 International Paper Co.......... 1,053,285
44,440 Kimberly-Clark Corp............. 2,191,447
8,500 Mead Corp....................... 238,000
2,300 Potlatch Corp................... 98,900
8,046 Stone Container Corp............ 83,980
4,600 Temple-Inland, Inc.............. 240,638
5,600 Union Camp Corp................. 300,650
8,250 Westvaco Corp................... 259,359
9,000 Williamette Industries, Inc..... 289,688
------------
5,701,377
------------
PHOTOGRAPHY -- 0.3%
26,300 Eastman Kodak Co................ 1,599,369
3,589 Polaroid Corp................... 174,739
------------
1,774,108
------------
POLLUTION CONTROL -- 0.2%
16,100 Browning-Ferris Industries,
Inc............................. 595,700
26,600 Laidlaw, Inc.................... 362,425
10,299 Pall Corp....................... 213,061
4,700 Safety-Kleen Corp............... 128,956
------------
1,300,142
------------
PRINTING -- COMMERCIAL -- 0.1%
11,800 R.R. Donnelley & Sons Co........ 439,550
------------
PROTECTION -- SAFETY -- 0.3%
43,100 Tyco International Ltd.......... 1,942,194
------------
PUBLISHING -- BOOKS -- 0.1%
8,000 McGraw-Hill Cos., Inc........... 592,000
------------
PUBLISHING -- NEWSPAPERS -- 0.6%
7,800 Dow Jones & Co.................. 418,763
23,000 Gannett, Inc.................... 1,421,687
7,000 Knight-Ridder, Inc.............. 364,000
</TABLE>
Continued
68
<PAGE> 215
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING -- NEWSPAPERS (CONTINUED)
7,800 New York Times Co............... $ 515,775
7,800 Times Mirror Co................. 479,700
9,900 Tribune Co...................... 616,275
------------
3,816,200
------------
PUBLISHING -- PERIODICALS -- 0.0%
4,300 Meredith Corp................... 153,456
------------
RESTAURANTS -- 0.6%
12,400 Darden Restaurants, Inc......... 155,000
55,700 McDonald's Corp................. 2,659,675
12,310 Tricon Global Restaurants*...... 357,759
10,700 Wendy's International, Inc...... 257,469
------------
3,429,903
------------
RETAIL -- 0.4%
64,019 Cendant Corp.*.................. 2,200,653
------------
RETAIL -- APPAREL/SHOES -- 0.4%
8,600 Charming Shoppes, Inc.*......... 40,313
32,550 Gap, Inc........................ 1,153,490
21,978 Limited, Inc.................... 560,439
6,200 Nordstrom, Inc.................. 374,325
13,200 TJX Companies, Inc.............. 453,750
------------
2,582,317
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.1%
8,000 Circuit City Stores, Inc........ 284,500
------------
RETAIL -- DISCOUNT -- 1.7%
17,150 Costco Cos., Inc.*.............. 765,319
17,600 Dayton-Hudson Corp.............. 1,188,000
39,500 Kmart Corp.*.................... 456,719
23,150 Toys 'R' Us, Inc.*.............. 727,778
182,400 Wal-Mart Stores, Inc............ 7,193,399
10,900 Woolworth Corp.*................ 222,088
------------
10,553,303
------------
RETAIL -- DRUG STORE -- 0.5%
13,900 CVS Corp........................ 890,469
3,100 Longs Drug Stores Corp.......... 99,588
10,100 Rite Aid Corp................... 592,744
39,800 Walgreen Co..................... 1,248,724
------------
2,831,525
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.6%
5,716 Harcourt General, Inc........... 312,951
20,200 J.C. Penney, Inc................ 1,218,313
18,700 May Department Stores Co........ 985,256
31,675 Sears, Roebuck & Co............. 1,433,294
------------
3,949,814
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
9,000 Dillards Department Stores,
Inc............................. 317,250
17,000 Federated Department Stores,
Inc.*........................... 732,063
3,000 Mercantile Stores Co............ 182,625
------------
1,231,938
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- SUPERMARKETS -- 0.5%
19,900 Albertsons, Inc................. $ 942,762
22,100 American Stores Co.............. 454,431
4,900 Giant Food Inc.................. 165,069
3,100 Great Atlantic & Pacific Tea
Co., Inc........................ 92,031
20,600 Kroger Co.*..................... 760,913
12,000 Winn-Dixie Stores, Inc.......... 524,250
------------
2,939,456
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.1%
12,200 Autozone, Inc.*................. 353,800
5,100 Pep Boys-Manny, Moe & Jack...... 121,763
------------
475,563
------------
RETAIL/WHOLESALE -- COMPUTERS -- 0.1%
8,428 Tandy Corp...................... 325,005
------------
RUBBER -- TIRES -- 0.2%
6,400 Cooper Tire & Rubber Co......... 156,000
12,700 Goodyear Tire & Rubber Co....... 808,038
------------
964,038
------------
SHOES & RELATED APPAREL -- 0.2%
23,500 Nike, Inc....................... 922,375
4,600 Reebok International Ltd.*...... 132,538
------------
1,054,913
------------
SOAP & CLEANING PREPARATIONS -- 1.8%
8,400 Clorox, Inc..................... 664,125
23,900 Colgate-Palmolive Co............ 1,756,650
108,800 Procter & Gamble Co............. 8,683,600
------------
11,104,375
------------
STEEL -- PRODUCERS -- 0.1%
8,700 Armco, Inc.*.................... 42,956
9,100 Bethlehem Steel Corp.*.......... 78,488
4,000 Inland Steel Industries, Inc.... 68,500
7,100 Nucor Corp...................... 343,019
6,940 USX-U.S. Steel Group, Inc....... 216,875
------------
749,838
------------
TECHNOLOGY -- SOFTWARE -- 0.0%
3,900 Auto Desk....................... 144,300
------------
TELECOMMUNICATIONS -- 0.2%
49,100 US West Media Group*............ 1,417,763
------------
TELECOMMUNICATIONS -- CELLULAR -- 0.3%
40,800 Airtouch Communications,
Inc.*........................... 1,695,750
------------
TELECOMMUNICATIONS -- EQUIPMENT -- 1.7%
7,255 Andrew Corp.*................... 174,120
9,500 DSC Communications Corp.*....... 228,000
6,500 Harris Corp..................... 298,188
51,923 Lucent Technologies, Inc........ 4,147,349
48,300 Motorola, Inc................... 2,756,118
21,200 Northern Telecom, Ltd........... 1,886,800
</TABLE>
Continued
69
<PAGE> 216
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- EQUIPMENT (CONTINUED)
6,400 Scientific-Atlanta, Inc......... $ 107,200
14,700 Tellabs, Inc.*.................. 777,263
------------
10,375,038
------------
TEXTILE -- APPAREL -- 0.2%
5,900 Fruit of the Loom, Inc.*........ 151,188
5,600 Liz Claiborne, Inc.............. 234,150
3,000 Russell Corp.................... 79,688
10,000 VF Corp......................... 459,374
------------
924,400
------------
TEXTILE -- HOME FURNISHINGS -- 0.0%
1,600 Springs Industries, Inc......... 83,200
------------
TOBACCO -- 1.6%
13,900 Fortune Brands Inc.............. 515,169
196,200 Philip Morris Cos., Inc......... 8,890,312
14,900 U.S.T., Inc..................... 550,369
------------
9,955,850
------------
TOOLS -- HAND HELD -- 0.1%
7,700 Black & Decker Corp............. 300,781
4,950 Snap-On, Inc.................... 215,944
7,200 The Stanley Works............... 339,750
------------
856,475
------------
TOYS/GAME/HOBBY -- 0.2%
10,200 Hasbro, Inc..................... 321,300
23,547 Mattel, Inc..................... 877,126
------------
1,198,426
------------
TRANSPORTATION -- AIR FREIGHT -- 0.1%
9,300 Federal Express Corp.*.......... 567,881
------------
TRANSPORTATION -- AIRLINE -- 0.4%
7,400 AMR Corp.*...................... 950,900
6,000 Delta Air Lines, Inc............ 714,000
17,750 Southwest Airlines Co........... 437,094
7,400 US Airways Group, Inc.*......... 462,500
------------
2,564,494
------------
TRANSPORTATION -- RAILROAD -- 0.7%
12,600 Burlington Northern Santa Fe
Corp............................ 1,171,013
17,608 CSX Corp........................ 950,832
30,500 Norfolk Southern Corp........... 939,781
20,000 Union Pacific Corp.............. 1,248,750
------------
4,310,376
------------
TRANSPORTATION -- TRUCKING -- 0.0%
3,200 Caliber Systems, Inc............ 155,800
------------
UTILITIES -- ELECTRIC POWER -- 2.4%
15,300 American Electric Power Co...... 789,863
11,900 Baltimore Gas & Electric Co..... 405,344
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- ELECTRIC POWER (CONTINUED)
12,200 Carolina Power & Light Co....... $ 517,738
17,200 Central & South West Corp....... 465,475
12,735 CINergy Corp.................... 487,910
19,000 Consolidated Edison Co. of New
York, Inc....................... 779,000
11,700 Detroit Edison Co............... 405,844
15,150 Dominion Resources, Inc......... 644,822
29,106 Duke Power Co................... 1,611,744
31,700 Edison International............ 861,843
19,700 Entergy Corp.................... 589,769
18,600 First Energy Corp.*............. 539,400
14,700 Florida Power & Light, Inc...... 870,055
9,800 General Public Utilities
Corp............................ 412,825
23,044 Houston Industries, Inc......... 614,987
11,700 Niagara Mohawk Power Corp.*..... 122,850
6,000 Northern States Power Co........ 349,500
24,000 PacifiCorp...................... 655,500
18,000 Peco Energy Corp................ 436,500
13,400 PP&L Resources, Inc............. 320,763
55,800 Southern Co..................... 1,443,824
19,970 Texas Utilities Co.............. 830,003
17,500 Unicom Corp..................... 538,125
8,300 Union Electric Co............... 358,975
------------
15,052,659
------------
UTILITIES -- GAS DISTRIBUTION -- 0.2%
7,700 Consolidated Natural Gas Co..... 465,849
1,600 Eastern Enterprises............. 72,000
3,900 Nicor, Inc...................... 164,531
2,500 ONEOK Inc....................... 100,938
6,700 Pacific Enterprises............. 252,088
2,800 People's Energy Corp............ 110,250
------------
1,165,656
------------
UTILITIES -- TELEPHONE -- 6.6%
15,000 Alltel Corp..................... 615,938
44,300 Ameritech Corp.................. 3,566,150
131,456 AT&T Corp....................... 8,051,679
62,820 Bell Atlantic Corp.............. 5,716,619
80,200 BellSouth Corp.................. 4,516,263
13,300 Frontier Corp................... 320,031
77,500 GTE Corp........................ 4,049,375
56,400 MCI Communications Corp......... 2,414,625
74,209 SBC Communications, Inc......... 5,435,809
34,800 Sprint Corp..................... 2,040,150
39,100 U.S. West, Inc.................. 1,764,388
73,100 WorldCom, Inc.*................. 2,211,275
------------
40,702,302
------------
TOTAL COMMON STOCKS............. 611,246,056
------------
(Cost $428,692,981)
</TABLE>
Continued
70
<PAGE> 217
The Kent Funds
INDEX EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- --------- ------
<C> <S> <C>
COMMERCIAL PAPER -- 1.0%
AUTOMOTIVE -- 1.0%
$5,896,442 General Motors Acceptance Corp.,
5.65%, 1/2/98................... $ 5,896,442
------------
TOTAL COMMERCIAL PAPER 5,896,442
------------
(Cost $5,896,442)
TOTAL INVESTMENTS -- 99.8%.................. $617,142,498
(Cost $434,589,423)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.2%....................... 1,021,028
------------
TOTAL NET ASSETS -- 100.0%.................. $618,163,526
============
</TABLE>
- ---------------
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal tax reporting of $838,110. Cost for
federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...............
$192,447,182
Unrealized depreciation...............
(10,732,217)
------------
Net unrealized appreciation...........
$181,714,965
============
</TABLE>
(b) Security has been deposited as initial margin on open future contracts.
* Non-income producing security.
ADR American Depositary Receipt
At December 31, 1997, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ----------------- ---------- ----------
<S> <C> <C> <C>
Standard & Poor's
24 500, 3/19/98 $5,748,390 $5,874,600
</TABLE>
See Notes to Financial Statements.
71
<PAGE> 218
The Kent Funds
SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
COMMERCIAL PAPER -- 2.7%
FINANCE -- 2.7%
$ 4,036,781 General Electric Capital Corp.,
5.65%, 1/2/98.................. $ 4,036,781
------------
TOTAL COMMERCIAL PAPER......... 4,036,781
------------
(Cost $4,036,781)
CORPORATE NOTES & BONDS -- 61.8%
BANKING -- 6.8%
5,000,000 ABN Amro Bank, 6.63%,
10/31/01....................... 5,074,505
5,000,000 Chase Manhattan Corp., 5.88%,
8/4/99......................... 4,981,400
------------
10,055,905
------------
BROKERS -- 10.1%
5,000,000 Goldman Sachs Group L.P.,
6.10%, 4/15/98................. 4,995,900
6,000,000 Morgan Stanley Group, Inc.,
6.50%, 3/30/01................. 6,071,160
3,750,000 Salomon, Inc., 6.50%, 3/1/00... 3,769,650
------------
14,836,710
------------
FINANCE -- 24.4%
5,329,000 Associates Corp N.A., 5.25%,
3/30/00........................ 5,231,906
5,000,000 CIT Group Holdings, 6.10%,
8/9/99......................... 5,008,600
5,000,000 General Motors Acceptance
Corp., 8.25%, 1/23/98.......... 5,005,600
5,000,000 Household International, 7.28%,
7/22/99........................ 5,101,950
5,000,000 MCN Investment Corp., 6.89%,
1/16/02........................ 5,121,800
5,000,000 New England Education, Loan
Marketing Corp., 6.13%,
7/17/98........................ 5,004,550
5,000,000 Norwest Financial, Inc., 7.88%,
2/15/02........................ 5,296,899
------------
35,771,305
------------
INDUSTRIAL GOODS & SERVICES -- 5.7%
4,375,000 Enron Corp., 6.45%, 11/15/01... 4,383,794
4,000,000 SuperValu, Inc., 7.25%,
7/15/99........................ 4,060,440
------------
8,444,234
------------
PHARMACEUTICALS -- 3.5%
5,000,000 American Home Products Corp.,
7.70%, 2/15/00................. 5,146,850
------------
RETAIL -- 3.8%
5,500,000 Sears Roebuck Co., 8.45%,
11/1/98........................ 5,599,550
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS (CONTINUED)
TELECOMMUNICATIONS -- 4.1%
$ 6,000,000 Southwestern Bell Telephone
Co., 6.13%, 3/12/01............ $ 6,014,520
------------
UTILITIES -- 3.4%
5,000,000 Georgia Power Co., First
Mortgage, 6.13%, 9/1/99........ 4,999,450
------------
TOTAL CORPORATE NOTES & BONDS.. 90,868,524
------------
(Cost $90,517,034)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.2%
5,000,000 Federal Home Loan Bank, 5.81%,
11/4/99........................ 5,000,000
5,000,000 Federal Home Loan Mortgage
Corp., 4.65%*, 3/11/98......... 4,990,650
5,000,000 Federal National Mortgage
Assoc., 6.03%, 7/2/99.......... 5,020,300
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 15,010,950
------------
(Cost $14,991,941)
U.S. GOVERNMENT OBLIGATIONS (23.6%)
U.S. TREASURY NOTES (23.6%)
6,000,000 5.50%, 11/15/98................ 5,993,460
20,000,000 7.50%, 10/31/99................ 20,618,800
5,000,000 6.00%, 8/15/00................. 5,035,950
3,000,000 6.63%, 7/31/01................. 3,084,360
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 34,732,570
------------
(Cost $34,315,957)
TOTAL INVESTMENTS - 98.3%................... 144,648,825
(Cost $143,861,713) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.7%....................... 2,522,839
------------
TOTAL NET ASSETS -- 100.0%.................. $147,171,664
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 1,315,282
Unrealized depreciation............... (528,170)
------------
Net unrealized appreciation........... $ 787,112
============
</TABLE>
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
See Notes to Financial Statements.
72
<PAGE> 219
The Kent Funds
INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
COMMERCIAL PAPER -- 0.7%
FINANCE -- 0.7%
$ 5,007,999 General Electric Capital Corp.,
5.65%, 1/2/98.................. $ 5,007,999
------------
TOTAL COMMERCIAL PAPER......... 5,007,999
------------
(Cost $5,007,999)
CORPORATE NOTES & BONDS -- 27.9%
BANKING -- 7.4%
6,000,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. 6,515,520
8,000,000 Chase Manhattan Corp., 7.25%,
6/1/07......................... 8,368,640
5,000,000 J.P. Morgan & Co., 7.63%,
9/15/04........................ 5,338,800
5,000,000 MBNA American Bank NA, 7.25%,
9/15/02........................ 5,136,450
5,000,000 NCNB Corp., 9.38%, 9/15/09..... 6,111,150
8,000,000 Royal Bank of Scotland, 6.38%,
2/1/11......................... 7,679,040
7,000,000 Societe Generale New York,
9.88%, 7/15/03................. 8,119,860
9,350,000 Societe Generale New York,
7.40%, 6/1/06.................. 9,768,413
------------
57,037,873
------------
BROKERS -- 1.3%
5,000,000 Salomon, Inc., 6.08%*,
2/15/98........................ 5,023,800
5,000,000 Salomon, Inc., 7.25%, 5/1/01... 5,131,600
------------
10,155,400
------------
FINANCE -- 12.9%
5,000,000 American Financial Group,
7.13%, 12/15/07................ 5,046,200
5,000,000 Associates Corp., N.A., 6.52%,
10/11/02....................... 5,075,850
5,500,000 Bear Stearns Co., 6.75%,
4/15/03........................ 5,579,860
11,000,000 Caterpillar Financial Services,
6.95%, 11/1/00................. 11,250,580
5,000,000 First Union Institutional
Capital I, 8.04%, 12/1/26,
Callable 12/1/06 @ 104.02...... 5,269,900
10,000,000 Ford Capital Guaranteed Notes,
9.88%, 5/15/02................. 11,315,700
8,400,000 Ford Motor Credit Corp., 9.03%,
12/30/09, Callable 12/30/04 @
100............................ 9,555,672
5,000,000 General Electric Capital Corp.,
6.66%*, 5/1/18, Callable 5/1/00
@100........................... 5,064,000
5,000,000 Household Finance Corp., 8.00%,
8/1/04......................... 5,394,550
8,000,000 HSBC America Capital II, 8.38%,
5/15/27, Callable 5/15/07 @
104.19......................... 8,529,760
5,000,000 Lehman Brothers, Inc., 7.38%,
1/15/07........................ 5,252,050
10,000,000 New England Education, Loan
Marketing Corp., 6.13%,
7/17/98........................ 10,009,100
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS (CONTINUED)
FINANCE (CONTINUED)
$ 7,000,000 Safeco Corp., 6.88%, 7/15/07
(b)............................ $ 7,162,330
5,000,000 Smith Barney Holdings, Inc.,
6.63%, 11/15/03................ 5,042,800
------------
99,548,352
------------
INDUSTRIAL GOODS & SERVICES -- 4.1%
14,800,000 Comdisco, Inc., 6.94%,
5/2/00......................... 15,045,828
6,000,000 ConAgra, Inc., 6.70%, 8/1/27... 6,158,220
10,000,000 SuperValu, Inc., 7.25%,
7/15/99........................ 10,151,100
------------
31,355,148
------------
RETAIL -- 0.7%
5,000,000 Sears Roebuck Acceptance Corp.,
6.86%, 8/6/01.................. 5,103,850
------------
TELECOMMUNICATIONS -- 0.8%
6,000,000 Bell Canada, 7.75%, 4/1/06..... 6,513,960
------------
UTILITIES -- 0.7%
5,000,000 Western Resorces, Inc., 6.88%,
8/1/04......................... 5,074,700
------------
TOTAL CORPORATE NOTES & BONDS.. 214,789,283
------------
(Cost $208,980,613)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 7.5%
10,000,000 Federal Farm Credit Bank,
6.30%, 9/23/04................. 10,175,000
5,000,000 Federal Home Loan Bank, 6.49%,
1/08/04........................ 5,150,800
5,000,000 Federal Home Loan Mortgage
Corp., 4.65%*, 3/11/98......... 4,990,650
10,410,000 Federal Home Loan Mortgage
Corp., 8.12%, 1/31/05.......... 11,631,509
3,000,000 Federal Home Loan Mortgage
Corp., 7.22%, 6/14/06.......... 3,224,070
7,950,000 Federal National Mortgage
Assoc., 7.35%, 3/28/05......... 8,549,987
9,100,000 Federal National Mortgage
Assoc., 6.00%, 11/15/22........ 8,937,838
5,000,000 Tennessee Valley Authority,
6.25%, 12/15/17................ 4,990,600
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 57,650,454
------------
(Cost $56,241,166)
U.S. GOVERNMENT OBLIGATIONS -- 60.9%
8,000,000 U.S. Treasury Bond, 9.13%,
5/15/09........................ 9,357,520
10,000,000 U.S. Treasury Note, 8.88%,
2/15/99........................ 10,345,300
35,000,000 U.S. Treasury Note, 6.38%,
5/15/99........................ 35,322,700
68,250,000 U.S. Treasury Note, 7.75%,
1/31/00........................ 70,980,000
</TABLE>
Continued
73
<PAGE> 220
The Kent Funds
INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (CONTINUED)
$23,050,000 U.S. Treasury Note, 6.88%,
3/31/00........................ $ 23,619,105
24,000,000 U.S. Treasury Note, 8.75%,
8/15/00........................ 25,754,880
33,500,000 U.S. Treasury Note, 6.25%,
8/31/00........................ 33,950,240
70,300,000 U.S. Treasury Note, 6.38%,
3/31/01........................ 71,618,125
56,000,000 U.S. Treasury Note, 6.50%,
5/31/01........................ 57,330,000
77,000,000 U.S. Treasury Note, 7.50%,
11/15/01....................... 81,632,319
35,000,000 U.S. Treasury Note, 6.25%,
2/15/03........................ 35,793,100
6,000,000 U.S. Treasury Note, 6.50%,
8/15/05........................ 6,260,640
6,800,000 U.S. Treasury Note, 6.13%,
8/15/07........................ 6,988,088
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 468,952,017
------------
(Cost $466,513,738)
YANKEE CERTIFICATES OF DEPOSIT -- 1.3%
10,000,000 Potash Corp. Saskatchewan,
7.13%, 6/15/07................. 10,227,600
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT........................ 10,227,600
------------
(Cost $10,026,500)
TOTAL INVESTMENTS -- 98.3%.................. 756,627,353
(Cost $746,770,016)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.7%....................... 13,084,148
------------
TOTAL NET ASSETS -- 100.0%.................. $769,711,501
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................ $12,213,872
Unrealized depreciation................ (2,356,535)
-----------
Net unrealized appreciation............ $ 9,857,337
===========
</TABLE>
(b) 144A security which is restricted as to resale to institutional investors.
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
See Notes to Financial Statements.
74
<PAGE> 221
The Kent Funds
INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
COMMERCIAL PAPER -- 4.0%
FINANCE -- 4.0%
$ 9,469,120 General Electric Capital Corp.,
5.65%, 1/2/98.................. $ 9,469,120
------------
TOTAL COMMERCIAL PAPER......... 9,469,120
------------
(Cost $9,469,120)
CORPORATE NOTES & BONDS -- 37.2%
BANKING -- 16.9%
2,700,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. 2,931,984
2,000,000 Bank of New York, 8.50%,
12/15/04....................... 2,239,600
2,000,000 BankAmerica Corp., 7.20%,
4/15/06........................ 2,089,080
2,000,000 Chase Manhattan Corp., 7.13%,
3/1/05......................... 2,069,960
2,000,000 Fleet/Norstar Group, 8.63%,
1/15/07........................ 2,275,920
2,000,000 Midland Bank PLC, 7.63%,
6/15/06........................ 2,125,160
3,000,000 National City Bank of
Cleveland, 7.25%, 7/15/10...... 3,205,710
5,000,000 NCNB Corp., 10.20%, 7/15/15.... 6,690,150
2,250,000 PNC Bank N.A., 7.88%,
4/15/05........................ 2,420,865
2,000,000 Republic New York Corp., 7.00%,
3/22/11........................ 2,061,780
3,000,000 Royal Bank of Scotland, 6.38%,
2/1/11......................... 2,879,640
4,600,000 Societe Generale New York,
7.40%, 6/1/06.................. 4,805,850
2,000,000 Southtrust Bank NA, 6.57%,
12/15/27....................... 2,036,600
2,000,000 Swiss Bank Corp. -- New York,
7.38%, 7/15/15................. 2,132,380
------------
39,964,679
------------
BROKERS -- 0.9%
2,000,000 Salomon, Inc., 6.75%,
2/15/03........................ 2,023,140
------------
FINANCE -- 7.3%
2,000,000 Discover Credit, 9.26%,
03/20/12....................... 2,498,700
2,000,000 Ford Motor Credit Corp., 9.03%,
12/30/09, Callable 12/30/04 @
100............................ 2,275,160
3,500,000 Great Western Financial Trust
II, 8.21%, 2/1/27, Callable
2/1/07 @ 104.1................. 3,712,170
2,000,000 HSBC America Capital II, 8.38%,
5/15/27, Callable 5/15/07 @
104.19......................... 2,132,440
2,000,000 Lehman Brothers Holdings, Inc.,
8.75%, 3/15/05................. 2,231,420
4,000,000 St. Paul Cos, Inc., 7.25%,
8/9/07......................... 4,276,960
------------
17,126,850
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
CORPORATE NOTES & BONDS (CONTINUED)
GAS TRANSMISSION -- 1.1%
$ 2,500,000 Enserch Corp., 7.13%,
6/15/05........................ $ 2,591,850
------------
INDUSTRIAL GOODS &
SERVICES -- 4.4%
2,000,000 ConAgra, Inc., 6.70%, 8/1/27... 2,052,740
3,000,000 Engelhard Corp., 7.38%,
8/1/06......................... 3,159,210
2,000,000 General Motors Corp., 9.13%,
7/15/01........................ 2,175,900
2,950,000 Raytheon Co., 6.75%, 8/15/07... 3,009,502
------------
10,397,352
------------
INSURANCE -- 0.9%
2,000,000 Travelers Capital III, 7.63%,
12/1/36........................ 2,170,060
------------
OIL & GAS -- 2.6%
5,000,000 Phillips Petroleum, 9.38%,
2/15/11........................ 6,182,300
------------
RETAIL -- 2.2%
4,893,277 Fred Meyer, Inc., Lease Trust,
8.50%, 7/15/17 (b)............. 5,146,749
------------
UTILITIES -- 0.9%
2,000,000 Pacific Gas & Electric, 6.25%,
3/1/04......................... 2,003,920
------------
TOTAL CORPORATE NOTES & BONDS.. 87,606,900
------------
(Cost $83,245,779)
FOREIGN GOVERNMENT AGENCIES -- 0.5%
1,000,000 Hydro-Quebec, 9.41%, 3/23/00... 1,067,220
------------
TOTAL FOREIGN GOVERNMENT
AGENCIES....................... 1,067,220
------------
(Cost $1,059,483)
MUNICIPAL BOND -- TAXABLE -- 0.9%
CALIFORNIA -- 0.9%
2,000,000 San Bernardino County,
Financing Authority Pension
Obligation Revenue, 6.99%,
8/1/10 (Insured by MBIA)....... 2,102,500
------------
TOTAL MUNICIPAL BOND --
TAXABLE........................ 2,102,500
------------
(Cost $2,030,920)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 5.5%
2,500,000 Federal Home Loan Mortgage
Corp., 7.22%, 6/14/06.......... 2,686,725
5,000,000 Federal National Mortgage
Assoc., 7.40%, 7/1/04.......... 5,379,700
5,000,000 Tennessee Valley Authority,
6.25%, 12/15/17................ 4,990,600
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 13,057,025
------------
(Cost $12,477,563)
</TABLE>
Continued
75
<PAGE> 222
The Kent Funds
INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- 50.4%
$ 9,500,000 U.S. Treasury Bond, 10.75%,
8/15/05........................ $ 12,358,930
15,000,000 U.S. Treasury Bond, 9.13%,
5/15/09........................ 17,545,350
25,000,000 U.S. Treasury Bond, 10.38%,
11/15/09....................... 31,257,750
19,000,000 U.S. Treasury Bond, 10.38%,
11/15/12....................... 25,246,250
30,000,000 U.S. Treasury Note, 8.00%,
5/15/01........................ 32,048,400
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 118,456,680
------------
(Cost $116,142,038)
TOTAL INVESTMENTS -- 98.5%.................. 231,759,445
(Cost $224,424,903) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.5%....................... 3,628,860
------------
TOTAL NET ASSETS -- 100.0%.................. $235,388,305
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................. $7,334,542
Unrealized depreciation................. 0
----------
Net unrealized appreciation............. $7,334,542
==========
</TABLE>
(b) 144A security which is restricted as to resale to institutional investors
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
76
<PAGE> 223
THE KENT FUNDS
LIMITED TERM TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 98.4%
ALASKA -- 2.9%
$ 500,000 Alaska State Housing Finance
Corp., 4.35%, 6/1/98 (Insured by
MBIA)........................... $ 501,335
530,000 Alaska State Housing Finance
Corp., 4.60%, 12/1/00 (Insured
by MBIA)........................ 540,600
------------
1,041,935
------------
ARIZONA -- 3.1%
1,000,000 Arizona State University
Revenue, 7.10%, 7/1/16,
Prerefunded 7/1/01 @102......... 1,113,750
------------
CALIFORNIA -- 3.4%
1,000,000 University of California
Revenue, Multiple Purpose
Projects, Series B, 9.00%,
9/1/03 (Insured by MBIA)........ 1,238,750
------------
CONNECTICUT -- 2.9%
1,000,000 Connecticut State, GO, Series C,
5.38%, 8/15/02.................. 1,051,250
------------
DISTRICT OF COLUMBIA -- 2.8%
1,000,000 District of Columbia, GO, 5.10%,
12/1/99 (Insured by MBIA)....... 1,020,000
------------
ILLINOIS -- 9.2%
500,000 Chicago, Illinois Metropolitan
Water Reclamation District,
Capital Improvement, 6.20%,
1/1/98.......................... 500,000
1,000,000 Chicago, Illinois Metropolitan
Water Reclamation District,
Working Cash Fund, 5.90%,
12/1/04......................... 1,097,500
1,000,000 Illinois Educational Facilities
Authority Revenue, Loyola
University, Series A, 6.30%,
7/1/98 (Insured by MBIA)........ 1,012,640
745,000 University of Illinois Revenue,
Health Service Facility, 4.90%,
10/1/01 (Insured by AMBAC)...... 762,694
------------
3,372,834
------------
KENTUCKY -- 2.8%
1,000,000 Kentucky State Property &
Buildings Commission, Project
No. 53, 5.80%, 10/1/98.......... 1,015,040
------------
LOUISIANA -- 2.8%
1,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A, 7.00%,
11/15/98 (Insured by FGIC)...... 1,026,190
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MARYLAND -- 2.8%
$1,000,000 Washington Suburban Sanitation
District, Water Revenue, Series
A, 6.13%, 6/1/98................ $ 1,009,650
------------
MICHIGAN -- 16.6%
1,235,000 Detroit, GO, 8.00%, 4/1/11,
Prerefunded 4/1/01 @102......... 1,403,269
1,000,000 Detroit, Self Insurance, Series
A, GO, 5.20%, 5/1/98............ 1,002,290
1,000,000 Michigan State Hospital Finance
Authority Revenue, Detroit
Medical Group, Series A, 5.00%,
8/15/06, (Insured by AMBAC)..... 1,037,500
1,600,000 Michigan State Hospital Finance
Authority Revenue, Sisters of
Mercy Health Corp. Bond 1993,
Series F, 4.60%, 8/15/02
(Insured by MBIA)............... 1,623,999
1,000,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, 5.15%, 10/1/00
(Insured by MBIA)............... 1,023,750
------------
6,090,808
------------
NEVADA -- 3.0%
1,090,000 Las Vegas, GO, 6.75%, 8/1/98
(Insured by MBIA)............... 1,108,083
------------
NEW JERSEY -- 3.1%
1,000,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Series A 1994,
7.00%, 7/1/03 (Insured by
MBIA)........................... 1,131,250
------------
NEW YORK -- 2.8%
1,000,000 New York State Dormitory
Authority Revenue, State
University Educational
Facilities, 4.70%, 5/15/99...... 1,010,000
------------
OHIO -- 4.4%
500,000 Cleveland Airport System
Revenue, 5.50%, 1/1/04, (Insured
by FSA)......................... 527,500
565,000 Cleveland-Cuyahoga County Port
Authority, Rock & Roll Hall of
Fame, Refunding, Subordinate
Bonds, 4.30%, 12/1/98........... 567,814
500,000 Cleveland-Cuyahoga County Port
Authority, Rock & Roll Hall of
Fame, Refunding, Subordinate
Bonds, 4.90%, 12/1/00........... 507,500
------------
1,602,814
------------
</TABLE>
Continued
77
<PAGE> 224
THE KENT FUNDS
LIMITED TERM TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
OKLAHOMA -- 3.2%
$1,115,000 Tulsa Industrial Authority
Revenue, University of Tulsa,
Series A, 5.50%, 10/1/00
(Insured by MBIA)............... $ 1,159,600
------------
PENNSYLVANIA -- 5.5%
1,000,000 Allegheny County Airport
Revenue, Pittsburgh
International Airport, 5.00%,
1/1/99 (Insured by MBIA)........ 1,008,020
1,000,000 Pennsylvania State, First
Series, GO, 5.00%, 5/1/99....... 1,013,750
------------
2,021,770
------------
TEXAS -- 10.8%
700,000 Eagle Pass Independent School
District, GO, 6.50%, 8/15/03.... 778,750
1,000,000 Harris County Flood Control
District, Series C, GO, 6.50%,
11/1/10, Prerefunded 11/1/99 @
100 (Insured by MBIA)........... 1,043,750
1,000,000 Houston Independent School
District, GO, Public Property
Finance Contractual Obligation,
6.25%, 7/15/99.................. 1,033,750
1,000,000 Pasadena Independent School
District, GO, Prerefunded
8/15/01 @ 100, 6.75%, 8/15/05
(Insured by FGIC)............... 1,086,250
------------
3,942,500
------------
UTAH -- 3.7%
1,310,000 Salt Lake City Redevelopment
Agency, Neighborhood
Redevelopment Tax, Inc., Series
A, 5.25%, 10/1/99............... 1,332,925
------------
VIRGINIA -- 4.2%
1,500,000 Norfolk, GO, 5.13%, 6/1/01...... 1,550,625
------------
WISCONSIN -- 2.8%
1,000,000 Green Bay, GO, Series A, 5.10%,
4/1/00.......................... 1,025,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
WYOMING -- 5.6%
$ 1,000,000 Campbell County School
District, No. 001 Gillette, GO,
5.15%, 6/1/02.................. $ 1,040,000
1,000,000 Wyoming Community Development,
4.45%, 6/1/99.................. 1,003,750
------------
2,043,750
------------
TOTAL MUNICIPAL BONDS.......... 35,908,524
------------
(Cost $35,175,240)
INVESTMENT COMPANIES -- 0.2%
82,999 Dreyfus Tax Exempt Money
Market......................... 82,999
------------
TOTAL INVESTMENT COMPANIES..... 82,999
------------
(Cost $82,999)
TOTAL INVESTMENTS -- 98.6%.................. 35,991,523
(Cost $35,258,239) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.4%....................... 506,047
------------
TOTAL NET ASSETS -- 100.0%.................. $ 36,497,570
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 733,284
Unrealized depreciation............... 0
------------
Net unrealized appreciation........... $ 733,284
============
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
78
<PAGE> 225
THE KENT FUNDS
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 98.0%
ALASKA -- 3.3%
$1,520,000 Alaska Municipal Bond Bank
Authority, Series A, GO, 4.75%,
10/1/99......................... $ 1,533,300
1,000,000 Anchorage Electric Utility,
Revenue Bond, Senior Lien,
5.50%, 12/1/03, Callable 6/1/03
@ 102 (Insured by MBIA)......... 1,062,500
1,000,000 Anchorage, GO, 6.30%, 7/1/99
(Insured by MBIA)............... 1,033,750
5,000,000 North Slope Boro, Series B, GO,
7.50%, 6/30/01 (Insured by
FSA)............................ 5,543,750
------------
9,173,300
------------
ARIZONA -- 3.2%
1,750,000 Phoenix, GO, Series A, 4.90%,
7/1/02.......................... 1,806,875
1,500,000 Pima County Unified School
District No. 1 Tucson, Series B,
GO, ETM, 6.80%, 7/1/00.......... 1,597,500
5,000,000 Salt River Project Agricultural
Improvement & Power District
Electric System, Series A,
5.63%, 1/1/06................... 5,418,750
------------
8,823,125
------------
CALIFORNIA -- 6.4%
3,400,000 California State, GO, 6.60%,
2/1/10.......................... 4,007,750
3,000,000 Orange County, Series A, 6.00%,
6/1/10 (Insured by MBIA)........ 3,360,000
2,000,000 Riverside County Transportation
Commission, Sales Tax Revenue,
Series A, 5.60%, 6/1/05 (Insured
by AMBAC)....................... 2,162,500
2,000,000 Turlock Irrigation District
Revenue, Series A, 6.00%, 1/1/06
(Insured by MBIA)............... 2,225,000
4,850,000 University of California
Revenue, Multiple Purpose
Projects, Series B, 9.00%,
9/1/03 (Insured by MBIA)........ 6,007,938
------------
17,763,188
------------
COLORADO -- 3.8%
4,000,000 Arapahoe County, School District
No. 005, Cherry Creek, Series A,
GO, 5.25%, 12/15/02............. 4,195,000
1,400,000 Boulder Valley School District,
5.50%, 12/1/07.................. 1,520,750
1,000,000 Colorado Springs Utility
Revenue, Series A, 6.50%,
11/15/03, Callable 11/15/01 @
102............................. 1,093,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
COLORADO (CONTINUED)
$1,000,000 E-470 Public Highway Authority
Revenue, Series C, 6.00%, 9/1/07
(Insured by MBIA)............... $ 1,118,750
2,500,000 Regional Transportation
District, Sales Tax Revenue,
5.50%, 11/1/04.................. 2,693,750
------------
10,622,000
------------
CONNECTICUT -- 1.5%
4,000,000 Connecticut State, Series A,
6.00%, 5/15/02.................. 4,295,000
------------
FLORIDA -- 1.9%
1,000,000 Broward County School District,
GO, 5.20%, 2/15/03.............. 1,038,750
2,000,000 Lakeland Electric & Water
Revenue, 5.90%, 10/1/07......... 2,220,000
1,000,000 Tampa Guaranteed Entitlement
Revenue, 6.60%, 10/1/00 (Insured
by AMBAC)....................... 1,068,750
1,000,000 Tampa Utilities, Tax & Special
Revenue, 6.30%, 10/1/00 (Insured
by AMBAC)....................... 1,061,250
------------
5,388,750
------------
GEORGIA -- 3.0%
2,670,000 Atlanta Airport Facilities
Revenue, Series B, (AMT), 5.50%,
1/1/03 (Insured by AMBAC)....... 2,800,163
1,000,000 Georgia State Tollway Authority
Revenue, Georgia 400 Project,
6.25%, 7/1/00................... 1,056,250
4,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08................... 4,490,000
------------
8,346,413
------------
HAWAII -- 1.2%
1,025,000 Honolulu City & County, Series
A, GO, 5.60%, 1/1/05............ 1,100,594
1,000,000 Honolulu City & County, Series
D, GO, ETM, 6.50%, 12/1/00...... 1,068,750
1,150,000 Maui County, Series A, GO,
6.80%, 12/1/03, Prerefunded
12/1/00 @ 101 (Insured by
AMBAC).......................... 1,249,187
------------
3,418,531
------------
ILLINOIS -- 6.2%
2,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 6.80%,
1/1/03.......................... 2,140,000
3,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 5.50%,
12/1/10......................... 3,228,750
4,270,000 Du Page & Will Counties,
Community School District No.
204, GO, 4.95%, 12/30/01
(Insured by FGIC)............... 4,398,100
</TABLE>
Continued
79
<PAGE> 226
THE KENT FUNDS
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
ILLINOIS (CONTINUED)
$4,000,000 Illinois Development Finance
Authority, Pollution Control
Revenue, Commonwealth Edison,
5.30%, 1/15/04 (Insured by
MBIA)........................... $ 4,180,000
3,135,000 Northwest Suburban Municipal
Joint Action, Water Agency,
Water Supply System, Series A,
5.25%, 5/1/04 (Insured by
MBIA)........................... 3,283,913
------------
17,230,763
------------
INDIANA -- 3.4%
2,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 5.88%, 1/1/10 (Insured by
MBIA)........................... 2,217,500
3,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 6.00%, 1/1/13 (Insured by
MBIA)........................... 3,371,250
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A, 5.75%, 6/1/12 (Insured
by AMBAC)....................... 1,095,000
1,000,000 Purdue University Dormitory
System Revenue, Series A, 6.40%,
7/1/99 (Insured by AMBAC)....... 1,033,750
1,000,000 Purdue University Student Fee
Revenue, Series D, 6.50%,
7/1/03, Callable 1/1/00 @ 103... 1,075,000
500,000 St. Joseph County Educational
Facilities Revenue, University
of Notre Dame, 6.50%, 3/1/26.... 617,500
------------
9,410,000
------------
LOUISIANA -- 2.7%
4,000,000 Louisiana State, Series A, GO,
5.30%, 8/1/04 (Insured by
MBIA)........................... 4,240,000
3,000,000 Louisiana State, Series A, GO,
6.00%, 4/15/07 (Insured by
FGIC)........................... 3,352,500
------------
7,592,500
------------
MASSACHUSETTS -- 5.4%
5,000,000 Massachusetts Bay Transportation
Authority, Series A, 5.00%,
3/1/02.......................... 5,150,000
2,000,000 Massachusetts State Turnpike
Authority, Metropolitan Highway,
Series A, 5.00%, 1/1/10,
Callable 1/1/07 @ 102........... 2,015,000
3,000,000 Massachusetts State Turnpike
Authority, Series A, Bond
Anticipation Note, 5.00%,
6/1/99, ETM..................... 3,041,250
1,000,000 Massachusetts State Turnpike
Authority, Series A, Bond
Anticipation Note, 5.00%,
6/1/99.......................... 1,013,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MASSACHUSETTS (CONTINUED)
$3,750,000 Massachusetts State, Special
Obligation Revenue, Series A,
5.25%, 6/1/08 (Insured by
AMBAC).......................... $ 3,975,000
------------
15,195,000
------------
MICHIGAN -- 17.8%
2,215,000 Battle Creek Downtown
Development Authority, 6.00%,
5/1/07.......................... 2,453,113
4,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 7.30%,
5/1/10, Callable 5/1/04 @ 102... 4,705,000
2,100,000 Caledonia Community Schools, GO,
6.70%, 5/1/22, Prerefunded
5/1/02 @ 102 (Insured by
AMBAC).......................... 2,341,500
3,000,000 Detroit Sewage Disposal Revenue,
Series B, 6.00%, 7/1/09 (Insured
by MBIA)........................ 3,390,000
6,000,000 Detroit Water Supply System,
Permanent Linked Bonds, 5.25%,
7/1/13 (Insured by FGIC)........ 6,089,999
1,000,000 Detroit Water Supply System,
Second Lien, Series A, 5.20%,
7/1/08 (Insured by MBIA)........ 1,067,500
3,000,000 Detroit, GO, Distributable State
Aid, 5.70%, 5/1/01 (Insured by
AMBAC).......................... 3,146,250
2,840,000 Grand Ledge Public Schools
District, GO, 5.35%, 5/1/10
(Insured by MBIA)............... 3,038,800
1,700,000 Greater Detroit Resource
Recovery Authority, Series A,
5.50%, 12/13/04 (Insured by
AMBAC).......................... 1,812,625
2,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 5.35%, 5/15/06
(Insured by MBIA)............... 2,127,500
2,000,000 Michigan State Comprehensive
Transportation, Series B, 5.50%,
5/15/02......................... 2,110,000
1,000,000 Michigan State Hospital Finance
Authority Revenue, Detroit
Medical Group, Series A, 5.00%,
8/15/06, (Insured by AMBAC)..... 1,037,500
1,450,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 5.00%, 5/15/06
(Insured by AMBAC).............. 1,508,000
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue, 5.80%, 11/1/05
(Insured by MBIA)............... 1,096,250
</TABLE>
Continued
80
<PAGE> 227
THE KENT FUNDS
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,300,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Ford
Motor Co. Project, Series A,
7.10%, 2/1/06................... $ 2,708,250
2,500,000 Michigan State Trunk Line,
Series A, 5.50%, 10/1/02........ 2,646,875
3,500,000 Michigan State Underground
Storage Tank Financial Assurance
Authority, Series I, 6.00%,
5/1/05 (Insured by AMBAC)....... 3,863,125
2,000,000 Northville Public Schools,
Series A, GO, 7.00%, 5/1/08..... 2,185,000
1,575,000 South Redford School District,
5.25%, 5/1/09 (Insured by
FGIC)........................... 1,645,875
1,000,000 Western Michigan University
Revenue, GO, 5.40%, 11/15/01
(Insured by FGIC)............... 1,045,000
------------
50,018,162
------------
MINNESOTA -- 0.4%
1,000,000 Minneapolis Community
Development Agency, Tax
Increment Revenue, 7.00%, 9/1/00
(Insured by MBIA)............... 1,077,500
------------
NEVADA -- 1.0%
2,500,000 Clark County School District,
Group 2, GO, 7.20%, 5/1/01,
Prerefunded 5/1/00 @ 102
(Insured by FGIC)............... 2,718,750
------------
NEW JERSEY -- 4.2%
6,000,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Senior Lien,
7.00%, 7/1/04 (Insured by
MBIA)........................... 6,915,000
1,375,000 New Jersey State, Series D, GO,
5.25%, 2/15/01.................. 1,424,844
3,000,000 Ocean County Utilities
Authority, Wastewater Revenue,
Refunding, GO, 6.00%, 1/1/07.... 3,360,000
------------
11,699,844
------------
NEW YORK -- 2.2%
1,130,000 Metropolitan Transportation
Authority, Series M, 5.50%,
7/1/08 (Insured by FGIC)........ 1,223,225
1,660,000 New York State Urban Development
Corp., Refunding, Syracuse
University Center, 5.50%,
1/1/15.......................... 1,728,475
3,000,000 Triborough Bridge & Tunnel
Authority, General Purpose,
Series Y, 5.50%, 1/1/17......... 3,213,750
------------
6,165,450
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
NORTH CAROLINA -- 0.8%
$2,000,000 North Carolina Municipal Power
Agency No. 1, Catawba Electric
Revenue, 5.90%, 1/1/03.......... $ 2,115,000
------------
OHIO -- 0.8%
2,125,000 Columbus, Sewer Improvement, GO,
6.30%, 9/15/99.................. 2,210,000
------------
OKLAHOMA -- 0.8%
2,000,000 Tulsa Industrial Authority,
University of Tulsa, Series A,
6.00%, 10/1/16 (Insured by
MBIA)........................... 2,250,000
------------
PENNSYLVANIA -- 3.0%
2,000,000 Allegheny County Airport
Revenue, (AMT), 5.00%, 1/1/02... 2,042,500
4,330,000 Chartiers Valley Joint School,
ETM, 6.15%, 3/1/07.............. 4,800,888
1,475,000 Pennsylvania State, Series A,
GO, 7.00%, 5/1/05, Prerefunded
5/1/00 @ 101.5.................. 1,591,156
------------
8,434,544
------------
PUERTO RICO -- 2.7%
3,055,000 Puerto Rico Commonwealth Aqeduct
& Sewer Authority, 6.00%,
7/1/06.......................... 3,379,594
2,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority,
Highway Revenue, Series X,
4.90%, 7/1/01................... 2,052,500
2,000,000 Puerto Rico Electric Power
Authority Revenue, Series W,
5.00%, 7/1/98................... 2,013,060
------------
7,445,154
------------
RHODE ISLAND -- 2.7%
1,000,000 Providence, GO, 6.70%, 1/15/02
Callable 1/15/00 @ 102 (Insured
by MBIA)........................ 1,070,000
3,025,000 Rhode Island State, GO, Series
A, 5.50%, 8/1/04 (Insured by
MBIA)........................... 3,229,188
2,000,000 State Depositors Economic
Protection Corp., Series A,
Special Obligation, 6.15%,
8/1/99 (Insured by MBIA)........ 2,065,000
1,000,000 State Depositors Economic
Protection Corp., Series B,
Special Obligation, 5.20%,
8/1/03 (Insured by MBIA)........ 1,045,000
------------
7,409,188
------------
TENNESSEE -- 0.5%
1,230,000 Tennessee State, Series B, GO,
6.20%, 6/1/01................... 1,316,100
------------
</TABLE>
Continued
81
<PAGE> 228
THE KENT FUNDS
INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
TEXAS -- 9.6%
$1,000,000 Austin Independent School
District, GO, 6.20%, 8/1/99..... $ 1,033,750
2,245,000 Dallas Independent School
District, GO, 5.40%, 8/15/03.... 2,374,088
1,190,000 Hays Consolidated Independent
School District, 6.00%,
9/1/04.......................... 1,310,488
1,500,000 Houston Water & Sewer System
Revenue, Junior Lien, Series C,
5.75%, 12/1/03 (Insured by
MBIA)........................... 1,614,375
1,000,000 Houston Water & Sewer System
Revenue, Prior Lien, Series A,
7.00%, 12/1/01 (Insured by
AMBAC).......................... 1,101,250
3,000,000 Lower Colorado River Authority,
4.90%, 1/1/07................... 3,082,499
1,050,000 Round Rock Independent School
District, GO, 5.25%, 2/15/05.... 1,107,750
2,800,000 Texas Municipal Power Agency,
5.60%, 9/1/01 (Insured by
MBIA)........................... 2,936,500
5,595,000 Texas State Public Finance
Authority, GO, Series A, 6.50%,
10/1/04......................... 6,329,343
4,450,000 Texas State, Series A, GO,
5.70%, 10/1/03.................. 4,800,437
1,015,000 University of Texas, University
Revenue, Series A, 6.60%,
8/15/02......................... 1,121,575
------------
26,812,055
------------
VIRGINIA -- 1.1%
3,000,000 Arlington County GO, 5.70%,
12/1/00......................... 3,146,250
------------
WASHINGTON -- 6.7%
1,000,000 King County Washington School
District, 4.60%, 12/1/03........ 1,026,250
2,695,000 Tacoma Electric System,
Refunding, 6.00%, 1/1/06
(Insured by AMBAC).............. 2,961,131
2,000,000 Washington State Public Power
Supply System, Nuclear Project
No. 1 Bond Revenue, Series C,
7.25%, 7/1/00 (Insured by
FGIC)........................... 2,147,500
8,000,000 Washington State, Series A, GO,
5.50%, 9/1/05................... 8,539,999
2,940,000 Washington State, Series A, GO,
Public Improvements, 5.25%,
1/1/06.......................... 3,116,400
850,000 Washington State, Series III-H,
Motor Vehicle Fuel Tax, 5.75%,
9/1/12.......................... 930,750
------------
18,722,030
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
WEST VIRGINIA -- 0.4%
$ 1,095,000 West Virginia School Building
Authority Revenue, Capital
Improvement, Series A, 6.70%,
7/1/00 (Insured by MBIA)...... $ 1,160,700
--------------
WISCONSIN -- 1.3%
1,025,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.60%,
10/1/99....................... 1,068,563
1,500,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.70%,
10/1/00....................... 1,599,375
1,000,000 Wisconsin State Public Power,
Inc., Supply System, Series A,
7.00%, 7/1/01 (Insured by
AMBAC)........................ 1,085,000
--------------
3,752,938
--------------
TOTAL MUNICIPAL BONDS......... 273,712,235
--------------
(Cost $257,614,807)
INVESTMENT COMPANIES -- 0.4%
1,117,598 Dreyfus Tax Exempt Money
Market........................ 1,117,598
--------------
TOTAL INVESTMENT COMPANIES.... 1,117,598
--------------
(Cost $1,117,598)
TOTAL INVESTMENTS -- 98.4%................. 274,829,833
(Cost $258,732,405)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.6%...................... 4,345,919
--------------
TOTAL NET ASSETS -- 100.0%................. $ 279,175,752
==============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 16,097,428
Unrealized depreciation............... 0
------------
Net unrealized appreciation........... $ 16,097,428
============
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
82
<PAGE> 229
THE KENT FUNDS
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 97.8%
ARIZONA -- 1.4%
$1,500,000 Arizona State University
Revenue, 7.00%, 7/1/15,
Prerefunded 7/1/02 @ 101
(Insured by AMBAC)............. $ 1,681,875
------------
CALIFORNIA -- 10.2%
1,000,000 Anaheim Public Financing
Authority, Lease Revenue,
Public Improvements Project,
Series A, 6.00%, 9/1/24
(Insured by FSA)............... 1,146,250
1,400,000 California State, GO, 7.00%,
6/1/05......................... 1,634,500
2,000,000 California State, GO, 6.25%,
9/1/12......................... 2,305,000
3,000,000 Northern California Power
Agency Revenue, Geothermal
Project, Series A, 5.50%,
7/1/05 (Insured by AMBAC)...... 3,217,500
2,000,000 Orange County, Series A, 6.00%,
6/1/10 (Insured by MBIA)....... 2,240,000
1,380,000 Turlock Irrigation District
Revenue, Series A, 6.00%,
1/1/07 (Insured by MBIA)....... 1,540,425
------------
12,083,675
------------
COLORADO -- 2.1%
1,580,000 Denver City & County Airport
Revenue, (AMT), 6.75%,
11/15/22....................... 1,718,250
650,000 Denver City & County Airport
Revenue, Series C, (AMT),
6.75%, 11/15/22, Callable
11/15/02 @ 102................. 726,375
------------
2,444,625
------------
FLORIDA -- 1.5%
1,400,000 Port Everglades Authority, Port
Improvement, ETM, 7.13%,
11/1/16........................ 1,723,750
------------
GEORGIA -- 0.9%
1,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08.................. 1,122,500
------------
HAWAII -- 2.8%
2,000,000 Hawaii State, Series CB, GO,
5.75%, 1/1/07.................. 2,185,000
1,000,000 Honolulu City & County, Series
A, GO, 5.75%, 4/1/10........... 1,092,500
------------
3,277,500
------------
ILLINOIS -- 8.1%
2,000,000 Chicago Metropolitan, Water
Reclamation District, Capital
Improvement, GO, 5.50%,
12/1/10........................ 2,152,500
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
ILLINOIS (CONTINUED)
$1,000,000 Chicago Public Building
Commission, Series A, ETM,
7.00%, 1/1/20 (Insured by
MBIA).......................... $ 1,252,500
2,000,000 Chicago School Finance
Authority, Series A, GO, 4.90%,
6/1/05 (Insured by MBIA)....... 2,065,000
2,000,000 Du Page & Will Counties,
Community School District No.
204, GO, 4.95%, 12/30/01
(Insured by FGIC).............. 2,060,000
1,000,000 Illinois State Sales Tax,
Series S, 5.00%, 6/15/08....... 1,033,750
1,000,000 Will County Forest Preserve
District, GO, 5.90%, 12/1/03,
Callable 12/1/02 @ 100 (Insured
by AMBAC)...................... 1,077,500
------------
9,641,250
------------
INDIANA -- 5.7%
2,000,000 Indiana Municipal Power Supply
Agency, System Revenue, Series
B, 6.00%, 1/1/13 (Insured by
MBIA).......................... 2,247,500
2,250,000 Indiana State Office Building
Commission, Capital Complex,
Government Center Parking
Facilities, Series A, 4.80%,
7/1/03 (Insured by AMBAC)...... 2,300,625
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A, 5.75%, 6/1/12
(Insured by AMBAC)............. 1,095,000
1,000,000 Marion County Hospital
Authority Revenue, Community
Hospital, Indianapolis Project,
ETM, 6.00%, 5/1/06............. 1,090,000
------------
6,733,125
------------
IOWA -- 2.1%
2,055,000 Iowa Finance Authority, Private
College Revenue, Drake
University Project, 6.50%,
12/1/11 (Insured by MBIA)...... 2,432,606
------------
KENTUCKY -- 1.1%
1,315,000 Louisville & Jefferson County,
Metropolitan Sewer District,
Sewer & Drain System Revenue,
Series A, 5.25%, 5/15/27,
Callable 5/15/07 @ 101 (Insured
by MBIA)....................... 1,321,575
------------
</TABLE>
Continued
83
<PAGE> 230
THE KENT FUNDS
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
LOUISIANA -- 2.7%
$3,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A, 7.25%,
11/15/00, Callable 11/15/99 @
102............................ $ 3,228,750
------------
MARYLAND -- 1.7%
2,000,000 Prince Georges County,
Consolidated Public
Improvement, GO, 5.00%, 1/1/02
(Insured by MBIA).............. 2,062,500
------------
MASSACHUSETTS -- 4.3%
1,000,000 Massachusetts State Industrial
Finance Agency, Resource
Recovery Revenue, Refusetech,
Inc. Project, Series A, 5.25%,
7/1/99 (Insured by FSA)........ 1,017,500
1,000,000 Massachusetts State Water,
Resource Authority, Series B,
5.00%, 12/1/25 (Insured by
MBIA).......................... 967,500
1,000,000 Massachusetts State, Series B,
GO, 5.40%, 11/1/06............. 1,067,500
2,000,000 Massachusetts Turnpike
Authority, Metropolitan
Highway, Series A, 5.00%,
1/1/10, Callable 1/1/07 @
102............................ 2,015,000
------------
5,067,500
------------
MICHIGAN -- 20.2%
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 7.30%,
5/1/10, Callable 5/1/04 @
102............................ 2,352,500
1,300,000 Berkley School District, GO,
7.00%, 1/1/07 (Insured by
FGIC).......................... 1,548,625
2,000,000 Detroit Sewage Disposal
Revenue, Series B, 6.00%,
7/1/09 (Insured by MBIA)....... 2,260,000
1,000,000 Detroit Water Supply System,
Series B, 5.10%, 7/1/07
(Insured by MBIA).............. 1,056,250
930,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.50%, 1/1/07,
Callable 1/1/05 @ 102.......... 997,425
2,000,000 Michigan State Hospital Finance
Authority, Sisters of Mercy,
Series P, 5.25%, 8/15/21
(Insured by MBIA).............. 1,985,000
2,365,000 Michigan State Hospital Finance
Authority, Detroit Medical
Center, Series B, 5.00%,
8/15/06 (Insured by AMBAC)..... 2,459,599
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,000,000 Michigan State Hospital Finance
Authority, Henry Ford Health,
Series A, 5.25%, 11/15/20
(Insured by AMBAC)............. $ 1,995,000
1,300,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
5.15%, 4/1/02 (Insured by
AMBAC)......................... 1,340,625
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue, 5.80%, 11/1/05
(Insured by MBIA).............. 1,096,250
1,500,000 Michigan State Strategic Fund,
Detroit Edition, 5.00%*, 1/2/98
(LOC: Barclays)................ 1,500,000
2,000,000 Michigan State Trunk Line,
5.50%, 11/1/16 (Insured by
FGIC).......................... 2,060,000
1,000,000 Michigan State Underground
Storage Tank Financial
Assurance Authority, Series I,
6.00%, 5/1/05 (Insured by
AMBAC)......................... 1,103,750
2,000,000 Michigan State University
Revenue, Series A, 5.50%,
8/15/22........................ 2,052,500
------------
23,807,524
------------
MISSOURI -- 1.8%
1,625,000 Missouri State, DFB
Infrastructure Facilities,
Science City Union Station A,
4.10%, 12/1/99................. 1,627,031
500,000 Missouri State, Health &
Education Facilities, Lake of
Ozarks General Hospital, 6.50%,
2/15/21, Callable 2/15/06 @
102............................ 541,250
------------
2,168,281
------------
NEBRASKA -- 1.0%
1,075,000 Omaha Public Power District,
5.10%, 2/1/08.................. 1,126,063
------------
NEVADA -- 3.7%
1,805,000 Clark County School District,
GO, 5.75%, 6/15/10, Callable
6/15/06 @ 101 (Insured by
FGIC).......................... 1,938,119
2,000,000 Nevada State, Nevada Municipal
Bond Bank, Series A, GO, 8.00%,
11/1/05........................ 2,487,500
------------
4,425,619
------------
NEW JERSEY -- 2.9%
1,500,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Senior Lien,
7.00%, 7/1/04 (Insured by
MBIA).......................... 1,728,750
</TABLE>
Continued
84
<PAGE> 231
THE KENT FUNDS
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
$1,500,000 New Jersey State Transportation
Trust Fund Authority,
Transportation System, Series
A, 6.00%, 12/15/06 (Insured by
MBIA).......................... $ 1,670,625
------------
3,399,375
------------
NEW YORK -- 3.4%
1,350,000 New York City, Municipal Water
& Sewer Revenue, 5.50%,
6/15/24, Callable 6/15/06 @
101............................ 1,388,813
1,500,000 New York City, Tax Revenue
Anticipation Note, Livingston
Plaza Project, 5.40%, 1/1/18... 1,567,500
1,000,000 New York State Thruway
Authority, Series 1997 B,
6.00%, 4/1/07.................. 1,090,000
------------
4,046,313
------------
OKLAHOMA -- 1.9%
1,000,000 Grand River Dam Authority,
5.75%, 6/1/08 (Insured by
FSA)........................... 1,112,500
1,000,000 Tulsa Industrial Authority,
University of Tulsa, Series A,
6.00%, 10/1/16 (Insured by
MBIA).......................... 1,125,000
------------
2,237,500
------------
PENNSYLVANIA -- 1.7%
2,000,000 Pennsylvania State, First
Series, GO, 5.38%, 5/15/16
(Insured by FGIC).............. 2,065,000
------------
PUERTO RICO -- 0.9%
1,000,000 Puerto Rico Commonwealth
Highway & Transportation
Authority, Highway Revenue,
Series X, 4.90%, 7/1/01........ 1,026,250
------------
RHODE ISLAND -- 0.9%
1,000,000 Convention Center Authority,
Series B, 5.00%, 5/15/09
(Insured by MBIA).............. 1,041,250
------------
SOUTH CAROLINA -- 1.0%
1,200,000 Myrtle Beach Water & Sewer
Revenue, 4.90%, 3/1/02 (Insured
by MBIA)....................... 1,234,500
------------
TENNESSEE -- 1.1%
1,225,000 Tennessee Housing Development
Agency, Mortgage Finance,
Series C, (AMT), 5.95%, 7/1/09,
Callable 7/1/05 @ 102 (Insured
by MBIA)....................... 1,307,688
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
TEXAS -- 6.0%
$ 1,000,000 Brownsville Utility System,
6.25%, 9/1/11 (Insured by
AMBAC)......................... $ 1,146,250
1,000,000 Harris County, Certificates of
Obligation, 6.00%, 12/15/11.... 1,133,750
2,000,000 Texas City Industrial
Development Corp., Marine
Terminal Revenue, Arco Pipeline
Co. Project, 7.38%, 10/1/20.... 2,627,500
2,000,000 Texas State, Series A, GO,
5.70%, 10/1/03................. 2,157,500
------------
7,065,000
------------
UTAH -- 2.6%
2,175,000 Intermountain Power Agency,
Utah Power Supply, Series D,
5.00%, 7/1/23.................. 2,096,156
1,000,000 St. George, Parks &
Recreational Facilities, GO,
5.38%, 8/1/21, Callable 8/1/07
@ 101 (Insured by FGIC)........ 1,022,500
------------
3,118,656
------------
WASHINGTON -- 4.1%
1,000,000 Douglas County Public Utility
District No. 001, Electric
Distribution System, 5.90%,
1/1/11, Callable 1/1/05 @ 102
(Insured by MBIA).............. 1,073,750
2,500,000 Port Seattle Limited, GO,
(AMT), 5.35%, 5/1/04........... 2,625,000
1,000,000 Washington State, Motor Vehicle
Fuel Tax, R-92D, GO, 6.25%,
9/1/07......................... 1,140,000
------------
4,838,750
------------
TOTAL MUNICIPAL BONDS.......... 115,729,000
------------
(Cost $108,371,163)
INVESTMENT COMPANIES -- 0.8%
972,571 Dreyfus Tax Exempt Money
Market......................... 972,571
------------
TOTAL INVESTMENT COMPANIES..... 972,571
------------
(Cost $972,571)
TOTAL INVESTMENTS -- 98.6%.................. 116,701,571
(Cost $109,343,734)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.4%....................... 1,662,588
------------
TOTAL NET ASSETS -- 100.0%.................. $118,364,159
============
</TABLE>
Continued
85
<PAGE> 232
THE KENT FUNDS
TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................. $7,357,837
Unrealized depreciation................. 0
----------
Net unrealized appreciation............. $7,357,837
==========
</TABLE>
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
86
<PAGE> 233
THE KENT FUNDS
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS -- 98.6%
MICHIGAN -- 95.9%
$1,785,000 Allegan Sanitary Sewer System,
(AMT), 5.45%, 11/1/02........... $ 1,836,319
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 6.90%,
5/1/04.......................... 2,222,500
1,000,000 Bay City Electric Utility
Revenue, 5.15%, 1/1/07 (Insured
by AMBAC)....................... 1,045,000
745,000 Bay City School District, GO,
5.50%, 5/1/98................... 749,239
560,000 Chippewa County Hospital Finance
Authority, 4.20%, 11/1/98....... 560,235
290,000 Chippewa County Hospital Finance
Authority, 4.40%, 11/1/99....... 290,725
585,000 Chippewa County Hospital Finance
Authority, 4.40%, 11/1/99....... 586,463
260,000 Chippewa County Hospital Finance
Authority, 4.60%, 11/1/00....... 260,975
1,000,000 Chippewa Valley School District,
GO, 6.38%, 5/1/05, Prerefunded
5/1/01 @ 101.5 (Insured by
FGIC)........................... 1,085,000
1,445,000 Chippewa Valley School District,
Series A, GO, 5.60%, 5/1/99..... 1,475,706
1,700,000 Clintondale Community School
District, GO, 4.65%, 5/1/03..... 1,725,500
2,000,000 Dearborn School District, GO,
6.63%, 5/1/09, Prerefunded
5/1/00 @ 102 (Insured by
MBIA)........................... 2,152,500
1,000,000 Dearborn School District, GO,
6.38%, 5/1/10, Prerefunded
5/1/00 @ 102 (Insured by
MBIA)........................... 1,071,250
1,075,000 Dearborn Sewage Disposal System,
7.00%, 4/1/99 (Insured by
MBIA)........................... 1,113,969
965,000 Dearborn Sewage Disposal System,
6.90%, 4/1/02 (Insured by
MBIA)........................... 1,065,119
1,000,000 Detroit, GO, 5.00%, 4/1/04...... 1,036,250
750,000 Detroit, GO, 5.05%, 4/1/06...... 829,688
2,800,000 Detroit Sewage Disposal, Series
A, 4.85%, 7/1/01 (Insured by
FGIC)........................... 2,866,499
580,000 Detroit, Distributable State
Aid, GO, 5.60%, 5/1/00 (Insured
by AMBAC)....................... 599,575
2,000,000 East China Township School
District, GO, 6.00%, 5/1/02,
Callable 5/1/01 @ 102........... 2,117,500
1,000,000 Eastern Michigan University, GO,
5.80%, 6/1/01 (Insured by
AMBAC).......................... 1,052,500
445,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series
A, 5.10%, 2/15/04 (Insured by
MBIA)........................... 463,356
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 470,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series
A, 5.20%, 2/15/05 (Insured by
MBIA)........................... $ 493,500
1,000,000 Grand Haven Area Public Schools,
GO, 5.45%, 5/1/04 (Insured by
MBIA)........................... 1,067,500
1,250,000 Greater Detroit Resource
Recovery Authority, Series B,
5.00%, 12/13/02 (Insured by
AMBAC).......................... 1,289,063
1,000,000 Holland Electric Revenue, 6.40%,
7/1/02, Prerefunded 7/1/99 @
100............................. 1,035,000
1,100,000 Holland Electric Revenue, 6.50%,
7/1/03, Prerefunded 7/1/99 @
100............................. 1,139,875
675,000 Hudsonville Public Schools,
Series B, GO, 4.50%, 5/1/98
(Insured by FGIC)............... 676,661
1,250,000 Huron Valley School District,
GO, 7.10%, 5/1/08, Prerefunded
5/1/01 @ 102 (Insured by
FGIC)........................... 1,389,063
1,810,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 4.95%, 5/15/02
(Insured by MBIA)............... 1,859,775
1,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 5.25%, 5/15/05
(Insured by MBIA)............... 1,053,750
1,295,000 Kenowa Hills Public Schools, GO,
5.50%, 5/1/05................... 1,388,888
500,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.25%, 1/1/04... 523,125
505,000 Kent County Airport Facility,
Kent County International
Airport, (AMT), 5.30%, 1/1/05... 531,513
1,150,000 Kent Hospital Finance Authority,
Butterworth Hospital, 4.90%,
1/15/05......................... 1,178,750
2,000,000 Lake Orion Community School
District, GO, 6.20%, 5/1/04
(Insured by AMBAC).............. 2,212,500
3,032,379 Michigan Department of State
Police Lease, 4.95%, 3/10/02.... 3,051,331
1,020,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Qualified School,
6.35%, 5/15/01.................. 1,092,675
1,000,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Series B, 6.90%, 5/1/99
(Insured by FGIC)............... 1,036,250
</TABLE>
Continued
87
<PAGE> 234
THE KENT FUNDS
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,000,000 Michigan Municipal Bond
Authority, Pooled Projects,
Series B, 5.10%, 10/1/04........ $ 1,050,000
1,000,000 Michigan Municipal Bond
Authority, State Revolving Fund,
5.50%, 10/1/99.................. 1,025,000
2,000,000 Michigan Municipal Bond
Authority, State Revolving Fund,
5.50%, 10/1/06.................. 2,157,500
2,000,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.30%, 1/1/00................... 2,050,000
750,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.70%, 1/1/03................... 796,875
1,000,000 Michigan State Building
Authority, Series II, 6.10%,
10/1/01......................... 1,071,250
3,000,000 Michigan State Comprehensive
Transportation, Series B, 5.63%,
5/15/03, Callable 7/1/02 @
102............................. 3,194,999
1,000,000 Michigan State Hospital Finance
Authority Revenue, Sisters of
Mercy Health Corp. Bond 1993,
Series F, 4.60%, 8/15/02
(Insured by MBIA)............... 1,015,000
1,855,000 Michigan State Hospital Finance
Authority, Bay Medical Center,
Series A, 5.38%, 7/1/06 (Insured
by FSA)......................... 1,977,894
750,000 Michigan State Hospital Finance
Authority, GO, Detroit Medical
Center Group A, 5.00%, 8/15/04
(Insured by AMBAC).............. 776,250
2,000,000 Michigan State Hospital Finance
Authority, Mclaren Obligated
Group, Series A, 5.75%,
10/15/03........................ 2,122,500
1,500,000 Michigan State Hospital Finance
Authority, Mercy Health
Services, Series S, 6.00%,
8/15/06......................... 1,651,875
1,060,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J, 7.15%,
2/15/99......................... 1,097,100
2,800,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J, 7.38%,
2/15/11, Prerefunded 2/15/01 @
102............................. 3,118,499
1,150,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 4.50%, 5/15/01
(Insured by AMBAC).............. 1,161,500
1,000,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center, 5.00%, 5/15/05
(Insured by AMBAC).............. 1,038,750
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,680,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
(AMT), 5.25%, 10/1/01 (Insured
by MBIA)........................ $ 2,760,399
415,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Lutheran Social Services
Project, 4.40%, 9/1/98 (LOC:
First of America)............... 416,677
860,000 Michigan State Strategic Fund,
Industrial Development Revenue,
Grand Rapids Motel Project,
(AMT), 5.25%*, 6/1/98 Mandatory
Put 6/1/98 @ 100 (LOC: Comerica
Bank)........................... 862,537
2,000,000 Michigan State Underground
Storage, Tank Financial
Assurance Authority, Series I,
5.00%, 5/1/00 (Insured by
AMBAC).......................... 2,040,000
1,270,000 Michigan State Underground
Storage, Tank Financial
Assurance Authority, Series I,
6.00%, 5/1/06 (Insured by
AMBAC).......................... 1,412,875
1,000,000 Mount Clemens Community School
District, GO, 6.60%, 5/1/20,
Prerefunded 5/1/02 @ 102
(Insured by MBIA)............... 1,110,000
1,580,000 Oakland County Economic
Development Corp. Revenue,
Boardwalk Shopping Center,
Limited Obligation Revenue,
4.75%*, 6/30/98 (LOC: NBD)...... 1,585,088
600,000 Oakland County Economic
Development Corp., Sugartree
Shopping Center, 4.75%, 1/1/14,
Mandatory Put 7/1/98 (LOC:
NBD)............................ 600,444
1,000,000 Oakland Washtenaw County
Community College, 6.65%,
5/1/11, Prerefunded 5/1/02 @
100............................. 1,110,000
3,000,000 Okemos Public School District,
Series I, GO, 6.90%, 5/1/11,
Prerefunded 5/1/01 @ 102........ 3,311,249
3,200,000 Plymouth-Canton Community School
District, Series B, GO, 6.80%,
5/1/17, Prerefunded 5/1/01 @
101............................. 3,491,999
735,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/01 (Insured by
FGIC)........................... 795,638
750,000 Reeths-Puffer Schools, GO,
6.25%, 5/1/02 (Insured by
FGIC)........................... 811,875
2,000,000 Rockford Public Schools, GO,
7.38%, 5/1/19, Prerefunded
5/1/00 @ 101.................... 2,165,000
</TABLE>
Continued
88
<PAGE> 235
THE KENT FUNDS
MICHIGAN MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ----------- ------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,000,000 South Lyon Community Schools,
GO, 7.80%, 5/1/14, Prerefunded
5/1/98 @ 102.................... $ 1,032,870
1,000,000 University of Michigan, Medical
Service Plan, Series A, 4.25%*,
1/2/98.......................... 1,000,000
2,035,000 Walled Lake Consolidated School
District, GO, 4.70%, 5/1/01..... 2,078,244
2,235,000 Walled Lake Consolidated School
District, GO, 4.80%, 5/1/02..... 2,296,463
2,000,000 Walled Lake Consolidated School
District, Series II, GO, 7.10%,
5/1/05, Prerefunded 5/1/00 @
102............................. 2,170,000
945,000 Warren Consolidated School
District, GO, 6.00%, 5/1/01..... 1,000,519
1,025,000 Washtenaw Community College, GO,
4.70%, 4/1/03 (Insured by
FGIC)........................... 1,046,781
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/98.......................... 548,400
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/99.......................... 547,938
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/00.......................... 544,500
1,750,000 Western Michigan University,
Series A, 6.50%, 7/15/01,
Prerefunded 7/15/01 @ 102
(Insured by AMBAC).............. 1,916,250
1,000,000 Wyandotte Electric Revenue,
6.20%, 10/1/03 (Insured by
MBIA)........................... 1,098,750
1,150,000 Ypsilanti School District,
4.50%, 5/01/00 (Insured by
FGIC)........................... 1,161,500
------------
111,446,075
------------
PUERTO RICO -- 2.7%
3,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority,
Highway Revenue, Series X,
4.90%, 7/1/01................... 3,078,750
------------
TOTAL MUNICIPAL BONDS........... 114,524,825
------------
(Cost $111,182,602)
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ ----------- ------
<C> <S> <C>
INVESTMENT COMPANIES -- 0.1%
154,117 Dreyfus Tax Exempt Money
Market......................... $ 154,117
------------
TOTAL INVESTMENT COMPANIES..... 154,117
------------
(Cost $154,117)
TOTAL INVESTMENTS -- 98.7%.................. 114,678,942
(Cost $111,336,719)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.3%....................... 1,469,357
------------
TOTAL NET ASSETS -- 100.0%.................. $116,148,299
============
</TABLE>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................. $3,342,223
Unrealized depreciation.................
0
----------
Net unrealized appreciation.............
$3,342,223
==========
</TABLE>
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
89
<PAGE> 236
THE KENT FUNDS
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
- --------- ---------
<C> <S> <C>
BANKERS ACCEPTANCES -- $8.1%
$5,000,000 Bank of America, 5.48%,
3/11/98......................... $ 4,947,483
4,398,113 Chase Manhattan Corp., 5.52%,
2/17/98......................... 4,366,417
5,000,000 Corestates Bank N.A., 5.53%,
1/30/98......................... 4,977,726
5,000,000 First Chicago NBD Corp., 5.51%,
3/2/98.......................... 4,954,083
5,000,000 Mellon Bank N.A., 5.53%,
1/20/98......................... 4,985,408
5,000,000 Mellon Bank N.A., 5.51%,
2/6/98.......................... 4,972,450
4,545,172 SunTrust Bank N.A., 5.70%,
1/16/98......................... 4,534,377
5,000,000.. SunTrust Bank N.A., 5.57%,
2/5/98.......................... 4,972,924
------------
TOTAL BANKERS ACCEPTANCES ... 38,710,868
------------
(Amortized Cost $38,710,868)
CERTIFICATES OF DEPOSIT -- 3.6%
3,084,303 First Chicago Corp., 5.35%,
1/5/98.......................... 3,084,172
10,000,000 J. P. Morgan & Co., 5.71%,
1/6/98.......................... 9,999,788
4,000,000 J. P. Morgan & Co., 5.60%,
2/5/98.......................... 3,999,086
------------
TOTAL CERTIFICATES OF DEPOSIT... 17,083,046
------------
(Amortized Cost $17,083,046)
COMMERCIAL PAPER -- 42.1%
7,230,000 ABN Amro North America Finance,
5.60%, 4/20/98.................. 7,107,412
5,000,000 Amoco Corp., 5.52%, 3/4/98...... 4,952,467
5,000,000 Banque National De Paris Canada,
5.55%, 1/5/98................... 4,996,917
4,400,000 Banque National De Paris Canada,
5.53%, 1/21/98.................. 4,386,482
5,000,000 Cargill, Inc., 5.62%, 1/21/98... 4,984,389
5,000,000 Daimler-Benz N.A. Corp., 5.72%,
1/23/98......................... 4,982,522
5,000,000 Daimler-Benz N.A. Corp., 5.52%,
2/12/98......................... 4,967,800
5,000,000 Daimler-Benz N.A. Corp., 5.54%,
2/17/98......................... 4,963,836
5,000,000 Daimler-Benz N.A. Corp., 5.53%,
2/27/98......................... 4,956,221
4,000,000 Daimler-Benz N.A. Corp., 5.65%,
3/26/98......................... 3,947,267
5,000,000 Dresdner US Finance, Inc.,
5.74%, 1/5/98................... 4,996,811
5,000,000 Dresdner US Finance, Inc.,
5.60%, 1/5/98................... 4,996,889
5,300,000 E.I. du Pont de Nemours & Co.,
5.53%, 4/20/98.................. 5,211,259
5,000,000 E.I. du Pont de Nemours & Co.,
5.53%, 6/4/98................... 4,881,719
5,000,000 Ford Motor Credit Co., 5.49%,
1/9/98.......................... 4,993,900
5,000,000 Ford Motor Credit Co., 5.51%,
1/26/98......................... 4,980,868
5,000,000 Gannett Co., Inc., 5.55%,
1/7/98.......................... 4,995,375
5,000,000 General Electric Capital Corp.,
5.59%, 1/12/98.................. 4,991,460
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
- --------- ---------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$5,000,000 General Electric Capital Corp.,
5.68%, 2/11/98.................. $ 4,967,656
5,000,000 General Electric Capital Corp.,
5.72%, 3/16/98.................. 4,941,211
5,000,000 General Electric Capital Corp.,
5.50%, 6/15/98.................. 4,873,958
5,000,000 General Motors Acceptance Corp.,
5.57%, 1/12/98.................. 4,991,490
5,000,000 General Motors Acceptance Corp.,
5.74%, 4/15/98.................. 4,917,089
5,000,000 General Motors Acceptance Corp.,
5.60%, 4/20/98.................. 4,915,222
4,000,000 GTE Corp., 5.98%, 1/8/98........ 3,995,349
5,000,000 GTE Corp., 6.20%, 1/16/98....... 4,987,083
5,000,000 HJ Heinz Co., 5.70%, 1/6/98..... 4,996,042
5,000,000 HJ Heinz Co., 5.75%, 2/17/98.... 4,962,465
5,000,000 Michigan Consolidated Gas Co.,
5.58%, 1/20/98.................. 4,985,275
5,000,000 Michigan Consolidated Gas Co.,
5.58%, 2/3/98................... 4,974,425
5,000,000 Michigan Consolidated Gas Co.,
5.68%, 2/17/98.................. 4,962,922
5,000,000 Michigan Consolidated Gas Co.,
5.56%, 2/27/98.................. 4,955,983
5,000,000 National Australia Bank, Ltd.,
5.55%, 1/9/98................... 4,993,833
5,000,000 Schering-Plough Corp., 5.70%,
3/17/98......................... 4,940,625
6,900,000 Sony Capital Corp., 5.75%,
1/7/98(c)....................... 6,893,388
5,500,000 Sony Capital Corp., 5.95%,
2/24/98(c)...................... 5,450,913
5,000,000 Southern New England
Telecommunications, 5.87%,
1/20/98......................... 4,984,510
5,000,000 Toyota Motor Credit Corp.,
5.75%, 2/20/98.................. 4,960,069
5,000,000 Toyota Motor Credit Corp.,
5.70%, 2/27/98.................. 4,954,875
5,000,000 Toyota Motor Credit Corp.,
5.71%, 3/26/98.................. 4,933,383
------------
TOTAL COMMERCIAL PAPER ... 200,831,360
------------
(Amortized Cost $200,831,360)
DEMAND NOTES -- 19.4%
6,000,000 American Healthcare Funding
L.L.C., 5.80%*, 1/8/98 (LOC:
LaSalle National Bank).......... 6,000,000
4,000,000 American Mfg. Co., Inc., Series
1997, 5.95%*, 1/8/98 (LOC:
Mellon Bank).................... 4,000,000
7,500,000 Arboretum Properties, L.L.C.,
6.08%*, 1/7/98 (LOC: Michigan
National Bank).................. 7,500,000
2,500,000 Buckeye Corrugated, Inc.,
6.08%*, 1/7/98 (LOC: Keybank)... 2,500,000
</TABLE>
Continued
90
<PAGE> 237
THE KENT FUNDS
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
- --------- ---------
<C> <S> <C>
DEMAND NOTES (CONTINUED)
$5,915,000 FC Bellevue, Inc., 6.10%*,
1/8/98 (LOC: National City Bank
Cleveland, Ohio)................ $ 5,915,000
5,000,000 First Metro Title Co., 6.08%*,
1/8/98 (LOC: Michigan National
Bank)........................... 5,000,000
4,790,000 Harry W. Albright, Jr.,
6.10%*,1/8/98................... 4,790,000
3,500,000 HWP Co., Ltd. Project, 6.10%*,
1/8/98 (LOC: National City Bank
Cleveland, Ohio)................ 3,500,000
4,730,000 Labelle Capital Funding L.L.C.,
6.10%*, 1/8/98 (LOC: First of
America Bank-Michigan).......... 4,730,000
4,000,000 Macroe Properties, Inc., 6.10%*,
1/8/98 (LOC: Huntington Bank)... 4,000,000
8,700,000 Ordeal Properties L.L.C.,
6.08%*, 1/7/98 (LOC: Keybank)... 8,700,000
2,500,000 Patt's Enterprises L.L.C.,
6.10%*, 1/8/98 (LOC: Huntington
National Bank).................. 2,500,000
5,000,000 PRA at Glenwood Hills Corporate,
Centre Limited Liability Co.,
6.05%*, 1/8/98 (LOC: First of
America Bank-Michigan).......... 5,000,000
8,530,000 PRD Finance L.L.C., 6.05%*,
1/8/98 (LOC: First of America
Bank-Michigan).................. 8,530,000
3,000,000 Royal Town Center L.L.C.
Project, 6.10%*, 1/8/98 (LOC:
Comerica Bank).................. 3,000,000
2,685,000 Rumpf Development Ltd., 6.08%*,
1/7/98 (LOC: Keybank)........... 2,685,000
5,000,000 Sheperd Capital L.L.C., 6.10%*,
1/8/98 (LOC: Comerica Bank)..... 5,000,000
2,000,000 South Bend MAC, L.P., 6.10%*,
1/7/98 (LOC: LaSalle National
Bank)........................... 2,000,000
1,075,000 The Economic Development Corp.
of the County of Marquette,
Pioneer Laboratories, Inc.
Project, 6.10%*, 1/8/98 (LOC:
NBD Bank)....................... 1,075,000
5,645,000 Zeigler Realty, L.L.C, 6.10%*,
1/2/98 (LOC: First of America
Bank-Michigan).................. 5,645,000
------------
TOTAL DEMAND NOTES ... 92,070,000
------------
(Amortized Cost $92,070,000)
EURO CERTIFICATES OF DEPOSIT -- 3.2%
5,000,000 Bayerische Landesbank, 5.77%,
2/27/98......................... 4,999,729
5,000,000 Rabobank Nederland, 5.58%,
1/12/98......................... 4,999,970
5,000,000 Societe Generale, 5.71%,
4/3/98.......................... 4,999,355
------------
TOTAL EURO CERTIFICATES OF
DEPOSIT ........................ 14,999,054
------------
(Amortized Cost $14,999,054)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
- --------- ---------
<C> <S> <C>
FUNDING AGREEMENTS -- $3.2%
$5,000,000 Allstate Financial Corp.,
5.84%*, 1/2/98 (b).............. $ 5,000,000
5,000,000 Allstate Financial Corp.,
5.84%*, 1/2/98 (b).............. 5,000,000
5,000,000 General American Life Insurance
Co., 5.89%*, 1/2/98 (b)......... 5,000,000
------------
TOTAL FUNDING AGREEMENTS ... 15,000,000
------------
(Amortized Cost $15,000,000)
MUNICIPAL BOND -- TAXABLE -- 1.1%
5,200,000 City of Cloquet, Minnesota
Taxable Industrial Bond, Series
1996B, 5.80%*, 1/7/98 (LOC:
Credit Suisse).................. 5,200,000
------------
TOTAL MUNICIPAL
BOND -- TAXABLE ................ 5,200,000
------------
(Amortized Cost $5,200,000)
YANKEE CERTIFICATES OF DEPOSIT -- 17.9%
5,000,000 ABN Amro Bank, 5.83%, 1/9/98.... 4,999,956
5,000,000 ABN Amro Bank, 5.70%, 3/2/98.... 4,999,993
5,000,000 ABN Amro Bank, 5.82%, 7/17/98... 4,999,683
5,000,000 Bank of Nova Scotia, 5.75%,
2/12/98......................... 5,000,000
5,000,000 Bankers Trust Co., 5.90%,
8/10/98......................... 4,998,553
5,000,000 Banque National De Paris, 5.78%,
2/4/98.......................... 4,999,197
5,000,000 Banque National De Paris, 5.73%,
3/9/98.......................... 5,000,090
5,000,000 Banque National De Paris, 5.96%,
6/30/98......................... 5,001,738
5,000,000 Barclays Bank PLC, 5.87%,
3/9/98.......................... 4,999,870
5,000,000 Barclays Bank PLC, 5.93%,
6/24/98......................... 5,001,370
5,000,000 Canadian Imperial Bank of
Commerce, 5.82%, 2/27/98........ 4,998,082
5,000,000 Commerzebank Group, 5.81%,
3/4/98.......................... 4,999,520
5,000,000 National Westminster Bank,
5.86%, 3/10/98.................. 5,000,181
5,000,000 Societe Generale, 5.81%,
3/16/98......................... 5,000,092
5,000,000 Societe Generale, 5.69%,
3/19/98......................... 4,999,708
5,000,000 Swiss Bank Corp., 5.75%,
2/12/98......................... 5,000,058
5,000,000 Swiss Bank Corp., 6.05%,
5/22/98......................... 5,004,346
------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT 85,002,437
------------
(Amortized Cost $85,002,437)
</TABLE>
Continued
91
<PAGE> 238
THE KENT FUNDS
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMORTIZED
SHARES COST
------ ---------
<C> <S> <C>
INVESTMENT COMPANIES -- 1.1%
5,230,364 Dreyfus Cash Management Money
Market.......................... $5,230,364
------------
TOTAL INVESTMENT COMPANIES ... 5,230,364
------------
(Amortized Cost $5,230,364)
TOTAL INVESTMENTS -- 99.7% ... 474,127,129
(Amortized Cost $474,127,129) (a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.3% .................... 1,430,086
------------
TOTAL NET ASSETS -- 100.0% .... $475,557,215
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
(b) Illiquid security.
(c) Section 4(2) Commercial Paper.
Security is subject to contractual or legal restrictions on its resale and
is deemed liquid by guidelines established by the Board of Trustees.
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
LOC Letter of Credit
See Notes to Financial Statements.
92
<PAGE> 239
THE KENT FUNDS
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS -- 91.9%
MICHIGAN -- 85.8%
$ 605,000 Bay City Electric Revenue,
5.00%, 1/1/98 (Insured by
AMBAC).......................... $ 605,000
440,000 Calhoun County, GO, 3.95%,
7/1/98 (Insured by AMBAC)....... 440,000
675,000 Clinton Township Economic
Development Corp., Pointe
Village Square, 4.00%, 2/1/98**
(LOC: First of America)......... 675,000
1,200,000 Dearborn Economic Development,
Oakbrook Community, 3.70%*,
1/7/98 (LOC: Mellon Bank)....... 1,200,000
1,100,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series C,
5.10%*, 2/17/98 (LOC: Bank of
Nova Scotia).................... 1,100,000
2,840,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., 3.75%,
1/22/98 (LOC: Union Bank of
Switzerland).................... 2,840,000
1,000,000 Detroit City School District,
State Aid, 4.50%, 5/1/98........ 1,001,912
1,000,000 Detroit Water Revenue, 7.88%,
7/1/19, Prerefunded 7/1/98 @
102............................. 1,039,305
680,000 Ecorse Public School District,
3.90%, 5/1/98 (Insured by
FGIC)........................... 680,000
390,000 Farmington Hills Michigan
Education, Marketing Displays,
3.80%, 3/2/98** (LOC: Comerica
Bank)........................... 390,000
1,780,000 Genesse County Economic
Development Corp., Grand Blanc
Convention Center, 3.85%,
5/1/98** (LOC: Citizens Banking
Corp.).......................... 1,780,000
2,500,000 Grand Rapids Water Supply,
7.88%, 1/1/18, Prerefunded
1/1/98 @ 102.................... 2,550,000
2,225,000 Leelanau County Economic
Development Corp., American
Mutual Insurance Co., 3.85%,
6/15/98 (LOC: First of
America)........................ 2,225,000
445,000 Livonia County Economic
Development Corp., American
Community Mutual Insurance Co.,
3.85%, 5/15/98 ** (LOC: First of
America)........................ 445,000
1,300,000 Marquette County Economic
Development Corp., Pioneer Labs,
Inc., (AMT), 4.15%*, 1/7/98,
(LOC: NBD)...................... 1,300,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$1,800,000 Meridian, Hannah Technology,
4.05%*, 1/15/98 (LOC: Comerica
Bank)........................... $ 1,800,000
1,000,000 Michigan Municipal Bond
Authority, 6.80%, 5/1/98
(Insured by FGIC)............... 1,009,253
5,570,000 Michigan Municipal Bond
Authority, 4.75%, 5/1/98........ 5,583,206
2,500,000 Michigan Municipal Bond
Authority, 4.50%, 7/2/98........ 2,508,407
1,670,000 Michigan Municipal Bond
Authority, Revenue Note, Series
1997C, 4.50%, 9/18/98........... 1,676,870
3,000,000 Michigan State, 4.50%,
9/30/98......................... 3,015,803
9,000,000 Michigan State Building
Authority, 3.75%, 3/2/98 (LOC:
CIBC)........................... 8,999,999
1,150,000 Michigan State Building
Authority, 3.70%, 4/1/98........ 1,150,000
1,000,000 Michigan State Building
Authority, 4.50%, 10/1/98....... 1,004,348
2,045,000 Michigan State Building
Authority, 4.50%, 10/15/98...... 2,055,590
595,000 Michigan State Hospital Finance
Authority Revenue, Mercy Health
Services, 5.00%, 8/15/98........ 598,756
3,450,000 Michigan State Housing
Development Authority,
Multifamily, Series A, 3.80%,
1/28/98 (LOC: Credit Suisse).... 3,450,000
1,000,000 Michigan State Housing
Development Authority,
Multifamily, Series A, 3.80%,
2/24/98 (LOC: Credit Suisse).... 1,000,000
3,600,000 Michigan State Housing
Development Authority,
Multifamily, Series A, 3.75%,
2/24/98 (LOC: Credit Suisse).... 3,600,000
3,300,000 Michigan State Job Development
Authority, BASF Wyandotte,
4.00%*, 1/7/98 (LOC: Credit
Suisse)......................... 3,300,000
415,000 Michigan State Strategic Fund,
3.90%, 3/1/98 (LOC: Michigan
National Bank).................. 415,000
4,000,000 Michigan State Strategic Fund,
John A. Brewer, (AMT), 4.20%*,
1/7/98 (LOC: NBD)............... 4,000,000
3,100,000 Michigan State Strategic Fund,
Rochester Gear Project, (AMT),
3.95%*, 1/7/98 (LOC: Comerica
Bank)........................... 3,100,000
5,100,000 Michigan State Strategic Fund,
Dow Chemical Co. Project, (AMT),
5.00%*, 1/2/98.................. 5,100,000
</TABLE>
Continued
93
<PAGE> 240
THE KENT FUNDS
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$3,000,000 Michigan State Strategic Fund,
Van Andel Research Project,
4.15%*, 1/9/98 (LOC: Michigan
National Bank).................. $ 3,000,000
2,510,000 Michigan State Strategic Fund,
Atmosphere Annealing, (AMT),
4.15%*, 1/8/98 (LOC: First of
America)........................ 2,510,000
1,160,000 Michigan State Strategic Fund,
B.K. Hardwoods, (AMT), 4.35%*,
1/2/98, (LOC: Huntington Bank).. 1,160,000
4,500,000 Michigan State Strategic Fund,
Banks Hardwoods, Inc., (AMT),
4.25%*, 1/8/98 (LOC: Bank One).. 4,500,000
1,000,000 Michigan State Strategic Fund,
C-Tec Inc. Project, (AMT),
4.30%*, 1/7/98 (LOC: SunTrust
Bank)........................... 1,000,000
2,500,000 Michigan State Strategic Fund,
Delta Containers, Inc. Project,
(AMT), 4.10%*, 1/7/98 (LOC:
NBD)............................ 2,500,000
2,500,000 Michigan State Strategic Fund,
Donnelly Corp., Series B, (AMT),
4.00%, 4/1/98** (LOC: Dresdner
Bank)........................... 2,500,000
1,275,000 Michigan State Strategic Fund,
Environmental Powder Co., (AMT),
4.35%*, 1/8/98 (LOC: Michigan
National Bank).................. 1,275,000
1,500,000 Michigan State Strategic Fund,
Gollin Block & Supply Co.,
(AMT), 4.15%*, 1/7/98 (LOC:
Northern Trust)................. 1,499,985
2,000,000 Michigan State Strategic Fund,
I.V.C. Industrial Coatings,
Inc., (AMT), 4.25%*, 1/8/98
(LOC: Bank One)................. 2,000,000
1,700,000 Michigan State Strategic Fund,
Industrial Development, Kinder
Care, (AMT), 3.90%*, 1/7/98
(LOC: Toronto Dominion)......... 1,700,000
205,000 Michigan State Strategic Fund,
Kazoo, Inc. Project, (AMT),
3.90%, 3/15/98 (LOC: First of
America)........................ 205,000
3,155,000 Michigan State Strategic Fund,
Kerkstra Precast Project, (AMT),
4.35%*, 1/8/98 (LOC: Huntington
Bank)........................... 3,155,000
630,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Tawas Bay Associates Project,
(AMT), 3.85%, 6/1/98 (LOC: First
of America)..................... 630,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$2,750,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Advanced Tooling, (AMT), 4.10%*,
1/2/98 (LOC: Huntington Bank)... $ 2,750,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Cincinnati Milacron, (AMT),
4.40%*, 1/2/98 (LOC: PNC Bank).. 2,500,000
1,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Dickinson Press, Inc. Project,
(AMT), 4.35%*, 1/2/98 (LOC:
Huntington Bank)................ 1,000,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Donnelly Corp., (AMT), 4.20%*,
1/2/98 (LOC: Dresdner Bank)..... 2,500,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Eclipse Mold, (AMT), 4.10%*,
1/7/98 (LOC: NBD)............... 2,000,000
4,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue, H.P.
Pelzer, Inc. Project, (AMT),
4.20%*, 1/2/98 (LOC: NBD)....... 4,000,000
4,800,000 Michigan State Strategic Fund,
Limited Obligation Revenue, JB
Labs, Inc., Michigan HDA Rental
Revenue, Series C, (AMT),
4.35%*, 1/2/98 (LOC: Credit
Suisse)......................... 4,800,000
5,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Karona, Inc., (AMT), 4.35%*,
1/2/98 (LOC: First of
America)........................ 5,498,114
2,430,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Kay
Screen Printing, (AMT), 4.15%*,
1/2/98 (LOC: Comerica Bank)..... 2,430,000
365,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Kay
Screen Printing, (AMT), 4.15%*,
1/8/98 (LOC: Comerica Bank)..... 365,000
3,025,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Midbrook Products, Inc. Project,
(AMT), 4.35%*, 1/7/98 (LOC:
Comerica Bank).................. 3,025,000
715,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Patten Monument, (AMT), 4.35%*,
1/2/98 (LOC: Huntington Bank)... 715,000
1,800,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Pilot Industries, (AMT), 4.25%*,
1/8/98 (LOC: NBD)............... 1,800,000
</TABLE>
Continued
94
<PAGE> 241
THE KENT FUNDS
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$ 980,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Stephenson Land, (AMT), 4.35%*,
1/2/98 (LOC: Comerica Bank)..... $ 980,000
500,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Tom
Miller, Inc., (AMT), 4.30%*,
1/2/98 (LOC: First Union)....... 500,000
4,595,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
United Fixtures, (AMT), 4.15%*,
1/2/98 (LOC: LaSalle National
Bank)........................... 4,595,000
1,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue.
Autocam Corp., (AMT), 4.10%*,
1/8/98 (LOC: Comerica Bank)..... 1,000,000
905,000 Michigan State Strategic Fund,
Molmec, Inc. (AMT), 4.35%*,
1/2/98 (LOC: Comerica Bank)..... 905,000
1,000,000 Michigan State Strategic Fund,
NSF International Project,
Series 1997B, 4.15%*, 1/7/98
(LOC: First of America)......... 1,000,000
1,750,000 Michigan State Strategic Fund,
Omni Technical Services, Inc.,
(AMT), 4.35%*, 1/8/98 (LOC:
First of America)............... 1,750,000
2,865,000 Michigan State Strategic Fund,
Ort Tool & Die Corp., (AMT),
4.35%*, 1/8/98 (LOC: National
City Bank)...................... 2,865,000
945,000 Michigan State Strategic Fund,
Plascore, Inc., 4.35%*, 1/2/98,
(LOC: Huntington Bank).......... 945,000
5,000,000 Michigan State Strategic Fund,
Solid Waste Disposal, Grayling
Generating Project, (AMT),
3.75%*, 1/7/98 (LOC: Barclays
Bank)........................... 5,000,000
2,200,000 Michigan State Strategic Fund,
Sunrise Windows Ltd. Project,
4.04%*, 1/7/98 (LOC: Keybank)... 2,200,000
2,800,000 Michigan State Strategic Fund,
Unidet Waste System, (AMT),
3.80%*, 2/4/98, (LOC: Bank of
America)........................ 2,800,000
1,400,000 Michigan State Strategic Fund,
Waltec American Forgings, (AMT),
4.20%*, 1/7/98 (LOC: NBD)....... 1,400,000
1,075,000 Michigan State Strategic Fund,
Wright -- Technology, Inc.,
Series 1997, 4.35%*, 1/8/98
(LOC: First of America)......... 1,075,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
$4,000,000 Midland County Economic
Development Corp., Limited
Obligation Revenue, Dow Chemical
Project, Series A, (AMT), Series
A, 5.10%*, 1/8/98............... $ 4,000,000
3,000,000 Oakland County Economic
Development Corp., Cranbrook
Community, 4.15%*, 1/8/98 (LOC:
SPA Comerica)................... 3,000,000
675,000 Oakland County Economic
Development Corp., Orchard Maple
Project, 3.70%, 5/15/98** (LOC:
First of America)............... 675,000
310,000 Rochester Hills Economic
Development Corp., BRG Assoc.,
4.00%, 6/1/98** (LOC: Comerica
Bank)........................... 310,000
825,000 Saginaw Township School
Refunding, QSBLF, 3.90%,
12/1/98......................... 825,000
955,000 St. Clair Shores, Michigan
Education, Borman's, Inc.
Project, 3.85%*, 4/15/98 (LOC:
Huntington Bank)................ 955,000
1,800,000 University of Michigan Hospital
Revenue, Series A, 5.10%*,
1/2/98.......................... 1,800,000
4,200,000 University of Michigan Hospital
Revenue, Series A, 5.10%*,
1/2/98.......................... 4,200,000
1,205,000 Warren Economic Development
Corp. (Cross Country Inn),
3.75%, 6/1/98 (LOC: Huntington
Bank)........................... 1,205,000
1,855,000 Warren Economic Development
Corp., CMX Corp. Project, 3.90%,
3/15/98 (LOC: First of
America)........................ 1,855,000
550,000 Warren Economic Development
Corp., Limited Obligation
Revenue, Elias Brothers, 4.00%,
6/1/98 (LOC: Comerica Bank)..... 550,000
1,000,000 Waterford Township School
District, QSBLF, 4.30%,
6/1/98.......................... 1,002,203
910,000 Wayne County Airport, Detroit
Airport, Series A, (AMT),
3.75%*, 1/7/98 (LOC: Baerische
Landesbank)..................... 910,000
------------
180,958,751
------------
PUERTO RICO -- 6.1%
2,500,000 Commonwealth of Puerto Rico, Tax
& Revenue Anticipation Notes,
Series A,, 4.50%, 7/30/98....... 2,510,585
3,000,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Abbott Labs Project, 3.75%,
3/2/98.......................... 3,000,000
</TABLE>
Continued
95
<PAGE> 242
THE KENT FUNDS
MICHIGAN MUNICIPAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO (CONTINUED)
$2,750,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Reynolds Metals, 3.80%, 9/1/98**
(LOC: ABN/Amro)................. $ 2,750,000
4,200,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
4.00%, 12/1/98.................. 4,200,000
500,000 Puerto Rico Industrial Medical &
Environmental Pollution Control,
Facilities Financing Authority,
Reynolds Metals, 3.80%*,
9/1/98** (LOC: ABN/Amro)........ 500,321
------------
12,960,906
------------
TOTAL MUNICIPAL BONDS........... 193,919,657
------------
(Amortized Cost $193,919,657)
TAX FREE COMMERCIAL PAPER -- 7.5%
MICHIGAN -- 7.5%
1,100,000 Cornell Township Economic
Development Corp., Industrial
Development Revenue, Mead
Escanaba Paper Co., 3.65%,
2/26/98 (LOC: Credit Suisse).... 1,100,000
1,000,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., 3.70%,
1/22/98 (LOC: Union Bank of
Switzerland).................... 1,000,000
2,700,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series A,
3.75%, 1/27/98 (LOC: Morgan
Guaranty)....................... 2,700,000
1,500,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series A,
3.70%, 2/2/98 (LOC: Morgan
Guaranty)....................... 1,500,000
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
TAX FREE COMMERCIAL PAPER (CONTINUED)
MICHIGAN (CONTINUED)
$1,500,000 Delta County Economic
Development Corp., Environmental
Improvement Revenue, Mead
Escanaba Paper Co., Series A,
3.75%, 2/2/98 (LOC: Morgan
Guaranty)....................... $ 1,500,000
9,000,000 Michigan State Underground Tank
Storage, 3.75%, 2/5/98 (LOC:
CIBC)........................... 9,000,000
------------
TOTAL TAX FREE COMMERCIAL
PAPER........................... 16,800,000
------------
(Amortized Cost $16,800,000)
INVESTMENT COMPANIES -- 0.2%
50,956 Dreyfus Tax Exempt Money
Market.......................... 50,956
455,877 Federated Tax Exempt Money
Market.......................... 455,877
------------
TOTAL INVESTMENT COMPANIES...... 506,833
------------
(Amortized Cost $506,833)
TOTAL INVESTMENTS -- 99.6%.................. 211,226,490
(Amortized Cost $211,226,490)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.4%....................... 744,703
------------
TOTAL NET ASSETS -- 100.0% $211,971,193
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
** Putable security. Maturity date reflects next put date.
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
GO General Obligation
LOC Letter of Credit
QSBLF Qualified School Bond Loan Fund
See Notes to Financial Statements.
96
<PAGE> 243
THE KENT FUND
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 98.9%
FEDERAL FARM CREDIT BANK -- 12.6%
$5,000,000 5.65%, 2/2/98.................... $ 5,000,000
5,000,000 5.52%, 3/18/98................... 4,941,733
2,000,000 5.54%, 4/27/98................... 1,964,298
-----------
11,906,031
-----------
FEDERAL HOME LOAN BANK -- 24.8%
3,000,000 5.36%, 1/2/98.................... 2,999,553
1,300,000 5.50%, 1/9/98.................... 1,298,411
1,008,000 5.62%, 1/20/98................... 1,005,010
5,000,000 5.59%, 1/21/98................... 4,984,472
1,602,000 5.50%, 1/27/98................... 1,595,637
6,700,000 5.43%, 1/30/98................... 6,670,672
5,000,000 5.43%, 3/18/98................... 4,942,683
-----------
23,496,438
-----------
FEDERAL HOME LOAN MORTGAGE CORP -- 35.8%
5,000,000 5.47%, 1/7/97.................... 4,995,442
5,000,000 5.60%, 1/9/98.................... 4,993,783
3,990,000 5.63%, 1/14/98................... 3,981,878
4,000,000 5.69%, 1/22/98................... 3,986,723
6,000,000 5.55%, 1/23/98................... 5,979,486
5,000,000 5.65%, 3/6/98.................... 4,949,778
1,000,000 5.42%, 3/26/98................... 987,353
4,000,000 5.69%, 8/21/98................... 3,997,535
-----------
33,871,978
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 25.7%
3,000,000 5.43%, 1/9/98.................... 2,996,380
2,000,000 5.49%, 1/21/98................... 1,993,900
2,125,000 5.63%, 2/2/98.................... 2,114,366
2,000,000 5.47%, 2/5/98.................... 1,989,364
2,000,000 5.58%, 3/5/98.................... 1,980,470
2,360,000 5.42%, 3/23/98................... 2,331,220
5,000,000 5.79%, 3/25/98................... 5,000,914
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
--------- ----------- ---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
FEDERAL NATIONAL MORTGAGE ASSOC. (CONTINUED)
$ 1,985,000 5.42%, 3/30/98................. $ 1,958,701
4,000,000 5.91%*, 1/6/98................. 4,000,000
------------
24,365,315
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 93,639,762
------------
(Amortized Cost $93,639,762)
INVESTMENT COMPANIES -- 1.3%
705,378 Dreyfus Cash Management Money
Market......................... 705,378
498,216 Federated Government
Obligations Money Market....... 498,216
------------
TOTAL INVESTMENT COMPANIES..... 1,203,594
------------
(Amortized Cost $1,203,594)
TOTAL INVESTMENTS -- 100.2%................. 94,843,356
(Amortized Cost $94,843,356)(a)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.2)%............................ (216,895)
------------
TOTAL NET ASSETS -- 100.0%.................. $ 94,626,461
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes is the same.
* Variable rate security. Rate presented represents rate in effect at December
31, 1997. Maturity date reflects next rate change date.
See Notes to Financial Statements.
97
<PAGE> 244
THE KENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost.................................... $622,545,953 $554,217,563 $431,328,252 $434,589,423
Net unrealized appreciation (depreciation)............. 109,847,171 187,800,124 67,214,952 182,553,075
------------ ------------ ------------ ------------
Total investments at value............................. 732,393,124 742,017,687 498,543,204 617,142,498
Foreign currency at value (cost $334,607)................ -- -- 333,053 --
Receivable for investments sold.......................... 12,588,542 10,378,556 2,734,447 394,786
Receivable for capital shares issued..................... 171,358 42,646 1,000 149,471
Interest and dividends receivable........................ 1,260,449 630,273 673,254 833,927
Tax reclaim receivable................................... -- -- 422,188 --
Net receivable for open foreign currency contracts....... -- -- 24,250 --
Net receivable for variation margin on futures
contracts.............................................. -- -- -- 430
Prepaid expenses......................................... 242 176 1,631 131
------------ ------------ ------------ ------------
Total Assets........................................... 746,413,715 753,069,338 502,733,027 618,521,243
------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased........................ 12,970,762 10,103,824 133,042 259,042
Payable for capital shares redeemed...................... 10,519 -- 811 9,152
Withholding taxes payable................................ -- -- 64,382 --
Net payable for variation margin on futures contracts.... 2,890 26,448 -- --
Cash overdraft........................................... -- 40,107 -- --
Payable to adviser....................................... 27,928 28,137 20,531 8,391
Payable to administrator................................. 7,254 7,308 4,977 4,089
Payable to transfer agent................................ 13,515 12,453 9,439 1,223
Payable to distributor (Investment Shares)............... 7,182 4,636 2,057 5,684
Payable to custodian..................................... 1,986 9,589 77,910 13,889
Payable to auditor....................................... 14,877 14,688 9,206 11,549
Payable to legal counsel................................. 4,937 4,962 2,989 3,616
Registration & filing fees payable....................... 12,286 5,574 6,752 21,818
Printing fees payable.................................... 11,802 13,173 8,735 9,659
Accrued expenses and other liabilities................... 12,143 16,751 13,487 9,605
------------ ------------ ------------ ------------
Total Liabilities...................................... 13,098,081 10,287,650 354,318 357,717
------------ ------------ ------------ ------------
NET ASSETS................................................. $733,315,634 $742,781,688 $502,378,709 $618,163,526
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital.......................................... $567,102,155 $516,979,693 $437,400,010 $436,155,073
Accumulated undistributed (distributions in excess of)
net investment income.................................. 50,009 (6,180) (2,157,265) (4,723)
Accumulated undistributed net realized gains (losses) on
investments, foreign currency and futures contracts
sold................................................... 56,041,229 37,737,966 (58,580) (666,108)
Net unrealized appreciation (depreciation) of
investments, foreign currency, forward foreign currency
exchange contracts and futures contracts............... 110,122,241 188,070,209 67,194,544 182,679,284
------------ ------------ ------------ ------------
TOTAL NET ASSETS........................................... $733,315,634 $742,781,688 $502,378,709 $618,163,526
============ ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets............................................... $697,972,970 $719,997,908 $492,598,359 $590,241,426
Shares Outstanding....................................... 44,881,954 39,149,106 33,089,656 30,834,874
Net Asset Value, offering and redemption price per
share.................................................. $ 15.55 $ 18.39 $ 14.89 $ 19.14
============ ============ ============ ============
INVESTMENT SHARES:
Net Assets............................................... $ 35,342,664 $ 22,783,780 $ 9,780,350 $ 27,922,100
Shares Outstanding....................................... 2,289,511 1,243,018 661,385 1,458,041
Net Asset Value, offering and redemption price per
share.................................................. $ 15.44 $ 18.33 $ 14.79 $ 19.15
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
98
<PAGE> 245
THE KENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Investments at cost..................................... $143,861,713 $746,770,016 $224,424,903
Net unrealized appreciation (depreciation).............. 787,112 9,857,337 7,334,542
------------ ------------ ------------
Total investments at value.............................. 144,648,825 756,627,353 231,759,445
Cash...................................................... 9,698 65,084 49,843
Receivable for capital shares issued...................... 38,388 42,400 113,566
Interest and dividends receivable......................... 2,507,001 13,123,115 3,520,427
Prepaid expenses.......................................... 568 216 1,919
------------ ------------ ------------
Total Assets............................................ 147,204,480 769,858,168 235,445,200
------------ ------------ ------------
LIABILITIES:
Payable for investments purchased......................... 4,729 37,064 20,922
Payable for capital shares redeemed....................... 4,500 5,000 3,100
Payable to adviser........................................ 4,016 23,142 7,720
Payable to administrator.................................. 1,460 7,650 2,339
Payable to transfer agent................................. 4,130 18,599 3,014
Payable to distributor (Investment Shares)................ 920 1,471 1,108
Payable to custodian...................................... 399 703 348
Payable to auditor........................................ 1,228 13,999 3,361
Payable to legal counsel.................................. 1,150 5,458 1,909
Registration & filing fees payable........................ -- 8,142 25
Printing fees payable..................................... 5,854 12,327 8,571
Accrued expenses and other liabilities.................... 4,430 13,112 4,478
------------ ------------ ------------
Total Liabilities....................................... 32,816 146,667 56,895
------------ ------------ ------------
NET ASSETS.................................................. $147,171,664 $769,711,501 $235,388,305
============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital........................................... $153,081,385 $770,245,558 $227,743,701
Accumulated undistributed (distributions in excess of) net
investment income....................................... 3,131 39,097 13,070
Accumulated undistributed net realized gains (losses) on
investments sold........................................ (6,699,964) (10,430,491) 296,992
Net unrealized appreciation (depreciation) of
investments............................................. 787,112 9,857,337 7,334,542
------------ ------------ ------------
TOTAL NET ASSETS............................................ $147,171,664 $769,711,501 $235,388,305
============ ============ ============
INSTITUTIONAL SHARES:
Net Assets................................................ $139,739,111 $762,739,586 $229,777,500
Shares Outstanding........................................ 14,338,849 77,010,336 22,313,511
Net Asset Value, offering and redemption price per
share................................................... $ 9.75 $ 9.90 $ 10.30
============ ============ ============
INVESTMENT SHARES:
Net Assets................................................ $ 7,432,553 $ 6,971,915 $ 5,610,805
Shares Outstanding........................................ 763,364 702,443 545,475
Net Asset Value, offering and redemption price per
share................................................... $ 9.74 $ 9.93 $ 10.29
============ ============ ============
</TABLE>
See Notes to Financial Statements
99
<PAGE> 246
THE KENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MICHIGAN
LIMITED TERM INTERMEDIATE TAX-FREE MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost..................................... $35,258,239 $258,732,405 $109,343,734 $111,336,719
Net unrealized appreciation (depreciation).............. 733,284 16,097,428 7,357,837 3,342,223
----------- ------------ ------------ ------------
Total investments at value.............................. 35,991,523 274,829,833 116,701,571 114,678,942
Interest and dividends receivable......................... 522,947 4,400,489 1,680,842 1,504,817
Unamortized organizational costs.......................... -- -- 2,548 --
Prepaid expenses.......................................... 16 2,996 1,540 20
----------- ------------ ------------ ------------
Total Assets............................................ 36,514,486 279,233,318 118,386,501 116,183,779
----------- ------------ ------------ ------------
LIABILITIES:
Payable for capital shares redeemed....................... 8,000 4,000 -- --
Payable to adviser........................................ 905 7,655 3,566 2,867
Payable to administrator.................................. 366 2,784 1,179 1,158
Fund accounting fees payable.............................. 1,034 4,195 2,142 2,626
Payable to transfer agent................................. 2,415 3,132 2,639 3,470
Payable to distributor (Investment Shares)................ 61 743 354 540
Payable to custodian...................................... 410 1,075 2,473 788
Payable to auditor........................................ 1,826 3,561 1,761 1,109
Payable to legal counsel.................................. 260 2,245 885 840
Registration & filing fees payable........................ 473 15,700 3,401 6,209
Printing fees payable..................................... 795 -- 1,054 2,358
Accrued expenses and other liabilities.................... 371 12,476 2,888 13,515
----------- ------------ ------------ ------------
Total Liabilities....................................... 16,916 57,566 22,342 35,480
----------- ------------ ------------ ------------
NET ASSETS.................................................. $36,497,570 $279,175,752 $118,364,159 $116,148,299
=========== ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital........................................... $35,758,635 $263,066,394 $110,915,251 $112,834,960
Accumulated undistributed (distributions in excess of) net
investment income....................................... 3,510 30,476 (1,369) 40,046
Accumulated undistributed net realized gains (losses) on
investments sold........................................ 2,141 (18,546) 92,440 (68,930)
Net unrealized appreciation (depreciation) of
investments............................................. 733,284 16,097,428 7,357,837 3,342,223
----------- ------------ ------------ ------------
TOTAL NET ASSETS............................................ $36,497,570 $279,175,752 $118,364,159 $116,148,299
=========== ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets................................................ $36,023,151 $275,641,260 $116,652,429 $111,735,337
Shares Outstanding........................................ 3,534,456 25,809,044 10,954,275 10,944,576
Net Asset Value, offering and redemption price per
share................................................... $ 10.19 $ 10.68 $ 10.65 $ 10.21
=========== ============ ============ ============
INVESTMENT SHARES:
Net Assets................................................ $ 474,419 $ 3,534,492 $ 1,711,730 $ 4,412,962
Shares Outstanding........................................ 46,374 330,953 160,364 432,714
Net Asset Value, offering and redemption price per
share................................................... $ 10.23 $ 10.68 $ 10.67 $ 10.20
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements
100
<PAGE> 247
THE KENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MICHIGAN
MUNICIPAL GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments:
Investments in securities at amortized cost............. $474,127,129 $211,226,490 $94,843,356
------------ ------------ -----------
Total investments at amortized cost..................... 474,127,129 211,226,490 94,843,356
Interest and dividends receivable......................... 3,884,471 1,400,326 267,814
Prepaid expenses.......................................... 6,680 218 4,836
------------ ------------ -----------
Total Assets............................................ 478,018,280 212,627,034 95,116,006
------------ ------------ -----------
LIABILITIES:
Dividends payable......................................... 2,341,377 629,509 474,933
Cash overdraft............................................ 77,988 -- --
Payable to adviser........................................ 10,508 4,690 1,039
Payable to administrator.................................. 2,984 1,219 559
Payable to transfer agent................................. 4,240 2,643 665
Payable to custodian...................................... 3,554 5,058 --
Payable to auditor........................................ 8,766 3,546 2,018
Payable to legal counsel.................................. 3,740 1,552 744
Accrued expenses and other liabilities.................... 7,908 7,624 9,587
------------ ------------ -----------
Total Liabilities....................................... 2,461,065 655,841 489,545
------------ ------------ -----------
NET ASSETS.................................................. $475,557,215 $211,971,193 $94,626,461
============ ============ ===========
NET ASSETS CONSIST OF:
Paid-in capital........................................... $475,546,186 $211,982,881 $94,624,247
Accumulated undistributed (distributions in excess of) net
investment income....................................... 13,072 781 2,214
Accumulated undistributed net realized gains (losses) on
investments sold........................................ (2,043) (12,469) --
------------ ------------ -----------
TOTAL NET ASSETS............................................ $475,557,215 $211,971,193 $94,626,461
============ ============ ===========
INSTITUTIONAL SHARES:
Net Assets................................................ $474,377,775 $211,682,179 $94,624,448
Shares Outstanding........................................ 474,371,951 211,671,569 94,624,444
Net Asset Value, offering and redemption price per
share................................................... $ 1.00 $ 1.00 $ 1.00
============ ============ ===========
INVESTMENT SHARES:
Net Assets................................................ $ 1,179,440 $ 289,014 $ 2,013
Shares Outstanding........................................ 1,179,430 288,995 2,013
Net Asset Value, offering and redemption price per
share................................................... $ 1.00 $ 1.00 $ 1.00
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
101
<PAGE> 248
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................................... $ 16,501,498 $ 7,646,361 $ 9,365,340 $ 7,982,276
Interest........................................... 2,433 32,327 520,830 18,020
Less: Net foreign taxes withheld................... (40,067) (4,583) (1,172,538) (27,698)
------------ ------------ ----------- ------------
Total Investment Income.......................... 16,463,864 7,674,105 8,713,632 7,972,598
------------ ------------ ----------- ------------
EXPENSES:
Investment advisory fees........................... 4,568,032 4,597,213 3,529,317 1,278,392
Administration fees................................ 1,169,235 1,176,682 842,845 766,851
Fund accounting and custodian fees................. 107,230 146,571 420,287 119,844
Audit fees......................................... 19,428 21,465 14,181 15,661
Legal fees......................................... 10,892 10,410 9,514 6,955
Transfer agent fees................................ 141,594 155,246 137,303 106,843
Trustees' fees and expenses........................ 11,333 11,347 8,761 8,289
Distribution fees (Investment Shares).............. 59,946 45,018 23,388 45,030
Printing expenses.................................. 3,402 15,401 20,896 3,555
Registration fees.................................. 32,886 21,741 30,478 5,921
Other expenses..................................... 1,776 2,204 4,137 331
------------ ------------ ----------- ------------
Total expenses before waivers.................... 6,125,754 6,203,298 5,041,107 2,357,672
Less: waivers.................................... (77,411) (77,831) (56,062) (485,961)
------------ ------------ ----------- ------------
Net Expenses..................................... 6,048,343 6,125,467 4,985,045 1,871,711
------------ ------------ ----------- ------------
NET INVESTMENT INCOME................................ 10,415,521 1,548,638 3,728,587 6,100,887
------------ ------------ ----------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on investments, foreign
currency, and foreign currency contracts......... 111,932,563 78,087,896 2,742,836 1,138,162
Net realized gains (losses) on futures contracts... (61,005) 524,810 -- 1,370,043
Net change in unrealized appreciation/depreciation
of futures contracts............................. 275,070 227,785 -- 120,014
Net change in unrealized appreciation/depreciation
of investments, foreign currency, and foreign
currency contracts............................... 15,661,888 81,347,122 4,769,670 98,353,714
------------ ------------ ----------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS........................................ 127,808,516 160,187,613 7,512,506 100,981,933
------------ ------------ ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $138,224,037 $161,736,251 $11,241,093 $107,082,820
============ ============ =========== ============
</TABLE>
See Notes to Financial Statements
102
<PAGE> 249
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
---------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $11,152,170 $51,050,679 $18,158,378
Dividends................................................. 418,796 1,514,383 382,540
----------- ----------- -----------
Total Investment Income................................. 11,570,966 52,565,062 18,540,918
----------- ----------- -----------
EXPENSES:
Investment advisory fees.................................. 857,575 4,262,333 1,489,950
Administration fees....................................... 306,274 1,386,330 444,179
Fund accounting and custodian fees........................ 26,634 116,074 39,981
Audit fees................................................ 10,509 25,302 10,856
Legal fees................................................ 1,542 10,722 3,892
Transfer agent fees....................................... 45,140 81,993 49,488
Trustees' fees and expenses............................... 2,348 9,884 3,830
Distribution fees (Investment Shares)..................... 9,174 17,259 8,849
Amortization of organization costs........................ -- -- 6,024
Printing expenses......................................... 2,389 9,109 2,190
Registration fees......................................... 7,759 18,896 10,328
Other expenses............................................ 37 446 2,793
----------- ----------- -----------
Total expenses before waivers........................... 1,269,381 5,938,348 2,072,360
Less: waivers........................................... (24,820) (93,254) (29,904)
----------- ----------- -----------
Net Expenses............................................ 1,244,561 5,845,094 2,042,456
----------- ----------- -----------
NET INVESTMENT INCOME....................................... 10,326,405 46,719,968 16,498,462
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investments sold........... (1,502,731) (3,309,390) 3,441,169
Net change in unrealized appreciation/depreciation of
investments............................................. 1,638,919 15,305,110 5,214,704
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS... 136,188 11,995,720 8,655,873
----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $10,462,593 $58,715,688 $25,154,335
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
103
<PAGE> 250
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MICHIGAN
LIMITED TERM INTERMEDIATE TAX-FREE MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................. $1,696,028 $14,164,975 $5,900,518 $5,830,519
Dividends............................................ 25,281 154,379 79,656 75,421
---------- ----------- ---------- ----------
Total Investment Income............................ 1,721,309 14,319,354 5,980,174 5,905,940
---------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees............................. 167,800 1,424,578 642,997 563,275
Administration fees.................................. 66,670 509,532 209,139 223,672
Distribution fees (Investment Shares)................ 773 8,298 2,621 7,499
Fund accounting and custodian fees................... 7,938 56,335 25,517 28,492
Audit fees........................................... 5,045 15,742 7,146 9,059
Legal fees........................................... 449 4,311 1,785 3,184
Transfer agent fees.................................. 37,236 40,987 39,201 37,521
Trustees' fees and expenses.......................... -- 4,365 525 1,814
Amortization of organization costs................... -- -- 1,668 --
Printing expenses.................................... -- 13,464 7,177 6,906
Registration fees.................................... 1,147 6,876 4,558 27
Other expenses....................................... -- 222 1,512 513
---------- ----------- ---------- ----------
Total expenses before waivers...................... 287,058 2,084,710 943,846 881,962
Less: waivers...................................... (4,821) (34,406) (14,069) (18,246)
---------- ----------- ---------- ----------
Net Expenses....................................... 282,237 2,050,304 929,777 863,716
---------- ----------- ---------- ----------
NET INVESTMENT INCOME.................................. 1,439,072 12,269,050 5,050,397 5,042,224
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on investments sold...... 159,864 691,582 376,069 49,676
Net change in unrealized appreciation/depreciation of
investments........................................ 136,663 6,286,893 4,279,292 1,602,539
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS.......................................... 296,527 6,978,475 4,655,361 1,652,215
---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $1,735,599 $19,247,525 $9,705,758 $6,694,439
========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements
104
<PAGE> 251
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MICHIGAN
MUNICIPAL GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND(1)
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................................. $28,553,830 $7,265,643 $2,957,599
Dividends................................................. 909,527 138,215 193,020
----------- ---------- ----------
Total Investment Income................................. 29,463,357 7,403,858 3,150,619
----------- ---------- ----------
EXPENSES:
Investment advisory fees.................................. 2,092,414 781,668 226,041
Administration fees....................................... 936,013 349,391 103,600
Fund accounting and custodian fees........................ 82,972 34,928 13,744
Audit fees................................................ 17,337 7,568 3,348
Legal fees................................................ 8,442 2,074 927
Transfer agent fees....................................... 55,039 39,410 16,905
Trustees' fees and expenses............................... 8,347 3,207 1,418
Amortization of organization costs........................ -- -- 4,275
Printing expenses......................................... 9,267 2,834 3,172
Registration fees......................................... 21,889 640 12,939
Other expenses............................................ 132 -- 673
----------- ---------- ----------
Total expenses before waivers........................... 3,231,852 1,221,720 387,042
Less: waivers........................................... (509,838) (199,790) (189,098)
----------- ---------- ----------
Net Expenses............................................ 2,722,014 1,021,930 197,944
----------- ---------- ----------
NET INVESTMENT INCOME....................................... 26,741,343 6,381,928 2,952,675
----------- ---------- ----------
NET REALIZED GAINS (LOSSES) ON INVESTMENT................... (1,165) (12,469) 4
----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $26,740,178 $6,369,459 $2,952,679
=========== ========== ==========
</TABLE>
- ---------------
(1) For the period from June 2, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
105
<PAGE> 252
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $515,920,253 $412,450,592 $558,516,596 $ 461,027,443
------------ ------------ ------------ -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.................................. 10,415,521 9,952,979 1,548,638 3,966,391
Net realized gains (losses) on investments, foreign
currency, and foreign currency contracts............. 111,932,563 39,233,025 78,087,896 32,298,684
Net realized gains (losses) on futures contracts....... (61,005) 2,415,000 524,810 3,527,985
Net change in unrealized appreciation/depreciation of
futures contracts.................................... 275,070 -- 227,785 87,425
Net change in unrealized appreciation/depreciation of
investments, foreign currency, and foreign currency
contracts............................................ 15,661,888 30,902,403 81,347,122 53,847,793
------------ ------------ ------------ -------------
Net increase in net assets resulting from operations... 138,224,037 82,503,407 161,736,251 93,728,278
------------ ------------ ------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income.................................. (10,051,899) (9,772,575) (1,572,242) (3,891,501)
In excess of net investment income..................... -- -- (570,748) --
Net realized gains on investments...................... (58,514,755) (49,510,778) (52,695,021) (24,783,337)
In excess of net realized gains........................ -- -- -- --
------------ ------------ ------------ -------------
Total dividends and distributions -- Institutional
Shares............................................. (68,566,654) (59,283,353) (54,838,011) (28,674,838)
------------ ------------ ------------ -------------
INVESTMENT:
Net investment income.................................. (322,621) (246,918) -- (70,033)
In excess of net investment income..................... -- (18,400) (36,830) (7,537)
Net realized gains on investments...................... (2,725,491) (1,458,817) (1,565,329) (629,504)
In excess of net realized gains........................ -- -- -- --
------------ ------------ ------------ -------------
Total dividends and distributions -- Investment
Shares............................................. (3,048,112) (1,724,135) (1,602,159) (707,074)
------------ ------------ ------------ -------------
Total dividends and distributions to shareholders.... (71,614,766) (61,007,488) (56,440,170) (29,381,912)
------------ ------------ ------------ -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................ 269,087,243 153,847,838 216,183,011 135,473,783
Reinvestment of distributions.......................... 33,077,724 27,411,595 28,070,255 14,891,206
Cost of shares redeemed................................ (151,378,857) (99,285,691) (165,284,255) (117,222,202)
------------ ------------ ------------ -------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS........................................... 150,786,110 81,973,742 78,969,011 33,142,787
------------ ------------ ------------ -------------
Net increase (decrease) in net assets.................. 217,395,381 103,469,661 184,265,092 97,489,153
------------ ------------ ------------ -------------
NET ASSETS AT END OF PERIOD.............................. $733,315,634 $515,920,253 $742,781,688 $ 558,516,596
============ ============ ============ =============
</TABLE>
See Notes to Financial Statements
106
<PAGE> 253
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD......................... $396,597,865 $294,093,096 $253,362,463 $190,488,589
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................... 3,728,587 3,169,685 6,100,887 4,133,408
Net realized gains (losses) on investments, foreign
currency, and foreign currency contracts.............. 2,742,836 3,330,884 1,138,162 1,057,376
Net realized gains (losses) on futures contracts........ -- -- 1,370,043 1,498,615
Net change in unrealized appreciation/depreciation of
futures contracts..................................... -- -- 120,014 49,520
Net change in unrealized appreciation/depreciation of
investments, foreign currency, and foreign currency
contracts............................................. 4,769,670 11,892,070 98,353,714 37,969,480
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.... 11,241,093 18,392,639 107,082,820 44,708,399
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income................................... (3,055,002) (2,589,632) (5,884,290) (3,996,731)
In excess of net investment income...................... (1,831,420) (504,939) (65,127) --
Net realized gains on investments.......................
In excess of net realized gains......................... (341,685) (161,046) (585,460) (668,004)
------------ ------------ ------------ ------------
Total dividends and distributions -- Institutional
Shares.............................................. (7,629,204) (6,581,114) (8,147,919) (9,048,415)
------------ ------------ ------------ ------------
INVESTMENT:
Net investment income................................... (35,702) (49,833) (215,864) (137,968)
In excess of net investment income...................... (59,234) -- (9,227) (5,705)
Net realized gains on investments....................... (47,965) (82,522) (88,824) (199,306)
In excess of net realized gains......................... (6,876) -- (11,017) --
------------ ------------ ------------ ------------
Total dividends and distributions -- Investment
Shares.............................................. (149,777) (132,355) (324,932) (342,979)
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders..... (7,778,981) (6,713,469) (8,472,851) (9,391,394)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. 193,400,718 139,625,382 339,198,444 72,390,118
Reinvestment of distributions........................... 3,565,223 3,275,693 6,673,196 6,280,152
Cost of shares redeemed................................. (94,647,209) (52,075,476) (79,680,546) (51,113,401)
------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL TRANSACTIONS... 102,318,732 90,825,599 266,191,094 27,556,869
------------ ------------ ------------ ------------
Net increase (decrease) in net assets................... 105,780,844 102,504,769 364,801,063 62,873,874
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD............................... $502,378,709 $396,597,865 $618,163,526 $253,362,463
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
107
<PAGE> 254
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT TERM BOND FUND INTERMEDIATE BOND FUND INCOME FUND
----------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF
PERIOD.......................... $237,096,910 $312,313,894 $776,722,838 $861,662,351 $242,781,715 $128,017,408
------------ ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income........... 10,326,405 17,428,126 46,719,968 50,745,83 16,498,462 13,248,046
Net realized gains (losses) on
investments sold.............. (1,502,731) (937,245) (3,309,390) (7,025,161) 3,441,169 2,157,485
Net change in unrealized
appreciation/depreciation of
investments................... 1,638,919 (5,032,357) 15,305,110 (20,975,605) 5,214,704 (7,015,717)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations..... 10,462,593 11,458,524 58,715,688 22,745,066 25,154,335 8,389,814
------------ ------------ ------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income........... (10,203,409) (17,416,111) (46,492,693) (51,337,391) (16,298,443) (13,204,524)
In excess of net investment
income........................ -- -- -- (2,304,413) -- (1,956,281)
Net realized gains on
investments................... -- -- -- -- (4,496,656) (717,482)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions --
Institutional Shares........ (10,203,409) (17,416,111) (46,492,693) (53,641,804) (20,795,099) (15,878,287)
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT:
Net investment income........... (230,620) (85,476) (400,310) (422,949) (236,638) (143,574)
In excess of net investment
income........................ -- (9,055) -- (38,057) -- (20,998)
Net realized gains on
investments................... -- -- -- -- (85,457) (2,063)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions -- Investment
Shares...................... (230,620) (94,531) (400,310) (461,006) (322,095) (166,635)
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and
distributions to
shareholders................ (10,434,029) (17,510,642) (46,893,003) (54,102,810) (21,117,194) (16,044,922)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued..... 55,848,711 71,401,214 201,540,137 200,094,674 67,917,967 155,448,604
Reinvestment of distributions... 6,828,762 11,174,796 25,204,467 29,128,985 4,339,793 2,778,971
Cost of shares redeemed......... (152,631,283) (151,740,876) (245,578,626) (282,805,428) (83,688,311) (35,808,160)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM
CAPITAL TRANSACTIONS............ (89,953,810) (69,164,866) (18,834,022) (53,581,769) (11,430,551) 122,419,415
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets........................ (89,925,246) (75,216,984) (7,011,337) (84,939,513) (7,393,410) 114,764,307
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD....... $147,171,664 $237,096,910 $769,711,501 $776,722,838 $235,388,305 $242,781,715
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
108
<PAGE> 255
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED TERM TAX-FREE FUND INTERMEDIATE TAX-FREE FUND
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD......................... $41,577,319 $55,401,190 $289,042,905 $287,540,348
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................... 1,439,072 1,861,546 12,269,050 12,643,123
Net realized gains (losses) on investments sold......... 159,864 82,971 691,582 1,079,288
Net change in unrealized appreciation/depreciation of
investments........................................... 136,663 (270,758) 6,286,893 (3,796,119)
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.... 1,735,599 1,673,759 19,247,525 9,926,292
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income................................... (1,432,406) (1,883,853) (12,149,068) (12,639,182)
In excess of net investment income...................... -- (22,303) -- (101,729)
Net realized gains on investments....................... (170,851) (45,972) (86,552) --
In excess of net realized gains......................... -- -- (17,244) --
------------ ------------ ------------ ------------
Total dividends and distributions -- Institutional
Shares.............................................. (1,603,257) (1,952,128) (12,252,864) (12,740,911)
------------ ------------ ------------ ------------
INVESTMENT:
Net investment income................................... (11,595) (2,384) (135,115) (137,261)
In excess of net investment income...................... -- (206) -- (7,740)
Net realized gains on investments....................... (2,045) (87) (863) --
In excess of net realized gains......................... -- -- (441) --
------------ ------------ ------------ ------------
Total dividends and distributions -- Investment
Shares.............................................. (13,640) (2,677) (136,419) (145,001)
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders..... (1,616,897) (1,954,805) (12,389,283) (12,885,912)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. 9,736,272 8,696,402 44,265,909 63,415,595
Reinvestment of distributions........................... 27,364 18,971 207,641 120,131
Cost of shares redeemed................................. (14,962,087) (22,258,198) (61,198,945) (59,073,549)
------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL TRANSACTIONS... (5,198,451) (13,542,825) (16,725,395) 4,462,177
------------ ------------ ------------ ------------
Net increase (decrease) in net assets................... (5,079,749) (13,823,871) (9,867,153) 1,502,557
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD............................... $36,497,570 $41,577,319 $279,175,752 $289,042,905
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
109
<PAGE> 256
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TAX-FREE INCOME FUND MICHIGAN MUNICIPAL BOND FUND
--------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------------------- -----------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $110,883,746 $122,384,290 $155,044,170 $187,365,585
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.................................. 5,050,397 4,737,111 5,042,224 6,577,753
Net realized gains (losses) on investments sold........ 376,069 1,968,582 49,676 86,964
Net realized gains (losses) on futures contracts....... -- (363,313) -- --
Net change in unrealized appreciation/depreciation of
investments.......................................... 4,279,292 (1,887,284) 1,602,539 (795,155)
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations... 9,705,758 4,455,096 6,694,439 5,869,562
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income.................................. (5,016,230) (4,725,879) (4,914,390) (6,489,955)
In excess of net investment income..................... (610) -- -- --
Net realized gains on investments...................... (330,223) (1,679,825) -- --
------------ ------------ ------------ ------------
Total dividends and distributions -- Institutional
Shares............................................. (5,347,063) (6,405,704) (4,914,390) (6,489,955)
------------ ------------ ------------ ------------
INVESTMENT:
Net investment income.................................. (42,572) (32,116) (121,577) (77,375)
In excess of net investment income..................... (929) -- -- (3,313)
Net realized gains on investments...................... (4,346) (9,292) -- --
In excess of net realized gains........................ -- (3,147) -- --
------------ ------------ ------------ ------------
Total dividends and distributions -- Investment
Shares............................................. (47,847) (44,555) (121,577) (80,688)
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders.... (5,394,910) (6,450,259) (5,035,967) (6,570,643)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................ 33,039,586 35,182,548 35,519,586 28,108,486
Reinvestment of distributions.......................... 116,653 68,391 131,586 74,582
Cost of shares redeemed................................ (29,986,674) (44,756,320) (76,205,515) (59,803,402)
------------ ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS........................................... 3,169,565 (9,505,381) (40,554,343) (31,620,334)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.................. 7,480,413 (11,500,544) (38,895,871) (32,321,415)
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD.............................. $118,364,159 $110,883,746 $116,148,299 $155,044,170
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
110
<PAGE> 257
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GOVERNMENT
MICHIGAN MUNICIPAL MONEY
MONEY MARKET FUND MONEY MARKET FUND MARKET FUND
------------------------------- --------------------------- ------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997(1)
-----------------------------
---------------------------
------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF YEAR.................... $ 484,722,709 $ 426,042,320 $156,205,940 $146,818,028 $ --
--------------- ------------- ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................ 26,741,343 21,617,630 6,381,928 4,998,349 2,952,675
Net realized gains (losses) on investments....... (1,165) (27) (12,469) 251 4
--------------- ------------- ------------ ------------ ------------
Net increase in net assets resulting from
operations..................................... 26,740,178 21,617,603 6,369,459 4,998,600 2,952,679
--------------- ------------- ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
INSTITUTIONAL:
Net investment income............................ (26,699,476) (21,564,398) (6,369,567) (4,966,358) (2,952,603)
--------------- ------------- ------------ ------------ ------------
Total dividends and
distributions -- Institutional Shares........ (26,699,476) (21,564,398) (6,369,567) (4,966,358) (2,952,603)
--------------- ------------- ------------ ------------ ------------
INVESTMENT:
Net investment income............................ (41,867) (53,232) (12,361) (31,991) (72)
--------------- ------------- ------------ ------------ ------------
Total dividends and distributions -- Investment
Shares....................................... (41,867) (53,232) (12,361) (31,991) (72)
--------------- ------------- ------------ ------------ ------------
Total dividends and distributions to
shareholders................................. (26,741,343) (21,617,630) (6,381,928) (4,998,349) (2,952,675)
--------------- ------------- ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued...................... 1,153,447,515 845,431,796 279,204,632 258,441,230 328,636,541
Reinvestment of distributions.................... 1,731,961 587,156 205,995 28,579 2,413,698
Cost of shares redeemed.......................... (1,164,343,805) (787,338,536) (223,632,905) (249,082,148) (236,423,732)
--------------- ------------- ------------ ------------ ------------
TOTAL NET INCREASE (DECREASE) FROM CAPITAL
TRANSACTIONS..................................... (9,164,329) 58,680,416 55,777,722 9,387,661 94,626,457
--------------- ------------- ------------ ------------ ------------
Net increase (decrease) in net assets............ (9,165,494) 58,680,389 55,765,253 9,387,912 94,626,461
--------------- ------------- ------------ ------------ ------------
NET ASSETS AT END OF YEAR.......................... $ 475,557,215 $ 484,722,709 $211,971,193 $156,205,940 $ 94,626,461
=============== ============= ============ ============ ============
</TABLE>
- ---------------
(1) For the period from June 2, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
111
<PAGE> 258
The Kent
Funds NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. As of
the date of this report, the Trust offered fourteen managed investment
portfolios. The accompanying financial statements and financial highlights are
those of The Kent Growth and Income Fund, The Kent Small Company Growth Fund,
The Kent International Growth Fund, The Kent Index Equity Fund, The Kent Short
Term Bond Fund, The Kent Intermediate Bond Fund, The Kent Income Fund, The Kent
Limited Term Tax-Free Fund, The Kent Intermediate Tax-Free Fund, The Kent
Tax-Free Income Fund, The Kent Michigan Municipal Bond Fund, The Kent Money
Market Fund, The Kent Michigan Municipal Money Market Fund and The Kent
Government Money Market Fund (individually, a "Portfolio" and collectively, the
"Portfolios").
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Portfolios with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues fourteen series of shares with two
separate classes in each series: Investment Shares and Institutional Shares.
Each class of shares is entitled upon liquidation of a series to a pro rata
share in the net assets of that class of such series. Each share in each series
or class has identical voting, dividend, liquidation and other rights, except in
matters affecting only a particular series or class, in which case only shares
of the affected series or class are entitled to vote. Class specific expenses,
if any, are currently limited to expenses directly attributable to the
Investment Shares under the Distribution Plan, shareholder services fees and
certain printing and postage expenses incurred as they relate to a particular
class of shares.
The investment objectives of the Portfolios are as follows:
Growth and Income Fund -- To seek long-term capital growth with current income
as a secondary goal.
Small Company Growth Fund -- To seek long-term capital appreciation by
investing in equity securities of small companies.
International Growth Fund -- To seek long-term growth of capital and
additional diversification for U.S. investors by investing in a varied portfolio
of foreign equity securities.
Index Equity Fund -- To seek investment results which mirror the capital
performance and dividend income of the Standard & Poor's 500 Composite Stock
Price Index.
Short Term Bond Fund -- To seek current income by investing primarily in a
limited range of investment quality fixed income securities.
Intermediate Bond Fund -- To seek current income by investing primarily in a
broad range of investment quality debt securities.
Income Fund -- To seek a high level of current income by investing in a broad
range of investment quality debt securities.
Limited Term Tax-Free Fund -- To seek current income, exempt from federal
income tax, while preserving capital.
Intermediate Tax-Free Fund -- To seek current income, exempt from federal
income tax, while preserving capital.
Tax-Free Income Fund -- To seek to provide as high a level of current income
exempt from federal income tax as is consistent with prudent investing, while
preserving capital.
Michigan Municipal Bond Fund -- To seek current income, exempt from federal
and State of Michigan personal income taxes, while preserving capital.
Money Market Fund -- To seek current income from short-term securities while
preserving capital and maintaining liquidity.
Michigan Municipal Money Market Fund -- To seek current income from short-term
securities that is exempt from federal and State of Michigan personal income
taxes, while preserving capital and maintaining liquidity.
Government Money Market Fund -- To seek current income from short-term United
States Government securities while preserving capital and maintaining liquidity.
112
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Securities in the Money Market Fund, Government Money
Market Fund and Michigan Municipal Money Market Fund (the "Money Market
Portfolios") are valued utilizing the amortized cost valuation method permitted
in accordance with Rule 2a-7 under the 1940 Act, which approximates market
value. This method involves valuing a portfolio security initially at its cost
on the date of purchase and thereafter assuming a constant amortization to
maturity of the difference between the principal amount due at maturity and
initial cost.
In the Limited Term Tax-Free Fund, the Intermediate Tax-Free Fund, the
Tax-Free Income Fund, the Michigan Municipal Bond Fund, the Short Term Bond
Fund, the Intermediate Bond Fund, and the Income Fund, corporate debt
securities, municipal securities and debt securities of the U.S. government and
its agencies (other than short-term investments maturing in 60 days or less) are
valued on the basis of valuations provided by dealers or by an independent
pricing service approved by the Board of Trustees. Short-term obligations that
mature in 60 days or less are valued at amortized cost, which constitutes fair
value and approximates market value. All other securities and other assets are
appraised at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
The Growth and Income Fund, Small Company Growth Fund, International Growth
Fund and the Index Equity Fund value securities at the last sales price on the
principal exchange where such securities are traded. Listed securities for which
last sales prices are not available are valued at the last bid price. Unlisted
securities are valued at the mean of the current bid and asked prices in the
principal market where such securities trade. Short-term obligations that mature
in 60 days or less are valued at amortized cost, which constitutes fair value
and approximates market value. All other securities and other assets are
appraised at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
REPURCHASE AGREEMENTS: The Trust's custodian and other banks acting in a
sub-custodian capacity, take possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to determine that the value, including accrued
interest, exceeds the repurchase price. In the event of the seller's default of
the obligation to repurchase, the Portfolios have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of the default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings.
FOREIGN CURRENCY TRANSLATION: Investments and other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates. Realized gains and losses on
foreign investments and foreign income and expenses are converted into U.S.
dollars based upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
Foreign currency-denominated receivables and payables are "marked-to-market"
using the current exchange rate. The fluctuation between the original exchange
rate and the current exchange rate is recorded as unrealized currency gain or
loss. Upon receipt of payment, a Portfolio realizes a gain or loss on foreign
currency amounting to the difference between the original value and the ending
value of the receivable or payable.
FUTURES CONTRACTS: The Growth and Income Fund, Small Company Growth Fund,
International Growth Fund, Index Equity Fund, Limited Term Tax-Free Fund,
Intermediate Tax-Free Fund, Tax-Free Income Fund and Michigan Municipal Bond
Fund may invest in futures contracts. These Portfolios generally enter into
futures contracts to hedge against declines in the value of their portfolios'
securities. This investment involves, to varying degrees, elements of market
risk and risks in
113
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
excess of the amount recognized in the Statement of Assets and Liabilities. The
face or contract amounts reflect the extent of the involvement the Portfolios
have in the particular classes of instruments. Risks include an imperfect
correlation between the movements in the price of the instruments and the price
of the underlying securities and interest rates. Risks may also arise if there
is an illiquid secondary market for the instruments or due to the inability of
counterparties to perform under the terms of the contract.
Cash or securities are deposited with brokers in order to maintain a position.
Subsequent payments made or received daily by the Portfolio based on the change
in the market value of the position are recorded as an unrealized gain or loss
until the contract is closed out at which time the gain or loss is recognized.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities, the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index or group of securities. Upon entering into a
futures contract, the Portfolio is required to deposit either cash or securities
in an amount ("initial margin") equal to a certain percentage of the contract
value with a broker. Subsequent payments ("variation margin") equal to changes
in the daily settlement price or last sale on the exchanges where they trade are
paid or received each day and are recorded as a gain or loss on futures
contracts.
The average market value of futures contracts held during the year ended
December 31, 1997 was as follows:
<TABLE>
<CAPTION>
AVERAGE
FUND MARKET VALUE
---- ------------
<S> <C>
Growth and Income Fund.................... $10,090,452
Small Company Growth Fund................. 8,180,496
Index Equity Fund......................... 7,361,783
</TABLE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The International Growth Fund may
enter into forward foreign currency exchange contracts. The purpose of these
contracts is to hedge against fluctuation in the value of the underlying
currency of certain portfolio investments. A forward foreign currency exchange
contract is an agreement to purchase or sell a specified currency at a specified
price on a future date. Risks associated with the contract include changes in
the value of the foreign currency relative to the U.S. dollar and/or the
counterparty's potential inability to perform under the contract.
The forward foreign currency exchange contracts are valued daily using the
current exchange rate of the underlying currency with any fluctuations recorded
as unrealized gains or losses. Realized gains or losses are recognized when
entering a closing or offsetting forward foreign currency exchange contract with
the same settlement date and broker.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
and on foreign currency transactions are recorded on the basis of identified
cost. Interest income is recorded on the accrual basis and includes, where
applicable, the amortization of premiums or accretion of discounts. Dividend
income is recorded on the ex-dividend date.
The International Growth Fund, upon the purchase or sale of a security
denominated in a foreign currency, may enter into foreign currency exchange
contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of foreign currency involved in the underlying security transaction to
hedge the portfolio against currency fluctuations during the settlement period.
In such cases, the Portfolio has not realized currency gains or losses between
the trade and settlement dates on these security transactions.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare and
distribute dividends from net investment income monthly, with the exception of
the International Growth Fund which declares and pays dividends annually and the
Money Market Portfolios which declare daily and pay monthly. Net investment
income for this purpose consists of interest accrued, discount earned (including
both original issue and market discount), dividends earned less amortization of
any market premium and accrued expenses. Net realized capital gains, if any, are
distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
114
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments to
paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED UNDISTRIBUTED
UNDISTRIBUTED NET REALIZED
NET INVESTMENT GAIN/(LOSS)
INCOME ON INVESTMENTS
------ --------------
<S> <C> <C>
Growth and Income Fund... $ -- $ --
Small Company Growth
Fund................... 603,541 (603,541)
International Growth
Fund................... (266,611) 289,981
Index Equity Fund........ 69,631 (69,631)
Short Term Bond Fund..... 1,757 (1,757)
Intermediate Bond Fund... 80,298 (80,298)
Income Fund.............. -- --
Limited Term Tax-Free
Fund................... 1,428 (1,428)
Intermediate Tax-Free
Fund................... 861 (861)
Tax-Free Income Fund..... 170 (170)
Michigan Municipal Bond
Fund................... 11,352 (11,352)
Money Market............. -- --
Michigan Municipal Money
Market Fund............ 781 (781)
Government Money Market
Fund................... 2,214 (4)
</TABLE>
FEDERAL INCOME TAXES: For federal income tax purposes, each Portfolio is
treated as a separate entity for the purpose of determining its qualification as
a regulated investment company under the Internal Revenue Code (the "Code"). It
is the policy of each Portfolio to meet the requirements of the Code applicable
to regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required. Withholding taxes on foreign dividends have
been paid or provided for in accordance with the applicable country's tax rules
and rates.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
At December 31, 1997, the following Portfolios had the following capital loss
carryforwards which will expire in the years indicated:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR
---- ----------- ----
<S> <C> <C>
Short Term Bond Fund................ $ 656,100 2001
3,015,994 2002
467,881 2003
438,260 2004
1,927,928 2005
-----------
6,506,163
===========
Intermediate Bond Fund.............. $ 6,353,600 2004
4,043,228 2005
-----------
$10,396,828
===========
Michigan Municipal Bond Fund........ $ 68,930 2003
-----------
Money Market Fund................... $ 433 1999
224 2002
194 2003
27 2004
432 2005
-----------
$ 1,310
===========
Michigan Municipal Money Market
Fund.............................. $ 12,469 2005
</TABLE>
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one series of the
Trust are allocated among the respective series based upon relative net assets
or another appropriate basis. In addition, investors in Investment Shares will
pay the expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
ORGANIZATIONAL COSTS: The Tax-Free Income Fund bears all costs in connection
with its organization, including the fees and expenses of registering and
qualifying their initial shares for distribution under federal and state
securities laws. All such costs are amortized using the straight-line method
over a period of five years beginning with the respective Portfolio's
commencement of operations. In the event that any of the initial shares
purchased by the Portfolio's sponsors are redeemed during such period by any
holder thereof, the Portfolio will be reimbursed by such holder
115
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
for any unamortized organization costs in the same proportion as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption. The other Portfolios beared all costs in connection
with their organization. All such costs were fully amortized as of December 31,
1997.
3. RELATED PARTY TRANSACTIONS
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a member of Michigan State Banking Association
and the principal subsidiary of Old Kent Financial Corporation. The Investment
Adviser is entitled to receive a fee, computed daily and paid monthly, based on
each Portfolio's average daily net assets at the following annual rates:
<TABLE>
<S> <C>
Growth and Income Fund........................... 0.70%
Small Company Growth Fund........................ 0.70%
International Growth Fund........................ 0.75%
Index Equity Fund................................ 0.30%
Short Term Bond Fund............................. 0.50%
Intermediate Bond Fund........................... 0.55%
Income Fund...................................... 0.60%
Limited Term Tax-Free Fund....................... 0.45%
Intermediate Tax-Free Fund....................... 0.50%
Tax-Free Income Fund............................. 0.55%
Michigan Municipal Bond Fund..................... 0.45%
Money Market Fund................................ 0.40%
Michigan Municipal Money Market Fund............. 0.40%
Government Money Market Fund..................... 0.40%
</TABLE>
The Index Equity Fund and Government Money Market Fund had investment advisory
fees waived by Old Kent Bank equal to $119,782 and $113,145, respectively.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
serves the Portfolios as Administrator and Distributor. BISYS Fund Services,
Inc. serves the Portfolios as Fund Accountant and Transfer Agent. BISYS and
BISYS Fund Services, Inc. are both wholly owned subsidiaries of The BISYS Group,
Inc. The Administrator is entitled to receive a fee computed daily and paid
monthly, at the annual rate of 0.185% of the average daily net assets of the
Trust up to $5 billion; 0.165% of the average daily net assets of the Trust in
excess of $5 billion up to $7.5 billion; and 0.135% of the average daily net
assets of the Trust in excess of $7.5 billion. Fund Accounting fees are computed
daily and paid monthly at the annual rate of 0.015% of the average daily net
assets of the Trust and are included as part of the fees paid to the
Administrator.
Gross administration fees and fees waived for the year ended December 31, 1997
were as follows for the Portfolios indicated:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
- ----- ---------- -----------
<S> <C> <C>
Growth and Income Fund......... $1,169,235 $ --
Small Company Growth Fund...... 1,176,682 --
International Growth Fund...... 842,845 --
Index Equity Fund.............. 766,851 302,110
Short Term Bond Fund........... 306,274 --
Intermediate Bond Fund......... 1,386,330 --
Income Fund.................... 444,179 --
Limited Term Tax-Free Fund..... 66,670 --
Intermediate Tax-Free Fund..... 509,532 --
Tax-Free Income Fund........... 209,139 --
Michigan Municipal Bond Fund... 223,672 --
Money Market Fund.............. 936,013 431,371
Michigan Municipal Money Market
Fund......................... 349,391 170,474
Government Money Market Fund... 103,600 67,476
</TABLE>
Beginning June 1, 1997, Old Kent Bank provided certain administration services
to the Trust pursuant to a Sub-Administration Agreement between Old Kent Bank
and BISYS. BISYS agreed to pay Old Kent Bank a fee, calculated daily and paid
monthly, at an annual rate of up to 0.05% of each Portfolio's average daily net
assets. The fees paid to Old Kent Bank by BISYS for such administrative services
come out of BISYS' administrative fee and are not an additional charge to the
Portfolios.
<TABLE>
<CAPTION>
FUNDS SUB-ADMINISTRATION FEES
----- -----------------------
<S> <C>
Growth and Income Fund........... $166,029
Small Company Growth Fund........ 167,566
International Growth Fund........ 117,605
Index Equity Fund................ 156,303
Short Term Bond Fund............. 36,851
Intermediate Bond Fund........... 185,578
Income Fund...................... 59,261
Limited Term Tax-Free Fund....... 8,723
Intermediate Tax-Free Fund....... 67,234
Tax-Free Income Fund............. 28,022
Michigan Municipal Bond Fund..... 28,435
Money Market Fund................ 123,614
Michigan Municipal Money Market
Fund........................... 37,248
Government Money Market Fund..... 28,520
</TABLE>
116
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transfer agent fees for each Portfolio for the year ended December 31, 1997
are as follows:
<TABLE>
<CAPTION>
FUNDS TRANSFER AGENT FEES
----- -------------------
<S> <C>
Growth and Income Fund............... $141,594
Small Company Growth Fund............ 155,246
International Growth Fund............ 137,303
Index Equity Fund.................... 106,843
Short Term Bond Fund................. 45,140
Intermediate Bond Fund............... 81,993
Income Fund.......................... 49,488
Limited Term Tax-Free Fund........... 37,236
Intermediate Tax-Free Fund........... 40,987
Tax-Free Income Fund................. 39,201
Michigan Municipal Bond Fund......... 37,521
Money Market Fund.................... 55,039
Michigan Municipal Money Market
Fund............................... 39,410
Government Money Market Fund......... 16,905
</TABLE>
Fund Accounting Fees and fees waived for each Portfolio for the year ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
----- ---------- -----------
<S> <C> <C>
Growth and Income Fund.......... $ 97,976 $77,411
Small Company Growth Fund....... 98,587 77,831
International Growth Fund....... 70,630 56,062
Index Equity Fund............... 64,069 64,069
Short Term Bond Fund............ 25,690 21,127
Intermediate Bond Fund.......... 116,243 93,254
Income Fund..................... 37,246 29,904
Limited Term Tax-Free Fund...... 5,591 4,511
Intermediate Tax-Free Fund...... 42,733 34,406
Tax-Free Income Fund............ 17,539 14,069
Michigan Municipal Bond Fund.... 18,760 15,238
Money Market Fund............... 78,467 78,467
Michigan Municipal Money Market
Fund.......................... 29,316 29,316
Government Money Market Fund.... 8,477 8,477
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Portfolios for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Portfolios pursuant to Rule 12b-1 of the 1940 Act. The
Plan provides for payments to the Distributor of up to 0.25% of the average
daily net assets of the Investment Shares of the Portfolios. Although the money
market Portfolios are authorized to pay 12b-1 fees of up to 0.25% in connection
with the sale of Investment Shares, none of the Portfolios currently intends to
pay such fees.
Gross distribution fees and fees waived for each Portfolio for the year ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FUNDS GROSS FEES FEES WAIVED
- ----- ---------- -----------
<S> <C> <C>
Growth and Income Fund......... $59,946 $ --
Small Company Growth Fund...... 45,018 --
International Growth Fund...... 23,388 --
Index Equity Fund.............. 45,030 --
Short Term Bond Fund........... 9,174 3,693
Intermediate Bond Fund......... 17,259 --
Income Fund.................... 8,849 --
Limited Term Tax-Free Fund..... 773 310
Intermediate Tax-Free Fund..... 8,298 --
Tax-Free Income Fund........... 2,621 --
Michigan Municipal Bond Fund... 7,499 3,008
Money Market Fund.............. -- --
Michigan Municipal Money Market
Fund......................... -- --
Government Money Market Fund... -- --
</TABLE>
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath LLP.
A partner of the firm serves as Assistant Secretary of the Trust.
117
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
----------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued...................................... $ 249,081,909 $150,224,731 $ 208,702,084 $ 132,474,283
Reinvestment of distributions...................... 30,110,268 25,727,424 26,503,462 14,200,151
Shares redeemed.................................... (147,058,160) (97,365,654) (161,953,808) (115,454,666)
------------- ------------ ------------- -------------
Net increase (decrease) from Institutional shares
transactions................................... $ 132,134,017 $78,586,501 $ 73,251,738 $ 31,219,768
------------- ------------ ------------- -------------
INVESTMENT:
Shares issued...................................... $ 20,005,334 $ 3,623,107 $ 7,480,927 $ 2,999,500
Reinvestment of distributions...................... 2,967,456 1,684,171 1,566,793 691,055
Shares redeemed.................................... (4,320,697) (1,920,037) (3,330,447) (1,767,536)
------------- ------------ ------------- -------------
Net increase (decrease) from Investment shares
transactions................................... $ 18,652,093 $ 3,387,241 $ 5,717,273 $ 1,923,019
------------- ------------ ------------- -------------
Total net increase (decrease) from shares
transactions................................... $ 150,786,110 $81,973,742 $ 78,969,011 $ 33,142,787
============= ============ ============= =============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued...................................... 16,279,124 10,889,808 11,956,401 8,964,612
Reinvestment of distributions...................... 1,971,493 1,890,610 1,547,774 937,802
Shares redeemed.................................... (9,401,038) (7,034,231) (9,131,520) (7,693,348)
------------- ------------ ------------- -------------
Net increase (decrease) from Institutional shares
transactions................................... 8,849,579 5,746,187 4,372,655 2,209,066
------------- ------------ ------------- -------------
INVESTMENT:
Shares issued...................................... 1,283,992 265,482 419,135 203,920
Reinvestment of distributions...................... 195,172 124,536 91,169 45,725
Shares redeemed.................................... (280,261) (139,590) (191,859) (118,619)
------------- ------------ ------------- -------------
Net increase (decrease) from Investment shares
transactions................................... 1,198,903 250,428 318,445 131,026
------------- ------------ ------------- -------------
Total net increase (decrease) from shares
transactions................................... 10,048,482 5,996,615 4,691,100 2,340,092
============= ============ ============= =============
</TABLE>
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued........................................ $189,937,844 $137,648,487 $323,258,744 $ 69,650,513
Reinvestment of distributions........................ 3,418,753 3,147,652 6,357,380 5,950,954
Shares redeemed...................................... (92,021,615) (50,898,479) (77,077,375) (50,001,044)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions..................................... $101,334,982 $89,897,660 $252,538,749 $ 25,600,423
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued........................................ $ 3,462,874 $ 1,976,895 $15,939,700 $ 2,739,605
Reinvestment of distributions........................ 146,470 128,041 315,816 329,198
Shares redeemed...................................... (2,625,594) (1,176,997) (2,603,171) (1,112,357)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions..................................... $ 983,750 $ 927,939 $13,652,345 $ 1,956,446
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions..................................... $102,318,732 $90,825,599 $266,191,094 $ 27,556,869
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued........................................ 12,562,555 9,359,272 18,391,993 5,172,550
Reinvestment of distributions........................ 230,973 215,585 353,825 434,418
Shares redeemed...................................... (5,990,183) (3,491,780) (4,462,155) (3,699,843)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions..................................... 6,803,345 6,083,077 14,283,663 1,907,125
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued........................................ 227,807 137,013 915,280 205,672
Reinvestment of distributions........................ 9,962 8,820 17,611 24,012
Shares redeemed...................................... (175,388) (81,019) (149,114) (81,276)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions..................................... 62,381 64,814 783,777 148,408
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions..................................... 6,865,726 6,147,891 15,067,440 2,055,533
============ ============ ============ ============
</TABLE>
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
---------------------------- ----------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
------------ ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued...................... $48,001,662 $ 71,054,235 $ 199,760,848 $ 198,301,060 $64,474,285 $154,129,760
Reinvestment of distributions...... 6,604,162 11,089,747 24,873,643 28,757,725 4,044,114 2,631,559
Shares redeemed.................... (150,317,030) (151,375,676) (243,018,554) (281,359,682) (82,779,834) (35,226,634)
------------ ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Institutional shares
transactions................... $(95,711,206) $ (69,231,694) $ (18,384,063) $ (54,300,897) $(14,261,435) $121,534,685
------------ ------------- ------------- ------------- ------------ ------------
INVESTMENT:
Shares issued...................... $ 7,847,049 $ 346,979 $ 1,779,289 $ 1,793,614 $ 3,443,682 $ 1,318,844
Reinvestment of distributions...... 224,600 85,049 330,824 371,260 295,679 147,412
Shares redeemed.................... (2,314,253) (365,200) (2,560,072) (1,445,746) (908,477) (581,526)
------------ ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Investment shares
transactions................... $ 5,757,396 $ 66,828 $ (449,959) $ 719,128 $ 2,830,884 $ 884,730
------------ ------------- ------------- ------------- ------------ ------------
Total net increase (decrease)
from shares transactions....... $(89,953,810) $ (69,164,866) $ (18,834,022) $ (53,581,769) $(11,430,551) $122,419,415
============ ============= ============= ============= ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued...................... 4,932,559 7,222,192 20,424,141 20,156,864 6,376,298 15,175,279
Reinvestment of distributions...... 681,245 1,133,650 2,553,873 2,949,495 400,874 259,124
Shares redeemed.................... (15,426,349) (15,396,719) (24,790,453) (28,751,972) (8,087,197) (3,437,207)
------------ ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Institutional shares
transactions................... (9,812,545) (7,040,877) (1,812,439) (5,645,613) (1,310,025) 11,997,196
------------ ------------- ------------- ------------- ------------ ------------
INVESTMENT:
Shares issued...................... 806,758 35,323 180,929 182,449 338,211 129,967
Reinvestment of distributions...... 23,130 8,703 33,899 38,010 29,196 14,507
Shares redeemed.................... (237,636) (37,044) (261,548) (148,005) (89,859) (57,824)
------------ ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Investment shares
transactions................... 592,252 6,982 (46,720) 72,454 277,548 86,650
------------ ------------- ------------- ------------- ------------ ------------
Total net increase (decrease)
from shares transactions....... (9,220,293) (7,033,895) (1,859,159) (5,573,159) (1,032,477) 12,083,846
============ ============= ============= ============= ============ ============
</TABLE>
120
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The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued............................................. $ 9,059,260 $ 8,644,704 $43,176,593 $ 62,493,861
Reinvestment of distributions............................. 13,903 16,368 124,001 42,417
Shares redeemed........................................... (14,638,082) (22,256,093) (60,115,232) (57,683,879)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions.......................................... $(5,564,919) $(13,595,021) $(16,814,638) $ 4,852,399
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued............................................. $ 677,012 $ 51,698 $ 1,089,316 $ 921,734
Reinvestment of distributions............................. 13,461 2,603 83,640 77,714
Shares redeemed........................................... (324,005) (2,105) (1,083,713) (1,389,670)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions.......................................... $ 366,468 $ 52,196 $ 89,243 $ (390,222)
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions.......................................... $(5,198,451) $(13,542,825) $(16,725,395) $ 4,462,177
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued............................................. 888,774 849,971 4,110,419 5,988,213
Reinvestment of distributions............................. 1,369 1,612 11,820 4,102
Shares redeemed........................................... (1,435,754) (2,187,798) (5,717,526) (5,565,749)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions.......................................... (545,611) (1,336,215) (1,595,287) 426,566
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued............................................. 66,418 5,061 103,878 89,120
Reinvestment of distributions............................. 1,317 256 7,978 7,510
Shares redeemed........................................... (31,731) (205) (104,039) (135,420)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions.......................................... 36,004 5,112 7,817 (38,790)
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions.......................................... (509,607) (1,331,103) (1,587,470) 387,776
============ ============ ============ ============
</TABLE>
121
<PAGE> 268
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE MICHIGAN MUNICIPAL
INCOME FUND BOND FUND
--------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ---------------- ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.......................................... $31,815,166 $34,651,840 $ 32,654,052 $ 27,099,860
Reinvestment of distributions.......................... 76,956 28,992 70,141 44,917
Shares redeemed........................................ (29,459,976) (44,605,879) (75,229,474) (59,293,642)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions....................................... $ 2,432,146 $(9,925,047) $(42,505,281) $(32,148,865)
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued.......................................... $ 1,224,420 $ 530,708 $ 2,865,534 $ 1,008,626
Reinvestment of distributions.......................... 39,697 39,399 61,445 29,665
Shares redeemed........................................ (526,698) (150,441) (976,041) (509,760)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions....................................... $ 737,419 $ 419,666 $ 1,950,938 $ 528,531
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions....................................... $ 3,169,565 $(9,505,381) $(40,554,343) $(31,620,334)
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued.......................................... 3,066,893 3,371,900 3,222,928 2,693,878
Reinvestment of distributions.......................... 7,401 2,825 6,941 4,468
Shares redeemed........................................ (2,828,842) (4,276,961) (7,426,189) (5,886,119)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional shares
transactions....................................... 245,452 (902,236) (4,196,320) (3,187,773)
------------ ------------ ------------ ------------
INVESTMENT:
Shares issued.......................................... 116,872 51,428 283,459 100,489
Reinvestment of distributions.......................... 3,802 3,826 6,073 2,956
Shares redeemed........................................ (51,267) (14,550) (97,266) (50,830)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment shares
transactions....................................... 69,407 40,704 192,266 52,615
------------ ------------ ------------ ------------
Total net increase (decrease) from shares
transactions....................................... 314,859 (861,532) (4,004,054) (3,135,158)
============ ============ ============ ============
</TABLE>
122
<PAGE> 269
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT
MICHIGAN MUNICIPAL MONEY
MONEY MARKET FUND MONEY MARKET FUND MARKET FUND
------------------------------- ----------------------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997(1)
--------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.............................. $ 1,151,538,209 $ 844,257,954 $ 279,013,482 $ 258,305,060 $ 328,632,081
Reinvestment of distributions.............. 1,693,047 540,797 192,298 -- 2,413,585
Shares redeemed............................ (1,162,770,824) (785,695,077) (222,935,437) (248,095,918) (236,421,222)
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) from
Institutional shares transactions...... $ (9,539,568) $ 59,103,674 $ 56,270,343 $ 10,209,142 $ 94,624,444
--------------- ------------- ------------- ------------- -------------
INVESTMENT:
Shares issued.............................. $ 1,909,306 $ 1,173,842 $ 191,150 $ 136,170 $ 4,460
Reinvestment of distributions.............. 38,914 46,359 13,697 28,579 63
Shares redeemed............................ (1,572,981) (1,643,459) (697,468) (986,230) (2,510)
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) from Investment
shares transactions.................... $ 375,239 $ (423,258) $ (492,621) $ (821,481) $ 2,013
--------------- ------------- ------------- ------------- -------------
Total net increase (decrease) from shares
transactions........................... $ (9,164,329) $ 58,680,416 $ 55,777,722 $ 9,387,661 $ 94,626,457
=============== ============= ============= ============= =============
SHARE AMOUNTS
INSTITUTIONAL:
Shares issued.............................. 1,151,538,209 844,257,954 279,013,482 258,305,060 328,632,081
Reinvestment of distributions.............. 1,693,047 540,797 192,298 -- 2,413,585
Shares redeemed............................ (1,162,770,823) (785,695,077) (222,935,438) (248,095,918) (236,421,222)
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) from
Institutional shares transactions...... (9,539,567) 59,103,674 56,270,342 10,209,142 94,624,444
--------------- ------------- ------------- ------------- -------------
INVESTMENT:
Shares issued.............................. 1,909,306 1,173,842 191,151 136,170 4,460
Reinvestment of distributions.............. 38,916 46,359 13,697 28,579 63
Shares redeemed............................ (1,572,981) (1,643,459) (697,467) (986,230) (2,510)
--------------- ------------- ------------- ------------- -------------
Net increase (decrease) from Investment
shares transactions.................... 375,241 (423,258) (492,619) (821,481) 2,013
--------------- ------------- ------------- ------------- -------------
Total net increase (decrease) from shares
transactions........................... (9,164,326) 58,680,416 55,777,723 9,387,661 94,626,457
=============== ============= ============= ============= =============
</TABLE>
- ---------------
(1) From the period June 2, 1997 (commencement of operations) through December
31, 1997.
123
<PAGE> 270
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---- ------------ ------------
<S> <C> <C>
Growth and Income Fund...... $632,120,553 $555,377,838
Small Company Growth Fund... 216,037,006 205,751,523
International Growth Fund... 96,638,427 15,470,957
Index Equity Fund........... 269,077,302 4,027,004
Short Term Bond Fund........ 138,965,062 231,314,649
Intermediate Bond Fund...... 832,771,422 860,725,166
Income Fund................. 198,416,661 222,640,748
Limited Term Tax-Free
Fund...................... 10,477,564 15,166,490
Intermediate Tax-Free
Fund...................... 62,249,579 74,531,186
Tax-Free Income Fund........ 24,828,380 17,964,881
Michigan Municipal Bond
Fund...................... 15,860,879 55,589,588
</TABLE>
6. RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES
The Growth and Income Fund and the International Growth Fund can purchase
securities of foreign issuers. Investing in securities of foreign issuers
involves special risks not typically associated with investing in securities of
U.S. issuers.
The risks include devaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign issuers and their
markets may be less liquid and their prices more volatile than those of
securities of comparable U.S. issuers.
7. CONCENTRATION OF CREDIT RISK
The Michigan Municipal Money Market Fund and Michigan Municipal Bond Fund
invest primarily in debt obligations issued by the State of Michigan and its
respective political subdivisions, agencies and public authorities to obtain
funds for various public purposes. The Portfolios are more susceptible to
economic and political factors adversely affecting issuers of Michigan specific
municipal securities than are municipal bond funds that are not concentrated in
these issuers to the same extent.
The Limited Term Tax-Free Fund, Intermediate Tax-Free Fund, Tax-Free Income
Fund, Michigan Municipal Bond Fund, and Michigan Municipal Money Market Fund had
the following concentrations by industry sector at December 31, 1997 (as a
percentage of total investments):
124
<PAGE> 271
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MICHIGAN MICHIGAN
LIMITED TERM INTERMEDIATE TAX-FREE MUNICIPAL MUNICIPAL MONEY
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND MARKET FUND
------------- ------------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Airport.................................... 4.27% 1.76% 2.95% 0.92% 0.43%
Chemical................................... -- -- -- -- 10.17%
Development................................ 18.15% 10.88% 28.56% 8.44% 5.54%
Education.................................. 17.50% 4.48% 5.28% 4.43% --
Environmental.............................. -- -- -- -- 5.10%
General Obligation......................... 25.49% 30.33% 21.69% 15.04% 19.79%
Manufacturing.............................. -- -- -- -- 21.13%
Materials.................................. -- -- -- -- 13.01%
Medical.................................... 7.39% 1.70% 6.92% 15.74% 3.12%
Multifamily Housing........................ 2.89% -- -- 2.41% 4.71%
Mutual Funds............................... 0.23% 0.41% 0.83% 0.13% 0.24%
Sewer...................................... 2.81% 3.43% 3.08% 5.53% 3.70%
Power...................................... -- 8.06% 8.38% 5.34% 0.29%
Printing................................... -- -- -- -- 3.98%
Resource Recovery.......................... -- -- -- 1.12% --
Retail..................................... -- -- -- -- 1.13%
School District............................ 10.94% 13.65% 6.52% 34.52% 1.65%
Technology................................. -- -- -- -- 4.31%
Transportation............................. 2.99% 11.14% 6.74% 5.47% --
Utilities.................................. -- 3.52% 1.90% 0.91% --
Water...................................... 7.34% 10.64% 7.15% -- 1.70%
----- ----- ----- ----- -----
100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
125
<PAGE> 272
The Kent GROWTH AND INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 13.90 $ 13.25 $ 10.50 $ 10.91 $ 10.31
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.25 0.30 0.33 0.31 0.27
Net realized and unrealized gains (losses) on
investments and futures contracts................... 3.04 2.16 3.28 (0.26) 0.95
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 3.29 2.46 3.61 0.05 1.22
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.25) (0.30) (0.33) (0.31) (0.27)
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)
-------- -------- -------- -------- --------
Net change in net asset value........................... 1.65 0.65 2.75 (0.41) 0.60
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 15.55 $ 13.90 $ 13.25 $ 10.50 $ 10.91
======== ======== ======== ======== ========
Total return............................................ 24.14% 19.47% 34.91% 0.51% 11.98%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $697,973 $500,857 $401,371 $308,825 $180,864
Ratio of expenses to average net assets............... 0.92% 0.95% 0.94% 0.98% 1.03%
Ratio of net investment income to average net
assets.............................................. 1.61% 2.18% 2.73% 3.04% 2.61%
Ratio of expenses to average net assets*.............. 0.93% 0.95% *** *** ***
Ratio of net investment income to average net
assets*............................................. 1.60% 2.18% *** *** ***
Portfolio turnover rate(1)............................ 88% 39% 58% 28% 54%
Average commission rate paid(2)....................... $ 0.0571 $ 0.0539 -- -- --
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
126
<PAGE> 273
The Kent GROWTH AND INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 13.81 $ 13.19 $ 10.46 $ 10.87 $ 10.29
-------- -------- -------- -------- --------
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
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 3.23 2.41 3.56 0.05 1.20
-------- -------- -------- -------- --------
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
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 15.44 $ 13.81 $ 13.19 $ 10.46 $ 10.87
======== ======== ======== ======== ========
Total return(1)......................................... 23.89% 19.14% 34.61% 0.50% 11.81%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 35,343 $ 15,063 $ 11,079 $ 8,005 $ 4,607
Ratio of expenses to average net assets............... 1.17% 1.09% 1.18% 0.98% 1.22%
Ratio of net investment income to average net
assets.............................................. 1.31% 1.77% 2.48% 3.03% 2.43%
Ratio of expenses to average net assets*.............. 1.18% 1.09% *** *** ***
Ratio of net investment income to average net
assets*............................................. 1.30% 1.77% *** *** ***
Portfolio turnover rate(2)............................ 88% 39% 58% 28% 54%
Average commission rate paid(3)....................... $ 0.0571 $ 0.0539 -- -- --
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
127
<PAGE> 274
The Kent SMALL COMPANY GROWTH FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 15.65 $ 13.82 $ 11.99 $ 12.50 $ 10.85
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.04 0.12 0.10 0.10 0.08
Net realized and unrealized gains (losses) on
investments and futures contracts................... 4.19 2.55 2.64 (0.10) 1.76
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 4.23 2.67 2.74 -- 1.84
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.04) (0.12) (0.10) (0.09) (0.08)
In excess of net investment income.................... (0.02) -- -- (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)
-------- -------- -------- -------- --------
Net change in net asset value........................... 2.74 1.83 1.83 (0.51) 1.65
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 18.39 $ 15.65 $ 13.82 $ 11.99 $ 12.50
======== ======== ======== ======== ========
Total return............................................ 27.94% 19.56% 23.75% (0.06%) 17.04%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $719,998 $544,081 $450,072 $304,179 $252,401
Ratio of expenses to average net assets............... 0.93% 0.96% 0.97% 0.98% 1.06%
Ratio of net investment income to average net
assets.............................................. 0.24% 0.78% 0.83% 0.79% 0.74%
Ratio of expenses to average net assets*.............. 0.94% 0.96% *** *** ***
Ratio of net investment income to average net
assets*............................................. 0.23% 0.78% *** *** ***
Portfolio turnover rate(1)............................ 32% 16% 30% 20% 14%
Average commission rate paid(2)....................... $ 0.0447 $ 0.0481 -- -- --
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
128
<PAGE> 275
The Kent SMALL COMPANY GROWTH FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 15.61 $ 13.81 $ 11.98 $12.49 $10.86
------- ------- ------- ------ ------
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
------- ------- ------- ------ ------
Total Income (Loss) from Investment Operations.............. 4.19 2.61 2.71 (0.01) 1.82
------- ------- ------- ------ ------
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
------- ------- ------- ------ ------
Net asset value, end of period.............................. $ 18.33 $ 15.61 $ 13.81 $11.98 $12.49
======= ======= ======= ====== ======
Total return(1)............................................. 27.71% 19.16% 23.47% (0.08%) 16.84%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $22,784 $14,436 $10,955 $8,433 $5,345
Ratio of expenses to average net assets................... 1.18% 1.21% 1.20% 0.98% 1.25%
Ratio of net investment income (loss) to average net
assets.................................................. (0.01%) 0.53% 0.59% 0.79% 0.59%
Ratio of expenses to average net assets*.................. 1.19% 1.21% *** *** ***
Ratio of net investment income (loss) to average net
assets*................................................. (0.02%) 0.53% *** *** ***
Portfolio turnover rate(2)................................ 32% 16% 30% 20% 14%
Average commission rate paid(3)........................... $0.0447 $0.0481 -- -- --
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
129
<PAGE> 276
The Kent INTERNATIONAL GROWTH FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 14.75 $ 14.18 $ 13.06 $ 12.84 $ 10.01
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................................. 0.11 0.13 0.13 0.12 0.09
Net realized and unrealized gains (losses) on
investments and foreign currency..................... 0.26 0.70 1.54 0.61 2.95
-------- -------- -------- -------- --------
Total Income from Investment Operations.................. 0.37 0.83 1.67 0.73 3.04
-------- -------- -------- -------- --------
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)
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)
-------- -------- -------- -------- --------
Net change in net asset value............................ 0.14 0.57 1.12 0.22 2.83
-------- -------- -------- -------- --------
Net asset value, end of period........................... $ 14.89 $ 14.75 $ 14.18 $ 13.06 $ 12.84
======== ======== ======== ======== ========
Total return............................................. 2.54% 5.87% 13.00% 5.73% 30.32%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $492,598 $387,799 $286,545 $178,186 $157,716
Ratio of expenses to average net assets................ 1.05% 1.09% 1.17% 1.22% 1.33%
Ratio of net investment income to average net assets... 0.80% 0.97% 1.35% 0.87% 0.86%
Ratio of expenses to average net assets*............... 1.06% 1.09% *** *** ***
Ratio of net investment income to average net
assets*.............................................. 0.79% 0.97% *** *** ***
Portfolio turnover rate(1)............................. 3% 13% 6% 20% 5%
Average commission rate paid(2)........................ $ 0.0148 $ 0.0219 -- -- --
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
130
<PAGE> 277
The Kent INTERNATIONAL GROWTH FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 14.69 $ 14.13 $ 13.00 $12.81 $10.03
------- ------- ------- ------ ------
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
------- ------- ------- ------ ------
Total Income from Investment Operations..................... 0.33 0.78 1.64 0.70 2.98
------- ------- ------- ------ ------
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
------- ------- ------- ------ ------
Net asset value, end of period.............................. $ 14.79 $ 14.69 $ 14.13 $13.00 $12.81
======= ======= ======= ====== ======
Total return(1)............................................. 2.25% 5.57% 12.86% 5.51% 29.67%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 9,780 $ 8,799 $ 7,548 $6,539 $3,202
Ratio of expenses to average net assets................... 1.30% 1.34% 1.40% 1.25% 1.43%
Ratio of net investment income to average net assets...... 0.53% 0.74% 1.11% 0.81% 0.32%
Ratio of expenses to average net assets*.................. 1.31% 1.34% *** *** ***
Ratio of net investment income to average net assets*..... 0.52% 0.74% *** *** ***
Portfolio turnover rate(2)................................ 3% 13% 6% 20% 5%
Average commission rate paid(3)........................... $0.0148 $0.0219 -- -- --
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
131
<PAGE> 278
The Kent INDEX EQUITY FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 14.71 $ 12.56 $ 10.68 $ 11.04 $ 10.41
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................................. 0.25 0.26 0.26 0.25 0.23
Net realized and unrealized gains (losses) on
investments and futures contracts.................... 4.50 2.47 3.44 (0.15) 0.71
-------- -------- -------- -------- --------
Total Income from Investment Operations.................. 4.75 2.73 3.70 0.10 0.94
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income.................................. (0.25) (0.26) (0.25) (0.26) (0.23)
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)
-------- -------- -------- -------- --------
Net change in net asset value............................ 4.43 2.15 1.88 (0.36) 0.63
-------- -------- -------- -------- --------
Net asset value, end of period........................... $ 19.14 $ 14.71 $ 12.56 $ 10.68 $ 11.04
======== ======== ======== ======== ========
Total return............................................. 32.55% 22.18% 36.23% 0.86% 9.11%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $590,241 $243,438 $183,877 $245,550 $233,451
Ratio of expenses to average net assets................ 0.43% 0.49% 0.56% 0.58% 0.65%
Ratio of net investment income to average net assets... 1.44% 1.91% 2.14% 2.32% 2.18%
Ratio of expenses to average net assets*............... 0.54% 0.59% 0.56% 0.58% 0.65%
Ratio of net investment income to average net
assets*.............................................. 1.33% 1.81% 2.14% 2.32% 2.18%
Portfolio turnover rate(1)............................. 1% 2% 3% 50% 1%
Average commission rate paid(2)........................ $ 0.0508 $ 0.0496 -- -- --
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
132
<PAGE> 279
The Kent INDEX EQUITY FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 14.72 $ 12.57 $ 10.70 $ 11.07 $ 10.44
------- ------- ------- ------- -------
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
------- ------- ------- ------- -------
Total Income from Investment Operations..................... 4.71 2.70 3.67 0.09 0.94
------- ------- ------- ------- -------
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
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 19.15 $ 14.72 $ 12.57 $ 10.70 $ 11.07
======= ======= ======= ======= =======
Total return (1)............................................ 32.24% 21.92% 35.81% 0.75% 9.09%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $27,922 $ 9,925 $ 6,612 $ 4,736 $ 3,776
Ratio of expenses to average net assets................... 0.68% 0.74% 0.80% 0.60% 0.86%
Ratio of net investment income to average net assets...... 1.20% 1.67% 1.86% 2.30% 2.04%
Ratio of expenses to average net assets*.................. 0.79% 0.84% 0.81% 0.60% 0.86%
Ratio of net investment income to average net assets*..... 1.09% 1.57% 1.85% 2.30% 2.04%
Portfolio turnover rate (2)............................... 1% 2% 3% 50% 1%
Average commission rate paid (3).......................... $0.0508 $0.0496 -- -- --
</TABLE>
- ---------------
(*) 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for periods prior to 1996.
See Notes to Financial Statements.
133
<PAGE> 280
The Kent SHORT TERM BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 9.75 $ 9.96 $ 9.52 $ 9.91 $ 9.99
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................... 0.61 0.61 0.55 0.48 0.42
Net realized and unrealized gains (losses) on
investments........................................... -- (0.21) 0.43 (0.38) (0.09)
-------- -------- -------- -------- --------
Total Income from Investment Operations................... 0.61 0.40 0.98 0.10 0.33
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................... (0.61) (0.61) (0.54) (0.49) (0.41)
In excess of net investment income...................... -- -- -- ** --
-------- -------- -------- -------- --------
Total Dividends and Distributions..................... (0.61) (0.61) (0.54) (0.49) (0.41)
-------- -------- -------- -------- --------
Net change in net asset value............................. -- (0.21) 0.44 (0.39) (0.08)
-------- -------- -------- -------- --------
Net asset value, end of period............................ $ 9.75 $ 9.75 $ 9.96 $ 9.52 $ 9.91
======== ======== ======== ======== ========
Total return.............................................. 6.42% 4.22% 10.53% 1.03% 3.36%
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $139,739 $235,430 $310,680 $176,765 $255,892
Ratio of expenses to average net assets................. 0.72% 0.70% 0.77% 0.73% 0.81%
Ratio of net investment income to average net assets.... 6.04% 6.17% 5.60% 4.75% 4.24%
Ratio of expenses to average net assets*................ 0.73% 0.70% *** *** ***
Ratio of net investment income to average net assets*... 6.03% 6.17% *** *** ***
Portfolio turnover rate (1)............................. 89% 32% 75% 56% 50%
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
134
<PAGE> 281
The Kent SHORT TERM BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.74 $ 9.95 $ 9.52 $ 9.91 $ 10.02
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.57 0.59 0.52 0.47 0.38
Net realized and unrealized gains (losses) on
investments ........................................ 0.02 (0.20) 0.44 (0.37) (0.08)
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 0.59 0.39 0.96 0.10 0.30
-------- -------- -------- -------- --------
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)
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 9.74 $ 9.74 $ 9.95 $ 9.52 $ 9.91
======== ======== ======== ======== ========
Total return(1)......................................... 6.26% 4.06% 10.30% 1.01% 3.04%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 7,433 $ 1,667 $ 1,634 $ 1,649 $ 1,427
Ratio of expenses to average net assets............... 0.88% 0.85% 0.91% 0.74% 1.24%
Ratio of net investment income to average net
assets.............................................. 5.75% 6.02% 5.40% 4.79% 3.91%
Ratio of expenses to average net assets*.............. 0.99% 0.96% *** *** ***
Ratio of net investment income to average net
assets*............................................. 5.64% 5.91% *** *** ***
Portfolio turnover rate(2)............................ 89% 32% 75% 56% 50%
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
135
<PAGE> 282
The Kent INTERMEDIATE BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.76 $ 10.12 $ 9.29 $ 10.18 $ 10.00
-------- -------- -------- -------- --------
Income (Loss) from Investment Operations:
Net investment income................................. 0.59 0.60 0.65 0.56 0.51
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
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.59) (0.61) (0.63) (0.54) (0.51)
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)
-------- -------- -------- -------- --------
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
======== ======== ======== ======== ========
Total return............................................ 7.80% 3.01% 16.18% (3.19%) 8.42%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $762,740 $769,395 $854,801 $977,865 $434,264
Ratio of expenses to average net assets............... 0.75% 0.77% 0.77% 0.80% 0.85%
Ratio of net investment income to average net
assets.............................................. 6.03% 6.18% 6.50% 6.03% 5.03%
Ratio of expenses to average net assets*.............. 0.76% 0.78% *** *** ***
Ratio of net investment income to average net
assets*............................................. 6.02% 6.17% *** *** ***
Portfolio turnover rate(1)............................ 114% 135% 166% 124% 126%
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
136
<PAGE> 283
The Kent INTERMEDIATE BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 9.78 $ 10.14 $ 9.32 $ 10.19 $ 10.03
-------- -------- -------- -------- --------
Income (Loss) from Investment Operations:
Net investment income................................. 0.57 0.58 0.61 0.57 0.47
Net realized and unrealized gains (losses) on
investments ........................................ 0.15 (0.32) 0.82 (0.87) 0.34
-------- -------- -------- -------- --------
Total Income (Loss) from Investment Operations.......... 0.72 0.26 1.43 (0.30) 0.81
-------- -------- -------- -------- --------
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
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 9.93 $ 9.78 $ 10.14 $ 9.32 $ 10.19
======== ======== ======== ======== ========
Total return(1)......................................... 7.62% 2.76% 15.76% (3.01%) 8.19%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 6,972 $ 7,327 $ 6,862 $ 9,196 $ 4,966
Ratio of expenses to average net assets............... 1.00% 1.02% 1.01% 0.81% 1.13%
Ratio of net investment income to average net
assets.............................................. 5.79% 5.92% 6.24% 5.94% 4.75%
Ratio of expenses to average net assets*.............. 1.01% 1.03% *** *** ***
Ratio of net investment income to average net
assets*............................................. 5.78% 5.91% *** *** ***
Portfolio turnover rate(2)............................ 114% 135% 166% 124% 126%
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
137
<PAGE> 284
The Kent INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1997 1996 1995(1)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.16 $ 10.84 $ 10.00
-------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.68 0.66 0.55
Net realized and unrealized gains (losses) on
investments............................................. 0.34 (0.56) 0.92
-------- -------- --------
Total Income from Investment Operations..................... 1.02 0.10 1.47
-------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.68) (0.65) (0.54)
In excess of net investment income........................ -- (0.10) --
Net realized gains on investments......................... (0.20) (0.03) (0.09)
-------- -------- --------
Total Dividends and Distributions....................... (0.88) (0.78) (0.63)
-------- -------- --------
Net change in net asset value............................... 0.14 (0.68) 0.84
-------- -------- --------
Net asset value, end of period.............................. $ 10.30 $ 10.16 $ 10.84
======== ======== ========
Total return................................................ 10.55% 1.19% 15.05%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $229,778 $240,060 $126,056
Ratio of expenses to average net assets................... 0.82% 0.83% 0.91%+
Ratio of net investment income to average net assets...... 6.65% 6.57% 6.65%+
Ratio of expenses to average net assets*.................. 0.83% 0.83% **
Ratio of net investment income to average net assets*..... 6.64% 6.57% **
Portfolio turnover rate(2)................................ 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 Institutional Class commenced operations on March 20, 1995.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
138
<PAGE> 285
The Kent INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1997 1996 1995(1)
------ ------ -------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $10.16 $10.82 $10.00
------ ------ ------
Income from Investment Operations:
Net investment income..................................... 0.63 0.66 0.52
Net realized and unrealized gains (losses) on
investments............................................. 0.35 (0.56) 0.91
------ ------ ------
Total Income from Investment Operations..................... 0.98 0.10 1.43
------ ------ ------
Less Dividends and Distributions from:
Net investment income..................................... (0.65) (0.64) (0.52)
In excess of net investment income........................ -- (0.09) --
Net realized gains on investments......................... (0.20) (0.03) (0.09)
------ ------ ------
Total Dividends and Distributions....................... (0.85) (0.76) (0.61)
------ ------ ------
Net change in net asset value............................... 0.13 (0.66) 0.82
------ ------ ------
Net asset value, end of period.............................. $10.29 $10.16 $10.82
====== ====== ======
Total return(2)............................................. 10.19% 1.16% 14.63%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $5,611 $2,722 $1,961
Ratio of expenses to average net assets................... 1.07% 1.08% 1.14%+
Ratio of net investment income to average net assets...... 6.38% 6.31% 6.40%+
Ratio of expenses to average net assets*.................. 1.08% 1.08% **
Ratio of net investment income to average net assets*..... 6.37% 6.31% **
Portfolio turnover rate(3)................................ 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
139
<PAGE> 286
The Kent LIMITED TERM TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995 1994(1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.16 $ 10.22 $ 9.80 $ 10.00
------- ------- ------- -------
Income (Loss) 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 (Loss) 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................................................ 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
Ratio of expenses to average net assets................... 0.76% 0.75% 0.69% 0.79%+
Ratio of net investment income to average net assets...... 3.86% 3.84% 3.87% 3.81%+
Ratio of expenses to average net assets*.................. 0.77% 0.75% 0.74% 0.96%+
Ratio of net investment income to average net assets*..... 3.85% 3.84% 3.82% 3.64%+
Portfolio turnover rate(2)................................ 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 Institutional Class commenced operations on September 1, 1994.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
140
<PAGE> 287
The Kent LIMITED TERM TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
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(2)............................................. 4.61% 3.51% 8.40% 0.03%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 474 $ 106 $ 54 $ 7
Ratio of expenses to average net assets................... 0.93% 0.87% 0.84% 0.87%+
Ratio of net investment income to average net assets...... 3.67% 3.69% 3.69% 3.86%+
Ratio of expenses to average net assets*.................. 1.04% 0.97% 0.85% 0.98%+
Ratio of net investment income to average net assets*..... 3.56% 3.59% 3.69% 3.75%+
Portfolio turnover rate(3)................................ 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.
(1) The Investment Class date of initial public investment was November 1,
1994.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
141
<PAGE> 288
The Kent INTERMEDIATE TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 10.42 $ 10.52 $ 9.74 $ 10.45 $ 10.02
-------- -------- -------- -------- --------
Income (Loss) from Investment Operations:
Net investment income.................................... 0.45 0.44 0.45 0.40 0.37
Net realized and unrealized gains (losses) on
investments............................................ 0.26 (0.08) 0.79 (0.71) 0.47
-------- -------- -------- -------- --------
Total Income (Loss) from Investment Operations............. 0.71 0.36 1.24 (0.31) 0.84
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income.................................... (0.45) (0.46) (0.45) (0.39) (0.36)
In excess of net investment income....................... -- ** (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)
-------- -------- -------- -------- --------
Net change in net asset value.............................. 0.26 (0.10) 0.78 (0.71) 0.43
-------- -------- -------- -------- --------
Net asset value, end of period............................. $ 10.68 $ 10.42 $ 10.52 $ 9.74 $ 10.45
======== ======== ======== ======== ========
Total return............................................... 7.07% 3.41% 12.90% (3.00%) 8.51%
Ratios/Supplemental Data:
Net Assets, end of period (000's).......................... $275,641 $285,674 $283,733 $380,715 $135,862
Ratio of expenses to average net assets.................. 0.72% 0.73% 0.72% 0.78% 0.84%
Ratio of net investment income to average net assets..... 4.31% 4.34% 4.39% 4.07% 3.62%
Ratio of expenses to average net assets*................. 0.73% 0.73% 0.72% 0.78% 0.84%
Ratio of net investment income to average net assets*.... 4.30% 4.34% 4.39% 4.07% 3.62%
Portfolio turnover rate(1)............................... 23% 35% 6% 36% 14%
</TABLE>
- ---------------
* 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) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
142
<PAGE> 289
The Kent INTERMEDIATE TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.42 $10.52 $ 9.74 $10.45 $10.04
------ ------ ------ ------ ------
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
------ ------ ------ ------ ------
Total Income (Loss) from Investment Operations.............. 0.69 0.33 1.21 (0.31) 0.82
------ ------ ------ ------ ------
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
------ ------ ------ ------ ------
Net asset value, end of period.............................. $10.68 $10.42 $10.52 $ 9.74 $10.45
====== ====== ====== ====== ======
Total return(1)............................................. 6.80% 3.17% 12.66% (3.03%) 8.29%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $3,534 $3,368 $3,807 $4,505 $3,307
Ratio of expenses to average net assets................... 0.97% 0.98% 0.97% 0.79% 1.08%
Ratio of net investment income to average net assets...... 4.06% 4.09% 4.13% 3.99% 3.44%
Ratio of expenses to average net assets*.................. 0.98% 0.98% 0.97% 0.79% 1.08%
Ratio of net investment income to average net assets*..... 4.05% 4.09% 4.13% 3.99% 3.44%
Portfolio turnover rate(2)................................ 23% 35% 6% 36% 14%
</TABLE>
- ---------------
* 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) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
143
<PAGE> 290
The Kent TAX-FREE INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1997 1996 1995(1)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.27 $ 10.49 $ 10.00
-------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.45 0.46 0.36
Net realized and unrealized gains (losses) on investments
and futures contracts................................... 0.41 (0.06) 0.49
-------- -------- --------
Total Income from Investment Operations..................... 0.86 0.40 0.85
-------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.45) (0.46) (0.36)
Net realized gains on investments and futures contracts... (0.03) (0.16) --
-------- -------- --------
Total Dividends and Distributions....................... (0.48) (0.62) (0.36)
-------- -------- --------
Net change in net asset value............................... 0.38 (0.22) 0.49
-------- -------- --------
Net asset value, end of period.............................. $ 10.65 $ 10.27 $ 10.49
======== ======== ========
Total return................................................ 8.59% 3.92% 8.64%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $116,652 $109,948 $121,855
Ratio of expenses to average net assets................... 0.79% 0.82% 0.73%+
Ratio of net investment income to average net assets...... 4.32% 4.38% 4.44%+
Ratio of expenses to average net assets*.................. 0.80% 0.82% 0.91%+
Ratio of net investment income to average net assets*..... 4.31% 4.38% 4.26%+
Portfolio turnover rate(2)................................ 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 Institutional Class commenced operations on March 20, 1995.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
144
<PAGE> 291
The Kent TAX-FREE INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1997 1996 1995(1)
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.29 $ 10.52 $ 10.00
-------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.42 0.41 0.31
Net realized and unrealized gains (losses) on investments
and futures contracts................................... 0.42 (0.05) 0.51
-------- -------- --------
Total Income from Investment Operations..................... 0.84 0.36 0.82
-------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.42) (0.43) (0.30)
In excess of net investment income........................ (0.01) -- --
Net realized gains on investments and futures contracts... (0.03) (0.12) --
In excess of net realized gains........................... -- (0.04) --
-------- -------- --------
Total Dividends and Distributions....................... (0.46) (0.59) (0.30)
-------- -------- --------
Net change in net asset value............................... 0.38 (0.23) 0.52
-------- -------- --------
Net asset value, end of period.............................. $ 10.67 $ 10.29 $ 10.52
======== ======== ========
Total return(2)............................................. 8.32% 3.53% 8.34%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 1,712 $ 936 $ 529
Ratio of expenses to average net assets................... 1.04% 1.07% 0.95%+
Ratio of net investment income to average net assets...... 4.05% 4.14% 4.25%+
Ratio of expenses to average net assets*.................. 1.05% 1.07% 1.17%+
Ratio of net investment income to average net assets*..... 4.04% 4.14% 4.03%+
Portfolio turnover rate (3)............................... 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 the initial public investment was March 31,
1995.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
145
<PAGE> 292
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
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
Ratio of expenses to average net assets............... 0.69% 0.70% 0.69% 0.49% 0.24%+
Ratio of net investment income to average net
assets.............................................. 4.04% 3.83% 3.81% 3.74% 3.34%+
Ratio of expenses to average net assets*.............. 0.70% 0.70% 0.70% 0.74% 0.68%+
Ratio of net investment income to average net
assets*............................................. 4.03% 3.83% 3.80% 3.50% 3.61%+
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 Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
146
<PAGE> 293
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
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)
-------- -------- -------- -------- --------
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
Ratio of expenses to average net assets............... 0.84% 0.85% 0.83% 0.49% 0.25%+
Ratio of net investment income to average net
assets.............................................. 3.88% 3.68% 3.68% 3.80% 3.43%+
Ratio of expenses to average net assets*.............. 0.95% 0.95% 0.85% 0.84% 1.08%+
Ratio of net investment income to average net
assets*............................................. 3.77% 3.58% 3.67% 2.74% 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 May 11, 1993.
(2) Calculation does not include sales charge. Effective May 1, 1997, the
Investment Shares were not assessed a sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
147
<PAGE> 294
The Kent MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.051 0.050 0.050 0.040 0.030
-------- -------- -------- -------- --------
Less Dividends from:
Net investment income................................. (0.051) (0.050) (0.050) (0.040) (0.030)
-------- -------- -------- -------- --------
Net change in net asset value........................... -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return............................................ 5.23% 5.06% 5.58% 3.75% 2.68%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $474,378 $483,919 $424,815 $323,539 $359,624
Ratio of expenses to average net assets............... 0.52% 0.52% 0.55% 0.60% 0.60%
Ratio of net investment income to average net
assets.............................................. 5.11% 4.95% 5.45% 3.65% 2.65%
Ratio of expenses to average net assets*.............. 0.62% 0.62% 0.63% 0.65% 0.68%
Ratio of net investment income to average net
assets*............................................. 5.01% 4.85% 5.37% 3.59% 2.57%
</TABLE>
- ---------------
* 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.
See Notes to Financial Statements.
148
<PAGE> 295
The Kent MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.051 0.050 0.050 0.040 0.030
-------- -------- -------- -------- --------
Less Dividends from:
Net investment income................................. (0.051) (0.050) (0.050) (0.040) (0.030)
-------- -------- -------- -------- --------
Net change in net asset value........................... -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return............................................ 5.23% 5.06% 5.56% 3.71% 2.67%
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 1,179 $ 804 $ 1,227 $ 369 $ 593
Ratio of expenses to average net assets............... 0.52% 0.52% 0.55% 0.63% 0.63%
Ratio of net investment income to average net
assets.............................................. 5.11% 4.94% 5.41% 3.58% 2.63%
Ratio of expenses to average net assets*.............. 0.62% 0.62% 0.62% 0.68% 4.49%
Ratio of net investment income (loss) to average net
assets*............................................. 5.01% 4.84% 5.33% 3.53% (1.24%)
</TABLE>
- ---------------
* 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.
See Notes to Financial Statements.
149
<PAGE> 296
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................................. 0.033 0.030 0.030 0.020 0.020
-------- -------- -------- -------- --------
Less Dividends from:
Net investment income.................................. (0.033) (0.030) (0.030) (0.020) (0.020)
-------- -------- -------- -------- --------
Net change in net asset value............................ -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period........................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return............................................. 3.31% 3.11% 3.50% 2.40% 2.00%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $211,682 $155,424 $145,215 $128,164 $183,366
Ratio of expenses to average net assets................ 0.52% 0.54% 0.56% 0.60% 0.60%
Ratio of net investment income to average net assets... 3.27% 3.06% 3.45% 2.33% 1.96%
Ratio of expenses to average net assets*............... 0.63% 0.64% 0.65% 0.70% 0.69%
Ratio of net investment income to average net
assets*.............................................. 3.16% 2.96% 3.36% 2.23% 1.87%
</TABLE>
- ---------------
* 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.
See Notes to Financial Statements.
150
<PAGE> 297
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.000 $ 1.00 $ 1.000 $ 1.000 $1.000
------- ------- ------- ------- ------
Income from Investment Operations:
Net investment income..................................... 0.033 0.030 0.030 0.020 0.020
------- ------- ------- ------- ------
Less Dividends from:
Net investment income..................................... (0.033) (0.030) (0.030) (0.020) (0.020)
------- ------- ------- ------- ------
Net change in net asset value............................... -- -- -- -- --
------- ------- ------- ------- ------
Net asset value, end of period.............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
======= ======= ======= ======= ======
Total return................................................ 3.31% 3.11% 3.48% 2.38% 1.98%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 289 $ 782 $ 1,603 $ 379 $ 149
Ratio of expenses to average net assets................... 0.52% 0.54% 0.54% 0.63% 0.63%
Ratio of net investment income to average net assets...... 3.22% 3.06% 3.48% 2.47% 2.01%
Ratio of expenses to average net assets*.................. 0.63% 0.64% 0.62% 0.73% 3.77%
Ratio of net investment income (loss) to average net
assets*................................................. 3.11% 2.96% 3.39% 2.37% (1.13%)
</TABLE>
- ---------------
* 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.
See Notes to Financial Statements.
151
<PAGE> 298
The Kent GOVERNMENT MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PERIOD
ENDED
DECEMBER 31,
1997(1)
------------
<S> <C>
Net asset value, beginning of period........................ $ 1.000
-------
Income from Investment Operations:
Net investment income..................................... 0.031
-------
Less Dividends from:
Net investment income..................................... (0.031)
-------
Net change in net asset value............................... --
-------
Net asset value, end of period.............................. $ 1.000
=======
Total return................................................ 3.10%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $94,624
Ratio of expenses to average net assets................... 0.35%+
Ratio of net investment income to average net assets...... 5.23%+
Ratio of expenses to average net assets*.................. 0.69%+
Ratio of net investment income to average net assets*..... 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.
See Notes to Financial Statements.
152
<PAGE> 299
The Kent GOVERNMENT MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
PERIOD
ENDED
DECEMBER 31,
1997(1)
------------
<S> <C>
Net asset value, beginning of period........................ $ 1.000
-------
Income from Investment Operations:
Net investment income..................................... 0.030
-------
Less Dividends from:
Net investment income..................................... (0.030)
-------
Net change in net asset value............................... --
-------
Net asset value, end of period.............................. $ 1.000
=======
Total return................................................ 3.06%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................... $ 2
Ratio of expenses to average net assets................... 0.43%+
Ratio of net investment income to average net assets...... 5.17%+
Ratio of expenses to average net assets*.................. 0.77%+
Ratio of net investment income to average net assets*..... 4.83%+
</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.
See Notes to Financial Statements.
153
<PAGE> 300
The Kent
Funds INDEPENDENT AUDITOR'S REPORT
The Shareholders and Board of Trustees of
The Kent Funds
We have audited the accompanying statements of assets and liabilities of The
Kent Funds--Growth and Income Fund, Small Company Growth Fund, International
Growth Fund, Index Equity Fund, Short Term Bond Fund, Intermediate Bond Fund,
Income Fund, Limited Term Tax-Free Fund, Tax-Free Income Fund, Michigan
Municipal Bond Fund, Money Market Fund, Michigan Municipal Money Market Fund,
and Government Money Market Fund including the portfolios of investments, as of
December 31, 1997, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of The Kent Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1997, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Kent Funds at December 31, 1997, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 20, 1998
154
<PAGE> 301
FORM N-14
---------
PART C. OTHER INFORMATION
Item 15. Indemnification
---------------
See Article VIII of Section 3 of Registrant's Restatement of
Declaration of Trust which is filed with Registrant's Post-Effective Amendment
No. 24 as Exhibit 24(b)(1) and is incorporated by reference herein. 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 16. Exhibits
--------
(1) Registrant's Restatement of Declaration of Trust was filed
with Registrant's Post-Effective Amendment No. 24 as Exhibit
24(b)(1) and is incorporated by reference herein.
(2) Registrant's Amended and Restated By-Laws were filed with
Registrant's Post-Effective Amendment No. 24 as Exhibit
24(b)(2) and are incorporated by reference herein.
(3) Not applicable.
(4) Plan of Reorganization dated November 19, 1998 is filed
herewith as Appendix A to the Combined Proxy Prospectuses.
(5) 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.
(6)(1) The First Amendment to the Investment Advisory Agreement
between Registrant and Old Kent Bank and Trust Company (now
known as Old Kent Bank) was filed with Registrant's
Post-Effective Amendment No. 24 as Exhibit 24(b)(5)(a) and is
incorporated by reference herein.
(6)(2) Amended Schedule A to the First Amendment to the Investment
Advisory Agreement between Registrant and Old Kent Bank and
Trust Company was filed with Registrant's Post-Effective
Amendment No. 24 as Exhibit 24(b)(5)(b) and is incorporated by
reference herein.
<PAGE> 302
(6)(2) 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 was filed
with Registrant's Post-Effective Amendment No. 24 as Exhibit
24(b)(5)(c) and is incorporated by reference herein.
(6)(4) Assumption Agreement between Old Kent Bank and Lyon Street
Asset Management Co. dated March 2, 1998 was filed with
Registrant's Post-Effective Amendment No. 24 as Exhibit
24(b)(5)(d) and is incorporated by reference herein.
(6)(5) The notice to Lyon Street Asset Management Co. pursuant to the
Investment Advisory Agreement between Registrant and Old Kent
Bank (which has been assumed by Lyon Street Asset Management
Co.) relating to The Kent Large Company Growth Fund was filed
with Registrant's Post-Effective Amendment No. 25 as Exhibit
24(d)(1) and is incorporated by reference herein.
(6)(6) The notice to Lyon Street Asset Management Co. pursuant to the
Investment Advisory Agreement between Registrant and Old Kent
Bank (which has been assumed by Lyon Street Asset Management
Co.) relating to Lyon Street Institutional Money Market Fund
was filed with Registrant's Post-Effective Amendment No. 26 as
Exhibit 24(d)(2) and is incorporated by reference herein.
(7)(1) 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.
(7)(2) 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)(3) 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 Large
Company Growth Fund was filed with Registrant's Post-Effective
Amendment No. 25 as Exhibit 24(e)(1) and is incorporated by
reference herein.
(7)(4) The notice to BISYS Fund Services Limited Partnership pursuant
to the Distribution Agreement between Registrant and BISYS
Fund Services Limited Partnership relating to Lyon Street
Institutional Money Market Fund was filed with Registrant's
Post-Effective Amendment No. 26 as Exhibit 24(e)(2) and is
incorporated by reference herein.
-2-
<PAGE> 303
(8) 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.
(9) 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.
(10)(1) 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.
(10)(2) 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.
(11) 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 16(11).
(12) Opinion and Consent of Counsel as to tax matters and
consequences to shareholders discussed in the Prospectus is
filed herewith as Exhibit 16(12).
(13)(1) 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.
(13)(2) 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.
(13)(3) 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 Large
Company Growth Fund was filed with Registrant's Post-Effective
Amendment No. 25 as Exhibit 24(h)(1)(a) and is incorporated by
reference herein.
-3-
<PAGE> 304
(13)(4) The notice to BISYS Fund Services Limited Partnership pursuant
to the Administration Agreement between Registrant and BISYS
Fund Services Limited Partnership relating to Lyon Street
Institutional Money Market Fund was filed with Post-Effective
Amendment No. 26 as Exhibit 24(h)(1)(b) and is incorporated by
reference herein.
(13)(5) 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.
(13)(6) 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.
(13)(7) The notice to BISYS Fund Services, Inc. pursuant to the Fund
Accounting Agreement between Registrant and BISYS Fund
Services, Inc. relating to The Kent Large Company Growth Fund
was filed with Registrant's Post-Effective Amendment No. 25 as
Exhibit 24(h)(2)(a) and is incorporated by reference herein.
(13)(8) The notice to BISYS Fund Services, Inc. pursuant to the Fund
Accounting Agreement between Registrant and BISYS Fund
Services, Inc. relating to Lyon Street Institutional Money
Market Fund was filed with Registrant's Post-Effective
Amendment No. 26 as Exhibit 24(h)(2)(b) and is incorporated by
reference herein.
(13)(9) 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.
(13)(10) 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.
(13)(11) The notice to BISYS Fund Services, Inc. pursuant to the
Transfer Agency Agreement between Registrant and BISYS Fund
Services, Inc. relating to The Kent Large Company Growth Fund
was filed with Registrant's Post-Effective Amendment No. 25 as
Exhibit 24(h)(3)(a) and is incorporated by reference herein.
(13)(12) The notice to BISYS Fund Services, Inc. pursuant to the
Transfer Agency Agreement between Registrant and BISYS Fund
Services, Inc. relating to Lyon Street Institutional Money
Market Fund was filed with Registrant's Post-Effective
Amendment No. 26 as Exhibit 24(h)(3)(b) and is incorporated by
reference herein.
-4-
<PAGE> 305
(14)(1) Consent of KPMG LLP is filed herewith as Exhibit 16(14)(1).
(15) Not applicable.
(16) Powers of Attorney are filed herewith as Exhibit 16(16).
(17)(1) Form of Proxy is filed herewith as Exhibit 17(1).
(17)(2) Prospectus for the Kent Limited Term Tax-Free and Intermediate
Tax-Free Funds dated May 1, 1998, as supplemented September
24, 1998 and January 5, 1999, is filed herewith as Exhibit
17(2).
(17)(3) Statement of Additional Information for the Kent Limited Term
Tax-Free and Intermediate Tax-Free Funds dated May 1, 1998, as
supplemented January 14, 1999, is filed herewith as Exhibit
17(3).
-5-
<PAGE> 306
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, as
amended (the "1933 Act"), the reoffering prospectus will
contain the information called for by the applicable
registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of
an amendment to the registration statement and will not be
used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
-6-
<PAGE> 307
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been
signed on behalf of the Registrant in the City of Columbus, in the State of
Ohio, on the 27th day of January, 1999.
THE KENT FUNDS
By:*/ James F. Duca, II
------------------------------
James F. Duca, II
President
As required by the Securities Act of 1933, this 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 January 27, 1999
- -------------------------------
James F. Duca, II
*/ Martin R. Dean Treasurer (Principal Accounting January 27, 1999
- ------------------------------- and Financial Officer)
Martin R. Dean
*/ Walter B. Grimm Chairman and Trustee January 27, 1999
- -------------------------------
Walter B. Grimm
*/ Joseph F. Damore Trustee January 27, 1999
- -------------------------------
Joseph F. Damore
*/ James F. Rainey Trustee January 27, 1999
- -------------------------------
James F. Rainey
*/ Ronald F. VanSteeland Trustee January 27, 1999
- -------------------------------
Ronald F. VanSteeland
</TABLE>
*By: /s/ Robert L. Tuch
-----------------------------
Robert L. Tuch
Attorney-in-Fact
* Robert L. Tuch, 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.
-7-
<PAGE> 308
N-14
EXHIBIT INDEX
-------------
Exhibit 16(11) Opinion and Consent of Counsel as to legality of securities
being registered.
Exhibit 16(12) Opinion and Consent of Counsel as to tax matters.
Exhibit 16(14)(1) Consent of KPMG LLP.
Exhibit 16(16) Powers of Attorney.
Exhibit 17(1) Form of Proxy.
Exhibit 17(2) Prospectus for the Kent Limited Term Tax-Free and
Intermediate Tax-Free Funds dated May 1, 1998, as
supplemented September 24, 1998 and January 5, 1999.
Exhibit 17(3) Statement of Additional Information for the Kent Limited
Term Tax-Free and Intermediate Tax-Free Funds dated May 1,
1998, as supplemented January 14, 1999.
<PAGE> 1
Exhibit 16(11)
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Fax: (215) 988-2757
January 27, 1999
The Kent Funds
P.O. Box 182201
Columbus, Ohio 43218-2201
Dear Ladies and Gentlemen:
We have acted as counsel for the Kent Funds, a Massachusetts business
trust (the "Trust"), in connection with the Plan of Reorganization, dated as of
November 19, 1998 (the "Plan of Reorganization"), providing for the transfer of
all assets of the Kent Limited Term Tax-Free Fund (the "Transferor Fund"),
subject to all liabilities of the Transferor Fund, in exchange for Investment
and Institutional Shares of beneficial interest, no par value (together, the
"Shares"), of the Kent Intermediate Tax-Free Fund (the "Surviving Fund"), which
shares shall be distributed by the Trust to holders of Investment and
Institutional Shares, respectively, of the Transferor Fund.
This transaction is referred to herein as the "Reorganization." This
opinion relates to the Shares to be issued in the Reorganization and is
delivered to you pursuant to Section 2(a)(i) of the Plan of Reorganization.
As counsel for the Trust, we are familiar with the proceedings of the
Board of Trustees of the Trust in connection with the authorization, issuance
and sale of the Shares. In addition, we have examined and are familiar with the
Trust's Restatement of Declaration of Trust (the "Declaration of Trust"), its
By-laws, the Plan of Reorganization, the Registration Statement on Form N-14
under the Securities Act of 1933, as amended (the "Registration Statement") and
the combined proxy statement and prospectus (the "Proxy Statement and
Prospectus") contained therein.
As to questions of fact material to this opinion, we have relied upon
the accuracy of the representations and documents of officers and
representatives of the Trust. We have not undertaken any independent
investigation or verification of factual matters. Any change in any law,
regulation or interpretation, or any change in the facts could cause a change in
our opinion.
<PAGE> 2
Moreover, this opinion does not purport to address the validity under any laws
of any aspect of the activities of the Trust not specifically identified herein.
In our examination, we have assumed that: (i) all documents submitted
to us as originals are authentic, the signatures thereon are genuine and the
persons signing the same were of legal capacity; and (ii) all documents
submitted to us as certified or photostatic copies conform to the original
documents and that such originals are authentic.
We have made such examination of the law as in our judgment is
necessary and appropriate for the purposes of this opinion. 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 the opinion of
Ropes & Gray to the extent that any matter which is the subject of this opinion
is governed by the laws of the Commonwealth of Massachusetts.
Based on the foregoing, we are of the opinion that upon (i) the
issuance of Shares in connection with the Plan of Reorganization and (ii) the
prior satisfaction of the conditions contained in the Plan of Reorganization, a
copy of which is set forth in the Proxy Statement and Prospectus, the Shares,
when issued pursuant to the Plan of Reorganization, will be validly issued,
fully paid and non-assessable by the Trust, under the laws of the Commonwealth
of Massachusetts.
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 Trust's 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 made or issued by or on behalf of the Trust or its trustees relating
to the Trust. The Trust's 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 or her 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.
The opinion expressed in this letter is solely for the use of the
Trust, and this opinion may not be referred to or used for any other purpose or
relied upon by any other persons without our prior written approval. The opinion
expressed in this letter is limited to the matters set forth in this letter and
no other opinions should be inferred beyond the matters expressly stated.
<PAGE> 3
We call your attention that W. Bruce McConnel, III, a partner of
Drinker Biddle & Reath LLP, is Assistant Secretary of the Trust.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and consent to the use of our name and to the references
to our firm included in the Registration Statement. However, this action 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, 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
under the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
---------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE> 1
Exhibit No. 16(12)
January 27, 1999
The Kent Funds
P.O. Box 182201
Columbia, OH 43218-2201
Re: Plan of Reorganization, dated November 19, 1998
with respect to The Kent Limited Term Tax-Free
Fund and The Kent Intermediate Tax-Free Fund
------------------------------------------------
Dear Ladies and Gentlemen:
We have been asked to give our opinion as to certain Federal
income tax consequences of the transactions contemplated in the Plan of
Reorganization (the "Plan").
Background
- ----------
The Kent Funds (the "Trust") is an open-end management
investment company registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended. The Trust currently
offers shares in fifteen investment portfolios, including The Kent Limited Term
Tax-Free Fund (the "Transferor Fund") and The Kent Intermediate Tax-Free Fund
(the "Surviving Fund").
At the Closing (as defined in the Plan), it is contemplated
that the Transferor Fund will transfer all of its assets and liabilities to the
Surviving Fund in exchange for shares of the Surviving Fund. The shares of the
Surviving Fund will then be distributed to the shareholders of the Transferor
Fund in exchange for all outstanding shares of the Transferor Fund, and the
existence of the Transferor Fund will be terminated. All of the above steps
constitute the "Transactions."
For purposes of this opinion, we have relied on certain
written representations of an officer of the Trust, a copy of which is attached
hereto, and have assumed such representations to be true. We have also assumed
that the Plan substantially in the form included as an appendix to the Combined
Proxy Statement/Prospectus ("Proxy Statement") which is part of the Registration
Statement (the "Registration Statement") being filed this day with the SEC on
Form N-14, will be approved by the shareholders of the Transferor Fund, and the
appropriate documents will be filed with the appropriate government agencies.
<PAGE> 2
Conclusions
- -----------
Based upon the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury Department regulations in effect as of the date
hereof, current published administrative positions of the Internal Revenue
Service contained in revenue rulings and procedures, and judicial decisions, and
upon the assumptions and representations referred to herein and the documents
provided to us by you (including the Proxy Statement and the Plan), it is our
opinion for Federal income tax purposes that:
(i) the transfer by the Transferor Fund of all of its assets
and liabilities to the Surviving Fund in exchange for shares of the Surviving
Fund, and the distribution of said shares to the shareholders of the Transferor
Fund, as provided in the Plan, will constitute a reorganization within the
meaning of section 368(a)(1)(C), or 368(a)(1)(D) of the Code, and each such Fund
will be "a party to the reorganization" within the meaning of section 368(b) of
the Code;
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Transferor Fund as a
result of the Transactions;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Surviving Fund as a result of the
Transactions;
(iv) in accordance with section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of the Transferor Fund on the
distribution to them by the Transferor Fund of shares of the Surviving Fund in
exchange for their shares of the Transferor Fund;
(v) in accordance with section 358(a)(1) of the Code, the
aggregate basis of the shares of the Surviving Fund received by each shareholder
of the Transferor Fund will be the same as the aggregate basis of the
shareholder's Transferor Fund shares exchanged therefor in the Transactions;
(vi) in accordance with section 362(b) of the Code, the basis
of the assets received by the Surviving Fund in the Transactions will be the
same as the basis of such assets in the hands of the Transferor Fund immediately
before the Transactions;
(vii) in accordance with section 1223(1) of the Code, a
Transferor Fund shareholder's holding period for shares of the Surviving Fund
will be determined by including the period for which the shareholder held the
shares of the Transferor Fund exchanged therefor, provided that the shareholder
held such shares of the Transferor Fund as a capital asset;
(viii) in accordance with section 1223(2) of the Code, the
holding period of the Surviving Fund with respect to the assets acquired in the
Transactions will include the period for which such assets were held by the
Transferor Fund; and
-2-
<PAGE> 3
(ix) in accordance with section 381(a) of the Code, the
Surviving Fund will succeed to the tax attributes of the Transferor Fund
described in section 381(c) of the Code.
This opinion represents our best legal judgment, but it has no
binding effect or official status of any kind, and no assurance can be given
that contrary positions may not be taken by the Internal Revenue Service or a
court concerning the issues. We express no opinion relating to any Federal
income tax matter except on the basis of the facts described above.
Additionally, we express no opinion on the tax consequences under foreign, state
or local laws. In issuing our opinion, we have relied solely upon existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative positions and judicial decisions. Such laws, regulations,
administrative positions and judicial decisions are subject to change at any
time. Any such change could affect the validity of the opinion set forth above.
Also, future changes in Federal income tax laws and the interpretation thereof
can have retroactive effect.
We hereby consent to the filing of this opinion with the SEC
as an exhibit to the Proxy Statement. We also consent to the references to our
firm under the caption "Information Relating to the Proposed Reorganization --
Federal Income Tax Consequences" in the Proxy Statement. In consenting to such
references to our firm, we have not certified any part of the Registration
Statement, and such consent does not establish that we come within the
categories of persons whose consent is required under section 7 of the
Securities Act of 1933 or under the rules and regulations of the SEC issued
thereunder.
Very truly yours,
/s/DRINKER BIDDLE & REATH LLP
DRINKER BIDDLE & REATH LLP
SDDH:EMM:FCM
-3-
<PAGE> 4
APPENDIX
- --------
KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
January 27, 1999
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
Re: Plan of Reorganization dated November 19, 1998,
with respect to The Kent Limited Term Tax-Free
Fund and The Kent Intermediate Tax-Free Fund
-----------------------------------------------
Gentlemen:
We have requested your opinion as to certain federal income tax matters
in connection with the proposed reorganization (the "Reorganization") of The
Kent Limited Term Tax-Free Fund (the "Transferor Fund") into The Kent
Intermediate Tax-Free Fund (the "Surviving Fund") pursuant to the
above-referenced Plan of Reorganization (the "Plan"). At the Closing (as defined
in the Plan), it is contemplated that the Transferor Fund will transfer all of
its assets and liabilities to the Surviving Fund in exchange for shares of the
Surviving Fund. The shares of the Surviving Fund will then be distributed to the
shareholders of the Transferor Fund in exchange for all outstanding shares of
the Transferor Fund, and the existence of the Transferor Fund will be
terminated. All of the above steps constitute the "Transactions." After the
Transactions, the Surviving Fund will continue the investment operations of the
Transferor Fund. To enable you to render such opinion, we are furnishing the
following representations:
1. Both the Transferor Fund and the Surviving Fund qualified as a
"regulated investment company" under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Internal Revenue Code of 1986, as amended, for their most
recently ended fiscal year and will so qualify for their current fiscal year.
2. The Transferor Fund will transfer to the Surviving Fund assets
consisting of at least 90% of the fair market value of the Transferor Fund's net
assets and at least 70% of the fair market value of its gross assets immediately
prior to the Transactions. For purposes of this assumption, all of the following
shall be considered as assets of the Transferor Fund held immediately prior to
the Transactions: (a) amounts used by the Transferor Fund to pay its expenses in
connection with the Transactions and (b) all amounts used to make redemptions of
or distributions on such Transferor Fund's shares (except for redemptions in the
ordinary course of its business, as required by section 22(e) of the Investment
Company Act of 1940, as amended,
<PAGE> 5
pursuant to a demand for redemption by a shareholder of the Transferor Fund, and
distributions of net investment income and net capital gains, other than net
capital gains resulting from sales of assets for the purpose of satisfying
investment objectives of the Surviving Fund, if any, that differ from the
existing investment objectives of the Transferor Fund).
3. The Transferor Fund, as promptly as practicable, will distribute the
Surviving Fund shares received in the Transactions to its shareholders in
complete liquidation of the Transferor Fund and, having made such distributions,
will take all necessary steps to terminate its existence.
4. Prior to the Transactions, the Transferor Fund will continue its
historic business within the meaning of Treasury Regulations section 1.368-1(d)
and will not dispose of more than fifty percent (50%) of the fair market value
of its assets for the purpose of satisfying investment objectives of the
Surviving Fund, if any, that differ from the existing investment objectives of
the Transferor Fund.
5. At the time of the Transactions, the adjusted income tax basis and
the fair market value of the assets to be transferred by the Transferor Fund to
the Surviving Fund will each equal or exceed the sum of the liabilities to be
assumed by the Surviving Fund or to which such transferred assets are subject.
6. At the time of the Transactions, there will be no plan or intention
by the shareholders of the Transferor Fund who own five percent (5%) or more of
the Transferor Fund's stock and, to the best of the knowledge of the management
of the Trust, no plan or intention on the part of the remaining shareholders of
the Transferor Fund, to sell, exchange or otherwise dispose of a number of
shares of the Surviving Fund's stock to be received in the Transactions that
would reduce the Transferor Fund shareholders' ownership of Surviving Fund stock
to a number of shares having a value, as of the time of the Transactions, of
less than fifty percent (50%) of the value of all of the formerly outstanding
stock of the Transferor Fund immediately prior to the Transactions. For purposes
of this assumption, (a) shares of the Transferor Fund surrendered by dissenters
will be treated as outstanding Transferor Fund stock immediately prior to the
Transactions, and (b) shares of the Transferor Fund and the Surviving Fund held
by Transferor Fund shareholders and otherwise sold, redeemed (except for
redemptions occurring in the ordinary course of the Transferor Fund's business
as an investment company) or disposed of in anticipation of the Transactions, or
subsequent to the Transactions pursuant to a plan or intention that existed at
the time of the Transactions, also will be taken into account.
7. The Transferor Fund is not and will not be under the jurisdiction of
a court in a case under Title 11 of the United States Code or a receivership,
foreclosure or similar proceeding in any federal or state court.
8. Following the Transactions, the Surviving Fund will continue the
historic business of the Transferor Fund or will use a significant portion of
the Transferor Fund's historic business assets in a business.
-2-
<PAGE> 6
9. At the time of the Transactions, the Surviving Fund will not have
any plan or intention to reacquire any of its shares issued in the Transactions,
except in the ordinary course of business.
10. At the time of the Transactions, the Surviving Fund will not have
any plan or intention to sell or otherwise to dispose of any of the assets of
the Transferor Fund acquired in the Transactions, except for dispositions made
in the ordinary course of business.
11. The liabilities of the Transferor Fund that will be assumed by the
Surviving Fund and the liabilities, if any, to which the transferred assets will
be subject were incurred by the Transferor Fund in the ordinary course of its
business.
12. There is and will be no interfund indebtedness between the
Surviving Fund and the Transferor Fund that was issued, acquired or will be
settled at a discount.
13. The Surviving Fund does not own, has not owned during the past five
years, and will not own, any stock of the Transferor Fund, directly or
indirectly.
14. The Transactions have been proposed for the purposes set forth in
the Combined Proxy Statement/Prospectus, a draft of which is part of the
Registration Statement being filed this day with the SEC.
We understand that you will, and expressly authorize you to, rely upon
each of the foregoing representations in rendering your opinion of even date
herewith. We undertake to advise you promptly if we become aware of any facts or
circumstances that would cause any representation that we have given to be
incorrect.
Very truly yours,
KENT FUNDS
By: /s/ James F. Duca II
------------------------------
James F. Duca II
President
-3-
<PAGE> 1
Exhibit 16(14)(1)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
The Kent Funds:
We consent to the use of our report dated February 20, 1998 for The Kent Funds
as included herein and to the reference of our firm under the heading "Financial
Statements" in the Combined Proxy/Prospectus included herein.
/s/ KPMG LLP
- ------------------
KPMG LLP
Columbus, Ohio
January 27, 1999
<PAGE> 1
Exhibit 16.16
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 to execute in my name,
place and stead in my capacity as a trustee or officer, or both, of The Kent
Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ James F. Duca, II
-----------------------------------
James F. Duca, II
Date: December 10, 1998
<PAGE> 2
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 to execute in my name,
place and stead in my capacity as a trustee or officer, or both, of The Kent
Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ Martin R. Dean
----------------------------
Martin R. Dean
Date: December 9, 1998
<PAGE> 3
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 to execute in my name,
place and stead in my capacity as a trustee or officer, or both, of The Kent
Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ Walter B. Grimm
------------------------------
Walter B. Grimm
Date: December 10, 1998
<PAGE> 4
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 to execute in my name,
place and stead in my capacity as a trustee or officer, or both, of The Kent
Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ Joseph F. Damore
-----------------------------
Joseph F. Damore
Date: December 10, 1998
<PAGE> 5
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 to execute in my name,
place and stead in my capacity as a trustee or officer, or both, of The Kent
Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ James F. Rainey
-----------------------------
James F. Rainey
Date: December 9, 1998
<PAGE> 6
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 to execute in
my name, place and stead in my capacity as a trustee or officer, or both, of The
Kent Funds (the "Fund"), a Registration Statement on Form N-14, any amendments
thereto 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 power to act hereunder with or without the other of said
attorneys and shall have full power of substitution and re-substitution; and
either of said attorneys shall have full power and authority to do and perform
in my name and on my behalf as a trustee or officer, or both, of the Fund, in
any and all capacities, every act whatsoever requisite or necessary to be done
in connection with the foregoing, as fully and to all intents and purposes as I
might or could do in person, said acts of said attorneys, or either of them,
being hereby ratified and approved.
/s/ Ronald F. VanSteeland
-----------------------------
Ronald F. VanSteeland
Date: December 9, 1998
<PAGE> 7
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of
Trustees of The Kent Funds on November 19, 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 on Form N-14 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 thereby ratified
and approved.
IN WITNESS WHEREOF, I have hereunto signed my name.
DATED: January 19, 1999 By: /s/ Robert L. Tuch
---------------------
Robert L. Tuch
Secretary
<PAGE> 1
EXHIBIT 17(1)
PRELIMINARY COPY
KENT FUNDS
This proxy is solicited by the Board of Trustees of the Kent Funds (the
"Trust") for use at a special meeting of shareholders of the Limited Term
Tax-Free Fund to be held in the Board Room at BISYS Fund Services, 3435 Stelzer
Road, Columbus, Ohio 43219 on March 24, 1999 at 9:00 a.m. (Eastern Time).
The undersigned hereby appoints Martin R. Dean and Robert L. Tuch, and
each of them, with full power of substitution, as proxies of the undersigned to
vote at the above-stated special meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest in the fund held of
record by the undersigned on January 31, 1999, the record date for the meeting,
upon the following matters and upon any other matter that may come before the
meeting, in their discretion.
Every properly signed proxy will be voted in the manner specified
hereon and, in the absence of specification, will be treated as granting
authority to vote "FOR" the Proposal.
To vote mark an X in blue or black ink on the proxy card below. Keep this
portion for your records.
- --------------------------------------------------------------------------------
(Detach here and return this portion only)
Proposal to approve or disapprove a Plan of Reorganization and the transactions
contemplated thereby, including the transfer of all of the assets and
liabilities of the Limited Term Tax-Free Fund to the Trust's Intermediate
Tax-Free Fund, in exchange for Investment Shares and Institutional Shares of the
Intermediate Tax-Free Fund and a liquidating distribution of such Investment
Shares and Institutional Shares to holders of Investment Shares and
Institutional Shares, respectively, of the Limited Term Tax-Free Fund:
1. Vote on Proposal
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
Please sign, date and return the proxy card promptly using the enclosed
envelope.
Please sign exactly as name appears hereon. When signing as attorney or
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
--------------------------------------------------------------------
Signature Date
<PAGE> 1
Exhibit (17)(2)
- -------------------------------------------------------------------------------
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> 2
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> 3
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> 4
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> 5
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> 6
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>
- --------------------------------------------------------------------------------------------------------
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
INDEX EQUITY FUND (CONTINUED)
(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> 14
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> 15
SMALL COMPANY GROWTH FUND (CONTINUED)
(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> 16
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> 17
INTERNATIONAL GROWTH FUND (CONTINUED)
(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> 18
[THIS PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 19
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> 20
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> 21
INTERMEDIATE BOND FUND (CONTINUED)
(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> 22
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> 23
SHORT TERM BOND FUND (CONTINUED)
(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> 24
[THIS PAGE INTENTIONALLY LEFT BLANK]
22
<PAGE> 25
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> 26
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> 27
INTERMEDIATE TAX-FREE FUND (CONTINUED)
(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> 28
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> 29
MICHIGAN MUNICIPAL BOND FUND (CONTINUED)
(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> 30
[THIS PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE> 31
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> 32
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> 33
MONEY MARKET FUND (CONTINUED)
(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> 34
[THIS PAGE INTENTIONALLY LEFT BLANK]
32
<PAGE> 35
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> 36
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> 37
MICHIGAN MUNICIPAL MONEY MARKET FUND (CONTINUED)
(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> 38
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> 39
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> 40
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.
38
<PAGE> 41
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.
39
<PAGE> 42
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.
----------------------------------------------------------------------------
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.
40
<PAGE> 43
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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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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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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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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<PAGE> 53
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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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<PAGE> 54
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> 55
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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<PAGE> 56
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.
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<PAGE> 57
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.
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<PAGE> 58
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
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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.
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- ----------------------------------------------------------------------------
[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> 60
THE KENT FUNDS
Supplement dated September 24, 1998
to the Prospectus dated May 1, 1998
On September 21, 1998, during a Special Meeting of Shareholders (the "Meeting"),
the shareholders of the Kent Funds approved the redesignation of each Fund's
investment objective from a fundamental policy to a non-fundamental policy.
Accordingly, the following paragraph replaces the first paragraph on page 36
within the section entitled "FUND CHOICES - Which Funds are Offered?":
The Trust currently offers fourteen Funds, each of which is described
below. Each Fund's investment objective is considered "non-fundamental"
and may 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 also
considered "non-fundamental" and may be changed by the Trust's Board of
Trustees without shareholder approval.
The shareholders also approved during the Meeting the redesignation of certain
investment restrictions applicable to the Funds from fundamental to
non-fundamental. Accordingly, the following paragraph replaces the third full
paragraph on page 43 within the section entitled "FUND CHOICES - What
Investments do the Funds Invest In?":
The Funds also have in place various investment restrictions. Certain
of these investment restrictions have been designated as "fundamental,"
which means that they cannot be changed for a Fund without the approval
of a "majority" (as defined in the SAI) of that Fund's outstanding
shares. Other investment restrictions have been designated as
"non-fundamental" and may be changed by the Trust's Board of Trustees
without shareholder approval. Some of these fundamental and
non-fundamental restrictions are set forth below. The first two
restrictions are fundamental. The third restriction is non-fundamental.
A complete list of investment restrictions for the Funds is contained
in the SAI.
<PAGE> 61
The section entitled "STRUCTURE AND MANAGEMENT OF THE FUNDS - Who Manages and
Services the Funds?" is being revised as a result of an addition to the
portfolio management staff at Lyon Street Asset Management Company. The second
paragraph under the heading "INVESTMENT ADVISER" on page 53 shall be amended by
adding the following at the end of the paragraph:
Brian J. Smolinski has been co-portfolio manager for the Index Equity,
Small Company Growth and International Growth Funds since June, 1998.
Mr. Smolinski is also responsible for developing and maintaining
proprietary software that is used in researching structured equity
investments. Prior to joining IMG, Mr. Smolinski worked as an
Applications Business Analyst at Old Kent for nine years.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT
WITH THE PROSPECTUS FOR FUTURE REFERENCE
-2-
<PAGE> 62
THE KENT FUNDS
Supplement dated January 5, 1999
to the Prospectus dated May 1, 1998
(as supplemented on September 24, 1998)
Proposed Plan of Reorganization
The Board of Trustees has approved a Plan of Reorganization whereby the assets
and liabilities of the Limited Term Tax-Free Fund would be transferred to the
Intermediate Tax-Free Fund. Proxy materials will be mailed to shareholders of
the Limited Term Tax-Free Fund seeking approval of the proposed reorganization.
If the reorganization is approved by the shareholders of the Limited Term
Tax-Free Fund, shareholders of the Limited Term Tax-Free Fund will become
shareholders of the Intermediate Tax-Free Fund upon consummation of the
reorganization.
Modification of Investment Policy - Government Money Market Fund
The following paragraph replaces the paragraph entitled "PRINCIPAL INVESTMENTS"
within the section entitled "What Funds are Offered? - Government Money Market
Fund":
PRINCIPAL INVESTMENTS: The Fund will invest exclusively in U.S.
Treasury bills, notes and other obligations issued 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 exclusively in such securities.
The following paragraph replaces the first paragraph under the section entitled
"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 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 exclusively in such securities. Each of these securities
and techniques is described in more detail under "Investment Policies"
in the SAI.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT
WITH THE PROSPECTUS FOR FUTURE REFERENCE
<PAGE> 1
THE KENT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FOR
INVESTMENT AND INSTITUTIONAL SHARES
OF
THE KENT LARGE COMPANY GROWTH FUND
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, as amended
on January 14, 1999
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 Kent Large Company Growth
Fund, dated January 14, 1999, as amended or supplemented from time to time, and
the prospectus for the Investment Shares and Institutional Shares of the other
Funds set forth above, dated May 1, 1998, as amended or supplemented from time
to time. A copy of each 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
prospectuses.
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, OLD KENT BANK OR ANY OF ITS AFFILIATES, AND ARE NOT
INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN 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> 2
TABLE OF CONTENTS
The Trust.....................................................................3
Investment Policies...........................................................3
Investment Restrictions......................................................20
Securities Transactions......................................................23
Valuation Of Securities......................................................25
Trustees And Officers........................................................27
Expenses.....................................................................29
Investment Adviser...........................................................29
Administrator................................................................32
Distributor..................................................................33
Transfer Agent...............................................................33
Custodian, Auditors And Counsel..............................................33
Distribution Plan............................................................33
Additional Purchase And Redemption Information...............................34
Dividends And Taxes..........................................................35
Declaration Of Trust.........................................................40
Standardized Total Return And Yield Quotations...............................41
Advertising Information......................................................47
Financial Statements.........................................................48
Additional Information.......................................................48
Appendix A..................................................................A-1
Appendix B..................................................................B-1
Appendix C..................................................................C-1
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS SAI, OR IN THE PROSPECTUSES RELATED HERETO,
IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUSES AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THIS SAI AND THE PROSPECTUSES DO NOT
CONSTITUTE AN OFFERING BY THE TRUST OR BY ITS DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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<PAGE> 3
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 fifteen 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
Large Company Growth Fund, 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' prospectuses. This
SAI provides additional information about the Trust and the Investment and
Institutional Shares of the Funds that may be of interest to some investors.
INVESTMENT POLICIES
The following information supplements the description of each Fund's
investment objective and policies as set forth in the prospectuses. 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 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 exclusively in such securities.
MONEY MARKET INSTRUMENTS
To the extent described in the Funds' prospectuses, 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 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
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<PAGE> 4
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.
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
4
<PAGE> 5
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.
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
5
<PAGE> 6
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.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
To the extent as described in the Funds' prospectuses, each Fund may
purchase securities on a when-issued basis or purchase or sell securities on a
forward commitment (sometimes called delayed delivery) basis. 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.
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<PAGE> 7
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, 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 prospectus for the Bond Funds and Money
Market Funds, such 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
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<PAGE> 8
also may purchase U.S. dollar-denominated "stripped" securities that evidence
ownership in the future interest payments or principal payments on obligations
of foreign governments.
SMBS are usually structured with two or more classes that receive
different proportions of the interest and principal distributions from a pool of
mortgage-backed obligations. A common type of SMBS will have one class receiving
all of the interest, while the other class receives all of the principal.
However, in some cases, one class will receive some of the interest and most of
the principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying obligations experience greater
than anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment. The market value of the class consisting entirely of
principal payments can be extremely volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
are generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped.
SMBS which are not issued by the U.S. Government (or a U.S. Government
agency or instrumentality) are considered illiquid. SMBS issued by the U.S.
Government (or a U.S. Government agency or instrumentality) may be considered
liquid under guidelines established by the Trust's Board of Trustees if they can
be disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of a Fund's per share net asset value.
Within the past several years, the Treasury Department has facilitated
transfers of ownership of stripped securities by accounting separately for the
beneficial ownership of particular interest coupon and principal payments on
Treasury securities through the Federal Reserve book-entry record-keeping
system. The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate Trading of Registered Interest and Principal
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.
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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. 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
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<PAGE> 10
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.
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. Such 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
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for prices that do not reflect current market value. The possibility of default
by the issuer or the issuer's credit provider may be greater for these
structured and derivative instruments than for other types of instruments. In
some cases it may be difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable objective information and an
established secondary market for some instruments may not exist. With respect to
purportedly tax-exempt derivative securities, in many cases the Internal Revenue
Service has not ruled on whether the interest received on such securities is in
fact free from Federal income taxes. Purchases of such securities by the
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
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and value. In such an event the Board of Trustees would reevaluate the Funds'
investment objectives and policies and consider changes in their structure or
possible dissolution.
Certain of the municipal obligations held by a Fund may be insured as to
the timely payment of principal and interest. The insurance policies will
usually be obtained by the issuer of the municipal obligations at the time of
its original issuance. In the event that the issuer defaults on an interest or
principal payment, the insurer will be notified and will be required to make
payment to the bondholders. There is, however, no guarantee that the insurer
will meet its obligations. In addition, such insurance will not protect against
market fluctuations caused by changes in interest rates and other factors. The
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 which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities).
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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 Large Company Growth Fund and
the Growth and Income Fund may invest a portion of their 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 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.
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Although the Large Company Growth Fund, the Growth and Income Fund and
the 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 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
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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 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.
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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 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
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an option written by a Fund expires on the stipulated expiration date or if a
Fund enters into a closing purchase transaction, it will realize a gain (or loss
if the cost of a closing purchase transaction exceeds the net premium received
when the option is sold) and the deferred credit related to such option will be
eliminated. If an option written by a Fund is exercised, the proceeds of the
sale will be increased by the net premium originally received and the Fund will
realize a gain or loss.
There are several risks associated with transactions in options. For
example, there are significant differences between the securities, currency and
options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition,
a liquid secondary market for particular options, whether traded
over-the-counter or on an exchange may be absent for reasons which include the
following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
securities or currencies; unusual or unforeseen circumstances may interrupt
normal operations on an exchange; the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
value; or one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
FUTURES CONTRACTS AND RELATED OPTIONS (The 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
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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.
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 Large Company Growth Fund, 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
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<PAGE> 19
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, 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.
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<PAGE> 20
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 purposes but, rather, will liquidate their
holdings in such securities at an appropriate time following receipt.
INVESTMENT RESTRICTIONS
The following investment restrictions include those that have been
designated as "fundamental," which 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"), and those that have been designated as
"non-fundamental," which may be changed without shareholder approval. 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.
The following investment restrictions are fundamental:
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) 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;
(3) 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;
(4) 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;
(5) 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;
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<PAGE> 21
(6) 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;
(7) 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;
(8) 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;
(9) 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
(10) 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.
The following investment restrictions are "non-fundamental" and may be
changed with respect to a Fund without shareholder approval:
A Fund may not:
(1) 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;
(2) 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;
(3) 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 each of the Small Company Growth Fund and the
International Growth Fund may invest up to 10% of its total assets in such
companies;
(4) 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; or
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<PAGE> 22
(5) Invest in the securities of other investment companies except as
permitted by the Investment Company Act of 1940, as amended, or the rules
promulgated thereunder.
With respect to Non-Fundamental Investment Restriction (2), 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 Fundamental Investment Restriction (7), 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 (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
Fundamental Investment Restrictions (3), (4) and (8), nor will the Money Market
Funds borrow money, pursuant to Fundamental Investment Restriction (2), in
excess of 10% of their total assets. With respect to Fundamental Investment
Restrictions (6) and (7), 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.
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<PAGE> 23
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 avail able as a result of transactions effected for such
other clients.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of a transaction may vary among different brokers. Transactions on foreign
stock exchanges involve payment for brokerage commissions which are generally
fixed. Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, 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.
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<PAGE> 24
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.
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.
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<PAGE> 25
VALUATION OF SECURITIES
MONEY MARKET FUNDS
As stated in the prospectus for the Money Market Funds, such 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 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
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<PAGE> 26
money market instruments, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the Funds.
In periods of declining interest rates, the indicated daily yield on shares of
the Funds, computed by dividing its annualized daily income by the net asset
value computed as above, may tend to be lower than similar computations made by
utilizing a method of valuation based upon market prices and estimates. In
periods of rising interest rates, the daily yield of shares at the value
computed as described above may tend to be higher than a similar computation
made by utilizing a method of calculation based upon market prices and
estimates.
NON-MONEY MARKET FUNDS
Current values for the Non-Money Market Funds' portfolio securities are
determined as follows:
(1) Common stock, preferred stock and other equity securities listed on
the NYSE are valued on the basis of the last sale price on the exchange. In the
absence of any sales, such securities are valued at the last bid price;
(2) Common stock, preferred stock and other equity securities listed on
other U.S. or foreign exchanges will be valued as described in (1) above using
quotations on the exchange on which the security is primarily traded;
(3) Common stock, preferred stock and other equity securities which are
unlisted and quoted on the National Market System (NMS) are valued at the last
sale price, provided a sale has occurred. In the absence of any sales, such
securities are valued at the high or "inside" bid, which is the bid supplied by
the National Association of Securities Dealers on its NASDAQ system for
securities traded in the over-the-counter market;
(4) Common stock, preferred stock and other equity securities which are
quoted on the NASDAQ system but not listed on NMS are valued at the high or
"inside" bid;
(5) Common stock, preferred stock and other equity securities which are
not listed and not quoted on the NASDAQ System and for which over-the-counter
market quotations are readily available are valued at the mean between the
current bid and asked prices for such securities;
(6) Non-U.S. common stock, preferred stock and other equity securities
which are not listed or are listed and subject to restrictions on sale are
valued at prices supplied by a dealer selected by 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
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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.
* 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.
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<PAGE> 28
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.
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* 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 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>
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<PAGE> 29
- ----------------
* 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.
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.
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<PAGE> 30
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 Large Company Growth Fund, 0.70%; 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 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.
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<PAGE> 31
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 22,
1998. 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") 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
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<PAGE> 32
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 current term of the Administration Agreement ends on July 31,
1999. 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 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
current term of the Fund Accounting Agreement ends on July 31, 1999. 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,
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<PAGE> 33
$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.
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 LLP, Two Nationwide Plaza, Columbus, Ohio 43215,
Certified Public Accountants, are the independent auditors for the Trust.
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, PA
19107, serves as counsel to the Trust.
DISTRIBUTION PLAN
THIS SECTION RELATES ONLY TO THE INVESTMENT SHARES OF THE FUNDS. THE
INSTITUTIONAL SHARES HAVE NOT ADOPTED A DISTRIBUTION PLAN.
As described in the prospectuses, the Trust has adopted with respect to
its Investment Shares a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act which regulates circumstances under which an investment
company may bear expenses associated with the distribution of its shares. The
Plan provides that the Investment Shares of a Fund may incur certain expenses
which may not exceed a maximum amount equal to 0.25% (on an annualized basis) of
the average daily net asset value of the Investment Shares.
All persons authorized to direct the disposition of monies paid or
payable by a Fund pursuant to the Plan or any related agreement must provide to
the Trust's Board of Trustees at least quarterly a written report of the amounts
so expended and the purposes for which such expenditures were made.
Representatives, brokers, dealers or others receiving payments pursuant to the
Plan must determine that
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<PAGE> 34
such payments and the services provided in connection with such payments are
appropriate for such persons and are not in violation of regulatory limitations
applicable to such persons.
The services under the Plan may include assistance in advertising and
marketing of Investment Shares, aggregating and processing purchase, exchange
and redemption requests for Investment Shares, maintaining account records,
issuing confirmations of transactions and providing sub-accounting with respect
to Investment Shares.
As required by Rule 12b-1, the Plan and the related Distribution and
Servicing Agreements have been approved, and are subject to annual approval, by
a majority of the Trust's Board of Trustees, and by a majority of the Trustees
who are not "interested" persons of the Trust (as defined by the 1940 Act) and
who have no direct or indirect interest in the operation of the Plan and the
agreements related thereto ("Independent Trustees"), by a vote cast in person at
a meeting called for the purpose of voting on the Plan and related agreements.
The Plan was most recently approved by the Board of Trustees as a whole and by
the Independent Trustees on November 19, 1998. 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 prospectuses for the Funds describe those investors who are
eligible to purchase Investment Shares and those who are eligible to purchase
Institutional Shares.
In an exchange, shares in the Fund from which an investor is
withdrawing will be redeemed at the net asset value per share next determined
after the exchange request is received. Shares of the Fund in which the investor
is investing will also normally be purchased at the net asset value per share
next determined after acceptance of the purchase order by the Trust in
accordance with its customary policies for accepting investments.
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<PAGE> 35
Under the 1940 Act, the Trust may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the NYSE is restricted by applicable rules and regulations of the Securities and
Exchange Commission; (b) the NYSE is closed for other than customary weekend and
holiday closings; (c) the Securities and Exchange Commission has by order
permitted such suspension; or (d) an emergency exists as determined by the
Securities and Exchange Commission. (The Trust may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions.)
In addition to the situation described in the prospectuses under "How
Can I Redeem Shares," the Trust may redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the 1940
Act, to reimburse the Funds for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder, or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the prospectuses
from time to time.
A Fund may make payment for redemption in securities or other property
if it appears appropriate to do so in light of the Fund's responsibilities under
the 1940 Act. In the event shares are redeemed for securities or other property,
shareholders may incur additional costs in connection with the conversion
thereof to cash. Redemption in kind is not as liquid as a cash redemption.
Shareholders who receive a redemption in kind may receive less than the
redemption value of their shares upon sale of the securities or property
received, particularly where such securities are sold prior to maturity.
The Trust has filed an election pursuant to Rule 18f-1 under the 1940
Act which provides that each portfolio of the Trust is obligated to redeem
shares solely in cash up to $250,000 or 1% of such portfolio's net asset value,
whichever is less, for any one shareholder within a 90-day period. Any
redemption beyond this amount may be made in proceeds other than cash.
DIVIDENDS AND TAXES
The following summarizes certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of the Funds or their shareholders, and the discussion here and in
the 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
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<PAGE> 36
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 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 Large Company Growth Fund, 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 states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or
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<PAGE> 37
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 for the Municipal Funds, such 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.
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
37
<PAGE> 38
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 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
38
<PAGE> 39
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.
39
<PAGE> 40
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 fifteen 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.
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
40
<PAGE> 41
underwriting contracts and the election of Trustees may be effectively acted
upon by shareholders of the Trust voting together in the aggregate without
regard to a particular investment portfolio.
The term "majority of the outstanding shares" of a Fund means the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund.
Shares of the Trust have non-cumulative voting rights, which means that
the holders of more than 50% of the shares of the Trust voting for the election
of Trustees can elect 100% of the Trustees to be elected at a meeting and, in
such event, the holders of the remaining less than 50% of the shares of the
Trust voting will not be able to elect any Trustees.
As a general matter, the Trust does not hold annual or other meetings
of shareholders. At such time, however, as less than a majority of the Trustees
holding office have been elected by shareholders, the Trustees then in office
will call a shareholders meeting for the election of Trustees. The Trustees
shall continue to hold office indefinitely, unless otherwise required by law,
and may appoint successor Trustees. A Trustee may be removed from office: (1) at
any time by two-thirds vote of the Trustees; or (2) at a special meeting of
shareholders by a two-thirds vote of the outstanding shares. Trustees may also
voluntarily resign from office.
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,
41
<PAGE> 42
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.
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 1/n
T = [(-------) - 1]
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1, 5
or 10 year (or other) periods at the end of the
applicable period (or a fractional portion
thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in
years.
42
<PAGE> 43
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>
43
<PAGE> 44
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>
44
<PAGE> 45
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>
45
<PAGE> 46
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.
46
<PAGE> 47
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)6 - 1]
cd
Where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = average daily number of shares outstanding during
the period entitled to receive dividends; and
d = net asset value per share on the last day of the
period.
Based on the foregoing calculations, for the 30-day period ended
December 31, 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%; Michigan
Municipal Bond Fund, 4.00%; and Limited Term Tax-Free Fund, 3.61%.
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 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
47
<PAGE> 48
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).
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 indicated as of January 6, 1999.
48
<PAGE> 49
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND CLASS PERCENTAGE OF
OWNERSHIP
<S> <C> <C> <C>
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 46%
Cash Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Intermediate Institutional 51%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
49
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
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 40%
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 44%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Small Company Institutional 46%
Cash Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent International Institutional 43%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent International Institutional 52%
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
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C> <C> <C>
Trent & Co. The Kent Index Equity Institutional 20%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Index Equity Institutional 66%
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 97%
Cash Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Income Fund Institutional 19%
Reinvestment Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Income Fund Institutional 76%
Cash Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
51
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Short Term Investment 69%
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 43%
Reinvestment Account Bond Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities, Inc. The Kent Intermediate Investment 15%
Trade House Acct. Bond Fund
Attn: Mutual Fund Dept.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
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 12%
Trade House Account Tax-Free Fund
ATTN: Mutual Fund Department
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
Linkins & Co. The Kent Intermediate Investment 9%
Northern Trust Bank of Florida Tax-Free Fund
Attn: Trust Accounting
P.O. Box 019688
Miami, FL 33101-9688
SEI Trust Company The Kent Intermediate Investment 21%
Reinvest Account Tax-Free Fund
Kent Moneywise
</TABLE>
52
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
One Freedom Valley Drive
Oaks, PA 19456
Trent & Co. The Kent Michigan Investment 22%
Reinvest Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Northern Trust Co. The Kent Michigan Investment 8%
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 11%
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 27%
Trade House Account Municipal Bond Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Michigan Investment 5%
Reinvest Account Municipal Bond
Kent Moneywise Fund
One Freedom Valley Drive
Oaks, PA 19456
Linkins & Co. The Kent Michigan Investment 7%
Northern Trust Bank of Florida Municipal Bond
Attn: Trust Accounting Fund
P.O. Box 019688
Miami, FL 33101-9688
BHC Securities Inc. The Kent Growth and Investment 44%
Trade House Account Income Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Growth and Investment 10%
Reinvest Account Income Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
53
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Small Company Investment 24%
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 Small Company Investment 16%
Reinvest Account Growth Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
SEI Trust Company The Kent International Investment 22%
Reinvest Account Growth Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
BHC Securities Inc. The Kent International Investment 23%
Trade House Account Growth Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. The Kent Index Investment 55%
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 7%
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 81%
Trade House Account Tax-Free Fund
Attn: Mutual Fund Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
BOST & Co. The Kent Limited Term Investment 9%
Acct. 47410332001 Tax-Free Fund
Attn: Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 19230-3198
SEI Trust Company The Kent Tax-Free Investment 26%
Reinvest Account Income Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
54
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Tax-Free Investment 38%
Trade House Account Income Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
FOTRU Co. The Kent Tax-Free Investment 6%
FBO Evelyn G. Varner Trust Income Fund
P.O. Box 1828
Grand Rapids, MI 49501-1828
Trent & Co. The Kent Money Market Institutional 94%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Old Kent Bank The Kent Government Institutional 76%
Attn: Funds Management Money Market Fund
111 Lyon St., N.W.
Grand Rapids, MI 49503
Trent & Co. The Kent Government Institutional 24%
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
BHC Securities Inc. The Kent Money Investment 42%
Trade House Account Market Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market Street, Suite 1200
Philidelphia, PA 19103
Fifth Third Bank, Custodian The Kent Money Investment 7%
V. Donna Berg Market Fund
Rollover IRA
403 Midlakes Boulevard
Plainwell, MI 49080
SEI Trust Company The Kent Money Investment 9%
Reinvest Account Market Fund
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
55
<PAGE> 56
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Money Investment 30%
One Commerce Square Market Fund
Attn: Cash Sweeps Department
2005 Market Street
Philadelphia, PA 19103
Daniel P. Kreuz The Kent Government Investment 44%
6685 Double Eagle Dr., Apt 212 Money Market Fund
Woodridge, IL 60517-5417
Fifth Third Bank, Custodian The Kent Government Investment 24%
Mary E. Jones Money Market Fund
IRA
125 Walnut
Schoolcroft, MI 49087
Allan C. Caldmeyer The Kent Government Investment 6%
Cust Matthew S. Caldmeyer Money Market Fund
UGMA MI
977 Gladstone SE
Grand Rapids, MI 49506
Brian T. Lee The Kent Government Investment 7%
TRST Brian T. Lee Trust Money Market Fund
U/A/D 12/8/86
1542 Whispering Oaks
Brighton, MI 48116
Frederick C. Lake The Kent Government Investment 6%
And Amy Z. Lake Money Market Fund
JT WROS
2210 Edgewood SE
Grand Rapids, MI 49546
Andrew Creasor The Kent Michigan Investment 7%
3403 Greenwood Lane Municipal Money
St. Charles, IL 60174 Market Fund
BHC Securities Inc. The Kent Michigan Investment 47%
One Commerce Square Municipal Money
Attn: Cash Sweeps Department Market Fund
2005 Market Street
Philadelphia, PA 19103
SEI Trust Company The Kent Michigan Investment 12%
Reinvestment Account Municipal Money
Kent Moneywise Market Fund
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
Set forth below are the record owners or, to the Trust's knowledge, the
beneficial owners of 5% or more of the outstanding Investment Shares of the
indicated Fund as of December 31, 1998.
<TABLE>
<S> <C> <C> <C>
BHC Securities Inc. The Kent Income Fund Investment 43%
Trade House Account
Attn: Mutual Fund Department
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
SEI Trust Company The Kent Income Fund Investment 33%
Reinvest Account
Kent Moneywise
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
Except as otherwise stated in the Trust's prospectuses, 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.
56
<PAGE> 57
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.
"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
A-1
<PAGE> 58
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:
"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."
A-2
<PAGE> 59
"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.
"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.
A-3
<PAGE> 60
"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 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
A-4
<PAGE> 61
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:
"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.
A-5
<PAGE> 62
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; 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
A-6
<PAGE> 63
commercial banks, thrifts and non-bank banks; non-United States banks; and
broker-dealers. The following summarizes the rating categories used by Thomson
BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
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:
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"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.
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.
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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 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.
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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 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 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)
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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. 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
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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 correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the adviser may still not
result in a successful hedging transaction over a short time frame.
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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
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
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(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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