<PAGE>
As filed with the Securities and Exchange Commission on April 28, 1997
Registration Nos. 33-11905, 811-5010
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 22 [X]
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 24 [X]
THE MONITOR MONEY MARKET FUND, THE MONITOR OHIO MUNICIPAL
MONEY MARKET FUND, THE MONITOR U.S. TREASURY MONEY MARKET
FUND, THE MONITOR GROWTH FUND, THE MONITOR INCOME EQUITY
FUND, THE MONITOR OHIO TAX-FREE FUND, THE MONITOR FIXED INCOME
SECURITIES FUND, THE MONITOR SHORT/INTERMEDIATE FIXED INCOME
SECURITIES FUND and THE MONITOR MORTGAGE SECURITIES FUND
each a Series of
THE MONITOR FUNDS
(Exact Name of Registrant as Specified in Charter)
41 South High Street
Columbus, Ohio 43287
(Address of Principal Executive Office)
1-800-544-8347
(Registrant's Telephone Number)
David G. Lee, Senior Vice President
SEI Fund Resources
One Freedom Valley Road
Oaks, Pennsylvania 19456
(Name and Address of Agent for Service)
Copy to:
Bradley J. Schram
Hertz, Schram & Saretsky, P.C.
1760 Telegraph Road, Suite 300
Bloomfield Hills, Michigan 48302-0183
(810) 335-3346 (FAX)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
[ ] 60 days after filing pursuant to Rule 485(a)(1), or
[ ] On , 199 , pursuant to Rule 485(a)(1), or
[ ] 75 days after filing pursuant to Rule 485(a)(2), or
[ ] On , 199 , pursuant to Rule 485(a)(2).
[ ] Immediately upon filing pursuant to Rule 485(b), or
[X] On April 30, 1997, pursuant to Rule 485(b)
If appropriate, check this box:
[ ] This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
- --------------------------------------------------------------------------------
The Registrant has previously registered an indefinite number of shares pursuant
to Rule 24f-2 under the Investment Company Act of 1940. The Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1996, on February 27,
1997.
<PAGE>
CROSS REFERENCE SHEET
The portfolios listed on the Cover Page are offered in two separate classes of
shares known as Trust Shares and Investment Shares. This Cross-Reference Sheet
includes information relating to each Class of each Fund to facilitate the
cross-reference process.
<TABLE>
<CAPTION>
Form N-1A Part A Item Location in Prospectus
- --------------------- ----------------------
<S> <C> <C>
Item 1. Cover Page......................... Cover Page
Item 2. Synopsis........................... Summary; Fee Table and Example
Item 3. Condensed Financial Information.... Financial Highlights
Item 4. General Description of Registrant.. The Funds' Investment Objectives; Money Market Funds; Equity Funds; Income Funds;
Additional Information on Portfolio Investments and Strategies; Investment
Restrictions
Item 5. Management of the Fund............. Management of the Trust; Administration of the Funds; Custodian, Recordkeeper,
Transfer Agent and Dividend Disbursing Agent; Independent Accountants
Item 5a. Management's Discussion of Fund
Performance........................ Not Applicable
Item 6. Capital Stock and Other Securities. Distributions and Taxes; Distribution Options; Federal Income Taxes; Ohio
Personal Income Taxes; Organization of the Trust; Voting Rights; Shareholder
Inquiries; Other Classes of Shares
Item 7. Purchase of Securities Being
Offered........................... How the Funds Value Their Shares; How to Buy (Trust/Investment Shares); to Place an
Order (Investment Shares Only); Minimum Investment Required; What Shares Cost
(Investment Shares Only); Purchases as Net Asset Value (Investment Shares Only);
Reducing the Sales Charge (Investment Shares Only); Quantity Discounts and Accumulated
Purchases (Investment Shares Only); Letter of Intent (Investment Shares Only);
Reinstatement Privilege (Investment Shares Only); Concurrent Purchases (Investment
Shares Only); Systematic Investment program; How to Exchange (Trust/Investment) Shares
Among the Funds; By Telephone (Investment Shares Only); By Mail (Investment Shares
Only); Distribution of (Trust/Investment) Shares; Distribution Plan (Investment Shares
Only) How to Redeem (Trust/Investment) Shares; Redeeming by Telephone; Redeeming by
Mail; Redeeming by Check (Investment Shares Only); Redeeming by Fax (Investment Share
Only); Systematic Withdrawal Program (Investment Share Only); Accounts with Low
Balances (Investment Share only)
Item 8. Redemption or Repurchase........... How to Redeem (Trust/Investment) Shares; Redeeming by Telephone; Redeeming by Mail;
Redeeming by Check (Investment Shares Only); Redeeming by Fax (Investment Shares
Only); Systematic Withdrawal Program (Investment Shares Only); Accounts with Low
Balances (Investment Shares only)
Item 9. Pending Legal Proceedings.......... Pending Legal Proceedings Relating to Piper
Location in Statement of
Form N-1A Part B Item Additional Information
- --------------------- ------------------------
Item 10. Cover Page......................... Cover Page
Item 11. Table of Contents.................. Table of Contents
Item 12. General Information and History.... Definitions; Additional Information About the Trust and its Shares
Item 13. Investment Objectives and Policies. Investment Objectives and Policies of the Trust; Investment Restrictions
Item 14. Management of the Fund............. Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities.............. Fund Ownership
Item 16. Investment Advisory and
Other Services..................... Investment Adviser; Administrator; Distributor; Custodian; Transfer Agent and Dividend
Disbursing Agent; Independent Accountants
Item 17. Brokerage Allocation and Other
Practices.......................... Portfolio Transactions; Brokerage and Research Services
Item 18. Capital Stock and Other Securities. Dividends and Distributions
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered........ Distribution Plan (Investment Shares Only); Determination of Net Asset Value;
Additional Purchase Information--Payment in Kind
Item 20. Tax Status......................... Taxes
Item 21. Underwriters....................... Not Applicable
Item 22. Calculation of Performance Data.... Performance Information
Item 23. Financial Statements............... Incorporated by Reference into the Combined Statement of Additional Information by
reference to the Trust's Combined Annual Report dated December 31, 1996
</TABLE>
Form N-1A Part C
- ----------------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Post-Effective Amendment to the
Registration Statement.
<PAGE>
PROSPECTUS
April 30, 1997
The Monitor Funds, a Massachusetts business trust (the "Trust"), consists of
separate series (the "Funds") which have different investment objectives and
policies. All of the Funds offer two classes of shares: Investment Shares and
Trust Shares. Investment Shares in each of the Funds may be purchased through
The Huntington Investment Company, Huntington Personal Bankers or the Mutual
Fund Services Center pursuant to respective agreements between The Huntington
Investment Company or The Huntington Trust Company, N.A., and SEI Financial
Services Company (the "Distributor"), the Trust's distributor. The different
Funds for which Investment Shares are available through this Prospectus
include:
MONEY MARKET FUNDS--INVESTMENT SHARES
The Monitor Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor U.S. Treasury Money Market Fund
EQUITY FUNDS--INVESTMENT SHARES
The Monitor Growth Fund
The Monitor Income Equity Fund
INCOME FUNDS--INVESTMENT SHARES
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate Fixed Income Securities Fund
This Prospectus relates only to Investment Shares of the Funds listed above.
This Prospectus sets forth concisely what a shareholder should know before
investing in Investment Shares of any of the Funds and should be read
carefully and retained for future reference. The Combined Statement of
Additional Information for Investment Shares and Trust Shares has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference. FOR A FREE COPY OF THE COMBINED STATEMENT OF
ADDITIONAL INFORMATION CALL THE MUTUAL FUND SERVICES CENTER AT: (IN OHIO) 614-
480-5580 OR (OUTSIDE THE 614 AREA CODE) 800-253-0412.
THE HUNTINGTON TRUST COMPANY, N.A.
Investment Adviser
SEI FUND RESOURCES
Administrator
SEI FINANCIAL SERVICES COMPANY
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE INVESTMENT COMPANY SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, THE HUNTINGTON TRUST COMPANY,
N.A., NOR ARE THEY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
OR ANY AGENCY SPONSORED BY THE FEDERAL GOVERNMENT OR ANY STATE. INVESTMENT IN
THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. EACH MONEY MARKET FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT EACH MONEY MARKET
FUND WILL BE ABLE TO DO SO.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY....................................................................... 1
FEE TABLE AND EXAMPLE......................................................... 3
FINANCIAL HIGHLIGHTS.......................................................... 4
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES................................10
MONEY MARKET FUNDS............................................................10
Money Market Fund............................................................11
Ohio Municipal Money Market Fund.............................................11
U.S. Treasury Money Market Fund..............................................13
EQUITY FUNDS..................................................................14
Growth Fund..................................................................14
Income Equity Fund...........................................................14
INCOME FUNDS..................................................................14
Mortgage Securities Fund.....................................................15
Ohio Tax-Free Fund...........................................................20
Fixed Income Securities Fund.................................................21
Short/Intermediate Fixed Income Securities Fund............................21
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS AND STRATEGIES................22
Ohio Tax-Exempt Securities...................................................22
Non-Diversification..........................................................22
Defensive Investment Strategies..............................................22
Options and Futures Contracts................................................23
Foreign Investments..........................................................24
Repurchase Agreements........................................................25
When-Issued and Delayed Delivery Transactions................................25
Lending of Portfolio Securities..............................................26
INVESTMENT RESTRICTIONS.......................................................26
HOW THE FUNDS VALUE THEIR SHARES..............................................27
HOW TO BUY INVESTMENT SHARES..................................................27
To Place an Order............................................................28
Minimum Investment Required..................................................28
Systematic Investment Program................................................29
What Shares Cost.............................................................29
PAGE
HOW TO EXCHANGE INVESTMENT SHARES AMONG THE FUNDS.............................32
By Telephone.................................................................33
By Mail......................................................................33
HOW TO REDEEM INVESTMENT SHARES...............................................33
Redeeming by Telephone.......................................................34
Redeeming by Mail............................................................34
Redeeming by Check...........................................................35
Redeeming by Fax.............................................................35
SYSTEMATIC WITHDRAWAL PROGRAM.................................................35
ACCOUNTS WITH LOW BALANCES....................................................36
MANAGEMENT OF THE TRUST.......................................................36
Distribution of Investment Shares............................................38
Distribution Plan............................................................38
Administration of the Funds..................................................39
Custodian, Recordkeeper, Transfer Agent, and Dividend Disbursing Agent.......40
Independent Accountants......................................................40
DISTRIBUTIONS AND TAXES.......................................................40
Money Market Funds...........................................................40
Other Funds..................................................................40
Distribution Options.........................................................40
Federal Income Taxes.........................................................41
Ohio Personal Income Taxes...................................................42
ORGANIZATION OF THE TRUST.....................................................42
Voting Rights................................................................43
PERFORMANCE DATA AND COMPARISONS..............................................44
SHAREHOLDER INQUIRIES.........................................................45
OTHER CLASSES OF SHARES.......................................................45
PENDING LEGAL PROCEEDINGS RELATING TO PIPER...................................45
APPENDIX I....................................................................46
<PAGE>
SUMMARY
The Trust, a management investment company, was established as Massachusetts
business trust under a Declaration of Trust dated February 10, 1987. The
Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of
securities. The shares in any one Fund may be offered in separate classes. As
of the date of this Prospectus, the Board of Trustees has established two
classes of shares, known as Trust Shares and Investment Shares, in the Money
Market Fund, the Ohio Municipal Money Market Fund, the U.S. Treasury Money
Market Fund, the Growth Fund, the Income Equity Fund, the Mortgage Securities
Fund, the Ohio Tax-Free Fund, the Fixed Income Securities Fund, and the
Short/Intermediate Fixed Income Securities Fund. All of the portfolios of the
Trust, with the exception of the Ohio Municipal Money Market Fund and the Ohio
Tax-Free Fund, are diversified. This Prospectus relates solely to the
Investment Shares of each Fund as set forth below.
As of the date of this Prospectus, the Trust is comprised of the following
nine Funds:
MONEY MARKET FUNDS--INVESTMENT SHARES
MONEY MARKET FUND--seeks to maximize current income while preserving
capital and maintaining liquidity by investing in a portfolio of high
quality money market instruments;
OHIO MUNICIPAL MONEY MARKET FUND--seeks to provide income exempt from
both federal regular income tax and Ohio personal income taxes while
preserving capital and maintaining liquidity by investing in Ohio tax-
exempt securities;
U.S. TREASURY MONEY MARKET FUND--seeks to maximize current income while
preserving capital and maintaining liquidity by investing exclusively
in obligations issued by the U.S. Government and backed by its full
faith and credit, and in repurchase agreements with respect to such
obligations;
EQUITY FUNDS--INVESTMENT SHARES
GROWTH FUND--seeks to achieve long-term capital appreciation by
investing primarily in equity securities;
INCOME EQUITY FUND--seeks to achieve high current income and moderate
appreciation of capital by investing in income-producing equity
securities;
INCOME FUNDS--INVESTMENT SHARES
MORTGAGE SECURITIES FUND--seeks to achieve current income by investing
in mortgage securities and in U.S. Government securities;
OHIO TAX-FREE FUND--seeks to provide current income exempt from federal
income taxes and Ohio personal income taxes by investing in Ohio tax-
exempt securities;
FIXED INCOME SECURITIES FUND--seeks to achieve high current income by
investing in fixed income securities where the average maturity of the
Fund will not exceed 10 years; and
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND--seeks to achieve
current income by investing in fixed income securities with a maximum
maturity for individual issues of 5 years or less at the time of
purchase and a dollar-weighted average portfolio maturity of more than
2 but less than 5 years.
For information on how to purchase Investment Shares of any of the Funds,
please refer to "How to Buy Investment Shares." A minimum initial investment
of $1,000 is required for each Fund.
1
<PAGE>
Subsequent investments in a Fund must be in amounts of at least $50.
Investment Shares of each Fund are sold at net asset value plus a sales charge
where applicable. Shares of each Fund are redeemed at net asset value.
Information on redeeming shares may be found under "How to Redeem Investment
Shares." The Funds are advised by The Huntington Trust Company, N.A. In
addition, Piper Capital Management Incorporated ("Piper"), a wholly-owned
subsidiary of Piper Jaffray Companies Inc., serves as sub-adviser to the
Mortgage Securities Fund.
RISK FACTORS. Investors should be aware of the following general
observations. There can be no assurance that a Fund will achieve its
investment objective. The market value of fixed-income securities, which
constitute a major part of the investments of several Funds, may vary
inversely in response to changes in prevailing interest rates ("interest rate
risk"). Shareholders of the Ohio Municipal Money Market Fund may be subject to
the federal alternative minimum tax on that part of the Funds' dividends
derived from interest on certain municipal securities. IN ADDITION, THE OHIO
MUNICIPAL MONEY MARKET FUND IS CONCENTRATED IN SECURITIES ISSUED BY THE STATE
OF OHIO OR OTHER GOVERNMENTAL ENTITIES WITHIN THE STATE OF OHIO AND THEREFORE
AN INVESTMENT IN THAT FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF
MONEY MARKET FUNDS. One or more Funds may make certain investments and employ
certain investment techniques that involve special risks, including the use of
repurchase agreements, lending portfolio securities, entering into futures
contracts and related options as hedges, investing in foreign securities, and
purchasing securities on a when-issued or delayed delivery basis, including
the use of "dollar rolls." These investments and investment techniques may
increase the volatility of a Fund's net asset value. Their risks are described
under "Additional Information on Portfolio Investments and Strategies." The
Mortgage Securities Fund may engage in short-term trading in attempting to
achieve its investment objective, which will increase transaction costs. The
Mortgage Securities Fund may purchase mortgage-related securities including
derivative mortgage securities. In addition to interest rate risk, mortgage-
related securities are subject to prepayment risk. Recent market experience
has shown that certain derivative mortgage securities may be extremely
sensitive to changes in interest rates and in prepayment rates on the
underlying assets and, as a result, the prices of such securities may be
highly volatile.
2
<PAGE>
FEE TABLE AND EXAMPLE
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Investment Shares will bear, either directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
FIXED SHORT/
MORTGAGE OHIO INCOME INTERMEDIATE
INCOME SECURITIES TAX-FREE SECURITIES FIXED INCOME
GROWTH FUND EQUITY FUND FUND FUND FUND SECURITIES FUND
----------- ----------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Im-
posed on
Purchases (as a per-
centage of
offering price)....... 4.00% 5.50% 2.00% 2.00% 2.00% 2.00%
</TABLE>
The Distributor may waive all or a portion of this sales load. See "What
Shares Cost--Purchases at Net Asset Value."
ANNUAL INVESTMENT SHARES OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
<TABLE>
<CAPTION>
TOTAL
INVESTMENT
SHARES
OPERATING
NET EXPENSES NET OF
MANAGEMENT 12B-1 OTHER ANY WAIVERS OR
FEES (1) FEES (2) EXPENSES (3) REIMBURSEMENTS
---------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Money Market Fund (4)*........ 0.30% 0.10% 0.23% 0.63%
Ohio Municipal Money Market
Fund (4)* ................... 0.25% 0.10% 0.24% 0.59%
U.S. Treasury Money Market
Fund (4)*.................... 0.20% 0.10% 0.22% 0.52%
Growth Fund................... 0.60% 0.25% 0.23% 1.08%
Income Equity Fund............ 0.60% 0.25% 0.22% 1.07%
Mortgage Securities Fund (5).. 0.30% 0.25% 0.37% 0.92%
Ohio Tax-Free Fund............ 0.50% 0.25% 0.26% 1.01%
Fixed Income Securities Fund.. 0.50% 0.25% 0.24% 0.99%
Short/Intermediate Fixed In-
come Securities Fund......... 0.50% 0.25% 0.22% 0.97%
</TABLE>
- --------
(1)Fees paid by each Fund for investment advisory services. See "Management of
the Trust."
(2)Fees paid by Investment Shares of each Fund for distribution services
provided with respect to Investment Shares. Total payments of up to 0.25 of 1%
for all Funds except the Mortgage Securities Fund, and up to 0.50 of 1% for
the Mortgage Securities Fund, of the average daily net assets attributable to
Investment Shares are permitted under the Distribution Plans. The Distributor
can terminate these voluntary waivers at any time in its sole discretion. See
"Management of the Trust--Distribution Plans."
(3)Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(4)The Total Investment Shares Operating Expenses for the Ohio Municipal Money
Market Fund would be 0.79%, absent the voluntary waiver of management fees and
if the maximum amounts were reimbursed for 12b-1 fees. The Total Investment
Shares Operating Expenses for the Money Market Fund would be 0.78%, if the
maximum amounts were reimbursed for 12b-1 fees. The maximum management fee for
the Ohio Municipal Money Market Fund is 0.30%. The maximum amount that can be
reimbursed for 12b-1 fees for the Money Market Fund and the Ohio Municipal
Money Market Fund is 0.25%.
(5)The Total Investment Shares Operating Expenses for the U.S. Treasury Money
Market Fund would have been 0.67% absent the voluntary waiver of 12b-1 fees.
The Total Investment Shares Operating Expenses for the Mortgage Securities
Fund would have been 1.37% absent the voluntary waiver of management fees and
12b-1 fees. The maximum 12b-1 fees is 0.25% and 0.50% for the U.S. Treasury
Money Market Fund and the Mortgage Securities Fund, respectively. The maximum
management fee is 0.50% for the Mortgage Securities Fund.
*The adviser, administrator and/or custodian can terminate these voluntary
waivers at any time at their sole discretion.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period, and (3)
payment of maximum sales load:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund.............................. $ 6 $20 $ 35 $ 79
Ohio Municipal Money Market Fund............... $ 6 $19 $ 33 $ 74
U.S. Treasury Money Market Fund................ $ 5 $17 $ 29 $ 65
Growth Fund.................................... $51 $73 $ 97 $166
Income Equity Fund............................. $65 $87 $111 $178
Mortgage Securities Fund....................... $29 $49 $ 70 $131
Ohio Tax-Free Fund............................. $30 $52 $ 75 $141
Fixed Income Securities Fund................... $30 $51 $ 74 $139
Short/Intermediate Fixed Income Securities
Fund.......................................... $30 $50 $ 73 $137
</TABLE>
The purpose of the foregoing example is to assist an investor in
understanding the various costs and expenses that a shareholder of Investment
Shares will bear directly or indirectly. The example should not be considered
a representation of past or future expenses. Actual expenses may be greater or
less than those shown.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
3
<PAGE>
FINANCIAL HIGHLIGHTS--MONEY MARKET FUNDS (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996 is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information.
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS TO NET ASSET
VALUE, NET SHAREHOLDERS VALUE,
YEAR ENDED BEGINNING INVESTMENT FROM NET END OF TOTAL
DECEMBER 31, OF PERIOD INCOME INVESTMENT INCOME PERIOD RETURN+ EXPENSES
- ---------------------------------------------------------------------------------
INVESTMENT SHARES
MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1991* $1.00 $0.04 $(0.04) $1.00 3.56% 0.60%(a)
1992 1.00 0.03 (0.03) 1.00 3.34% 0.60%
1993 1.00 0.03 (0.03) 1.00 2.63% 0.61%
1994 1.00 0.04 (0.04) 1.00 3.76% 0.61%
1995 1.00 0.05 (0.05) 1.00 5.48% 0.63%
1996 1.00 0.05 (0.05) 1.00 4.90% 0.63%
<CAPTION>
OHIO MUNICIPAL MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1991* $1.00 0.03 (0.03) $1.00 2.51% 0.67%(a)
1992 1.00 0.03 (0.03) 1.00 2.51% 0.59%
1993 1.00 0.02 (0.02) 1.00 1.98% 0.55%
1994 1.00 0.02 (0.02) 1.00 2.31% 0.55%
1995 1.00 0.03 (0.03) 1.00 3.47% 0.52%
1996 1.00 0.03 (0.03) 1.00 3.04% 0.52%
<CAPTION>
U.S. TREASURY MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1993** $1.00 0.01 (0.01) $1.00 0.54% 0.50%(a)
1994 1.00 0.04 (0.04) 1.00 3.68% 0.52%
1995 1.00 0.05 (0.05) 1.00 5.43% 0.53%
1996 1.00 0.05 (0.05) 1.00 4.87% 0.52%
</TABLE>
- -------------------------------------------------------------------------------
* Reflects operations for the period from May 1, 1991 (date of initial public
investment) to December 31, 1991.
** Reflects operations for the period from October 19, 1993 (date of initial
public investment) to December 31, 1993.
+ Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
4
<PAGE>
<TABLE>
<CAPTION>
NET NET ASSETS,
INVESTMENT EXPENSE WAIVER/ END OF PERIOD
INCOME REIMBURSEMENT(B) (000 OMITTED)
- ----------------------------------------------------------------------------------
<S> <C> <C>
5.08%(a) -- $17,936
3.26% -- 19,962
2.60% 0.02% 21,583
3.85% 0.02% 41,629
5.30% 0.03% 91,288
4.80% -- 97,557
3.69%(a) 0.02%(a) $425
2.35% 0.14% 2,452
1.88% 0.20% 20,312
2.30% 0.19% 37,134
3.42% 0.20% 55,469
3.00% 0.12% 74,102
2.65%(a) 0.16%(a) $948
3.66% 0.17% 20,390
5.28% 0.18% 38,973
4.77% 0.15% 47,884
</TABLE>
- -------------------------------------------------------------------------
5
<PAGE>
FINANCIAL HIGHLIGHTS--EQUITY FUNDS (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996, is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information. The Monitor Income Equity Fund
Investment Shares had not commenced operations as of December 31, 1996 and
therefore no financial information is available for Investment Shares of the
Income Equity Fund.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME+
- ------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
GROWTH
<S> <C> <C> <C> <C> <C> <C> <C>
1991* $22.79 $0.33 $2.07 $2.40 $(0.33) $(0.06) $(0.02)
1992 24.78 0.49 1.36 1.85 (0.48) (0.39) --
1993 25.76 0.40 0.43 0.83 (0.41) (0.02) --
1994 26.16 0.33 0.22 0.55 (0.33) (0.07) --
1995 26.31 0.35 7.61 7.96 (0.35) (3.11) --
1996 30.81 0.31 4.73 5.04 (0.33) (1.56) --
</TABLE>
- -------------------------------------------------------------------------------
*Reflects operations for the period from May 1, 1991 (date of initial public
investment) to December 31, 1991.
+ Distributions in excess of net investment income were the result of
certain book and tax timing differences. These distributions do not
represent a return of capital for federal income tax purposes.
++Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Average commission rate paid per share for securities purchases and sales
during the period. Presentation of the rate is only required beginning in
1996.
6
<PAGE>
<TABLE>
<CAPTION>
NET ASSET NET ASSETS,
VALUE, NET END OF PORTFOLIO AVERAGE
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ PERIOD (000 TURNOVER COMMISSION
DISTRIBUTIONS PERIOD RETURN++ EXPENSES INCOME REIMBURSEMENT(B) OMITTED) RATE RATE(C)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.41) $24.78 9.20% 1.24%(a) 1.88%(a) 0.02%(a) $1,078 13% n/a
(0.87) 25.76 7.57% 1.16% 2.03% 0.01% 3,637 36% n/a
(0.43) 26.16 3.25% 1.10% 1.54% 0.04% 3,961 29% n/a
(0.40) 26.31 2.08% 1.13% 1.27% 0.04% 3,212 42% n/a
(3.46) 30.81 30.40% 1.11% 1.08% 0.05% 3,777 37% n/a
(1.89) 33.96 16.43% 1.08% 0.93% -- 4,285 21% $0.045
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
FINANCIAL HIGHLIGHTS--INCOME FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996, is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information. The Monitor Short/Intermediate
Fixed Income Securities Fund Investment Shares had not commenced operations as
of December 31, 1996, and therefore no financial information is available for
Investment Shares of the Short/Intermediate Fixed Income Securities Fund.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME+
- ------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
OHIO TAX-FREE
<S> <C> <C> <C> <C> <C> <C> <C>
1991* $20.56 $0.67 $ 0.51 $ 1.18 $(0.69) -- --
1992 21.05 0.93 0.26 1.19 (0.93) -- --
1993 21.31 0.90 0.73 1.63 (0.90) -- --
1994 22.04 0.94 (1.56) (0.62) (0.92) -- --
1995 20.50 0.96 1.27 2.23 (0.96) -- --
1996 21.77 0.96 (0.29) 0.67 (0.96) -- --
<CAPTION>
FIXED INCOME SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C>
1991* $20.17 0.91 1.47 2.38 (0.87) $(0.10) --
1992 21.58 1.33 (0.04) 1.29 (1.37) (0.12) $(0.06)
1993 21.32 1.19 0.92 2.11 (1.33) (0.06) --
1994 22.04 1.23 (2.29) (1.06) (1.28) -- --
1995 19.70 1.29 2.09 3.38 (1.30) -- --
1996 21.78 1.29 (0.83) 0.46 (1.29) -- --
<CAPTION>
MORTGAGE SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C>
1992**(c) $10.00 0.62 0.28 0.90 (0.60) (0.03) --
1993(c) 10.27 1.47 (0.27) 1.20 (1.43) (0.10) --
1994(c) 9.94 0.87 (3.19) (2.32) (0.91) -- (0.01)
1995(c) 6.70 0.55 1.46 2.01 (0.55) -- (0.04)
1996(c) 8.12 0.53 (0.04) 0.49 (0.53) -- --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 1, 1991 (date of initial public
investment) to December 31, 1991.
** Reflects operations for the period from June 2, 1992 (date of initial
public investment) to December 31, 1992.
+ Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
++ Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Per share information presented is based upon the monthly number of shares
outstanding due to large fluctuations in the number of shares outstanding
during the period.
8
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS,
NET ASSET NET END OF PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT EXPENSE WAIVER/ PERIOD (000 TURNOVER
DISTRIBUTIONS OF PERIOD RETURN++ EXPENSES INCOME REIMBURSEMENT(B) OMITTED) RATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.69) $21.05 5.78% 1.18%(a) 4.74%(a) -- $ 486 13%
(0.93) 21.31 5.76% 1.16% 4.36% -- 1,339 3%
(0.90) 22.04 7.78% 1.07% 4.13% 0.04% 2,838 2%
(0.92) 20.50 (2.83%) 1.02% 4.43% 0.04% 2,307 12%
(0.96) 21.77 11.10% 1.03% 4.49% 0.08% 2,163 13%
(0.96) 21.48 3.20% 1.01% 3.24% -- 1,900 6%
(0.97) $21.58 12.12% 1.19%(a) 6.68%(a) -- $ 135 21%
(1.55) 21.32 6.25% 1.08% 6.16% -- 845 15%
(1.39) 22.04 10.07% 0.99% 5.61% 0.04% 2,563 7%
(1.28) 19.70 (4.88%) 1.00% 6.01% 0.04% 1,958 23%
(1.30) 21.78 17.63% 1.02% 6.17% 0.05% 2,176 20%
(1.29) 20.95 2.32% 0.99% 6.12% -- 1,851 16%
(0.63) $10.27 8.97% 0.83%(a) 10.35%(a) 0.44%(a) $4,742 50%
(1.53) 9.94 11.94% 1.03% 13.95% 0.29% 8,533 154%
(0.92) 6.70 (24.72%) 1.13% 10.91% 0.37% 4,259 91%
(0.59) 8.12 31.13% 0.76% 7.40% 0.73% 2,008 194%
(0.53) 8.08 6.25% 0.92% 6.57% 0.53% 1,666 90%
- -------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of the various Funds are described
below. There can, of course, be no guarantee that a Fund will achieve its
investment objective.
Each Fund's investment objective is fundamental and may be changed only by a
vote of a majority of the outstanding shares of that Fund. Unless otherwise
noted in this Prospectus or in the Statement of Additional Information, the
investment policies of the Funds are not fundamental and may be changed by the
Trust's Board of Trustees (the "Trustees"). Except with respect to borrowing
money or downgrades of securities in the Money Market Funds, any percentage
limitation on a Fund's investments (or other activities) will be considered to
be violated only if such limitation is exceeded immediately after, and is
caused by, an acquisition of an investment (or the taking of such other
action).
For a description of the ratings of nationally recognized statistical rating
organizations (individually, an "NRSRO") utilized by The Huntington Trust
Company, N.A., in managing the Funds' investments, see the Appendix to the
Statement of Additional Information.
MONEY MARKET FUNDS
Each of the Money Market Funds described below is designed for investors
seeking current income with stability of principal. The Money Market Funds
intend to limit their investments by operating in a manner consistent with
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940
Act"). Rule 2a-7 permits funds to utilize the amortized cost method of
valuation in order to offer their shares at a net asset value of $1.00 per
share (see also the section of the Statement of Additional Information
entitled, "Determination of Net Asset Value"). Rule 2a-7 imposes certain risk
limiting conditions on the Money Market Funds which in some instances restrict
a Money Market Fund's investment policies. These risk limiting conditions
include the following:
. The Money Market Funds must limit their investments to "Eligible Securities"
as defined under Rule 2a-7, and which Huntington has determined present
minimal credit risks under guidelines adopted by the Trustees. (For an
explanation of some of the terms defined by Rule 2a-7, see Appendix I to
this Prospectus.)
. Each Money Market Fund (except the Ohio Municipal Money Market Fund) must
limit investments in "Second Tier Securities" to 5% of total assets and 1%
of total assets in the securities of a single Second Tier issuer.
. The Money Market Funds may invest without limit in "First Tier Securities"
subject to the 5% issuer diversification limitation where applicable. In
addition, the portfolio investments of each Money Market Fund must have a
maturity of 397 days or less from the time of purchase by it, although
securities owned pursuant to a repurchase agreement and certain adjustable
interest rate instruments may bear longer maturities. The dollar-weighted
average maturity of each Money Market Fund's portfolio must not exceed 90
days. Of course, a Money Market Fund's yield, and under unusual
circumstances, the value of its portfolio securities, will be affected by
changes in interest rates.
10
<PAGE>
MONEY MARKET FUND
The objective of the Money Market Fund is to maximize current income while
preserving capital and maintaining liquidity by investing in a portfolio of
high quality money market instruments. The Money Market Fund's portfolio
investments may include:
(a) obligations, such as notes, bills or bonds, issued by or guaranteed as
to principal and interest by the U.S. Government or its agencies or
instrumentalities;
(b) commercial paper, including U.S. dollar denominated eurodollar
commercial paper, considered under Rule 2a-7 to be rated in the highest
category by an NRSRO(s) or, if not rated, of comparable quality as
determined by Huntington pursuant to guidelines established by the
Trustees;
(c) negotiable certificates of deposit and bankers' acceptances issued by
domestic banks and U.S. branches of foreign banks which are subject to
the same regulation as U.S. banks and which, at the time of purchase,
have capital, surplus, and undivided profits in excess of $100,000,000
(as of the bank's most recently published financial statements);
(d) corporate debt obligations, including bonds, notes and debentures
considered under Rule 2a-7 to be rated in the two highest categories by
an NRSRO(s) or, if not rated, of comparable quality as determined by
Huntington pursuant to guidelines established by the Trustees; and
(e) repurchase agreements and master demand notes.
RESTRICTED AND ILLIQUID SECURITIES. The Money Market Fund intends to invest
in restricted securities. Restricted securities are any securities in which
the Money Market Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. However, the Money Market Fund will limit investments
in illiquid securities, including certain restricted securities not determined
by the Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to
10% of its net assets.
The Money Market Fund may invest in commercial paper issued in reliance on
the exemption from registration afforded by Section 4(2) of the Securities Act
of 1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law, and is generally sold to institutional investors, such
as the Money Market Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper
is normally resold to other institutional investors like the Money Market Fund
through or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity. The Money
Market Fund believes that Section 4(2) commercial paper and possibly certain
other restricted securities which meet the criteria for liquidity established
by the Trustees are quite liquid. The Money Market Fund intends, therefore, to
treat the restricted securities which meet the criteria for liquidity
established by the Trustees, including Section 4(2) commercial paper, as
determined by Huntington, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section
4(2) commercial paper is liquid, the Money Market Fund intends to not subject
such paper to the limitation applicable to restricted securities.
OHIO MUNICIPAL MONEY MARKET FUND
The objective of the Ohio Municipal Money Market Fund is to provide income
exempt from both federal regular income tax and Ohio personal income taxes
while preserving capital and maintaining liquidity. As a fundamental policy,
the Ohio Municipal Money Market Fund invests its assets so that at
11
<PAGE>
least 80% of its annual interest income is exempt from federal regular income
tax. The Ohio Municipal Money Market Fund invests primarily in Ohio tax-exempt
securities which, under normal market conditions, will comprise at least 65%
of its assets. Ohio tax-exempt securities are debt obligations issued by or on
behalf of the State of Ohio, its political subdivisions, or agencies, or
financing authorities of any of these, the income from which is, in the
opinion of qualified legal counsel, exempt from both federal regular income
tax and the personal income taxes imposed by the State of Ohio. Examples of
tax-exempt securities include, but are not limited to:
. tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
. bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having serial maturities and pre-
refunded bonds); and
. participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND OBLIGATIONS. Variable rate demand obligations are long-
term tax-exempt securities that have variable or floating interest rates and
provide the Ohio Municipal Money Market Fund with the right to tender the
security for repurchase at its stated principal amount plus accrued interest.
Such securities typically bear interest at a rate that is intended to cause
the securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally
established by the remarketing agent of the respective securities. Most
variable rate demand obligations allow the holder to demand the repurchase of
the security on not more than seven days prior notice. Other obligations only
permit the holder to tender the security at the time of each interest rate
adjustment or at other fixed intervals. See "Demand Features." The Ohio
Municipal Money Market Fund treats variable rate demand obligations as
maturing on the later of the date of the next interest adjustment or the date
on which it may next tender the security for redemption.
PARTICIPATION INTERESTS. The Ohio Municipal Money Market Fund may purchase
interests in tax-exempt securities from financial institutions such as
commercial and investment banks, savings and loan associations and insurance
companies. These interests may take the form of participations, beneficial
interests in a trust, partnership interests or any other form of indirect
ownership that allows the holder to treat the income from the investment as
exempt from federal income tax. The Ohio Municipal Money Market Fund invests
in these participation interests in order to obtain credit enhancement or
demand features that would not be available through direct ownership of the
underlying tax-exempt securities.
CREDIT ENHANCEMENT. Certain of the portfolio investments of the Ohio
Municipal Money Market Fund may have been credit enhanced by a guaranty,
letter of credit or insurance. The Ohio Municipal Money Market Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. However, credit
enhanced securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Ohio Municipal Money Market
Fund has invested more than 10% of its assets in securities issued, guaranteed
or otherwise credit enhanced by the credit enhancer, in which case the
securities will be treated as having
12
<PAGE>
been issued both by the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the
quality and marketability of the underlying security. The Ohio Municipal Money
Market Fund may have more than 40% of its total assets invested in securities
which are credit-enhanced by foreign or domestic banks. Changes in credit
quality of these banking institutions could cause losses to the Fund and
affect its share price.
DEMAND FEATURES. The Ohio Municipal Money Market Fund may acquire securities
that are subject to puts and standby commitments ("demand features") to
purchase the securities at their principal amount (usually with accrued
interest) within a fixed period (usually seven days) following a demand by the
fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and may not
be transferred separately from the underlying security. The Ohio Municipal
Money Market Fund uses these arrangements to provide liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.
TEMPORARY INVESTMENTS. The Ohio Municipal Money Market Fund invests its
assets so that at least 80% of its annual interest income is exempt from
federal regular income taxes and at least 65% of its assets are invested in
securities the income from which is exempt from Ohio personal income taxes.
However, from time to time, when Huntington determines that market conditions
call for a temporary defensive posture, the Ohio Municipal Money Market Fund
may invest in temporary investments with remaining maturities of 13 months or
less at the time of purchase, or hold assets in cash. Interest income from
temporary investments may be taxable to shareholders as ordinary income. These
temporary investments include: obligations issued by or on behalf of municipal
or corporate issuers having the same quality characteristics as Ohio tax-
exempt securities purchased by the Fund; marketable obligations issued or
guaranteed by the U.S. Government, its agencies, or instrumentalities;
instruments issued by a U.S. branch of a domestic bank or other depository
institutions having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment; repurchase agreements (arrangements in
which the organization selling a temporary investment agrees at the time of
sale to repurchase it at a mutually agreed upon time and price); and
commercial paper rated in one of the two highest short-term rating categories
by an NRSRO(s).
Although the Ohio Municipal Money Market Fund is permitted to make taxable,
temporary investments that may have Ohio state tax implications, there is no
current intention of generating income subject to federal regular or Ohio
personal income taxes.
U.S. TREASURY MONEY MARKET FUND
The objective of the U.S. Treasury Money Market Fund is to maximize current
income while preserving capital and maintaining liquidity by investing
exclusively in obligations issued by the U.S. Government and backed by its
full faith and credit and in repurchase agreements with respect to such
obligations. At least 65% of the U.S. Treasury Money Market Fund's total
assets will be invested in Treasury bills, notes and bonds which are direct
obligations of the U.S. Treasury, and repurchase agreements with respect to
such obligations.
13
<PAGE>
EQUITY FUNDS
GROWTH FUND
The objective of the Growth Fund is to achieve long-term capital
appreciation primarily through investments in equity securities. Current
income will be only an incidental consideration in the selection of
investments. Equity securities in which the Growth Fund may invest include
common stocks, preferred stocks, securities convertible into or exchangeable
for common stocks, and other securities which Huntington believes have common
stock characteristics, such as rights and warrants. The Growth Fund may invest
in foreign securities and, subject to its investment restrictions, securities
restricted as to resale under federal securities laws. The Growth Fund's
common stock selection emphasizes those companies which Huntington believes
have characteristics such as above average earnings and dividend growth,
superior balance sheets, and potential for capital gains, but its investment
policy recognizes that securities of other companies may be attractive for
capital appreciation purposes by virtue of special developments or depression
in price believed to be temporary. The Growth Fund will invest in large and
medium-sized capitalization growth companies which provide these financial and
growth characteristics. As a matter of fundamental policy, under normal market
conditions, the Growth Fund will invest at least 65% of its total assets in
equity securities. The Growth Fund may also, under normal market conditions,
invest a portion of its assets in cash equivalents, including repurchase
agreements and the shares of money market mutual funds, for liquidity
purposes.
INCOME EQUITY FUND
The objective of the Income Equity Fund is to achieve high current income
and moderate appreciation of capital primarily through investment in income-
producing equity securities. Consistent with this objective, the Income Equity
Fund may invest in preferred stocks, in securities convertible into or
exchangeable for common stocks and securities which Huntington believes have
common stock characteristics, such as rights and warrants. The Income Equity
Fund may invest in foreign securities and, subject to its investment
restrictions, in securities restricted as to resale under federal securities
laws. As a matter of fundamental policy, under normal market conditions, the
Income Equity Fund will invest at least 65% of its total assets in the equity
securities described in this paragraph. The Income Equity Fund may invest up
to 35% of its assets in debt securities rated investment grade or better. The
Income Equity Fund may also, under normal market conditions, invest a portion
of its assets in cash equivalents, including repurchase agreements and the
shares of money market mutual funds, for liquidity purposes.
INCOME FUNDS
The investment objectives and policies of the Income Funds are described
below. Each of the Income Funds invests primarily in debt securities. The
prices of fixed income securities generally fluctuate inversely to the
direction of interest rates. Thus, a decrease in interest rates will generally
result in an increase in the values of debt securities held by an Income Fund.
Conversely, during periods of rising interest rates, the values of an Income
Fund's assets will generally decline. The values of such securities are also
affected by changes in the financial condition of their issuers. Changes in
the values of an Income Fund's securities will not generally affect the income
derived from such securities but will affect an Income Fund's net asset value.
14
<PAGE>
MORTGAGE SECURITIES FUND
The investment objective of the Mortgage Securities Fund is current income.
The Mortgage Securities Fund seeks to achieve this investment objective by
investing at least 65% of the value of its total assets in mortgage-related
securities issued by the U.S. Government, government-related entities, and
private entities. These mortgage-related securities include derivative
mortgage securities. Recent market experience has shown that certain
derivative mortgage securities may be extremely sensitive to changes in
interest rates and in prepayment rates on the underlying mortgage assets, and,
as a result, the prices of such securities may be highly volatile.
The Mortgage Securities Fund may invest up to 35% of the value of its total
assets in:
(i) non-mortgage related securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities;
(ii) certificates of deposit, bankers' acceptances and interest-bearing
savings deposits of banks having total assets of more than $1 billion and
which are members of the Federal Deposit Insurance Corporation (the
"FDIC"); and
(iii) commercial paper rated A-1 by Standard & Poor's Ratings Group
("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, issued by companies which have an outstanding debt issue rated AAA
by S&P or Aaa by Moody's.
The Mortgage Securities Fund will attempt to maintain a dollar-weighted
average portfolio life of more than three years but no more than ten years. In
order to maintain this dollar-weighted average portfolio life, Huntington will
monitor the prepayment experience of the underlying mortgage pools of the
mortgage-related securities and will purchase and sell securities in the
portfolio to shorten or lengthen the average life of the portfolio, as
appropriate.
It is important to understand that, while a valuable measure, average life
is based on certain assumptions and has several limitations. It is most useful
as a measure of the repayment of principal when interest rate changes are
small. In addition, average life is difficult to calculate precisely for bonds
with prepayment options, such as mortgage-related securities, because the
calculation requires assumptions about prepayment rates. For example, when
interest rates go down, homeowners may prepay their mortgages at a higher rate
than assumed in the initial securities. Conversely, if rates increase,
prepayments may decrease to a greater extent than assumed, extending the
average life of such securities. For these reasons, average lives of funds
which invest a significant portion of their assets in mortgage-related
securities can be greatly affected by changes in interest rates.
The portfolio turnover rate of the Mortgage Securities Fund may exceed 100%,
which is higher than the portfolio turnover rate of most mutual funds.
However, the Adviser does not expect the portfolio turnover rate of the
Mortgage Securities Fund to exceed 200%. To the extent that short-term trading
results in the realization of short-term capital gains, shareholders will be
taxed on such gains at ordinary income tax rates. However, certain tax rules
may restrict the Mortgage Securities Fund's ability to sell securities in some
circumstances when the security has been held for less than three (3) months.
Increased portfolio turnover necessarily results in higher costs, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities, and may result in the
acceleration of capital gains.
15
<PAGE>
Mortgage-Related Securities. Mortgage-related securities are securities
that, directly or indirectly, represent participations in, or are secured by
and payable from, loans secured by real property. Mortgage-related securities,
as the term is used in this Prospectus, include mortgage pass-through
securities, adjustable rate mortgage securities, collateralized mortgage
obligations and stripped mortgage-backed securities. These mortgage-related
securities include derivative mortgage securities. Mortgage-related securities
fall into three categories: (a) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"); (b) those
issued by non-governmental issuers that represent interests in, or are
collateralized by, mortgage-related securities issued or guaranteed by the
United States Government or one of its agencies or instrumentalities; and (c)
those issued by non-governmental issuers that represent an interest in, or are
collateralized by, whole mortgage loans or mortgage-related securities without
a government guarantee but usually with over-collateralization or some other
form of private credit enhancement. Non-governmental issuers referred to in
(b) and (c) above include originators of and investors in mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
Mortgage Pass-Through Securities. The mortgage pass-through securities in
which the Mortgage Securities Fund invests provide for the pass-through to
investors of their pro-rata share of monthly payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans,
net of any fees paid to the guarantor of such securities and the servicer of
the underlying mortgage loans. The Mortgage Securities Fund invests both in
U.S. Government pass-through securities issued by GNMA, FNMA and FHLMC, and in
pass-through securities issued by non-governmental issuers. Each of GNMA, FNMA
and FHLMC guarantee timely distributions of interest to certificate holders.
GNMA and FNMA guarantee timely distributions of scheduled principal. FHLMC
generally guarantees only ultimate collection of principal of the underlying
mortgage loans.
Adjustable Rate Mortgage Securities. The Mortgage Securities Fund may also
invest in adjustable rate mortgage securities ("ARMS"). ARMS are pass-through
mortgage securities collateralized by mortgages with interest rates that are
adjusted from time to time. The adjustments usually are determined in
accordance with a predetermined interest rate index and may be subject to
certain limits. While the values of ARMS, like other debt securities,
generally vary inversely with changes in market interest rates (increasing in
value during periods of declining interest rates and decreasing in value
during periods of increasing interest rates), the values of ARMS should
generally be more resistant to price swings than other debt securities because
the interest rates of ARMS move with market interest rates. The adjustable
rate feature of ARMS will not, however, eliminate fluctuations in the prices
of ARMS, particularly during periods of extreme fluctuations in interest
rates. Also, since many adjustable rate mortgages only reset on an annual
basis, it can be expected that the prices of ARMS will fluctuate to the extent
that changes in prevailing interest rates are not immediately reflected in the
interest rates payable on the underlying adjustable rate mortgages.
ARMS typically have caps which limit the maximum amount by which the
interest rate may be increased or decreased at periodic intervals or over the
life of the loan. To the extent that interest rates increase in excess of the
caps, ARMS can be expected to behave more like traditional debt securities and
to decline in value to a greater extent than would be the case in the absence
of such caps. Also,
16
<PAGE>
since many adjustable rate mortgages only reset on an annual basis, it can be
expected that the prices of ARMS will fluctuate to the extent that changes in
prevailing interest rates are not immediately reflected in the interest rates
payable on the underlying adjustable rate mortgages. The extent to which the
prices of ARMS fluctuate with changes in interest rates will also be affected
by the indices underlying the ARMS. Some indices, such as the one-year
constant maturity Treasury note rate, closely mirror changes in market
interest rate levels. Others, such as the 11th District Federal Reserve Cost
of Funds Index (often related to ARMS issued by FNMA), tend to lag changes in
market levels and tend to be somewhat less volatile.
Collateralized Mortgage Obligations. The Mortgage Securities Fund may invest
in CMOs (collateralized mortgage obligations and multi-class pass-through
securities unless the context otherwise indicates), which are derivative
mortgage securities. Collateralized mortgage obligations are debt instruments
issued by special purpose entities which are secured by pools of mortgage
loans or other mortgage-related securities. Multi-class pass-through
securities are equity interests in a trust composed of mortgage loans or other
mortgage-related securities. Payments of principal and interest on underlying
collateral provide the funds to pay debt service on the collateralized
mortgage obligation or make scheduled distributions on the multi-class pass-
through security. The Mortgage Securities Fund will invest only in CMOs which
are issued by agencies or instrumentalities of the U.S. government or CMOs
issued by private organizations which are rated AAA by an NRSRO.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO, often referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated
among the several tranches of a CMO in many ways. For example, certain
tranches may have variable or floating interest rates and others may be
stripped securities which provide only the principal or interest feature of
the underlying security. See "Stripped Mortgage-Backed Securities," below.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various tranches is to obtain a more predictable cash flow to certain of the
individual tranches than exists with the underlying collateral of the CMO. As
a general rule, the more predictable the cash flow is on a CMO tranche, the
lower the anticipated yield will be on that tranche at the time of issuance
relative to prevailing market yields on mortgage-related securities. As part
of the process of creating more predictable cash flows on most of the tranches
of a CMO, one or more tranches generally must be created that absorb most of
the volatility in the cash flows on the underlying mortgage loans. The yields
on these tranches, which may include inverse floaters, IOs, POs, and Z
tranches, discussed below, are generally higher than prevailing market yields
on mortgage-related securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and
yield on these tranches generally are more volatile.
The Mortgage Securities Fund may invest in any CMO tranche, including
"inverse floaters" and "Z tranches." An inverse floater is a CMO tranche with
a coupon rate that moves inversely to a designated index, such as LIBOR
(London Inter-Bank Offered Rate) or COFI (Cost of Funds Index). Like most
other fixed-income securities, the value of inverse floaters will decrease as
interest rates increase. Inverse floaters, however, exhibit greater price
volatility than the majority of mortgage pass-through securities or CMOs.
Coupon rates on inverse floaters typically change at a multiple of the
17
<PAGE>
changes in the relevant index rate. Thus, any rise in the index rate (as a
consequence of an increase in interest rates) causes a correspondingly greater
drop in the coupon rate of an inverse floater while any drop in the index rate
causes a correspondingly greater increase in the coupon of an inverse floater.
Some inverse floaters also exhibit extreme sensitivity to changes in
prepayments. Inverse floaters would be purchased by the Fund to attempt to
protect against a reduction in the income earned on the Fund's investments due
to a decline in interest rates.
Z tranches of CMOs defer interest and principal payments until one or more
other classes of the CMO have been paid in full. Interest accretes on the Z
tranche, being added to principal, and is compounded through the accretion
period. After the other classes have been paid in full, interest payments
begin and continue through maturity. Z tranches have characteristics similar
to zero coupon bonds. Like a zero coupon bond, during its accretion period a Z
tranche has the advantage of eliminating the risk of reinvesting interest
payments at lower rates during a period of declining market interest rates. At
the same time, however, and also like a zero coupon bond, the market value of
a Z tranche can be expected to fluctuate more widely with changes in market
interest rates than would the market value of a tranche which pays interest
currently. In addition, changes in prepayment rates on the underlying mortgage
loans will affect the accretion period of a Z tranche, and therefore also will
influence its market value.
Stripped Mortgage-Backed Securities. Some of the mortgage-related securities
purchased by the Mortgage Securities Fund may represent an interest solely in
the principal repayments or solely in the interest payments on mortgage-backed
securities (stripped mortgage-backed securities or "SMBSs"). SMBSs are
derivative multi-class securities. SMBSs are usually structured with two
classes and receive different proportions of the interest and principal
distributions on the pool of underlying mortgage-backed securities. Due to the
possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Mortgage
Securities Fund. If prevailing interest rates fall below the level at which
SMBSs were issued, there may be substantial prepayments on the underlying
mortgages, leading to the relatively early prepayments of principal-only SMBSs
(the principal-only or "PO" class) and a reduction in the amount of payments
made to holders of interest-only SMBSs (the interest-only or "IO" class).
Therefore, interest-only SMBSs generally increase in value as interest rates
rise and decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. If the underlying mortgages
experience slower than anticipated prepayments of principal, the yield on a PO
class will be affected more severely than would be the case with a traditional
mortgage-related security. Because the yield to maturity of an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage-backed securities, it is possible that the
Mortgage Securities Fund might not recover its original investment on
interest-only SMBSs if there are substantial prepayments on the underlying
mortgages. The Mortgage Securities Fund's inability to fully recoup its
investment in these securities as a result of a rapid rate of principal
prepayments may occur even if the securities are rated AAA by an NRSRO. In
view of these considerations, Huntington or Piper intends to use these
characteristics of interest-only SMBSs to reduce the effects of interest rate
changes on the value of the Mortgage Securities Fund's portfolio, while
continuing to pursue current income.
U.S. Government Securities. The U.S. government securities in which the
Mortgage Securities Fund invests are either issued or guaranteed as to payment
of principal and interest by the U.S.
18
<PAGE>
Government, its agencies, or instrumentalities. THE CURRENT MARKET PRICES FOR
SUCH SECURITIES ARE NOT GUARANTEED AND WILL FLUCTUATE. Investments in U.S.
Government securities are limited to:
(a)direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
(b)notes, bonds, and discount notes of U.S. Government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association; Export-
Import Bank of the United States; Commodity Credit Corporation; Federal
Financing Bank; The Student Loan Marketing Association; National Credit
Union Administration; and Tennessee Valley Authority.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the
U.S. Treasury. No assurances can be given that the U.S. Government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. These instruments are supported by:
(a)the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
(b)the discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality; or
(c)the credit of the agency or instrumentality.
Short-Term Trading. The Mortgage Securities Fund will use short-term trading
to benefit from yield disparities among different issues of securities or
otherwise to achieve its investment objective. To the extent that the Mortgage
Securities Fund engages in short-term trading, such activities will cause it
to pay greater mark-up charges. The Mortgage Securities Fund's portfolio
turnover rate is set forth in "Financial Highlights."
Investment Risks. The Mortgage Securities Fund is subject to interest rate
risk, which is the potential for a decline in bond prices due to rising
interest rates. In general, bond prices vary inversely with interest rates.
When interest rates rise, bond prices generally fall. Conversely, when
interest rates fall, bond prices generally rise. Interest rate risk applies to
U.S. Government securities as well as other bonds. U.S. Government securities
are guaranteed only as to the payment of interest and principal. The current
market prices for such securities are not guaranteed and will fluctuate.
The Mortgage Securities Fund invests a significant portion of its assets in
mortgage-related securities and, as a result, is subject to prepayment risk.
Prepayment risk results because, as interest rates fall, homeowners are more
likely to refinance their home mortgages. When home mortgages are refinanced,
the principal on mortgage-related securities held is "prepaid" earlier than
expected. The Mortgage Securities Fund must then reinvest the unanticipated
principal payments, just at a time when interest rates on new mortgage
investments are falling. Prepayment risk has two important effects on the
Fund:
. When interest rates fall and additional mortgage prepayments must be
reinvested at lower interest rates, Mortgage Securities Fund's income
will be reduced; and
19
<PAGE>
. When interest rates fall, prices on mortgage-backed securities may not
rise as much as comparable Treasury bonds because bond market investors
may anticipate an increase in mortgage prepayments and a likely decline
in income.
The Mortgage Securities Fund's investments in mortgage-related securities
also subject it to extension risk. Extension risk is the possibility that
rising interest rates may cause prepayments to occur at a slower than expected
rate. This particular risk may effectively change a security which was
considered short- or intermediate-term at the time of purchase into a long-
term security. Long-term securities generally fluctuate more widely in
response to changes in interest rates than short- or intermediate-term
securities.
The Mortgage Securities Fund's investments in mortgage-related securities
include derivative mortgage securities such as CMOs and stripped mortgage-
backed securities which, as discussed above, may involve risks in addition to
those found in other mortgage-related securities. Recent market experience has
shown that certain derivative mortgage securities may be highly sensitive to
changes in interest and prepayment rates and, as a result, the prices of such
securities may be highly volatile. In addition, recent market experience has
shown that during periods of rising interest rates, the market for certain
derivative mortgage securities may become more unstable and such securities
may become more difficult to sell as market makers either choose not to
repurchase such securities or offer prices, based on current market
conditions, which are unacceptable to the Fund.
OHIO TAX-FREE FUND
The objective of the Ohio Tax-Free Fund is to provide current income exempt
from federal income tax and Ohio personal income taxes. The Ohio Tax-Free Fund
will attempt to achieve its objective by investing in Ohio tax-exempt
securities. "Ohio tax-exempt securities" are debt obligations which (i) are
issued by or on behalf of the State of Ohio or its respective authorities,
agencies, instrumentalities and political subdivisions, and (ii) produce
interest which, in the opinion of bond counsel at the time of issuance, is
exempt from federal income tax and Ohio personal income taxes. As a matter of
fundamental policy, under normal market conditions at least 80% of the Ohio
Tax-Free Fund's net assets will be invested in Ohio tax-exempt securities. In
addition, the Ohio Tax-Free Fund will not, as a matter of fundamental policy,
invest in securities the income from which is treated as a preference item for
purposes of the federal alternative minimum tax. This policy will restrict the
Ohio Tax-Free Fund's ability to invest in certain private activity bonds
issued after August 7, 1986.
The Ohio Tax-Free Fund will only invest in Ohio tax-exempt securities that
are rated at the time of purchase in one of the top four categories by an
NRSRO(s) or, if not rated, of comparable quality as determined by Huntington
under guidelines established by the Trustees. Based on current market
conditions, it is anticipated that the dollar-weighted average portfolio
maturity will be between four and seven years. Under normal market conditions,
the Ohio Tax-Free Fund will not invest in obligations with a remaining
maturity of more than 15 years at the time of purchase.
The Ohio Tax-Free Fund may also invest in numerous types of short-term tax-
exempt instruments, which may be used to fund short-term cash requirements
such as interim financing in anticipation of the collections, revenue receipts
or bond sales to finance various public purposes.
From time to time, the Ohio Tax-Free Fund may invest in obligations the
interest on which is subject to federal income tax or Ohio personal income
taxes pending investment in Ohio tax-exempt securities or for liquidity
purposes. The Ohio Tax-Free Fund may also hold a portion of its assets in
20
<PAGE>
cash or money market instruments, the interest on which may not be exempt from
federal or Ohio personal income taxes.
Credit Enhancement. Certain of the portfolio investments of the Ohio Tax-
Free Fund may have been credit enhanced by a guaranty, letter of credit or
insurance. The Ohio Tax-Free Fund typically evaluates the credit quality and
ratings of credit enhanced securities based upon the financial condition and
ratings of the party providing the credit enhancement (the "credit enhancer"),
rather than the issuer. However, credit enhanced securities will not be
treated as having been issued by the credit enhancer for diversification
purposes, unless the Ohio Tax-Free Fund has invested more than 10% of its
assets in securities issued, guaranteed or otherwise credit enhanced by the
credit enhancer, in which case the securities will be treated as having been
issued both by the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the
quality and marketability of the underlying security.
FIXED INCOME SECURITIES FUND
The objective of the Fixed Income Securities Fund is to achieve high current
income through investment in fixed income securities where the average
maturity of the Fixed Income Securities Fund will not exceed 10 years. The
Fixed Income Securities Fund may purchase obligations of the U.S. Government
and its agencies and instrumentalities, corporate bonds, debentures,
nonconvertible fixed income preferred stocks, mortgage pass-through
securities, eurodollar certificates of deposit and eurodollar bonds. The Fixed
Income Securities Fund may also invest up to 10% of its net assets in non-U.S.
dollar denominated bonds. Both fixed and variable rate issues may be
purchased. Debt securities will be rated at the time of purchase in one of the
top four categories by an NRSRO(s) or, if not rated, of comparable quality as
determined by Huntington under guidelines established by the Trustees. As a
matter of fundamental policy, under normal market conditions, the Fixed Income
Securities Fund will invest at least 65% of its assets in fixed income
securities. The Fixed Income Securities Fund may also, under normal market
conditions, invest a portion of its assets in cash equivalents, including
repurchase agreements and the shares of money market mutual funds, for
liquidity purposes.
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND
The objective of the Short/Intermediate Fixed Income Securities Fund is to
achieve current income through investment in fixed income securities with a
maximum maturity or average life for individual issues of 5 years or less at
the time of purchase and a dollar-weighted average portfolio maturity of more
than 2 but less than 5 years. The Short/Intermediate Fixed Income Fund may
purchase obligations of the U.S. Government and its agencies and
instrumentalities, corporate bonds, debentures, non-convertible fixed income
preferred stocks, mortgage pass-through securities, eurodollar certificates of
deposit and eurodollar bonds. The Short/Intermediate Fixed Income Fund may
also invest up to 10% of its net assets in non-U.S. dollar denominated bonds
and non-convertible fixed-income European Currency Unit bonds. Both fixed and
variable rate issues may be purchased. Debt securities will be rated at the
time of purchase in one of the top four categories by an NRSRO(s) or, if not
rated, of comparable quality as determined by Huntington. As a matter of
fundamental policy, under normal market conditions the Short/Intermediate
Fixed Income Fund will invest at least 65% of its assets in fixed income
securities. The Short/Intermediate Fixed Income Fund may also, under normal
market conditions, invest a portion of its assets in cash equivalents,
including repurchase agreements and the shares of money market mutual funds,
for liquidity purposes.
21
<PAGE>
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS AND STRATEGIES
OHIO TAX-EXEMPT SECURITIES
The two principal classifications of Ohio tax-exempt securities are general
obligation and limited obligation (or revenue) securities. General obligation
securities involve the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues. The characteristics
and methods of enforcement of general obligation securities vary according to
the law applicable to the particular issuer. Limited obligation securities are
payable only from the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Private activity bonds and industrial
development bonds generally are limited obligation securities, the credit and
quality of which are usually directly related to the credit of the private
user of the facilities.
The economy of Ohio, while diversifying more into the service area,
continues to rely in part on durable goods manufacturing, which is largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity in Ohio, as in
many other industrially-developed states, tends to be more cyclical than in
some other states and in the nation as a whole. Agriculture also is an
important segment of the economy in the State, and the State has instituted
several programs to provide financial assistance to farmers. Ohio's economy,
including particularly an unemployment rate usually somewhat higher than the
national average, has had varying effects on the different geographic areas of
the State and the political subdivisions located in such geographic areas.
Although revenue obligations of the State or its political subdivisions may be
payable from a specific source or project, there can be no assurance that
future economic difficulties and the resulting impact on state and local
government finances will not adversely affect the market value of the Ohio
tax-exempt securities in an Ohio Fund, as defined below, or the ability of the
respective obligors to make timely payment of interest and principal on such
obligations. See the Statement of Additional Information for further
discussion of special considerations regarding investments in Ohio tax-exempt
securities.
NON-DIVERSIFICATION
The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund (the "Ohio
Funds") are non-diversified Funds under the 1940 Act, which means that they
may invest their assets in the obligations of fewer issuers than would be the
case if they were "diversified". The Ohio Funds' ability to invest a
relatively high percentage of their assets in the securities of a limited
number of issuers involves an increased risk of loss to an Ohio Fund if any
one issuer is unable to make interest or principal payments or if the market
value of the issuer's securities declines.
Although non-diversified under the Investment Company Act, the Ohio Funds
intend to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires, among other things, that at the end of each quarter of
the taxable year, with regard to at least 50% of each Ohio Fund's total
assets, no more than 5% of its total assets are invested in the assets of a
single issuer; beyond that, no more than 25% of its total assets are invested
in the securities of a single issuer.
DEFENSIVE INVESTMENT STRATEGIES
At times Huntington may judge that conditions in securities markets may make
pursuing a Fund's basic investment strategy inconsistent with the best
interests of the Fund's shareholders. At such
22
<PAGE>
times, Huntington may temporarily use alternative strategies, primarily
designed to reduce fluctuations in the value of a Fund's assets. In
implementing these temporary "defensive" strategies, a Fund may temporarily
place all or a portion of its assets in cash, U.S. Government securities, debt
securities which Huntington considers to be of comparable quality to the
acceptable investments of the Fund and other investments which Huntington
considers consistent with such strategies. In the case of the Ohio Funds, a
Fund's alternative strategies may give rise to income which is not exempt from
federal or state taxes.
OPTIONS AND FUTURES CONTRACTS (ALL FUNDS OTHER THAN THE MONEY MARKET FUNDS)
A Fund may seek to increase its current return by writing covered call
options and covered put options on its portfolio securities or other
securities in which it may invest. A Fund receives a premium from writing a
call or put option, which increases a Fund's return if the option expires
unexercised or is closed out at a net profit. A Fund may also buy and sell put
and call options on its securities for hedging purposes. When a Fund writes a
call option on a portfolio security, it gives up the opportunity to profit
from any increases in the price of the security above the exercise price of
the option. When it writes a put option, a Fund takes the risk that it will be
required to purchase a security from the option holder at a price above the
current market price of the security. A Fund may terminate an option that it
has written prior to expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms as the
option written.
A Fund may purchase and sell futures contracts and related options to hedge
against changes in the value of securities it owns or expects to purchase.
Futures contracts on a variety of stock and bond indices are currently
available. An index is intended to represent a numerical measure of market
performance by the securities making up the index. A Fund may purchase and
sell futures contracts on any index approved for trading by the Commodity
Futures Trading Commission to hedge against general changes in market values
of securities which a Fund owns or expects to purchase. A Fund may also
purchase and sell put and call options on index futures or directly on the
underlying indices for hedging purposes. In addition, a Fund may purchase and
sell futures contracts and related options on individual debt securities which
a Fund owns or expects to purchase, if and when such futures contracts and
options become available.
In connection with its futures transactions, a Fund will be required to
deposit as "initial margin" an amount of cash and/or securities. Thereafter,
subsequent payments (referred to as "variation margin") are made to and from
the broker to reflect changes in the value of the futures contract. A Fund
will not generally purchase or sell futures contracts or purchase or sell
options on futures contracts if as a result the sum of initial margin deposits
on a Fund's existing futures contracts and options written by a Fund plus
premiums paid for outstanding options on futures contracts purchased by a
Fund, would exceed 5% of a Fund's net assets.
Options and futures transactions involve various risks, including the risk
that a Fund may be unable at times to close out its positions, that such
transactions may not accomplish their purposes because of imperfect market
correlations, or that Huntington or its Subadviser may not forecast market
movements correctly. Options and futures transactions involve costs and may
result in losses. The effective use of options and futures strategies by a
Fund is dependent upon, among other things, a Fund's ability to terminate
options and futures positions at times when Huntington or its Subadviser deems
it desirable to do so. Although a Fund will enter into an options or futures
contract position only
23
<PAGE>
if Huntington or its Subadviser believes that a liquid secondary market exists
for such options or futures contract, there is no assurance that a Fund will
be able to effect closing transactions at a particular time or at an
acceptable price.
The Funds generally expect that their options and futures transactions will
be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter ("OTC") markets. A
Fund's ability to terminate options in the OTC market may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to a Fund. A Fund will, however, engage in OTC market transactions
only when appropriate exchange-traded transactions are unavailable and when,
in the opinion of Huntington, the pricing mechanism and liquidity of the OTC
market is satisfactory and the participants are responsible parties likely to
meet their contractual obligations.
The use of options and futures strategies also involves the risk of
imperfect correlation between movements in the prices of options and futures
contracts and movements in the value of the underlying securities that are the
subject of a hedge. The successful use of these strategies further depends on
the ability of Huntington to forecast market movements correctly.
For more information about any of the options or futures portfolio
transactions described above, see the Statement of Additional Information.
FOREIGN INVESTMENTS
Except as otherwise limited in this Prospectus, a Fund may invest some or
all of its assets in securities principally traded in foreign markets. Since
foreign securities are normally denominated and traded in foreign currencies,
the value of a Fund's assets may be affected favorably or unfavorably by
currency exchange rates and exchange control regulation. Exchange rates with
respect to certain currencies may be particularly volatile. There may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those
in the United States. The securities of some foreign companies are less liquid
and at times more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally higher than in
the United States. Foreign settlement procedures and trade regulations may
involve certain risks (such as delays in payment or delivery of securities or
in the recovery of a Fund's assets held abroad) and expenses not present in
the settlement of domestic investments.
In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments which
could affect the value of investments in those countries. In certain
countries, legal remedies available to investors may be more limited than
those available with respect to investments in the United States or other
countries. The laws of some foreign countries may limit a Fund's ability to
invest in securities of certain issuers located in those countries. Special
tax considerations apply to foreign securities.
A Fund may buy or sell foreign currencies and forward foreign currency
exchange contracts for hedging purposes in connection with its foreign
investments.
A more detailed explanation of foreign investments, and the risks associated
with them, is included in the Statement of Additional Information.
24
<PAGE>
REPURCHASE AGREEMENTS
Certain securities in which a Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
Government securities or other securities to a Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. A Fund or
its custodian will take possession of the securities subject to repurchase
agreements and these securities will be marked to market daily. To the extent
that the original seller does not repurchase the securities from a Fund, a
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Trustees believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor
of a Fund and allow retention or disposition of such securities. A Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are found by Huntington
to be creditworthy pursuant to guidelines established by the Trustees.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
A Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which a Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more
or less than the market value of the securities on the settlement date.
A Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so.
In connection with its ability to purchase securities on a when-issued or
delayed delivery basis, the Mortgage Securities Fund may enter into mortgage
"dollar rolls" in which it sells securities for delivery in the current month
and simultaneously contracts with the same counterparty to repurchase similar
(same type, coupon and maturity) but not identical securities on a specified
future date. The Mortgage Securities Fund gives up the right to receive
principal and interest paid on the securities sold. However, the Mortgage
Securities Fund would benefit to the extent of any difference between the
price received for the securities sold and the lower forward price for the
future purchase plus any fee income received. Unless such benefits exceed the
income, capital appreciation and gain or loss due to mortgage prepayments that
would have been realized on the securities sold as part of the mortgage dollar
roll, the use of this technique will diminish the investment performance of
the Mortgage Securities Fund compared with what such performance would have
been without the use of mortgage dollar rolls. The Mortgage Securities Fund
will hold and maintain in a segregated account until the settlement date, cash
or liquid high-grade debt securities in an amount equal to the forward
purchase price. The benefits derived from the use of mortgage dollar rolls may
depend upon Piper's ability to predict correctly mortgage prepayments and
interest rates. There is no assurance that mortgage dollar rolls can be
successfully employed. In addition, the use of mortgage dollar rolls by the
Mortgage Securities Fund while remaining substantially fully invested
increases the amount of its assets that are
25
<PAGE>
subject to market risk to an amount that is greater than its net asset value,
which could result in increased volatility of the price of its shares. The
Mortgage Securities Fund may invest up to 35% of its total assets in
securities purchased on a when-issued or delayed delivery basis.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, a Fund may lend its portfolio
securities on a short-term basis to brokers, dealers or other financial
institutions. A Fund will only enter into loan arrangements with brokers,
dealers or other financial institutions which Huntington has determined are
creditworthy under guidelines established by the Trustees and must receive
collateral equal to at least 102% of the current market value of the
securities loaned. The collateral received when a Fund lends portfolio
securities must be valued daily and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. As a matter of fundamental policy, the aggregate value of all securities
loaned by a Fund may not exceed 20% of the Fund's total assets.
There is the risk that, when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and a Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions and limitations for
the purpose of reducing its exposure in specific situations. These investment
limitations are fundamental policies and may be changed with respect to any
Fund only by a vote of a majority of the outstanding shares of that Fund.
No Fund will:
(1) Except for the Ohio Funds, invest more than 5% of the value of its
total assets in the securities of any one issuer (this limitation does
not apply to securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities or to repurchase agreements
secured by such obligations);
(2) Invest 25% or more of the value of its total assets (i) in securities
of companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities), and (ii) with respect
to the Ohio Funds, in municipal obligations of one issuer or which are
related in such a way that, in the opinion of Huntington, an economic,
business or political development other than an Ohio state-wide,
national or international development, affecting one such obligation
would also affect the others in a similar manner. Such concentration
may occur as a result of changes in the market value of portfolio
securities, but such concentration may not result from investment;
(3) Except for investments by the Money Market Fund in commercial paper
issued under Section 4(2) of the Securities Act of 1933 and certain
other restricted securities which meet the criteria for liquidity as
established by the Trustees, invest more than 10% of the value of its
total assets in illiquid securities, including restricted securities,
repurchase agreements of over seven days' duration and OTC options; and
(4) Borrow in excess of 5% of its total assets (borrowings are permitted
only as a temporary measure for extraordinary or emergency purposes) or
pledge (mortgage) its assets as security for any indebtedness.
26
<PAGE>
HOW THE FUNDS VALUE THEIR SHARES
Each Money Market Fund attempts to stabilize the net asset value of its
Investment Shares at $1.00 by valuing its portfolio securities using the
amortized cost method. The net asset value per Investment Share is determined
by adding the interest of the Investment Shares in the value of all securities
and other assets of a Money Market Fund, subtracting the interest of the
Investment Shares in the liabilities of a Fund and those attributable to
Investment Shares, and dividing the remainder by the total number of
Investment Shares outstanding. A Money Market Fund cannot guarantee that its
net asset value will always remain at $1.00 per share.
The net asset value for Investment Shares of each of the other Funds is
determined by adding the interest of the Investment Shares in the market value
of all securities and other assets of a Fund, subtracting the interest of the
Investment Shares in the liabilities of a Fund and those attributable to
Investment Shares, and dividing the remainder by the total number of
Investment Shares outstanding. The net asset value of a Fund's Investment
Shares will differ from that of Trust Shares due to the expense of the Rule
12b-1 fee applicable to a Fund's Investment Shares.
Securities for which market quotations are readily available are stated at
market value. Short-term investments with remaining maturities of 60 days or
less at the time of purchase are stated at amortized cost, which approximates
market value. Debt securities for which market quotations are not readily
available will be valued on the basis of valuations provided by pricing
services approved by the Trustees. Pricing services often use information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, and various relationships between
securities in determining value. All other Fund assets are valued at their
fair value following procedures approved by the Trustees.
The Money Market Funds calculate net asset value per Investment Share as of
the close of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on
each Business Day. The other Funds calculate net asset value per Investment
Share as of the close of the New York Stock Exchange (currently 4:00 p.m.
Eastern Time) on each Business Day. As used herein, a "Business Day"
constitutes Monday through Friday except (i) days on which there are not
sufficient changes in the value of a Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day and (iv)
other civil holidays, such as Veterans' Day and Martin Luther King Day, when
the Federal Reserve Banks or the financial markets are closed.
HOW TO BUY INVESTMENT SHARES
Investment Shares of the Funds may be purchased through The Huntington
Investment Company, Huntington Personal Bankers or the Mutual Fund Services
Center (collectively, the "Huntington Group") pursuant to respective
agreements between The Huntington Investment Company or The Huntington Trust
Company, N.A. and the Distributor. Investors may purchase Investment Shares of
the Funds on all Business Days. Investment Shares in each Money Market Fund
other than the Ohio Municipal Money Market Fund purchased prior to 1:00 p.m.
(Eastern Time) begin earning dividends that day; Investment Shares in the Ohio
Municipal Money Market Fund purchased prior to 10:30 a.m. (Eastern Time) begin
earning dividends that day; Investment Shares purchased after such time begin
earning dividends on the following day. In connection with the sale of a
Fund's Investment Shares, the Distributor may from time to time offer certain
items of nominal value to any shareholder.
27
<PAGE>
From time to time, the Trust may temporarily suspend the offering of shares
of one or more of the Funds or any class thereof. During the period of any
such suspension and depending on the reasons for the suspension, persons who
are already shareholders of any such Fund or class may be permitted to
continue to purchase additional shares and to have dividends reinvested. The
Trust or the Distributor may refuse any order to purchase shares or waive any
minimum purchase requirements. The Funds will issue certificates representing
Investment Shares upon request.
TO PLACE AN ORDER
To purchase Investment Shares of the Funds, an investor may call The
Huntington Investment Company at 800-322-4600, or the investor's Personal
Banker directly. All other investors should call the Mutual Fund Services
Center at (in Ohio) 614-480-5580 or (outside the 614 Area Code) 800-253-0412.
Payment may be made either by check or wire transfer of federal funds. To
purchase by check, the check must be included with the order and made payable
to the name of the applicable Fund, designating Investment Shares. If a
shareholder pays for Investment Shares by check and the check does not clear,
the purchase will be cancelled, and the shareholder may be charged a fee and
will be liable for any losses incurred. Neither initial nor subsequent
investments will be made by third party check. If a shareholder pays for
Investment Shares with a check drawn from a bank outside the United States,
the check will be sent to the bank for collection prior to placing the trade
in the shareholder's account, and approximately four to five weeks will be
required before the trade will be processed. Orders are considered received
after payment by check is converted into federal funds by the Funds' transfer
agent, SEI Financial Management Corporation (the "Transfer Agent").
When payment is made through wire transfer of federal funds, the order is
considered received immediately upon receipt by the Transfer Agent. With
respect to the Money Market Fund, Ohio Municipal Money Market Fund and U.S.
Treasury Money Market Fund, payment by wire must be received by the applicable
member of the Huntington Group before 10:30 a.m. (Eastern Time) in order to
earn dividends for that day. With respect to the Growth Fund, Mortgage
Securities Fund, Ohio Tax-Free Fund and Fixed Income Securities Fund, payment
by wire must be received by the applicable member of the Huntington Group
before 4:00 p.m. (Eastern Time) in order for Investment Shares of a Fund to be
purchased at that day's price. Prior to purchasing by wire, investors should
call the applicable member of the Huntington Group. It is the responsibility
of the applicable member of the Huntington Group to transmit orders promptly
to the Transfer Agent. Federal funds should be wired as follows: Huntington
National Bank, ABA 044000024, Trust Department, Account Number 01891160404,
Monitor Retail, Attention: Shareholder Services.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Investment Shares of a Fund is $1,000.
Subsequent investments must be in amounts of at least $50.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, holders of Investment Shares of a Fund may
add to their investment on a regular basis in minimum amounts of at least $50.
The Funds will waive the initial $1,000 investment minimum for investors who
sign up for the Systematic Investment Program. Under this program, funds will
be automatically withdrawn periodically from the shareholder's banking account
28
<PAGE>
and invested in Investment Shares of a Fund at the applicable public offering
price per share next determined after an order is received by the Transfer
Agent. Shareholders may apply for participation in this program by completing
the appropriate section of the account application.
If the shareholder's automatic investment program payment does not clear,
the purchase will be cancelled and the shareholder may be charged a fee and
will be liable for any losses incurred. Any subsequent such occurrences may
result in the cancellation of the automatic investment program feature of the
shareholder's account.
WHAT SHARES COST
Money Market Funds. With respect to the Money Market Fund, Ohio Municipal
Money Market Fund and U.S. Treasury Money Market Fund, Investment Shares are
sold at their net asset value next determined after an order is received.
There is no sales charge imposed by these Funds.
Growth Fund. With respect to the Growth Fund, Investment Shares are sold at
their net asset value per share next determined after an order is received,
plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
--------------------- --------------------- -------------------
<S> <C> <C>
Less than $100,000 4.00% 4.17%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 1.50% 1.52%
$750,000 but less than $1 million 0.75% 0.76%
$1 million or more 0.25% 0.25%
</TABLE>
Income Equity Fund. With respect to the Income Equity Fund, Investment
Shares are sold at their net asset value per share next determined after an
order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
--------------------- --------------------- -------------------
<S> <C> <C>
Less than $50,000 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 2.75% 2.83%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or more none none
</TABLE>
Income Funds. With respect to the Mortgage Securities Fund, Ohio Tax-Free
Fund, Fixed Income Securities Fund and Short/Intermediate Fixed Income
Securities Fund, Investment Shares are sold at their net asset value per share
next determined after an order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
--------------------- --------------------- -------------------
<S> <C> <C>
Less than $500,000 2.00% 2.04%
$500,000 but less than $750,000 1.50% 1.52%
$750,000 but less than $1 million 0.75% 0.76%
$1 million or more 0.00% 0.00%
</TABLE>
29
<PAGE>
Purchases at Net Asset Value. Investment Shares issued through reinvestment
of dividends and capital gains distributions are not subject to a sales
charge. In addition, the Distributor has agreed to waive all sales loads
imposed on purchases of Investment Shares of any of the Funds and any other
classes of Investment Shares hereafter offered by any other Series of The
Monitor Funds by the following persons: (a) current officers, directors,
employees (and their spouses or immediate family members) and retired officers
and employees (including their spouses) of Huntington Bancshares Incorporated
or any of its subsidiaries; (b) persons who participate in certain financial
services programs offered by the banking subsidiaries of Huntington Bancshares
Incorporated; and (c) persons who are current members of certain affinity
groups (such as trade associations or membership associations) that have
entered into written agreements with the Trust's Investment Advisor and the
Distributor providing for such a sales load waiver. Potential investors who
believe that they are eligible for this sales load waiver may contact The
Monitor Funds Shareholder Services Department (1-800-253-0412) for further
information.
Dealer Concession. For sales of Investment Shares of the Funds, a dealer
will normally receive up to 90% of the applicable sales charge. Any portion of
the sales charge which is not paid to a dealer will be retained by the
Distributor. However, the Distributor will, periodically, uniformly offer to
pay cash, or promotional incentives in the form of trips to sales seminars at
luxury resorts, tickets or other items, to all dealers selling Investment
Shares of the Funds, from that portion of the sales load which the Distributor
retains or any other source available to it. Such payments will be predicated
upon the amount of Investment Shares of the Funds that are sold by the dealer.
The sales charge for Investment Shares sold other than through registered
broker/dealers will be retained by the Distributor. The Distributor may pay
fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the banks' customers in
connection with the initiation of customer accounts and purchases of
Investment Shares of the Funds.
Reducing the Sales Charge. The sales charge can be reduced through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent;
. using the reinstatement privilege; or
. concurrent purchases.
Quantity Discounts and Accumulated Purchases. As shown in the table above,
larger purchases reduce the sales charge paid. The Distributor will combine
purchases made on the same day by the investor, his spouse, and his children
under age 21 when it calculates the sales charge. In addition, the sales
charge, if applicable, is reduced for purchases made at one time by a trustee
or fiduciary for a single trust estate or a single fiduciary account.
If an additional purchase of Investment Shares in a Fund which impose a
sales charge is made, the Distributor will aggregate such additional purchases
with previous purchases of Investment Shares of Funds imposing a sales charge
provided the prior purchase is still invested in the Funds. For example, if a
shareholder already owns Investment Shares having a current value at the
public offering price of $700,000 and he purchases $50,000 more at the current
public offering price, the sales charge on the additional purchase according
to the schedule now in effect would be 0.75%, not 1.5%.
30
<PAGE>
To receive the sales charge reduction, an investor should complete the
appropriate section of the account application at the time the purchase is
made indicating that Investment Shares of Funds which impose a sales charge
have been purchased and are still invested or that such purchases are being
combined. The Distributor will reduce the sales charge after it confirms the
purchase.
Letter of Intent. If an investor intends to purchase at least $100,000 of
Investment Shares in a Fund that imposes a 4% sales charge or at least
$500,000 in one or more Funds that imposes a 2% sales charge, over the next 13
months, the sales charge may be reduced by completing the Letter of Intent
section of the account application. The Letter of Intent includes a provision
for a sales charge adjustment depending on the amount actually purchased
within the 13-month period. In addition, pursuant to a Letter of Intent, the
custodian will hold in escrow the difference between the sales charge
applicable to the amount initially purchased and the sales charge paid at the
time of the investment, which is based on the amount covered by the Letter of
Intent.
For example, assume an investor signs a Letter of Intent to purchase at
least $250,000 in Investment Shares of a Fund that imposes a 4% sales charge
and, at the time of signing the Letter of Intent, purchases $100,000 of
Investment Shares of one of these Funds. The investor would pay an initial
sales charge of 2.50% (the sales charge applicable to purchases of $250,000),
and 1.00% of the investment (representing the difference between the 3.50%
sales charge applicable to purchases of $100,000 and the 2.50% in sales
charges already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more of Investment Shares under his Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the
end of the 13-month period unless the amount specified in the Letter of Intent
is not purchased. In order to qualify for a Letter of Intent, the investor
will be required to make a minimum initial investment of at least $25,000.
A Letter of Intent will not obligate the investor to purchase Investment
Shares, but if he does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within
the past 90 days.
Reinstatement Privilege. If Investment Shares in a Fund have been redeemed,
the shareholder has a one-time right, within 30 days of redemption, to
reinvest the redemption proceeds at the next-determined net asset value
without any sales charge. The applicable member of the Huntington Group must
be notified in writing of the reinvestment by the shareholder in order to
eliminate a sales charge. If the shareholder redeems his Investment Shares in
a Fund and utilizes the reinstatement privilege, there may be tax
consequences.
Concurrent Purchases. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent purchases
of Investment Shares in two or more Funds in the Trust, the public offering
price of which includes a sales charge. For example, if a shareholder of the
Growth Fund concurrently invests $30,000 in one Fund with a sales charge, and
$70,000 in another Fund with a sales charge, the sales charge will be reduced.
In addition, if a shareholder of the Mortgage Securities Fund, Ohio Tax-Free
Fund or Fixed Income Securities Fund concurrently invests $50,000 in one Fund
with a sales charge, and $450,000 in another Fund with a sales charge, the
sales charge will be reduced.
31
<PAGE>
To receive this sales charge reduction, the applicable Huntington Group
member must be notified in writing by the shareholder (at the address provided
below under "How to Exchange Investment Shares Among the Funds--By Mail") at
the time the concurrent purchases are made. The Distributor will reduce the
sales charge after it confirms the purchases.
HOW TO EXCHANGE INVESTMENT SHARES AMONG THE FUNDS
Shareholders may exchange Investment Shares in any Fund for Investment
Shares in any other Fund offering Investment Shares at the respective net
asset values per Investment Share next determined after receipt of the request
in good order, plus the applicable sales charge (if any) as described below.
This privilege is available to shareholders resident in any state in which the
Fund shares being acquired may be sold.
No sales charge applies when Investment Shares are exchanged from a Fund
that imposes such a charge to a Fund with no sales charge. If, however, a
shareholder seeks to exchange shares of a Fund that does not have a sales
charge for shares of a Fund that imposes such a charge, the shareholder will
be required to pay the applicable sales charge of the Fund into which the
shares are exchanged. In all cases, shareholders will be required to pay a
sales charge only once. Thus, for example, no sales charge applies when shares
are exchanged among Funds that impose a sales charge. Similarly, no sales
charge applies where a shareholder exchanges shares of a Fund with a sales
charge for shares of a Fund that does not impose such a charge and
subsequently exchanges those shares back into a Fund with a sales charge.
In order to make an exchange, shareholders will be required to maintain the
applicable minimum account balance in each Fund in which shares are owned and
must satisfy the minimum initial and subsequent purchase amounts of the Fund
into which shares are exchanged.
If the exchanging shareholder does not have an account in the Fund whose
Investment Shares are being acquired, a new account will be established with
the same registration and reinvestment options for dividends and capital gains
distributions as the account of the Fund from which the Investment Shares are
exchanged, unless otherwise specified in writing by the shareholder. In the
event the new account registration is not identical to that of the existing
account, a signature guarantee will be required. (See "Redeeming By Mail"
below.)
An exchange is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may
be realized. In addition, if a shareholder exchanges shares of a Fund that
imposes a sales charge into another Fund that imposes such a charge, there may
be special tax consequences.
The Trust's exchange privileges may be terminated or modified. Except as
indicated below, shareholders will be given 60 days' prior notice of any such
termination or any material amendment of existing exchange privileges. No
notice will be given when the only material effect of an amendment is to
reduce or eliminate any charges payable at the time of an exchange or under
certain extraordinary circumstances, such as in connection with the suspension
of the sale or redemption of Fund shares. Shareholders may obtain further
information on the exchange privilege by calling the applicable member of the
Huntington Group.
32
<PAGE>
BY TELEPHONE
Shareholders may provide instructions for exchanges between Funds by
calling: The Huntington Investment Company at 800-322-4600; their Personal
Banker directly or Mutual Fund Services Center at (in Ohio) 614-480-5580 or
(outside the 614 Area Code) 800-253-0412. Investors may request the Trust's
telephone exchange privilege on their account application. Information on this
service can be obtained through the applicable member of the Huntington Group.
Investment Shares may be exchanged by telephone only between Fund accounts
having identical shareholder registrations. Exchange instructions given by
telephone may be electronically recorded and will be binding upon the
shareholder. Because telephone exchange requests will be honored from anyone
who provides the correct information (described below under "By Mail"), this
service involves a possible risk of loss if someone uses the service without
the shareholder's permission.
Telephone exchange instructions must be received by the applicable member of
the Huntington Group before 3:00 p.m. (Eastern Time) for Investment Shares to
be exchanged the same day. The telephone exchange privilege may be modified or
terminated at any time and shareholders will be notified of any such
modification or termination. Shareholders of a Fund may have difficulty in
making exchanges by telephone during times of extreme economic or market
conditions. If a shareholder cannot make contact by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail to the appropriate member of the Huntington Group. Written instructions
may require a signature guarantee. If reasonable procedures are not followed
by the Funds, they may be liable for losses due to unauthorized or fraudulent
telephone instructions.
BY MAIL
Shareholders may provide instructions for exchanges between the Funds by
making a written request to the appropriate member of the Huntington Group at
Huntington Center, 41 South High Street, Columbus, Ohio 43287.
To exchange by letter or by telephone, a shareholder must state (1) the name
of the Fund from which the exchange is to be made (and designating that
Investment Shares are involved), (2) the name(s) and address on the
shareholder account, (3) the account number, (4) the dollar amount or number
of Investment Shares to be exchanged, and (5) the Fund into which the
Investment Shares are to be exchanged. Written exchange requests must be
signed by the shareholder, and it may be necessary to have the shareholder's
signature guaranteed by a member firm of a national securities exchange or by
a commercial bank, savings and loan association or trust company. Further
documentation may be required, and a signature guarantee is generally required
from corporations, executors, administrators, trustees and guardians.
HOW TO REDEEM INVESTMENT SHARES
Shareholders may redeem all or any portion of the Investment Shares in their
account on any Business Day at the appropriate net asset value per share next
determined after a redemption request in proper form is received by the
Transfer Agent. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for more than seven days, as permitted by federal securities
law.
33
<PAGE>
REDEEMING BY TELEPHONE
A shareholder may redeem Investment Shares of a Fund by calling The
Huntington Investment Company at 800-322-4600, their Personal Banker directly
or the Mutual Fund Services Center at (in Ohio) 614-480-5580 or (outside the
614 Area Code) 800-253-0412.
Shareholders of the Money Market Fund, Ohio Municipal Money Market Fund, and
U.S. Treasury Money Market Fund who request a redemption before 10:30 a.m.
(Eastern Time) will usually have the proceeds wired the same day but will not
be entitled to that day's dividend; redemption requests received after 10:30
a.m. (Eastern Time) will receive that day's dividend and the proceeds will
normally be wired the following Business Day. Requests for redemptions in the
Income and Equity Funds must be received by the appropriate member of the
Huntington Group before 3:00 p.m. (Eastern Time) in order for Investment
Shares to be redeemed at that day's net asset value.
Members of the Huntington Group are responsible for promptly submitting
redemption requests and providing proper written redemption instructions to a
Fund. If at anytime the Trust shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
Investors may request the Trust's telephone redemption privilege on their
account application. If not completed at the time of initial application,
authorization forms and information on this service can be obtained through
the members of the Huntington Group. Proceeds for redemptions will normally be
wired to the shareholder's account with proper authorization (at a domestic
commercial bank that is a member of the Federal Reserve System designated by
the shareholder in writing) or a check will be sent to the address of record.
Telephone redemption instructions may be recorded.
In the event of extreme economic or market conditions, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as through written request, should be
considered. If reasonable procedures are not followed by the Funds, they may
be liable for losses due to unauthorized or fraudulent telephone instructions.
REDEEMING BY MAIL
Shareholders may redeem Investment Shares of a Fund by sending a written
request to the appropriate member of the Huntington Group. The written request
should include the shareholder's name, Fund name (designating Investment
Shares), the account number, and the Investment Share or dollar amount
requested.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Transfer
Agent, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
--a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the FDIC;
--a member of the New York, American, Midwest, or Pacific Stock Exchanges;
--a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
-- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
34
<PAGE>
The Funds do not accept signatures guaranteed by a notary public.
The Funds and the Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and the Transfer Agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request provided that Huntington has received payment for
Investment Shares from the shareholder. Shares will be redeemed at the net
asset value determined as of the end of the Business Day on which the written
redemption request is received by the Transfer Agent.
REDEEMING BY CHECK (MONEY MARKET FUNDS ONLY)
At the shareholder's request, the appropriate member of the Huntington Group
will establish a checking account for redeeming Investment Shares of the Money
Market Funds. Shareholders may be charged a fee for this service.
With a Fund checking account, Investment Shares may be redeemed simply by
writing a check for $250 or more. The redemption will be made at the
applicable net asset value per share on the date that the check is presented
to the Fund. A check may not be written to close an account. In addition, if a
shareholder wishes to redeem Investment Shares and have the proceeds
available, a check may be written and negotiated through the shareholder's
local bank. Checks should never be sent to the issuing bank to redeem
Investment Shares. Cancelled checks are sent to the shareholder each month.
REDEEMING BY FAX
Shareholders wishing to expedite the redemption process may Fax a copy of
their written request to the appropriate member of the Huntington Group at Fax
No. 614-480-4682 (The Huntington Investment Company) or 614-480-5516 (Mutual
Fund Services Center). Shareholders redeeming by Fax must call the appropriate
member of the Huntington Group to confirm receipt of the written request. See
"Redeeming By Telephone" in this Prospectus for a discussion of when
shareholders will receive redemption proceeds when redeeming by Fax.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may
take advantage of the Systematic Withdrawal Program. Under this program,
Investment Shares of a particular Fund are redeemed at the applicable net
asset value per Investment Share at the time of the withdrawal to provide for
periodic withdrawal payments in an amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Investment Shares, and
the fluctuation of the net asset value of Investment Shares redeemed under
this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Investment Shares of a particular Fund. For this
reason, payments under this program should not be considered as yield or
income on the shareholder's investment in Investment Shares of a Fund. To be
eligible to participate in this program, a shareholder must have an account
value of at
35
<PAGE>
least $10,000. A shareholder may apply for participation in this program
through the appropriate member of the Huntington Group. The Trust requires two
to three days to process a systematic withdrawal and uses automated clearing
house funds, which are transferred electronically and thus have the potential
to be uninvested for up to 48 hours.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, a Fund may
redeem Investment Shares in any account, except retirement plans, and pay the
proceeds to the shareholder if the account balance falls below the required
minimum value of $1,000 due to shareholder redemptions. This requirement does
not apply, however, if the balance falls below $1,000 because of changes in a
Fund's net asset value. Before Investment Shares are redeemed to close an
account, the shareholder will be notified in writing and allowed 30 days to
purchase additional Investment Shares to meet the minimum requirement.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business. The Huntington Trust Company, N.A.
("Huntington"), Huntington Center, 41 South High Street, Columbus, Ohio 43287,
serves as investment adviser to the Funds pursuant to an investment advisory
agreement with the Trust. Huntington is an indirect wholly-owned subsidiary of
Huntington Bancshares Incorporated, a registered bank holding company with
executive offices located at Huntington Center, 41 South High Street,
Columbus, Ohio 43287.
Subject to the supervision of the Trustees, Huntington provides a continuous
investment program for the Funds, including investment research and management
with respect to all securities, instruments, cash and cash equivalents in the
Funds. The Trust pays Huntington management fees, computed daily and payable
monthly, for each of the Funds at the following annual rates: Money Market
Fund and Ohio Municipal Money Market Fund: 0.30% of the first $500 million of
average daily net assets of the Fund, 0.25% of the next $500 million, and
0.20% of any amount over $1 billion; U.S. Treasury Money Market Fund: 0.20% of
the Fund's average daily net assets; Growth Fund and Income Equity Fund: 0.60%
of the Fund's average daily net assets; and Mortgage Securities Fund, Ohio
Tax-Free Fund, Fixed Income Securities Fund, and Short/Intermediate Fixed
Income Securities Fund: 0.50% of the Fund's average daily net assets.
Huntington may periodically waive all or a portion of its management fee with
respect to any Fund to increase the net income of the Fund available for
distribution as dividends.
Adviser's Background. Huntington is an indirect, wholly-owned subsidiary of
Huntington Bancshares Incorporated ("HBI"). With $20.8 billion in assets as of
December 31, 1996, HBI is a major Midwest regional bank holding company.
Through its subsidiaries and affiliates, HBI offers a full range of services
to the public, including: commercial lending, depository services, cash
management, brokerage services, retail banking, international services,
mortgage banking, investment advisory services, and trust services.
Huntington, a recognized investment advisory and fiduciary services subsidiary
of HBI, provides investment advisory services for corporate, charitable,
governmental, institutional, personal trust and other assets. Huntington Trust
is responsible for $12.0 billion of assets, and has investment discretion over
approximately $2.8 billion of that amount.
36
<PAGE>
Huntington has served as investment adviser to mutual funds since 1987 and
has over 75 years of experience providing investment advisory services to
fiduciary accounts.
As part of its regular banking operations, Huntington may make loans to
public companies. Thus, it may be possible, from time to time, for the Funds
to hold or acquire the securities of issuers which are also lending clients of
Huntington. The lending relationship will not be a factor in the selection of
securities for the Funds.
Philip H. Farrington, a Vice President of Huntington, has been a co-
portfolio manager of the Growth Fund since April of 1994. Mr. Farrington has
more than 30 years of investment management experience. He has held the
positions of Chief Investment Officer, Portfolio Manager, and Director of
Research for major banks and asset management companies. He is a member of the
equity management team at Huntington. Mr. Farrington is a graduate of Harvard
University.
James Gibboney, Jr., a Vice President of Huntington, has been a co-portfolio
manager of the Growth Fund since November of 1993. Mr. Gibboney, a Chartered
Financial Analyst, serves as one of Huntington's balanced portfolio managers.
Prior to joining Huntington in 1989, he gained more than 11 years of
investment management experience as portfolio manager for a major investment
firm, a trust company, and a state government agency. He received his
undergraduate degree in Finance from the Ohio State University and an MBA from
Xavier University.
James M. Buskirk, Chief Investment Officer of Huntington, has been the
portfolio manager of the Income Equity Fund since January of 1991. As Chief
Investment Officer of Huntington, Mr. Buskirk has ultimate responsibility for
all investment activities. He brings more than 14 years of investment
experience to Huntington. His background includes extensive experience in
managing both personal and employee benefit balanced portfolios for a major
investment advisory company and bank holding company. Mr. Buskirk is a
Chartered Financial Analyst. He received his undergraduate degree in Finance
from the Ohio State University and his MBA from the University of Oregon.
William G. Doughty, a Vice President of Huntington, has been the portfolio
manager of the Ohio Tax-Free Fund since its inception. Mr. Doughty has more
than 25 years of experience in the investment field. He is responsible for
fixed income portfolio management and heads the fixed income trading operation
at Huntington. Mr. Doughty is a graduate of Franklin University with a degree
in Business Administration and has an MBA from the University of Dayton.
Stephen M. Geis, a Vice President of Huntington, has been the portfolio
manager of the Short/Intermediate Fixed Income Securities Fund and the Fixed
Income Securities Fund since October of 1989. Mr. Geis, a Chartered Financial
Analyst, serves as the Huntington's senior fixed income manager. Prior to
joining Huntington in 1988, he spent nearly ten years as a fixed income
manager for a major insurance company and treasurer of a regional bank. Mr.
Geis received his undergraduate degree from the College of Wooster, his MBA
from the University of Dayton, and his Juris Doctorate from Capital
University.
Sub-Adviser. Under the terms of a sub-advisory contract between Huntington
and Piper, Piper will assist Huntington in the purchase or sale of the
Mortgage Securities Fund's portfolio instruments. Huntington pays Piper
management fees, computed and paid monthly, for the Mortgage Securities Fund
at an annual rate of 0.15% of the Mortgage Securities Fund's average daily net
assets.
37
<PAGE>
Sub-Adviser's Background. Piper, located at Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota, 55440, was formed in 1985. Piper is a
wholly-owned subsidiary of Piper Jaffray Companies Inc., a publicly-held
corporation engaged through its subsidiaries in various aspects of the
financial services industry. Piper serves as the investment adviser to a
number of open-end and closed-end investment companies and to various other
concerns, including pension and profit-sharing funds, corporate funds and
individuals. As of March 31, 1996, Piper rendered investment advice with
regard to approximately $9.3 billion in assets.
Worth Bruntjen, a Senior Vice President of Piper, has been a senior
portfolio manager of the Mortgage Securities Fund since its inception. Mr.
Bruntjen is a co-manager of one open-end mutual fund distributed by Piper
Jaffray Inc., and three closed-end bond funds listed on the New York Stock
Exchange. He is also fixed income manager for a variety of client portfolios,
including foundations, pension plans, state funds, and individuals. He is a
graduate of the University of Minnesota. Mr. Bruntjen has approximately 29
years of investment experience.
Bruce D. Salvog, a Senior Vice President of Piper, assists Mr. Bruntjen as a
co-manager of the portfolio investments of the Mortgage Securities Fund. Mr.
Salvog has been a Senior Vice President of Piper since 1992 and was a
portfolio manager at Kennedy Associates, Inc., in Seattle, Washington, from
1984 to 1992. He is also fixed income manager for a variety of client
portfolios, including foundations, pension plans, state funds and individuals.
He is a graduate of Harvard University and has over 26 years of financial
experience.
DISTRIBUTION OF INVESTMENT SHARES
SEI Financial Services Company, One Freedom Valley Road, Oaks, Pennsylvania
19456, is the principal distributor for shares of each Fund. It is a Delaware
corporation, and is the principal distributor for a number of investment
companies.
DISTRIBUTION PLAN
Each Fund offering Investment Shares has adopted a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act (the "Distribution Plan"). The
Distribution Plan provides for payments to be made to the Distributor in
connection with the provision of certain services (described below) with
respect to the Funds' Investment Shares.
In accordance with the Distribution Plan, the Distributor may enter into
agreements with brokers and dealers relating to distribution and/or
administrative services with respect to the Investment Shares of the Funds.
The Distributor may also enter into agreements with administrators (including
financial institutions, fiduciaries, custodians for public funds, and
investment advisers) to provide administrative services with respect to
Investment Shares. Administrative services may include, but are not limited
to, the following functions: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel
as necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of customer account cash balances; answering routine customer
inquiries regarding Investment Shares; assisting customers in changing
dividend options, account designations, and addresses; and providing such
other services as the Distributor may reasonably request in connection with
investments in Investment Shares. As of the date of this Prospectus, The
Huntington Investment
38
<PAGE>
Company and Huntington have entered into agreements with the Distributor
concerning the provision of administrative services to customers of the
Huntington Group who purchase Investment Shares of the Funds.
In connection with the provision of the distribution and administrative
services described above, the Distributor will pay brokers, dealers and
administrators (including The Huntington Investment Company) a fee based on
the amount of Investment Shares owned by their customers. For all of the Funds
except the Mortgage Securities Fund amounts paid by the Distributor for
services rendered with respect to a Fund's Investment Shares will be
reimbursed by the Fund in an amount which may not exceed an annual rate of
0.25 of 1% of the average daily net assets attributable to the Fund's
Investment Shares held in customer accounts for which brokers, dealers, and
administrators provide such services. For the Mortgage Securities Fund, the
amounts that may be reimbursed by the Fund may not exceed an annual rate of
0.50 of 1% of the Fund's average daily net assets. Fees under the Distribution
Plan with respect to each Fund's Investment Shares are accrued daily, payable
quarterly, and calculated on an annual basis.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an underwriter
or distributor of most securities. In the event the Glass-Steagall Act is
deemed to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Trustees will consider appropriate changes in the
administrative services performed in connection with the Distribution Plan.
State securities laws governing the ability of depository institutions to
act as underwriters or distributors of securities may differ from
interpretations given to the Glass-Steagall Act and, therefore, banks and
financial institutions may be required to register as brokers or dealers
pursuant to state law.
Shareholder Servicing Arrangements. In addition to the fees paid by the
Distributor to financial institutions under the Distribution Plan as described
above, the Distributor may also pay financial institutions a fee based upon
the average net asset value of Investment Shares held by their customers for
providing administrative services. This fee, if paid, will be reimbursed by
the Huntington and not the Funds.
ADMINISTRATION OF THE FUNDS
SEI Fund Resources, an affiliate of the Distributor, provides the Funds with
certain administrative personnel and services necessary to operate the Funds.
For these services, each of the Funds pays a fee, computed and payable daily,
to SEI Fund Resources at an annual rate of 0.11% of their average daily net
assets. SEI Fund Resources has entered into an agreement with Huntington
pursuant to which Huntington provides certain administrative services to the
Funds. The fees paid to Huntington under this agreement are paid by SEI Fund
Resources and not by the Funds.
39
<PAGE>
CUSTODIAN, RECORDKEEPER, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Huntington acts as custodian and recordkeeper of the Trust's investments and
other assets, except for the Mortgage Securities Fund, where Huntington acts
only as custodian. Huntington receives custody and recordkeeping fees of 5.6
basis points (0.056%) for each Fund except the Mortgage Securities Fund, for
which Huntington receives 2.6 basis points (0.026%) for custody services only.
American Data Services, Inc., acts as recordkeeper for the Mortgage Securities
Fund, for which it receives an annual fee of $35,000. SEI Fund Resources,
serves as the Trust's transfer agent and dividend disbursing agent. SEI Fund
Resources has entered into an agreement with State Street Bank and Trust
Company and Huntington pursuant to which State Street Bank and Huntington
provide certain transfer agency services to the Funds. The fees paid under
this agreement are paid by SEI Fund Resources and not by the Funds.
INDEPENDENT ACCOUNTANTS
Effective in 1997, the independent accountants for the Trust are KPMG Peat
Marwick, Columbus, Ohio.
DISTRIBUTIONS AND TAXES
MONEY MARKET FUNDS
All of the net income of both classes of shares of each Money Market Fund is
declared each Business Day as a dividend to shareholders of record at the time
of the declaration. A Money Market Fund's net income from the time of the
immediately preceding dividend declaration consists of interest accrued or
discount earned during such period (including both original issue and market
discount) on the Money Market Fund's securities, less amortization of premium
and the estimated expenses of each class of shares of the Money Market Fund.
Shares purchased prior to 10:30 a.m. (Eastern Time) begin earning dividends
that day. Shares purchased after such time begin earning dividends on the
following day. Dividends are declared daily and payable monthly.
Although none of the Money Market Funds expects to realize long-term capital
gains, any net long-term capital gains that may be realized will be paid
annually. Each Money Market Fund expects to distribute any net realized short-
term gains once each year, although it may distribute them more frequently if
necessary in order to maintain the net asset value of each Money Market Fund
at $1.00 per share.
OTHER FUNDS
Dividends, if any, from the investment income of each Fund other than the
Money Market Funds are declared and paid monthly to both classes of shares.
Distributions resulting from any net realized capital gains of any Fund will
be paid at least annually.
DISTRIBUTION OPTIONS
Shareholders of the Money Market Funds may choose to receive all
distributions in cash or to reinvest all distributions in additional
Investment Shares of a Fund. Shareholders of other Funds may choose to receive
all distributions in cash, to reinvest all distributions in additional
Investment Shares, or to reinvest all capital gains distributions in
additional Investment Shares and to receive all other
40
<PAGE>
distributions in cash. Shareholders may choose a distribution option by
selecting the appropriate option on the Account Registration Form or by
notifying the appropriate member of the Huntington Group of their selection.
If a shareholder fails to choose a distribution option, all distributions will
be reinvested in additional Investment Shares of the Fund making the
distribution.
FEDERAL INCOME TAXES
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for
it to be relieved of federal taxes on income (and gains, if any) paid to
shareholders in the form of dividends. In order to accomplish this goal, each
Fund must, among other things, distribute substantially all of its ordinary
income (and net short-term capital gains, if any) on a current basis and
maintain a portfolio of investments which satisfies certain diversification
criteria.
All distributions by a Fund to a shareholder (with the exception of
distributions of tax-exempt income by the Ohio Funds and other than long-term
capital gain distributions, if any) will be taxable as ordinary income to the
extent of a Fund's current and accumulated "earnings and profits." However,
shareholders not subject to tax on their income generally will not be required
to pay tax on amounts distributed to them. The dividends received deduction
for corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to the Fund if the Fund were a regular corporation, and to the
extent designated by the Fund as so qualifying. The Money Market Funds and the
Income Funds do not expect to pay any distributions that would be eligible for
the dividends received deduction. If a Fund were to have net long-term capital
gains in excess of short-term losses in a particular year, distributions by a
Fund of those gains will be taxable to a shareholder as long-term capital
gains, regardless of how long a shareholder has held the shares. If a
shareholder disposes of shares at a loss before holding such shares for longer
than six months, such loss will be treated as a long-term capital loss to the
extent the shareholder has received a long-term capital gains dividend on the
shares.
In general, dividends paid by the Ohio Funds that are designated by the
Funds as "exempt-interest dividends" will be exempt from federal regular
income tax. However, under the Internal Revenue Code of 1986, as amended (the
"Code"), dividends paid by the Ohio Funds attributable to interest on certain
private activity bonds issued after August 7, 1986, must be included as an
item of tax preference in computing alternative minimum taxable income for the
purpose of determining liability (if any) for the 26%-28% federal alternative
minimum tax for individuals and the 20% federal alternative minimum tax for
corporations. In addition, exempt-interest dividends paid by the Ohio Funds
will be included in a corporation's "adjusted current earnings" for purposes
of the alternative minimum tax. Thus, a corporation's alternative minimum tax
base would generally be increased by 75% of interest received which is
excluded from gross income for regular federal income tax purposes (other than
dividends paid by the Ohio Funds attributable to interest on certain private
activity bonds issued after August 7, 1986, which interest would already be
included in alternative minimum taxable income as a specific item of tax
preference).
Early in each year each Fund will notify each of its shareholders of the
amount and the federal income tax status of the distributions paid or deemed
paid to the shareholders by the Fund during the preceding year.
41
<PAGE>
If a shareholder receives an exempt-interest dividend with respect to a
share and holds the share for six months or less, any loss on the sale or
exchange of the share will be disallowed to the extent of the amount of such
exempt-interest dividend. The Treasury Department is authorized to issue
regulations reducing the period to not less than 31 days for regulated
investment companies that regularly distribute at least 90% of their net tax-
exempt interest. No such regulations have been issued as of the date of this
Prospectus.
Distributions will be taxable as described above whether received in cash or
in shares through the reinvestment of distributions. A dividend paid to a
shareholder by a Fund in January of a year generally is deemed to have been
received by the shareholder on December 31 of the preceding year, if the
dividend was declared and payable to shareholders of record on a date in
October, November or December of that preceding year.
Additional information regarding federal income taxes is contained in the
Statement of Additional Information. The foregoing is a general and
abbreviated summary of certain applicable provisions of the Code and Treasury
regulations currently in effect. The Code and regulations are subject to
change by legislative or administrative action. A Fund's distributions may
also be subject to state and local taxes. Shareholders should consult their
own tax adviser to determine the precise effect of an investment in a Fund on
their particular tax situation.
OHIO PERSONAL INCOME TAXES
Dividends received from the Ohio Funds that are derived from interest on
Ohio tax-exempt securities are exempt from the Ohio personal income tax.
Specific state statutes authorizing the issuance of certain Ohio tax-exempt
securities provide that the interest on and gain from the sale or other
disposition of such obligations are exempt from all taxation in the State.
Dividends on shares of an Ohio Fund which are attributable to interest on or
gain from the sale of obligations issued pursuant to such statutes should be
exempt from the Ohio personal income tax. Ohio municipalities may not impose
income taxes on dividends or any intangible property, including shares of the
Ohio Funds, except that municipalities that taxed the types of intangible
income which were not exempt from municipal income taxation on or before April
1, 1986, may tax such intangible income if such a tax was approved by the
electors of the municipality in an election held on November 8, 1988. Ohio
residents should consult their own tax adviser regarding potential municipal
income tax liability in connection with their investment in an Ohio Fund. The
description in this paragraph, which is only a summary of the Ohio tax
treatment of dividends paid by the Ohio Funds, is based upon current statutes
and regulations and upon current policies of the Ohio Department of Taxation,
all of which are subject to change.
ORGANIZATION OF THE TRUST
The Trust was organized as a Massachusetts business trust on February 10,
1987. A copy of the Trust's Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The Commonwealth
of Massachusetts.
The Trust is an open-end management investment company, whose Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities. The
shares in any one portfolio may be offered in two or more separate classes. As
of the date of this Prospectus, the Trustees have established two classes of
shares, known as
42
<PAGE>
Investment Shares and Trust Shares, in the Money Market Fund, the Ohio
Municipal Money Market Fund, the U.S. Treasury Money Market Fund, the Growth
Fund, the Income Equity Fund, the Mortgage Securities Fund, the Ohio Tax-Free
Fund, the Fixed Income Securities Fund, and the Short/ Intermediate Fixed
Income Securities Fund.
Investment Shares and Trust Shares of a Fund are fully transferable. Each
class is entitled to dividends from the respective class assets of the Fund as
declared by the Trustees, and, if the Trust (or the Fund) were liquidated, the
shareholders of each class would receive the net assets of the Fund
attributable to each respective class.
VOTING RIGHTS
Shareholders are entitled to one vote for each share held on the record date
for any action requiring a vote by the shareholders, and a proportionate
fractional vote for each fractional share held. Shareholders of the Trust will
vote in the aggregate and not by Fund or class except (i) as otherwise
expressly required by law or when the Trustees determine that the matter to be
voted upon affects only the interests of the shareholders of a particular Fund
or class, and (ii) only holders of Investment Shares will be entitled to vote
on matters submitted to shareholder vote with respect to the Rule 12b-1 Plan
applicable to such class.
As of April 1, 1997, National Financial Services Corp., New York, New York,
was the owner of record of approximately 45,114,898 shares (44.0%) and
Huntington, acting in various capacities for numerous accounts, was the owner
of 24,157,598 (23.6%) of the Investment Shares of the Money Market Fund; as of
April 1, 1997, Huntington, acting in various capacities for numerous accounts,
was the owner of record of approximately 61,293,549 shares (82.7%) of the
Investment Shares of the Ohio Municipal Money Market Fund; as of April 1,
1997, William J. Umberg, Cincinnati, OH, was the owner of 5,307 shares (6.2%)
and Cincinnati Institute of Fine Arts, Cincinnati, OH, was the owner of 4,619
shares (5.4%) of the Investment Shares of the Fixed Income Securities Fund; as
of April 1, 1997, Alex Barna, Shaker Heights, OH, was the owner of 26,703
shares (13.8%) of the Investment Shares of the Mortgage Securities Fund; as of
April 1, 1997, Huntington, acting in various capacities for numerous accounts,
was the owner of 21,621,955 shares (47.6%) and Allied Fidelity Insurance Co.,
Indianapolis, Indiana was the owner of 3,784,973 shares (8.3%) of the
Investment Shares of the U.S. Treasury Market Fund; as of April 1, 1997,
Ursula E. M. and William J. Umberg, Cincinnati, OH, was the owner of 9,125
shares (11.1%), Florence M. and Ralph E. Brinkman, Grove City, OH, was the
owner of 13,977 shares (16.9%), John W. and Arlene J. Warbritton, Westerville,
OH, was the owner of 6,030 shares (7.3%), and Michael M. and Mary Ann
Machowsky, Jr., Rossford, OH, was the owner of 4,612 shares (5.6%) of the
Investment Shares of the Ohio Tax-Free Fund. Such persons or entities may, for
certain purposes, be deemed to control the respective Funds and be able to
affect the outcome of certain matters presented for a vote of shareholders.
As of April 1, 1997, Huntington, acting in various capacities for numerous
accounts, was the owner of record of approximately 353,829,388 shares (99.9%)
of the Trust Shares of the Money Market Fund; 60,342,744 shares (99.9%) of the
Trust Shares of the Ohio Municipal Money Market Fund; 493,804,763 shares
(99.9%) of the Trust Shares of the U.S. Treasury Money Market Fund; 5,115,049
shares (98.9%) of the Trust Shares of the Growth Fund; 5,774,349 shares
(98.8%) of the Trust Shares of the Income Equity Fund; 4,970,340 shares
(98.7%) of the Trust Shares of the Mortgage Securities Fund; 2,998,781 shares
(98.9%) of the Trust Shares of the Ohio Tax-Free Fund; 6,976,395 shares
43
<PAGE>
(99.5%) of the Trust Shares of the Fixed Income Securities Fund; and 6,230,866
shares (99.2%) of the Trust Shares of the Short/Intermediate Fixed Income
Securities Fund, and therefore, may, for certain purposes, be deemed to
control the respective Funds and be able to affect the outcome of certain
matters presented for a vote of shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders, but may hold special meetings from time to time.
Trustees may be removed by the Trustees or by shareholders at a meeting
called for that purpose. For information about how shareholders may call such
a meeting and communicate with other shareholders for that purpose, see the
Statement of Additional Information.
To the extent that matters arise requiring a shareholder vote in which
Huntington may have a conflict of interest, Huntington will engage in a voting
practice known as reflexive voting, whereby the votes of those shares over
which it exercises discretion will be voted in proportion to the votes cast by
the other record owners.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding shares" of the Trust or a particular
Fund or a particular class of shares of the Trust or a Fund means the
affirmative vote of the lesser of (a) more than 50% of the outstanding shares
of the Trust or such Fund or such class, or (b) 67% or more of the shares of
the Trust or such Fund or such class present at a meeting at which the holders
of more than 50% of the outstanding shares of the Trust or such Fund or such
class are represented in person or by proxy.
PERFORMANCE DATA AND COMPARISONS
Yield and total return data for both classes of shares may, from time to
time, be included in advertisements about the Funds.
Each of the Money Market Funds may show its yield and effective yield for
both classes of shares. A Money Market Fund's yield represents an
annualization of the change in value of a shareholder account excluding any
capital changes in the Fund for a specific seven-day period. Effective yield
compounds the Fund's yield for a year and is, for that reason, greater than
the Money Market Fund's yield.
Yield for both classes of shares of each of the other Funds is calculated by
dividing the Fund's annualized net investment income per share during a recent
30-day period by the maximum public offering price per share on the last day
of that period. With respect to the Ohio Funds, the tax-equivalent yield of
each class of shares shows the effect on performance of the tax-exempt status
of distributions received from an Ohio Fund. Tax-equivalent yield reflects the
approximate yield that a taxable investment must earn for shareholders at
stated income levels to produce an after-tax yield equivalent to an Ohio
Fund's tax-exempt yield. Total return for the one-year period and for the life
of a Fund through the most recent calendar quarter represents the average
annual compounded rate of return on a $1,000 investment in each class of the
Fund. Total return may also be presented for other periods.
Yield, effective yield, tax-equivalent yield, and total return will be
calculated separately for Investment Shares and Trust Shares. Because
Investment Shares are subject to 12b-1 fees, the yield, effective yield, tax-
equivalent yield, and total return for Investment Shares will be lower than
that of Trust Shares for the same period. In addition, the sales load
applicable to Investment Shares of the Growth Fund, Mortgage Securities Fund,
Ohio Tax-Free Fund, Income Equity Fund, Short/Intermediate
44
<PAGE>
Fixed Income Securities Fund, and Fixed Income Securities Fund also
contributes to a lower total return for such Funds' Investment Shares. The
total return figures quoted in advertisements will normally reflect the effect
of the maximum sales load. However, from time to time, these advertisements
may include total returns which do not reflect the effect of an applicable
sales load.
All data is based on a Fund's past investment results and is not intended to
indicate future performance. Investment performance for both classes is based
on many factors, including market conditions, the composition of a Fund's
portfolio, and the operating expenses of a Fund or a particular class.
Investment performance also often reflects the risks associated with the
Fund's investment objective and policies. These factors should be considered
when comparing a Fund's investment results to those of other mutual funds and
other investment vehicles.
From time to time, advertisements for a Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare a
Fund's performance to certain indices.
SHAREHOLDER INQUIRIES
Shareholder inquiries regarding the Funds should be directed to The
Huntington Investment Company, Huntington Center, 41 South High Street,
Columbus, Ohio 43287.
OTHER CLASSES OF SHARES
Each of the Funds also offers another class of shares called Trust Shares.
Trust Shares are sold through procedures established by the Distributor in
connection with the requirements of fiduciary, advisory, agency, and other
similar accounts maintained by or on behalf of customers of The Huntington
Trust Company, N.A. or its affiliates or correspondent banks. Trust Shares are
sold at net asset value and are subject to a minimum initial investment of
$1,000.
Investment Shares and Trust Shares of any Fund are subject to certain of the
same expenses; however, Investment Shares are distributed under a Rule 12b-1
Plan pursuant to which the Distributor is paid a fee based upon a percentage
of the average daily net assets attributable to a Fund's Investment Shares.
Expense differences between a Fund's Investment Shares and Trust Shares may
affect the performance of each class.
Investors may obtain information about Trust Shares by contacting The
Huntington Trust Company Mutual Fund Services Center at: (in Ohio) 614-480-
5580 or (outside the 614 Area Code) 800-253-0412.
PENDING LEGAL PROCEEDINGS RELATING TO PIPER
A number of complaints and arbitrations have been filed against Piper
relating to several other investment companies for which Piper acts or has
acted as investment adviser or subadviser. These lawsuits and arbitrations do
not involve the Mortgage Securities Fund. Piper and its affiliate, Piper
Jaffray Companies, Inc., have also been subject to regulatory inquiries
related to various funds or assets managed by Piper. Certain regulatory
inquiries have been settled, including inquiries by the National Association
of Securities Dealers, Inc. and the State of Minnesota. Piper does not believe
that any outstanding complaint, action in arbitration or regulatory inquiry
will have a material adverse effect upon its ability to perform under its
agreement with Huntington. See "Pending Litigation Relating to Piper" in the
Combined Statement of Additional Information.
45
<PAGE>
APPENDIX I
Rule 2a-7, as amended, defines the terms NRSRO, Eligible Securities, Unrated
Securities, First Tier Securities and Second Tier Securities in establishing
risk limiting conditions for money market mutual funds.
A summary of those definitions follows.
NRSRO is any nationally recognized statistical rating organization as that
term is used in the Securities Exchange Act of 1934, that is not an affiliated
person of the issuer, guarantor or provider of credit support for the
instrument. (While the Appendix to the Statement of Additional Information
identifies each NRSRO, examples include Standard & Poor's Ratings Group
("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, Inc.)
ELIGIBLE SECURITIES are defined as those with a remaining maturity of 397 or
less days and which (i) have a short-term rating in one of the two highest
rating categories by an NRSRO (e.g. A-1/P-1 or A-2/P-2 by Standard & Poor's
and Moody's, respectively), (ii) securities that are comparable in priority
and security to other short-term debt of the issuer having a short-term rating
in one of the two highest rating categories or (iii) Unrated Securities that
are of comparable quality. A long-term security without a short-term rating
but with a long-term rating below the two highest rating categories (i.e., a
rating of A or below) is not an Eligible Security.
UNRATED SECURITIES include (i) securities that do not have a current short-
term rating and that are not comparable in priority or security to another
class of the issuer's securities having a short-term rating and (ii)
securities that do have a rating, but are subject to an external credit
support agreement that was not in effect when the rating was assigned.
FIRST TIER SECURITY means any Eligible Security which has, or is comparable
to short-term debt of the issuer having, the highest short-term rating by any
two NRSROs that have issued a rating with respect to a security or class of
debt obligations of an issuer. If only one NRSRO has issued a rating with
respect to such security, it must be the highest short-term rating given by
such NRSRO.
SECOND TIER SECURITY means any Eligible Security that is not a First Tier
Security.
46
<PAGE>
Investment Adviser
- --------------------------------------------------------------------------------
The Huntington Trust Company, N.A.
Huntington Center
Columbus, OH 43287
1-800-253-0412
Administrator
- --------------------------------------------------------------------------------
SEI Fund Resources
One Freedom Valley Road
Oaks, PA 19456
Distributor
- --------------------------------------------------------------------------------
SEI Financial Services Company
One Freedom Valley Road
Oaks, PA 19456
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the
offering made by this Prospectus and, if given or made, such information or
representations may not
be relied upon as having been authorized by a Fund or the Distributor. This
Prospectus does not constitute an offering
by a Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
609409875 609409784
609409807 609409834
609409768 609409826
609409743 609409750
609409842 1032204A-R 14, 95
LOGO
M logo FPO
The Monitor Funds
MARBLE SCREEN F.P.O.
Investment Shares
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
The Monitor Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor U.S. Treasury Money Market Fund
EQUITY FUND
- --------------------------------------------------------------------------------
The Monitor Growth Fund
The Monitor Income Equity Fund
INCOME FUNDS
- --------------------------------------------------------------------------------
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate Fixed Income Securities Fund
April 30, 1997
ART
<PAGE>
PROSPECTUS
April 30, 1997
The Monitor Funds, a Massachusetts business trust (the "Trust"), consists of
nine series (the "Funds") which have different investment objectives and
policies. All of the Funds offer two classes of shares: Trust Shares and
Investment Shares. Investors may purchase Trust Shares in each of the Funds
through procedures established by SEI Financial Services Company (the
"Distributor"), the Trust's distributor, in connection with the requirements
of fiduciary, advisory, agency, and other similar accounts maintained by or on
behalf of customers by The Huntington Trust Company, N.A., or its affiliates
or correspondent banks. The different Funds for which Trust Shares are
available through this Prospectus include:
MONEY MARKET FUNDS--TRUST SHARES
The Monitor Money Market Fund The Monitor Ohio Municipal Money Market Fund The
Monitor U.S. Treasury Money Market Fund
EQUITY FUNDS--TRUST SHARES
The Monitor Growth Fund The Monitor Income Equity Fund
INCOME FUNDS--TRUST SHARES
The Monitor Mortgage Securities Fund The Monitor Ohio Tax-Free Fund The
Monitor Fixed Income Securities Fund The Monitor Short/Intermediate Fixed
Income Securities Fund
This Prospectus relates only to Trust Shares of the Funds. This Prospectus
sets forth concisely what a shareholder should know before investing in Trust
Shares of any of the Funds and should be read carefully and retained for
future reference. The Combined Statement of Additional Information for Trust
Shares and Investment Shares has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. FOR A FREE
COPY OF THE COMBINED STATEMENT OF ADDITIONAL INFORMATION CALL THE MUTUAL FUND
SERVICES CENTER AT: (IN OHIO) 614-480-5580 OR (OUTSIDE THE 614 AREA CODE) 800-
253-0412.
THE HUNTINGTON TRUST COMPANY, N.A.
Investment Adviser
SEI FUND RESOURCES
Administrator
SEI FINANCIAL SERVICES COMPANY
Distributor
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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INVESTMENT COMPANY SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, THE HUNTINGTON TRUST COMPANY,
N.A., NOR ARE THEY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE COR-
PORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN IN-
VESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT OR
ANY AGENCY SPONSORED BY THE FEDERAL GOVERNMENT OR ANY STATE. INVESTMENT IN
THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCI-
PAL. EACH MONEY MARKET FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT EACH MONEY MARKET FUND WILL BE
ABLE TO DO SO.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY........................................................................1
FEE TABLE AND EXAMPLE..........................................................3
FINANCIAL HIGHLIGHTS...........................................................4
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.................................10
MONEY MARKET FUNDS............................................................10
Money Market Fund............................................................10
Ohio Municipal Money Market Fund.............................................11
U.S. Treasury Money Market Fund..............................................13
EQUITY FUNDS..................................................................14
Growth Fund..................................................................14
Income Equity Fund...........................................................14
INCOME FUNDS..................................................................14
Mortgage Securities Fund.....................................................15
Ohio Tax-Free Fund...........................................................20
Fixed Income Securities Fund.................................................21
Short/Intermediate Fixed Income Securities Fund..............................21
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS AND STRATEGIES................21
Ohio Tax-Exempt Securities...................................................21
Non-Diversification..........................................................22
Defensive Investment Strategies..............................................22
Options and Futures Contracts................................................22
Foreign Investments..........................................................24
Repurchase Agreements........................................................24
When-Issued and Delayed Delivery Transactions................................25
Lending of Portfolio Securities..............................................25
INVESTMENT RESTRICTIONS.......................................................26
PAGE
HOW THE FUNDS VALUE THEIR SHARES..............................................26
HOW TO BUY TRUST SHARES.......................................................27
Minimum Investment Required..................................................28
Systematic Investment Program................................................28
HOW TO EXCHANGE TRUST SHARES AMONG THE FUNDS..................................28
HOW TO REDEEM TRUST SHARES....................................................29
Redeeming By Telephone.......................................................29
Redeeming By Mail............................................................30
MANAGEMENT OF THE TRUST.......................................................31
Distribution of Trust Shares.................................................33
Administration of the Funds..................................................33
Custodian, Recordkeeper, Transfer Agent, and Dividend Disbursing Agent.......33
Independent Accountants......................................................33
DISTRIBUTIONS AND TAXES.......................................................33
Money Market Funds...........................................................33
Other Funds..................................................................34
Distribution Options.........................................................34
Federal Income Taxes.........................................................34
Ohio Personal Income Taxes...................................................35
ORGANIZATION OF THE TRUST.....................................................36
Voting Rights................................................................36
PERFORMANCE DATA AND COMPARISONS..............................................37
SHAREHOLDER INQUIRIES.........................................................38
OTHER CLASSES OF SHARES.......................................................38
PENDING LEGAL PROCEEDINGS RELATING TO PIPER...................................39
APPENDIX I....................................................................39
<PAGE>
SUMMARY
The Trust, a management investment company, was established as a
Massachusetts business trust under a Declaration of Trust dated February 10,
1987. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate
classes. As of the date of this Prospectus, the Board of Trustees has
established two classes of shares, known as Trust Shares and Investment
Shares, in the Money Market Fund, the Ohio Municipal Money Market Fund, the
U.S. Treasury Money Market Fund, the Growth Fund, the Income Equity Fund, the
Mortgage Securities Fund, the Ohio Tax-Free Fund, the Fixed Income Securities
Fund, and the Short/Intermediate Fixed Income Securities Fund. All of the
portfolios of the Trust, with the exception of the Ohio Municipal Money Market
Fund and the Ohio Tax-Free Fund, are diversified. This Prospectus relates
solely to the Trust Shares of each Fund as set forth below.
As of the date of this Prospectus, the Trust is comprised of the following
nine Funds:
MONEY MARKET FUNDS--TRUST SHARES
MONEY MARKET FUND--seeks to maximize current income while preserving
capital and maintaining liquidity by investing in a portfolio of high
quality money market instruments;
OHIO MUNICIPAL MONEY MARKET FUND--seeks to provide income exempt from
both federal regular income tax and Ohio personal income taxes while
preserving capital and maintaining liquidity by investing in Ohio tax-
exempt securities;
U.S. TREASURY MONEY MARKET FUND--seeks to maximize current income while
preserving capital and maintaining liquidity by investing exclusively
in obligations issued by the U.S. Government and backed by its full
faith and credit and in repurchase agreements with respect to such
obligations;
EQUITY FUNDS--TRUST SHARES
GROWTH FUND--seeks to achieve long-term capital appreciation by
investing primarily in equity securities;
INCOME EQUITY FUND--seeks to achieve high current income and moderate
appreciation of capital by investing in income-producing equity
securities;
INCOME FUNDS--TRUST SHARES
MORTGAGE SECURITIES FUND--seeks to achieve current income by investing
in mortgage securities and in U.S. Government securities;
OHIO TAX-FREE FUND--seeks to provide current income exempt from federal
income tax and Ohio personal income taxes by investing in Ohio tax-
exempt securities;
FIXED INCOME SECURITIES FUND--seeks to achieve high current income by
investing in fixed income securities where the average maturity of the
Fund will not exceed 10 years; and
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND--seeks to achieve
current income by investing in fixed income securities with a maximum
maturity for individual issues of 5 years or less at the time of
purchase and a dollar-weighted average portfolio maturity of more than
2 but less than 5 years.
For information on how to purchase Trust Shares of any of the Funds, please
refer to "How to Buy Trust Shares." A minimum initial investment of $1,000 is
required for each Fund. Subsequent
1
<PAGE>
investments in a Fund must be in amounts of at least $500. Trust Shares of
each Fund are sold and redeemed at net asset value. Information on redeeming
shares may be found under "How to Redeem Trust Shares." The Funds are advised
by The Huntington Trust Company, N.A. In addition, Piper Capital Management
Incorporated ("Piper"), a wholly-owned subsidiary of Piper Jaffray Companies
Inc., serves as sub-adviser to the Mortgage Securities Fund.
RISK FACTORS. Investors should be aware of the following general
observations. There can be no assurance that a Fund will achieve its
investment objective. The market value of fixed-income securities, which
constitute a major part of the investments of several Funds, may vary
inversely in response to changes in prevailing interest rates ("interest rate
risk"). Shareholders of the Ohio Municipal Money Market Fund may be subject to
the federal alternative minimum tax on that part of the Funds' dividends
derived from interest on certain municipal securities. IN ADDITION, THE OHIO
MUNICIPAL MONEY MARKET FUND IS CONCENTRATED IN SECURITIES ISSUED BY THE STATE
OF OHIO OR OTHER GOVERNMENTAL ENTITIES WITHIN THE STATE OF OHIO AND THEREFORE
AN INVESTMENT IN THAT FUND MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF
MONEY MARKET FUNDS. One or more Funds may make certain investments and employ
certain investment techniques that involve special risks, including the use of
repurchase agreements, lending portfolio securities, entering into futures
contracts and related options as hedges, investing in foreign securities, and
purchasing securities on a when-issued or delayed delivery basis, including
the use of "dollar rolls." These investments and investment techniques may
increase the volatility of a Fund's net asset value. Their risks are described
under "Additional Information on Portfolio Investments and Strategies." The
Mortgage Securities Fund may engage in short-term trading in attempting to
achieve its investment objective, which will increase transaction costs. The
Mortgage Securities Fund may purchase mortgage-related securities including
derivative mortgage securities. In addition to interest rate risk, mortgage-
related securities are subject to prepayment risk. Recent market experience
has shown that certain derivative mortgage securities may be extremely
sensitive to changes in interest rates and in prepayment rates on the
underlying assets and, as a result, the prices of such securities may be
highly volatile.
2
<PAGE>
FEE TABLE AND EXAMPLE
The following Fee Table and Example summarize the various costs and expenses
that a shareholder of Trust Shares will bear, either directly or indirectly.
ANNUAL TRUST SHARES OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL TRUST SHARES
NET OPERATING EXPENSES
MANAGEMENT 12B-1 OTHER NET OF ANY WAIVERS
FEES (1) FEES EXPENSES (2) OR REIMBURSEMENTS
---------- ------ ------------ ------------------
<S> <C> <C> <C> <C>
Money Market Fund............ 0.30% None 0.23% 0.53%
Ohio Municipal Money Market
Fund (3)*.................... 0.25% None 0.24% 0.49%
U.S. Treasury Money Market
Fund ........................ 0.20% None 0.22% 0.42%
Growth Fund.................. 0.60% None 0.23% 0.83%
Income Equity Fund........... 0.60% None 0.22% 0.82%
Mortgage Securities Fund
(4)*......................... 0.30% None 0.37% 0.67%
Ohio Tax-Free Fund........... 0.50% None 0.26% 0.76%
Fixed Income Securities Fund. 0.50% None 0.24% 0.74%
Short/Intermediate Fixed
Income Securities Fund....... 0.50% None 0.22% 0.72%
</TABLE>
- --------
(1)Fees paid by each Fund for investment advisory services. See "Management of
the Trust."
(2)Includes administration fees. See "Management of the Trust--Administration
of the Funds."
(3) The Total Trust Shares Operating Expenses for the Ohio Municipal Money
Market Fund would have been 0.54%, absent the voluntary waiver of
management fees. The maximum management fee for Ohio Municipal Money
Market Fund is 0.30%.
(4) The Total Trust Shares Operating Expenses for the Mortgage Securities Fund
in the table above are different than those incurred during the fiscal
year ending December 31, 1996 due to a reduction, subsequent to December
31, 1996, in the level of fee waiver. Absent the voluntary waiver of the
management fee, the total fund operating expenses would be 0.87%. The
maximum management fee is 0.50%.
*The adviser can terminate its voluntary waiver at any time at its sole
discretion.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund.............................. $5 $17 $30 $ 66
Ohio Municipal Money Market Fund............... $5 $16 $27 $ 62
U.S. Treasury Money Market Fund................ $ 4 $13 $24 $ 53
Growth Fund.................................... $ 8 $26 $46 $103
Income Equity Fund............................. $ 8 $26 $46 $101
Mortgage Securities Fund....................... $ 7 $21 $37 $ 83
Ohio Tax-Free Fund............................. $ 8 $24 $42 $ 94
Fixed Income Securities Fund................... $ 8 $24 $41 $ 92
Short/Intermediate Fixed Income Securities
Fund.......................................... $ 7 $23 $40 $ 89
</TABLE>
The purpose of the foregoing example is to assist an investor in
understanding the various costs and expenses that a shareholder of Trust
Shares will bear directly or indirectly. The example should not be considered
a representation of past or future expenses. Actual expenses may be greater or
less than those shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS--MONEY MARKET FUNDS (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996, is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information.
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS TO NET ASSET
VALUE, NET SHAREHOLDERS VALUE,
YEAR ENDED BEGINNING INVESTMENT FROM NET END OF TOTAL
DECEMBER 31, OF PERIOD INCOME INVESTMENT INCOME PERIOD RETURN+ EXPENSES
- ---------------------------------------------------------------------------------
TRUST SHARES
MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1987* $1.00 $0.04 $(0.04) $1.00 3.38% 0.49%(a)
1988 1.00 0.07 (0.07) 1.00 7.45% 0.45%
1989 1.00 0.09 (0.09) 1.00 9.13% 0.50%
1990 1.00 0.08 (0.08) 1.00 8.10% 0.47%
1991 1.00 0.06 (0.06) 1.00 5.85% 0.50%
1992 1.00 0.03 (0.03) 1.00 3.44% 0.50%
1993 1.00 0.03 (0.03) 1.00 2.74% 0.51%
1994 1.00 0.04 (0.04) 1.00 3.86% 0.51%
1995 1.00 0.05 (0.05) 1.00 5.58% 0.53%
1996 1.00 0.05 (0.05) 1.00 5.01% 0.53%
<CAPTION>
OHIO MUNICIPAL MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1987** $1.00 $0.02 $(0.02) $1.00 2.14% 0.50%(a)
1988 1.00 0.05 (0.05) 1.00 4.89% 0.52%
1989 1.00 0.06 (0.06) 1.00 6.01% 0.52%
1990 1.00 0.05 (0.05) 1.00 5.43% 0.60%
1991 1.00 0.04 (0.04) 1.00 4.07% 0.58%
1992 1.00 0.03 (0.03) 1.00 2.61% 0.49%
1993 1.00 0.02 (0.02) 1.00 2.08% 0.45%
1994 1.00 0.02 (0.02) 1.00 2.41% 0.45%
1995 1.00 0.04 (0.04) 1.00 3.57% 0.42%
1996 1.00 0.03 (0.03) 1.00 3.14% 0.42%
<CAPTION>
U.S. TREASURY MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
1989*** $1.00 $0.02 $(0.02) $1.00 1.37% 0.38%(a)
1990 1.00 0.07 (0.07) 1.00 7.97% 0.44%
1991 1.00 0.05 (0.05) 1.00 5.66% 0.44%
1992 1.00 0.03 (0.03) 1.00 3.43% 0.41%
1993 1.00 0.03 (0.03) 1.00 2.77% 0.40%
1994 1.00 0.04 (0.04) 1.00 3.79% 0.42%
1995 1.00 0.05 (0.05) 1.00 5.53% 0.43%
1996 1.00 0.05 (0.05) 1.00 4.98% 0.42%
</TABLE>
- -------------------------------------------------------------------------------
* Reflects operations for the period from June 11, 1987 (date of initial
public investment) to December 31, 1987.
**Reflects operations for the period from June 10, 1987 (date of initial
public investment) to December 31, 1987.
*** Reflects operations for the period from October 2, 1989 (date of initial
public investment) to December 31, 1989.
+ Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
4
<PAGE>
<TABLE>
<CAPTION>
NET NET ASSETS,
INVESTMENT EXPENSE WAIVER/ END OF PERIOD
INCOME REIMBURSEMENT(B) (000 OMITTED)
- ---------------------------------------------------
<S> <C> <C>
6.76%(a) -- $303,798
7.24% -- 295,414
8.75% -- 327,419
7.79% -- 313,436
5.74% -- 335,751
3.38% -- 291,818
2.70% 0.02% 337,276
3.75% 0.02% 287,805
5.44% 0.03% 296,764
4.90% -- 337,962
4.33%(a) -- $72,001
4.76% -- 70,370
5.85% -- 71,527
5.33% -- 72,105
4.00% 0.02% 54,873
2.60% 0.14% 48,893
2.07% 0.20% 40,141
2.40% 0.19% 39,624
3.52% 0.20% 56,551
3.10% 0.12% 56,654
7.58%(a) 0.05%(a) $62,499
7.68% -- 149,066
5.52% -- 130,302
3.34% -- 146,453
2.74% 0.01% 231,123
3.76% 0.02% 256,538
5.40% 0.03% 277,142
4.87% -- 474,593
</TABLE>
- ---------------------------------------------
5
<PAGE>
FINANCIAL HIGHLIGHTS--EQUITY FUNDS (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996, is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME+
- ------------------------------------------------------------------------------------------------------------
TRUST SHARES
GROWTH
<S> <C> <C> <C> <C> <C> <C> <C>
1989* $20.00 $0.33 $0.59 $0.92 $(0.31) -- --
1990 20.61 0.50 (0.47) 0.03 (0.51) -- --
1991 20.13 0.53 4.74 5.27 (0.54) $(0.06) $(0.02)
1992 24.78 0.56 1.36 1.92 (0.55) (0.39) --
1993 25.76 0.46 0.44 0.90 (0.47) (0.02) --
1994 26.17 0.39 0.21 0.60 (0.40) (0.07) --
1995 26.30 0.43 7.62 8.05 (0.43) (3.11) --
1996 30.81 0.40 4.72 5.12 (0.40) (1.56) --
<CAPTION>
INCOME EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
1989* $20.00 $0.50 $0.17 $0.67 $(0.42) -- --
1990 20.25 0.80 (2.57) (1.77) (0.88) -- --
1991 17.60 0.71 3.31 4.02 (0.72) -- --
1992 20.90 0.75 0.79 1.54 (0.74) -- --
1993 21.70 0.74 1.57 2.31 (0.74) $(0.06) --
1994 23.21 0.88 (1.29) (0.41) (0.87) -- --
1995 21.93 0.94 5.34 6.28 (0.96) -- --
1996 27.25 1.00 3.51 4.51 (1.00) (0.50) --
</TABLE>
- -------------------------------------------------------------------------------
* Reflects operations for the period from July 3, 1989 (date of initial
public investment) to December 31, 1989.
+ Distributions in excess of net investment income were the result of
certain book and tax timing differences. These distributions do not
represent a return of capital for federal income tax purposes.
++ Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Average commission rate paid per share for securities purchases and sales
during the period. Presentation of the rate is only required beginning in
fiscal 1996.
6
<PAGE>
<TABLE>
<CAPTION>
NET ASSET NET ASSETS,
VALUE, NET END OF PORTFOLIO AVERAGE
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ PERIOD (000 TURNOVER COMMISSION
DISTRIBUTIONS PERIOD RETURN++ EXPENSES INCOME REIMBURSEMENT(B) OMITTED) RATE RATE(C)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.31) $20.61 4.63% 0.95%(a) 3.24%(a) -- $24,457 14% n/a
(0.51) 20.13 0.16% 1.00% 2.58% -- 36,253 18% n/a
(0.62) 24.78 26.47% 0.93% 2.33% 0.02% 71,451 13% n/a
(0.94) 25.76 7.88% 0.91% 2.25% 0.01% 90,096 36% n/a
(0.49) 26.17 3.53% 0.84% 1.79% 0.04% 109,576 29% n/a
(0.47) 26.30 2.28% 0.88% 1.52% 0.04% 103,463 42% n/a
(3.54) 30.81 30.75% 0.86% 1.34% 0.05% 143,421 37% n/a
(1.96) 33.97 16.72% 0.83% 1.20% -- 175,764 21% $0.045
$(0.42) $20.25 3.39% 0.92%(a) 5.13%(a) -- $35,215 29% n/a
(0.88) 17.60 (8.86%) 0.94% 4.43% -- 45,468 66% n/a
(0.72) 20.90 23.20% 0.93% 3.67% -- 79,908 25% n/a
(0.74) 21.70 7.49% 0.85% 3.53% 0.01% 95,182 22% n/a
(0.80) 23.21 10.85% 0.82% 3.29% -- 135,618 10% n/a
(0.87) 21.93 (1.82%) 0.84% 3.91% -- 115,399 50% n/a
(0.96) 27.25 29.26% 0.82% 3.85% -- 141,892 17% n/a
(1.50) 30.26 16.88% 0.82% 3.50% -- 172,767 25% $0.035
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
FINANCIAL HIGHLIGHTS--INCOME FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following information with respect to each of the five years in the
period ended December 31, 1996, has been derived from the Trust's financial
statements, which were audited by the Trust's independent accountants, Price
Waterhouse LLP. Their report on the Trust's financial statements and financial
highlights for the year ended December 31, 1996, is included in the Trust's
1996 Annual Report to Shareholders, and is incorporated by reference into the
Combined Statement of Additional Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED GAIN OF NET
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME+
- ------------------------------------------------------------------------------------------------------------
TRUST SHARES
OHIO TAX-FREE
<S> <C> <C> <C> <C> <C> <C> <C>
1988* $20.00 $0.22 $(0.05) $0.17 $(0.22) -- --
1989 19.95 1.20 0.23 1.43 (1.15) -- --
1990 20.23 1.11 0.12 1.23 (1.15) -- --
1991 20.31 1.05 0.74 1.79 (1.05) -- --
1992 21.05 0.98 0.26 1.24 (0.98) -- --
1993 21.31 0.96 0.73 1.69 (0.96) -- --
1994 22.04 0.99 (1.55) (0.56) (0.98) -- --
1995 20.50 1.01 1.27 2.28 (1.01) -- --
1996 21.77 1.01 (0.28) 0.73 (1.01) -- --
<CAPTION>
FIXED INCOME SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C>
1989** $20.00 $0.60 $0.02 $0.62 $(0.60) -- --
1990 20.02 1.44 (0.03) 1.41 (1.48) -- --
1991 19.95 1.43 1.65 3.08 (1.35) $(0.10) --
1992 21.58 1.37 (0.02) 1.35 (1.47) (0.12) $(0.02)
1993 21.32 1.28 0.88 2.16 (1.39) (0.06) --
1994 22.03 1.28 (2.28) (1.00) (1.34) -- --
1995 19.69 1.34 2.09 3.43 (1.34) -- --
1996 21.78 1.34 (0.83) 0.51 (1.35) -- --
<CAPTION>
MORTGAGE SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C>
1992***(c) $10.00 $0.63 $0.29 $0.92 $(0.61) $(0.04) --
1993(c) 10.27 1.50 (0.28) 1.22 (1.46) (0.10) --
1994(c) 9.93 0.89 (3.19) (2.30) (0.93) -- $(0.01)
1995(c) 6.69 0.55 1.46 2.01 (0.55) -- (0.06)
1996(c) 8.09 0.55 (0.04) 0.51 (0.54) -- --
<CAPTION>
SHORT/INTERMEDIATE FIXED INCOME SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C>
1989** $20.00 $0.72 $0.05 $0.77 $(0.66) -- --
1990 20.11 1.50 0.10 1.60 (1.54) -- --
1991 20.17 1.49 1.14 2.63 (1.51) $(0.11) $(0.03)
1992 21.15 1.36 (0.09) 1.27 (1.36) (0.32) (0.11)
1993 20.63 1.19 0.31 1.50 (1.31) (0.25) --
1994 20.57 1.13 (1.33) (0.20) (1.23) -- --
1995 19.14 1.18 1.21 2.39 (1.18) -- --
1996 20.35 1.17 (0.37) 0.80 (1.19) -- --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflects operations for the period from October 18, 1988 (date of initial
public investment) to December 31, 1988.
**Reflects operations for the period from July 3, 1989 (date of initial public
investment) to December 31, 1989.
***Reflects operations for the period from June 2, 1992 (date of initial
public investment) to December 31, 1992.
+ Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
8
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS,
NET ASSET NET END OF PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT EXPENSE WAIVER/ PERIOD (000 TURNOVER
DISTRIBUTIONS OF PERIOD RETURN++ EXPENSES INCOME REIMBURSEMENT(B) OMITTED) RATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.22) $19.95 0.59% 0.88%(a) 5.42%(a) -- $15,724 76%
(1.15) 20.23 7.37% 0.87% 5.88% -- 28,040 86%
(1.15) 20.31 6.28% 0.91% 5.59% -- 29,886 5%
(1.05) 21.05 9.06% 0.90% 5.13% -- 38,112 13%
(0.98) 21.31 6.04% 0.91% 4.62% -- 47,557 3%
(0.96) 22.04 8.08% 0.82% 4.39% 0.04% 59,541 2%
(0.98) 20.50 (2.57%) 0.77% 4.68% 0.04% 56,469 12%
(1.01) 21.77 11.35% 0.78% 4.74% 0.08% 59,869 13%
(1.01) 21.49 3.48% 0.76% 3.49% -- 64,799 6%
$(0.60) $20.02 3.14% 0.88%(a) 7.14%(a) -- $26,502 19%
(1.48) 19.95 7.49% 0.82% 7.56% -- 38,131 7%
(1.45) 21.58 16.13% 0.90% 7.12% -- 54,525 21%
(1.61) 21.32 6.54% 0.83% 6.49% -- 87,107 15%
(1.45) 22.03 10.32% 0.74% 5.87% 0.04% 112,103 7%
(1.34) 19.69 (4.62%) 0.75% 6.26% 0.04% 119,117 23%
(1.34) 21.78 17.95% 0.77% 6.41% 0.05% 141,423 20%
(1.35) 20.94 2.56% 0.74% 6.39% -- 144,038 16%
$(0.65) $10.27 9.12% 0.58%(a) 10.60%(a) 0.19%(a) $90,677 50%
(1.56) 9.93 12.10% 0.78% 14.20% 0.04% 90,461 154%
(0.94) 6.69 (24.59%) 0.88% 11.16% 0.12% 54,164 91%
(0.61) 8.09 31.10% 0.49% 7.29% 0.63% 52,667 194%
(0.54) 8.06 6.56% 0.67% 6.86% 0.29% 39,566 90%
$(0.66) $20.11 3.91% 0.76%(a) 7.54%(a) -- $84,702 24%
(1.54) 20.17 8.34% 0.74% 7.59% -- 104,218 20%
(1.65) 21.15 13.62% 0.78% 7.23% -- 101,519 50%
(1.79) 20.63 6.25% 0.74% 6.44% -- 123,400 41%
(1.56) 20.57 7.43% 0.71% 5.70% -- 123,897 24%
(1.23) 19.14 (0.98%) 0.72% 5.76% -- 125,112 38%
(1.18) 20.35 12.81% 0.74% 5.93% -- 133,951 40%
(1.19) 19.96 4.08% 0.72% 5.83% -- 125,514 39%
- -------------------------------------------------------------------------------------------------
</TABLE>
++Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a)Computed on an annualized basis.
(b)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Per share information presented is based upon the monthly number of shares
outstanding due to large fluctuations in the number of shares outstanding
during the period.
9
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of the various Funds are described
below. There can, of course, be no guarantee that a Fund will achieve its
investment objective.
Each Fund's investment objective is fundamental and may be changed only by a
vote of a majority of the outstanding shares of that Fund. Unless otherwise
noted in this Prospectus or in the Statement of Additional Information, the
investment policies of the Funds are not fundamental and may be changed by the
Trust's Board of Trustees (the "Trustees"). Except with respect to borrowing
money or downgrades of securities in the Money Market Funds, any percentage
limitation on a Fund's investments (or other activities) will be considered to
be violated only if such limitation is exceeded immediately after, and is
caused by, an acquisition of an investment (or the taking of such other
action).
For a description of the ratings of nationally recognized statistical rating
organizations (individually, an "NRSRO") utilized by The Huntington Trust
Company, N.A., in managing the Funds' investments, see the Appendix to the
Statement of Additional Information.
MONEY MARKET FUNDS
Each of the Money Market Funds described below is designed for investors
seeking current income with stability of principal. The Money Market Funds
intend to limit their investments by operating in a manner consistent with
Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940
Act"). Rule 2a-7 permits funds to utilize the amortized cost method of
valuation in order to offer their shares at a net asset value of $1.00 per
share (see also the section of the Statement of Additional Information
entitled "Determination of Net Asset Value"). Rule 2a-7 imposes certain risk
limiting conditions on the Money Market Funds which in some instances restrict
a Money Market Fund's investment policies. These risk limiting conditions
include the following:
. The Money Market Funds must limit their investments to "Eligible Securities"
as defined under Rule 2a-7, and which Huntington has determined present
minimal credit risks under guidelines adopted by the Trustees. (For an
explanation of some of the terms defined by Rule 2a-7, see Appendix I to this
Prospectus.)
. Each Money Market Fund (except the Ohio Municipal Money Market Fund) must
limit investments in "Second Tier Securities" to 5% of total assets and 1% of
total assets in the securities of a single Second Tier issuer.
. The Money Market Funds may invest without limit in "First Tier Securities"
subject to the 5% issuer diversification limitation where applicable. In
addition, the portfolio investments of each Money Market Fund must have a
maturity of 397 days or less from the time of purchase by a Money Market
Fund, although securities owned pursuant to a repurchase agreement and
certain adjustable interest rate instruments may bear longer maturities. The
dollar-weighted average maturity of each Money Market Fund's portfolio must
not exceed 90 days. Of course, a Money Market Fund's yield, and under unusual
circumstances, the value of its portfolio securities, will be affected by
changes in interest rates.
MONEY MARKET FUND
The objective of the Money Market Fund is to maximize current income while
preserving capital
10
<PAGE>
and maintaining liquidity by investing in a portfolio of high quality money
market instruments. The Money Market Fund's portfolio investments may include:
(a) obligations, such as notes, bills or bonds, issued by or guaranteed as
to principal and interest by the U.S. Government or its agencies or
instrumentalities;
(b)commercial paper, including U.S. dollar denominated eurodollar
commercial paper, considered under Rule 2a-7 to be rated in the highest
category by an NRSRO(s) or, if not rated, of comparable quality as
determined by Huntington pursuant to guidelines established by the
Trustees;
(c)negotiable certificates of deposit and bankers' acceptances issued by
domestic banks and U.S. branches of foreign banks which are subject to
the same regulation as U.S. banks and which, at the time of purchase,
have capital, surplus, and undivided profits in excess of $100,000,000
(as of the bank's most recently published financial statements);
(d)corporate debt obligations, including bonds, notes and debentures
considered under Rule 2a-7 to be rated in the two highest categories by
an NRSRO(s) or, if not rated, of comparable quality as determined by
Huntington pursuant to guidelines established by the Trustees; and
(e)repurchase agreements and master demand notes.
RESTRICTED AND ILLIQUID SECURITIES. The Money Market Fund intends to invest
in restricted securities. Restricted securities are any securities in which
the Money Market Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restriction on resale under
federal securities law. However, the Money Market Fund will limit investments
in illiquid securities, including certain restricted securities not determined
by the Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to
10% of its net assets.
The Money Market Fund may invest in commercial paper issued in reliance on
the exemption from registration afforded by Section 4(2) of the Securities Act
of 1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law, and is generally sold to institutional investors, such
as the Money Market Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper
is normally resold to other institutional investors like the Money Market Fund
through or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity. The Money
Market Fund believes that Section 4(2) commercial paper and possibly certain
other restricted securities which meet the criteria for liquidity established
by the Trustees are quite liquid. The Money Market Fund intends, therefore, to
treat the restricted securities which meet the criteria for liquidity
established by the Trustees, including Section 4(2) commercial paper, as
determined by Huntington, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section
4(2) commercial paper is liquid, the Money Market Fund intends to not subject
such paper to the limitation applicable to restricted securities.
OHIO MUNICIPAL MONEY MARKET FUND
The objective of the Ohio Municipal Money Market Fund is to provide income
exempt from both federal regular income tax and Ohio personal income taxes
while preserving capital and maintaining
11
<PAGE>
liquidity. As a fundamental policy, the Ohio Municipal Money Market Fund
invests its assets so that at least 80% of its annual interest income is
exempt from federal regular income tax. The Ohio Municipal Money Market Fund
invests primarily in Ohio tax-exempt securities which, under normal market
conditions, will comprise at least 65% of its assets. Ohio tax-exempt
securities are debt obligations issued by or on behalf of the State of Ohio,
its political subdivisions, or agencies, or financing authorities of any of
these, the income from which is, in the opinion of qualified legal counsel,
exempt from both federal regular income tax and the personal income taxes
imposed by the State of Ohio. Examples of tax-exempt securities include, but
are not limited to:
.tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
.bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
.municipal commercial paper and other short-term notes;
.variable rate demand notes;
.municipal bonds (including bonds having serial maturities and pre-funded
bonds); and
.participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND OBLIGATIONS. Variable rate demand obligations are long-
term tax-exempt securities that have variable or floating interest rates and
provide the Ohio Municipal Money Market Fund with the right to tender the
security for repurchase at its stated principal amount plus accrued interest.
Such securities typically bear interest at a rate that is intended to cause
the securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally
established by the remarketing agent of the respective securities. Most
variable rate demand obligations allow the holder to demand the repurchase of
the security on not more than seven days prior notice. Other obligations only
permit the holder to tender the security at the time of each interest rate
adjustment or at other fixed intervals. See "Demand Features." The Ohio
Municipal Money Market Fund treats variable rate demand obligations as
maturing on the later of the date of the next interest adjustment or the date
on which it may next tender the security for redemption.
PARTICIPATION INTERESTS. The Ohio Municipal Money Market Fund may purchase
interests in tax-exempt securities from financial institutions such as
commercial and investment banks, savings and loan associations and insurance
companies. These interests may take the form of participations, beneficial
interests in a trust, partnership interests or any other form of indirect
ownership that allows the holder to treat the income from the investment as
exempt from federal income tax. The Ohio Municipal Money Market Fund invests
in these participation interests in order to obtain credit enhancement or
demand features that would not be available through direct ownership of the
underlying tax-exempt securities.
CREDIT ENHANCEMENT. Certain of the portfolio investments of the Ohio
Municipal Money Market Fund may have been credit enhanced by a guaranty,
letter of credit or insurance. The Ohio Municipal Money Market Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. However, credit
enhanced securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Ohio Municipal
12
<PAGE>
Money Market Fund has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in
which case the securities will be treated as having been issued both by the
issuer and the credit enhancer. The bankruptcy, receivership or default of the
credit enhancer will adversely affect the quality and marketability of the
underlying security. The Ohio Municipal Money Market Fund may have more than
40% of its total assets invested in securities which are credit-enhanced by
foreign or domestic banks. Changes in credit quality of these banking
institutions could cause losses to the Fund and affect its share price.
DEMAND FEATURES. The Ohio Municipal Money Market Fund may acquire securities
that are subject to puts and standby commitments ("demand features") to
purchase the securities at their principal amount (usually with accrued
interest) within a fixed period (usually seven days) following a demand by the
fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and may not
be transferred separately from the underlying security. The Ohio Municipal
Money Market Fund uses these arrangements to provide liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.
TEMPORARY INVESTMENTS. The Ohio Municipal Money Market Fund invests its
assets so that at least 80% of its annual interest income is exempt from
federal regular income taxes and at least 65% of its assets are invested in
securities the income from which is exempt from Ohio personal income taxes.
However, from time to time, when Huntington determines that market conditions
call for a temporary defensive posture, the Ohio Municipal Money Market Fund
may invest in temporary investments with remaining maturities of 13 months or
less at the time of purchase, or hold assets in cash. Interest income from
temporary investments may be taxable to shareholders as ordinary income. These
temporary investments include: obligations issued by or on behalf of municipal
or corporate issuers having the same quality characteristics as Ohio tax-
exempt securities purchased by the Fund; marketable obligations issued or
guaranteed by the U.S. Government, its agencies, or instrumentalities;
instruments issued by a U.S. branch of a domestic bank or other depository
institutions having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment; repurchase agreements (arrangements in
which the organization selling a temporary investment agrees at the time of
sale to repurchase it at a mutually agreed upon time and price); and
commercial paper rated in one of the two highest short-term rating categories
by an NRSRO(s).
Although the Ohio Municipal Money Market Fund is permitted to make taxable,
temporary investments that may have Ohio state tax implications, there is no
current intention of generating income subject to federal regular or Ohio
personal income taxes.
U.S. TREASURY MONEY MARKET FUND
The objective of the U.S. Treasury Money Market Fund is to maximize current
income while preserving capital and maintaining liquidity by investing
exclusively in obligations issued by the U.S. Government and backed by its
full faith and credit and in repurchase agreements with respect to such
obligations. At least 65% of the U.S. Treasury Money Market Fund's total
assets will be invested in Treasury bills, notes and bonds which are direct
obligations of the U.S. Treasury, and repurchase agreements with respect to
such obligations.
13
<PAGE>
EQUITY FUNDS
GROWTH FUND
The objective of the Growth Fund is to achieve long-term capital
appreciation primarily through investments in equity securities. Current
income will be only an incidental consideration in the selection of
investments. Equity securities in which the Growth Fund may invest include
common stocks, preferred stocks, securities convertible into or exchangeable
for common stocks, and other securities which Huntington believes have common
stock characteristics, such as rights and warrants. The Growth Fund may invest
in foreign securities and, subject to its investment restrictions, securities
restricted as to resale under federal securities laws. The Growth Fund's
common stock selection emphasizes those companies which Huntington believes
have characteristics such as above average earnings and dividend growth,
superior balance sheets, and potential for capital gains, but its investment
policy recognizes that securities of other companies may be attractive for
capital appreciation purposes by virtue of special developments or depression
in price believed to be temporary. The Growth Fund will invest in large and
medium-sized capitalization growth companies which provide these financial and
growth characteristics. In managing the investments of the Growth Fund,
Huntington seeks to purchase equity securities whose potential for capital
gains is balanced by an ability to better withstand overall downward market
movements. As a matter of fundamental policy, under normal market conditions,
the Growth Fund will invest at least 65% of its total assets in the equity
securities described in this paragraph. The Growth Fund may also, under normal
market conditions, invest a portion of its assets in cash equivalents,
including repurchase agreements and the shares of money market mutual funds,
for liquidity purposes.
INCOME EQUITY FUND
The objective of the Income Equity Fund is to achieve high current income
and moderate appreciation of capital primarily through investment in income-
producing equity securities. Consistent with this objective, the Income Equity
Fund may invest in preferred stocks, in securities convertible into or
exchangeable for common stocks and securities which Huntington believes have
common stock characteristics, such as rights and warrants. The Income Equity
Fund may invest in foreign securities and, subject to its investment
restrictions, in securities restricted as to resale under federal securities
laws. As a matter of fundamental policy, under normal market conditions, the
Income Equity Fund will invest at least 65% of its total assets in the equity
securities described in this paragraph. The Income Equity Fund may invest up
to 35% of its assets in debt securities rated investment grade or better. The
Income Equity Fund may also, under normal market conditions, invest a portion
of its assets in cash equivalents, including repurchase agreements and the
shares of money market mutual funds, for liquidity purposes.
INCOME FUNDS
The investment objectives and policies of the Income Funds are described
below. Each of the Income Funds invests primarily in debt securities. The
prices of fixed income securities generally fluctuate inversely to the
direction of interest rates. Thus, a decrease in interest rates will generally
result in an increase in the values of debt securities held by an Income Fund.
Conversely, during periods of rising interest rates, the values of an Income
Fund's assets will generally decline. The values of such securities are also
affected by changes in the financial condition of their issuers. Changes in
the values of an Income Fund's securities will not generally affect the income
derived from such securities but will affect an Income Fund's net asset value.
14
<PAGE>
MORTGAGE SECURITIES FUND
The investment objective of the Mortgage Securities Fund is current income.
The Mortgage Securities Fund seeks to achieve this investment objective by
investing at least 65% of the value of its total assets in mortgage-related
securities issued by the U.S. Government, government-related entities, and
private entities. These mortgage-related securities include derivative
mortgage securities. Recent market experience has shown that certain
derivative mortgage securities may be extremely sensitive to changes in
interest rates and in prepayment rates on the underlying mortgage assets, and,
as a result, the prices of such securities may be highly volatile.
The Mortgage Securities Fund may invest up to 35% of the value of its total
assets in:
(i) non-mortgage related securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities;
(ii) certificates of deposit, bankers' acceptances and interest-bearing
savings deposits of banks having total assets of more than $1 billion and
which are members of the Federal Deposit Insurance Corporation (the
"FDIC"); and
(iii) commercial paper rated A-1 by Standard & Poor's Ratings Group
("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, issued by companies which have an outstanding debt issue rated AAA
by S&P or Aaa by Moody's.
The Mortgage Securities Fund will attempt to maintain a dollar-weighted
average portfolio life of more than three years but no more than ten years. In
order to maintain a dollar-weighted average portfolio life, Huntington will
monitor the prepayment experience of the underlying mortgage pools of the
mortgage-related securities and will purchase and sell securities in the
portfolio to shorten or lengthen the average life of the portfolio, as
appropriate.
It is important to understand that, while a valuable measure, average life
is based on certain assumptions and has several limitations. It is most useful
as a measure of the repayment of principal when interest rate changes are
small. In addition, average life is difficult to calculate precisely for bonds
with prepayment options, such as mortgage-related securities, because the
calculation requires assumptions about prepayment rates. For example, when
interest rates go down, homeowners may prepay their mortgages at a higher rate
than assumed in the initial average life calculation, thereby shortening the
average life of the Fund's mortgage-related securities. Conversely, if rates
increase, prepayments may decrease to a greater extent than assumed, extending
the average life of such securities. For these reasons, the average lives of
funds which invest a significant portion of their assets in mortgage-related
securities can be greatly affected by changes in interest rates.
The portfolio turnover rate of the Mortgage Securities Fund may exceed 100%,
which is higher than the portfolio turnover rate of most mutual funds.
However, the Adviser does not expect the portfolio turnover rate of the
Mortgage Securities Fund to exceed 200%. To the extent that short-term trading
results in the realization of short-term capital gains, shareholders will be
taxed on such gains at ordinary income tax rates. However, certain tax rules
may restrict the Mortgage Securities Fund's ability to sell securities in some
circumstances when the security has been held for less than three (3) months.
Increased portfolio turnover necessarily results in higher costs, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities, and may result in the
acceleration of capital gains.
Mortgage-Related Securities. Mortgage-related securities are securities
that, directly or indirectly, represent participations in, or are secured by
and payable from, loans secured by real
15
<PAGE>
property. Mortgage-related securities, as the term is used in this Prospectus,
include mortgage pass-through securities, adjustable rate mortgage securities,
collateralized mortgage obligations and stripped mortgage-backed securities.
These mortgage-related securities include derivative mortgage securities.
Mortgage-related securities fall into three categories: (a) those issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities,
such as Government National Mortgage Association ("GNMA"), Federal National
Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation
("FHLMC"); (b) those issued by non-governmental issuers that represent
interests in, or are collateralized by, mortgage-related securities issued or
guaranteed by the United States Government or one of its agencies or
instrumentalities; and (c) those issued by non-governmental issuers that
represent an interest in, or are collateralized by, whole mortgage loans or
mortgage-related securities without a government guarantee but usually with
over-collateralization or some other form of private credit enhancement. Non-
governmental issuers referred to in (b) and (c) above include originators of
and investors in mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.
Mortgage Pass-Through Securities. The mortgage pass-through securities in
which the Mortgage Securities Fund invests provide for the pass-through to
investors of their pro-rata share of monthly payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans,
net of any fees paid to the guarantor of such securities and the servicer of
the underlying mortgage loans. The Mortgage Securities Fund invests both in
U.S. Government pass-through securities issued by GNMA, FNMA and FHLMC, and in
pass-through securities issued by non-governmental issuers. Each of GNMA, FNMA
and FHLMC guarantee timely distributions of interest to certificate holders.
GNMA and FNMA guarantee timely distributions of scheduled principal. FHLMC
generally guarantees only ultimate collection of principal of the underlying
mortgage loans.
Adjustable Rate Mortgage Securities. The Mortgage Securities Fund may also
invest in adjustable rate mortgage securities ("ARMS"). ARMS are pass-through
mortgage securities collateralized by mortgages with interest rates that are
adjusted from time to time. The adjustments usually are determined in
accordance with a predetermined interest rate index and may be subject to
certain limits. While the values of ARMS, like other debt securities,
generally vary inversely with changes in market interest rates (increasing in
value during periods of declining interest rates and decreasing in value
during periods of increasing interest rates), the values of ARMS should
generally be more resistant to price swings than other debt securities because
the interest rates of ARMS move with market interest rates. The adjustable
rate feature of ARMS will not, however, eliminate fluctuations in the prices
of ARMS, particularly during periods of extreme fluctuations in interest
rates. Also, since many adjustable rate mortgages only reset on an annual
basis, it can be expected that the prices of ARMS will fluctuate to the extent
that changes in prevailing interest rates are not immediately reflected in the
interest rates payable on the underlying adjustable rate mortgages.
ARMS typically have caps which limit the maximum amount by which the
interest rate may be increased or decreased at periodic intervals or over the
life of the loan. To the extent that interest rates increase in excess of the
caps, ARMS can be expected to behave more like traditional debt securities and
to decline in value to a greater extent than would be the case in the absence
of such caps. Also, since many adjustable rate mortgages only reset on an
annual basis, it can be expected that the prices of ARMS will fluctuate to the
extent that changes in prevailing interest rates are not immediately reflected
in the interest rates payable on the underlying adjustable rate mortgages. The
extent to which
16
<PAGE>
the prices of ARMS fluctuate with changes in interest rates will also be
affected by the indices underlying the ARMS. Some indices, such as the one-
year constant maturity Treasury note rate, closely mirror changes in market
interest rate levels. Others, such as the 11th District Federal Reserve Cost
of Funds Index (often related to ARMS issued by FNMA), tend to lag changes in
market levels and tend to be somewhat less volatile.
Collateralized Mortgage Obligations. The Mortgage Securities Fund may invest
in CMOs (collateralized mortgage obligations and multi-class pass-through
securities unless the context otherwise indicates), which are derivative
mortgage securities. Collateralized mortgage obligations are debt instruments
issued by special purpose entities which are secured by pools of mortgage
loans or other mortgage-related securities. Multi-class pass-through
securities are equity interests in a trust composed of mortgage loans or other
mortgage-related securities. Payments of principal and interest on underlying
collateral provide the funds to pay debt service on the collateralized
mortgage obligation or make scheduled distributions on the multi-class pass-
through security. The Mortgage Securities Fund will invest only in CMOs which
are issued by agencies or instrumentalities of the U.S. Government or CMOs
issued by private organizations which are rated AAA by an NRSRO.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO, often referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated
among the several tranches of a CMO in many ways. For example, certain
tranches may have variable or floating interest rates and others may be
stripped securities which provide only the principal or interest feature of
the underlying security. See "Stripped Mortgage-Backed Securities," below.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various tranches is to obtain a more predictable cash flow to certain of the
individual tranches than exists with the underlying collateral of the CMO. As
a general rule, the more predictable the cash flow is on a CMO tranche, the
lower the anticipated yield will be on that tranche at the time of issuance
relative to prevailing market yields on mortgage-related securities. As part
of the process of creating more predictable cash flows on most of the tranches
of a CMO, one or more tranches generally must be created that absorb most of
the volatility in the cash flows on the underlying mortgage loans. The yields
on these tranches, which may include inverse floaters, IOs, POs, and Z
tranches, discussed below, are generally higher than prevailing market yields
on mortgage-related securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and
yield on these tranches generally are more volatile.
The Mortgage Securities Fund may invest in any CMO tranche, including
"inverse floaters" and "Z tranches." An inverse floater is a CMO tranche with
a coupon rate that moves inversely to a designated index, such as LIBOR
(London Inter-Bank Offered Rate) or COFI (Cost of Funds Index). Like most
other fixed-income securities, the value of inverse floaters will decrease as
interest rates increase. Inverse floaters, however, exhibit greater price
volatility than the majority of mortgage pass-through securities or CMOs.
Coupon rates on inverse floaters typically change at a multiple of the changes
in the relevant index rate. Thus, any rise in the index rate (as a consequence
of an increase in interest rates) causes a correspondingly greater drop in the
coupon rate of an inverse floater while any drop in the index rate causes a
correspondingly greater increase in the coupon of an inverse floater. Some
inverse floaters also exhibit extreme sensitivity to changes in prepayments.
Inverse floaters would be purchased to attempt to protect against a reduction
in the income earned on investments due to a decline in interest rates.
17
<PAGE>
Z tranches of CMOs defer interest and principal payments until one or more
other classes of the CMO have been paid in full. Interest accretes on the Z
tranche, being added to principal, and is compounded through the accretion
period. After the other classes have been paid in full, interest payments
begin and continue through maturity. Z tranches have characteristics similar
to zero coupon bonds. Like a zero coupon bond, during its accretion period a Z
tranche has the advantage of eliminating the risk of reinvesting interest
payments at lower rates during a period of declining market interest rates. At
the same time, however, and also like a zero coupon bond, the market value of
a Z tranche can be expected to fluctuate more widely with changes in market
interest rates than would the market value of a tranche which pays interest
currently. In addition, changes in prepayment rates on the underlying mortgage
loans will affect the accretion period of a Z tranche, and therefore also will
influence its market value.
Stripped Mortgage-Backed Securities. Some of the mortgage-related securities
purchased by the Mortgage Securities Fund may represent an interest solely in
the principal repayments or solely in the interest payments on mortgage-backed
securities (stripped mortgage-backed securities or "SMBSs"). SMBSs are
derivative multi-class securities. SMBSs are usually structured with two
classes and receive different proportions of the interest and principal
distributions on the pool of underlying mortgage-backed securities. Due to the
possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased. If prevailing
interest rates fall below the level at which SMBSs were issued, there may be
substantial prepayments on the underlying mortgages, leading to the relatively
early prepayments of principal-only SMBSs (the principal-only or "PO" class)
and a reduction in the amount of payments made to holders of interest-only
SMBSs (the interest-only or "IO" class). Therefore, interest-only SMBSs
generally increase in value as interest rates rise and decrease in value as
interest rates fall, counter to changes in value experienced by most fixed
income securities. If the underlying mortgages experience slower than
anticipated prepayments of principal, the yield on a PO class will be affected
more severely than would be the case with a traditional mortgage-related
security. Because the yield to maturity of an IO class is extremely sensitive
to the rate of principal payments (including prepayments) on the related
underlying mortgage-backed securities, it is possible that the Mortgage
Securities Fund might not recover its original investment on interest-only
SMBSs if there are substantial prepayments on the underlying mortgages. The
Mortgage Securities Fund's inability to fully recoup its investment in these
securities as a result of a rapid rate of principal prepayments may occur even
if the securities are rated by an NRSRO. In view of these considerations,
Huntington or Piper intends to use these characteristics of interest-only
SMBSs to reduce the effects of interest rate changes on the value of the
Mortgage Securities Fund's portfolio, while continuing to pursue current
income.
U.S. Government Securities. The U.S. Government securities in which the
Mortgage Securities Fund invests are either issued or guaranteed as to payment
of principal and interest by the U.S. Government, its agencies, or
instrumentalities. THE CURRENT MARKET PRICES FOR SUCH SECURITIES ARE NOT
GUARANTEED AND WILL FLUCTUATE. Investments in U.S. Government securities are
limited to:
(a)direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
(b)notes, bonds, and discount notes of U.S. Government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association; Export-
Import Bank of the United States; Commodity Credit Corporation; Federal
Financing Bank;
18
<PAGE>
The Student Loan Marketing Association; National Credit Union
Administration; and Tennessee Valley Authority.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the
U.S. Treasury. No assurances can be given that the U.S. Government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. These instruments are supported by:
(a)the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
(b)the discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality; or
(c)the credit of the agency or instrumentality.
Short-Term Trading. The Mortgage Securities Fund will use short-term trading
to benefit from yield disparities among different issues of securities or
otherwise to achieve its investment objective. To the extent that the Mortgage
Securities Fund engages in short-term trading, such activities will cause it
to pay greater mark-up charges. The Mortgage Securities Fund's portfolio
turnover rate is set forth in "Financial Highlights."
Investment Risks. The Mortgage Securities Fund is subject to interest rate
risk, which is the potential for a decline in bond prices due to rising
interest rates. In general, bond prices vary inversely with interest rates.
When interest rates rise, bond prices generally fall. Conversely, when
interest rates fall, bond prices generally rise. Interest rate risk applies to
U.S. Government securities as well as other bonds. U.S. Government securities
are guaranteed only as to the payment of interest and principal. The current
market prices for such securities are not guaranteed and will fluctuate.
The Mortgage Securities Fund invests a significant portion of its assets in
mortgage-related securities and, as a result, is subject to prepayment risk.
Prepayment risk results because, as interest rates fall, homeowners are more
likely to refinance their home mortgages. When home mortgages are refinanced,
the principal on mortgage-related securities held is "prepaid" earlier than
expected. The Mortgage Securities Fund must then reinvest the unanticipated
principal payments, just at a time when interest rates on new mortgage
investments are falling. Prepayment risk has two important effects on the
Fund:
. When interest rates fall and additional mortgage prepayments must be
reinvested at lower interest rates, Mortgage Securities Fund's income
will be reduced; and
. When interest rates fall, prices on mortgage-backed securities may not
rise as much as comparable Treasury bonds because bond market investors
may anticipate an increase in mortgage prepayments and a likely decline
in income.
The Mortgage Securities Fund's investments in mortgage-related securities
also subject it to extension risk. Extension risk is the possibility that
rising interest rates may cause prepayments to occur at a slower than expected
rate. This particular risk may effectively change a security which was
considered short- or intermediate-term at the time of purchase into a long-
term security. Long-term securities generally fluctuate more widely in
response to changes in interest rates than short- or intermediate-term
securities.
19
<PAGE>
The Mortgage Securities Fund's investments in mortgage-related securities
include derivative mortgage securities such as CMOs and stripped mortgage-
backed securities which, as discussed above, may involve risks in addition to
those found in other mortgage-related securities. Recent market experience has
shown that certain derivative mortgage securities may be highly sensitive to
changes in interest and prepayment rates and, as a result, the prices of such
securities may be highly volatile. In addition, recent market experience has
shown that during periods of rising interest rates, the market for certain
derivative mortgage securities may become more unstable and such securities
may become more difficult to sell as market makers either choose not to
repurchase such securities or offer prices, based on current market
conditions, which are unacceptable to the Fund.
OHIO TAX-FREE FUND
The objective of the Ohio Tax-Free Fund is to provide current income exempt
from federal income tax and Ohio personal income taxes. The Ohio Tax-Free Fund
will attempt to achieve its objective by investing in Ohio tax-exempt
securities. "Ohio tax-exempt securities" are debt obligations which (i) are
issued by or on behalf of the State of Ohio or its respective authorities,
agencies, instrumentalities and political subdivisions, and (ii) produce
interest which, in the opinion of bond counsel at the time of issuance, is
exempt from federal income tax and Ohio personal income taxes. As a matter of
fundamental policy, under normal market conditions at least 80% of the Ohio
Tax-Free Fund's net assets will be invested in Ohio tax-exempt securities. In
addition, the Ohio Tax-Free Fund will not, as a matter of fundamental policy,
invest in securities the income from which is treated as a preference item for
purposes of the federal alternative minimum tax. This policy will restrict the
Ohio Tax-Free Fund's ability to invest in certain private activity bonds
issued after August 7, 1986.
The Ohio Tax-Free Fund will only invest in Ohio tax-exempt securities that
are rated at the time of purchase in one of the top four categories by an
NRSRO(s) or, if not rated, of comparable quality as determined by Huntington
under guidelines established by the Trustees. Based on current market
conditions, it is anticipated that the dollar-weighted average portfolio
maturity will be between four and seven years. Under normal market conditions,
the Ohio Tax-Free Fund will not invest in obligations with a remaining
maturity of more than 15 years at the time of purchase.
The Ohio Tax-Free Fund may also invest in numerous types of short-term tax-
exempt instruments, which may be used to fund short-term cash requirements
such as interim financing in anticipation of tax collections, revenue receipts
or bond sales to finance various public purposes.
From time to time, the Ohio Tax-Free Fund may invest in obligations the
interest on which is subject to federal income tax or Ohio personal income
taxes pending investment in Ohio tax-exempt securities or for liquidity
purposes. The Ohio Tax-Free Fund may also hold a portion of its assets in cash
or money market instruments, the interest on which may not be exempt from
federal or Ohio income taxes.
Credit Enhancement. Certain of the portfolio investments of the Ohio Tax-
Free Fund may have been credit enhanced by a guaranty, letter of credit or
insurance. The Ohio Tax-Free Fund typically evaluates the credit quality and
ratings of credit enhanced securities based upon the financial condition and
ratings of the party providing the credit enhancement (the "credit enhancer"),
rather than the issuer. However, credit enhanced securities will not be
treated as having been issued by the credit enhancer for diversification
purposes, unless the Ohio Tax-Free Fund has invested more than 10% of its
assets in securities issued, guaranteed or otherwise credit enhanced by the
credit enhancer, in which case the securities will be treated as having been
issued both by the issuer and the credit
20
<PAGE>
enhancer. The bankruptcy, receivership or default of the credit enhancer will
adversely affect the quality and marketability of the underlying security.
FIXED INCOME SECURITIES FUND
The objective of the Fixed Income Securities Fund is to achieve high current
income through investment in fixed income securities where the average
maturity of the Fixed Income Securities Fund will not exceed 10 years. The
Fixed Income Securities Fund may purchase obligations of the U.S. Government
and its agencies and instrumentalities, corporate bonds, debentures,
nonconvertible fixed income preferred stocks, mortgage pass-through
securities, eurodollar certificates of deposit and eurodollar bonds. The Fixed
Income Securities Fund may also invest up to 10% of its net assets in non-U.S.
dollar denominated bonds. Both fixed and variable rate issues may be
purchased. Debt securities will be rated at the time of purchase in one of the
top four categories by an NRSRO(s) or, if not rated, of comparable quality as
determined by Huntington under guidelines established by the Trustees. As a
matter of fundamental policy, under normal market conditions, the Fixed Income
Securities Fund will invest at least 65% of its assets in fixed income
securities. The Fixed Income Securities Fund may also, under normal market
conditions, invest a portion of its assets in cash equivalents, including
repurchase agreements and the shares of money market mutual funds, for
liquidity purposes.
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND
The objective of the Short/Intermediate Fixed Income Securities Fund is to
achieve current income through investment in fixed income securities with a
maximum maturity or average life for individual issues of 5 years or less at
the time of purchase and a dollar-weighted average portfolio maturity of more
than 2 but less than 5 years. The Short/Intermediate Fixed Income Fund may
purchase obligations of the U.S. Government and its agencies and
instrumentalities, corporate bonds, debentures, non-convertible fixed income
preferred stocks, mortgage pass-through securities, eurodollar certificates of
deposit and eurodollar bonds. The Short/Intermediate Fixed Income Fund may
also invest up to 10% of its net assets in non-U.S. dollar denominated bonds
and non-convertible fixed-income European Currency Unit bonds. Both fixed and
variable rate issues may be purchased. Debt securities will be rated at the
time of purchase in one of the top four categories by an NRSRO(s) or, if not
rated, of comparable quality as determined by Huntington. As a matter of
fundamental policy, under normal market conditions the Short/Intermediate
Fixed Income Fund will invest at least 65% of its assets in fixed income
securities. The Short/Intermediate Fixed Income Fund may also, under normal
market conditions, invest a portion of its assets in cash equivalents,
including repurchase agreements and the shares of money market mutual funds,
for liquidity purposes.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS AND STRATEGIES
OHIO TAX-EXEMPT SECURITIES
The two principal classifications of Ohio tax-exempt securities are general
obligation and limited obligation (or revenue) securities. General obligation
securities involve the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues. The characteristics
and methods of enforcement of general obligation securities vary according to
the law applicable to the particular issuer. Limited obligation securities are
payable only from the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Private activity bonds and industrial
21
<PAGE>
development bonds generally are limited obligation securities, the credit and
quality of which are usually directly related to the credit of the private
user of the facilities.
The economy of Ohio, while diversifying more into the service area,
continues to rely in part on durable goods manufacturing, which is largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity in Ohio, as in
many other industrially-developed states, tends to be more cyclical than in
some other states and in the nation as a whole. Agriculture also is an
important segment of the economy in the State, and the State has instituted
several programs to provide financial assistance to farmers. Ohio's economy,
including particularly an unemployment rate usually somewhat higher than the
national average, has had varying effects on the different geographic areas of
the State and the political subdivisions located in such geographic areas.
Although revenue obligations of the State or its political subdivisions may be
payable from a specific source or project, there can be no assurance that
future economic difficulties and the resulting impact on state and local
government finances will not adversely affect the market value of the Ohio
tax-exempt securities in an Ohio Fund, as defined below, or the ability of the
respective obligors to make timely payment of interest and principal on such
obligations. See the Statement of Additional Information for further
discussion of special considerations regarding investments in Ohio tax-exempt
securities.
NON-DIVERSIFICATION
The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund (the "Ohio
Funds") are non-diversified Funds under the 1940 Act, which means that they
may invest their assets in the obligations of fewer issuers than would be the
case if they were "diversified". The Ohio Funds' ability to invest a
relatively high percentage of their assets in the securities of a limited
number of issuers involves an increased risk of loss to an Ohio Fund if any
one issuer is unable to make interest or principal payments or if the market
value of the issuer's securities declines.
Although non-diversified under the 1940 Act, the Ohio Funds intend to comply
with Subchapter M of the Internal Revenue Code. This undertaking requires,
among other things, that at the end of each quarter of the taxable year, with
regard to at least 50% of each Ohio Fund's total assets, no more than 5% of
its total assets are invested in the assets of a single issuer; beyond that,
no more than 25% of its total assets are invested in the securities of a
single issuer.
DEFENSIVE INVESTMENT STRATEGIES
At times Huntington may judge that conditions in securities markets may make
pursuing a Fund's basic investment strategy inconsistent with the best
interests of the Fund's shareholders. At such times, Huntington may
temporarily use alternative strategies, primarily designed to reduce
fluctuations in the value of a Fund's assets. In implementing these temporary
"defensive" strategies, a Fund may temporarily place all or a portion of its
assets in cash, U.S. Government securities, debt securities which Huntington
considers to be of comparable quality to the acceptable investments of the
Fund and other investments which Huntington considers consistent with such
strategies. In the case of the Ohio Funds, a Fund's alternative strategies may
give rise to income which is not exempt from federal or state taxes.
OPTIONS AND FUTURES CONTRACTS (ALL FUNDS OTHER THAN THE MONEY MARKET FUNDS)
A Fund may seek to increase its current return by writing covered call
options and covered put options on its portfolio securities or other
securities in which it may invest. A Fund receives a premium
22
<PAGE>
from writing a call or put option, which increases a Fund's return if the
option expires unexercised or is closed out at a net profit. A Fund may also
buy and sell put and call options on its securities for hedging purposes. When
a Fund writes a call option on a portfolio security, it gives up the
opportunity to profit from any increases in the price of the security above
the exercise price of the option. When it writes a put option, a Fund takes
the risk that it will be required to purchase a security from the option
holder at a price above the current market price of the security. A Fund may
terminate an option that it has written prior to expiration by entering into a
closing purchase transaction in which it purchases an option having the same
terms as the option written.
A Fund may purchase and sell futures contracts and related options to hedge
against changes in the value of securities it owns or expects to purchase.
Futures contracts on a variety of stock and bond indices are currently
available. An index is intended to represent a numerical measure of market
performance by the securities making up the index. A Fund may purchase and
sell futures contracts on any index approved for trading by the Commodity
Futures Trading Commission to hedge against general changes in market values
of securities which a Fund owns or expects to purchase. A Fund may also
purchase and sell put and call options on index futures or directly on the
underlying indices for hedging purposes. In addition, a Fund may purchase and
sell futures contracts and related options on individual debt securities which
a Fund owns or expects to purchase, if and when such futures contracts and
options become available.
In connection with its futures transactions, a Fund will be required to
deposit as "initial margin" an amount of cash and/or securities. Thereafter,
subsequent payments (referred to as "variation margin") are made to and from
the broker to reflect changes in the value of the futures contract. A Fund
will not generally purchase or sell futures contracts or purchase or sell
options on futures contracts if as a result the sum of initial margin deposits
on a Fund's existing futures contracts and options written by a Fund plus
premiums paid for outstanding options on futures contracts purchased by a
Fund, would exceed 5% of a Fund's net assets.
Options and futures transactions involve various risks, including the risk
that a Fund may be unable at times to close out its positions, that such
transactions may not accomplish their purposes because of imperfect market
correlations, or that Huntington or its Subadviser may not forecast market
movements correctly. Options and futures transactions involve costs and may
result in losses. The effective use of options and futures strategies by a
Fund is dependent upon, among other things, a Fund's ability to terminate
options and futures positions at times when Huntington or its Subadviser deems
it desirable to do so. Although a Fund will enter into an options or futures
contract position only if Huntington or its Subadviser believes that a liquid
secondary market exists for such options or futures contract, there is no
assurance that a Fund will be able to effect closing transactions at a
particular time or at an acceptable price.
The Funds generally expect that their options and futures transactions will
be conducted on recognized exchanges. In certain instances, however, a Fund
may purchase and sell options in the over-the-counter ("OTC") market. A Fund's
ability to terminate options in the OTC market may be more limited than for
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would be unable to meet their obligations
to a Fund. A Fund will, however, engage in OTC market transactions only when
appropriate exchange-traded transactions are unavailable and when, in the
opinion of Huntington, the pricing mechanism and liquidity of the OTC market
is satisfactory and the participants are responsible parties likely to meet
their contractual obligations.
23
<PAGE>
The use of options and futures strategies also involves the risk of
imperfect correlation between movements in the prices of options and futures
contracts and movements in the value of the underlying securities that are the
subject of a hedge. The successful use of these strategies further depends on
the ability of Huntington to forecast market movements correctly.
For more information about any of the options or futures portfolio
transactions described above, see the Statement of Additional Information.
FOREIGN INVESTMENTS
Except as otherwise limited in this Prospectus, a Fund may invest some or
all of its assets in securities principally traded in foreign markets. Since
foreign securities are normally denominated and traded in foreign currencies,
the value of a Fund's assets may be affected favorably or unfavorably by
currency exchange rates and exchange control regulation. Exchange rates with
respect to certain currencies may be particularly volatile. There may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those
in the United States. The securities of some foreign companies are less liquid
and at times more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally higher than in
the United States. Foreign settlement procedures and trade regulations may
involve certain risks (such as delays in payment or delivery of securities or
in the recovery of a Fund's assets held abroad) and expenses not present in
the settlement of domestic investments.
In addition, with respect to certain foreign countries, there is a
possibility of nationalization or expropriation of assets, confiscatory
taxation, political or financial instability and diplomatic developments which
could affect the value of investments in those countries. In certain
countries, legal remedies available to investors may be more limited than
those available with respect to investments in the United States or other
countries. The laws of some foreign countries may limit a Fund's ability to
invest in securities of certain issuers located in those countries. Special
tax considerations apply to foreign securities.
A Fund may buy or sell foreign currencies and forward foreign currency
exchange contracts for hedging purposes in connection with its foreign
investments.
A more detailed explanation of foreign investments, and the risks associated
with them, is included in the Statement of Additional Information.
REPURCHASE AGREEMENTS
Certain securities in which a Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
Government securities or other securities to a Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. A Fund or
its custodian will take possession of the securities subject to repurchase
agreements and these securities will be marked to market daily. To the extent
that the original seller does not repurchase the securities from a Fund, a
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Trustees believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor
of a Fund and allow retention or disposition of such securities. A Fund will
only enter into repurchase agreements with banks and other recognized
24
<PAGE>
financial institutions, such as broker/dealers, which are found by Huntington
to be creditworthy pursuant to guidelines established by the Trustees.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
A Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which a Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more
or less than the market value of the securities on the settlement date.
A Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so.
In connection with its ability to purchase securities on a when-issued or
delayed delivery basis, the Mortgage Securities Fund may enter into mortgage
"dollar rolls" in which it sells securities for delivery in the current month
and simultaneously contracts with the same counterparty to repurchase similar
(same type, coupon and maturity) but not identical securities on a specified
future date. The Mortgage Securities Fund gives up the right to receive
principal and interest paid on the securities sold. However, the Mortgage
Securities Fund would benefit to the extent of any difference between the
price received for the securities sold and the lower forward price for the
future purchase plus any fee income received. Unless such benefits exceed the
income, capital appreciation and gain or loss due to mortgage prepayments that
would have been realized on the securities sold as part of the mortgage dollar
roll, the use of this technique will diminish the investment performance of
the Mortgage Securities Fund compared with what such performance would have
been without the use of mortgage dollar rolls. The Mortgage Securities Fund
will hold and maintain in a segregated account until the settlement date, cash
or liquid high-grade debt securities in an amount equal to the forward
purchase price. The benefits derived from the use of mortgage dollar rolls may
depend upon Piper's ability to predict correctly mortgage prepayments and
interest rates. There is no assurance that mortgage dollar rolls can be
successfully employed. In addition, the use of mortgage dollar rolls by the
Mortgage Securities Fund while remaining substantially fully invested
increases the amount of its assets that are subject to market risk to an
amount that is greater than its net asset value, which could result in
increased volatility of the price of its shares. The Mortgage Securities Fund
may invest up to 35% of its total assets in securities purchased on a when-
issued or delayed delivery basis.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, a Fund may lend its portfolio
securities on a short-term basis to brokers, dealers or other financial
institutions. A Fund will only enter into loan arrangements with brokers,
dealers or other financial institutions which Huntington has determined are
creditworthy under guidelines established by the Trustees and must receive
collateral equal to at least 102% of the current market value of the
securities loaned. The collateral received when a Fund lends portfolio
securities must be valued daily and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. As a matter of fundamental policy, the aggregate value of all securities
loaned by a Fund may not exceed 20% of the Fund's total assets.
There is the risk that, when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and a Fund may, therefore,
lose the opportunity to sell the securities at a
25
<PAGE>
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions and limitations for
the purpose of reducing its exposure in specific situations. These investment
limitations are fundamental policies and may be changed with respect to any
Fund only by a vote of a majority of the outstanding shares of that Fund.
No Fund will:
(1)Except for the Ohio Funds, invest more than 5% of the value of its
total assets in the securities of any one issuer (this limitation does
not apply to securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities or to repurchase agreements
secured by such obligations);
(2)Invest 25% or more of the value of its total assets (i) in securities
of companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities), and (ii) with respect
to the Ohio Funds, in municipal obligations of one issuer or which are
related in such a way that, in the opinion of Huntington, an economic,
business or political development other than an Ohio state-wide,
national or international development, affecting one such obligation
would also affect the others in a similar manner. Such concentration
may occur as a result of changes in the market value of portfolio
securities, but such concentration may not result from investment;
(3)Except for investments by the Money Market Fund in commercial paper
issued under Section 4(2) of the Securities Act of 1933 and certain
other restricted securities which meet the criteria for liquidity as
established by the Trustees, invest more than 10% of the value of its
total assets in illiquid securities, including restricted securities,
repurchase agreements of over seven days' duration and OTC options; and
(4)Borrow in excess of 5% of its total assets (borrowings are permitted
only as a temporary measure for extraordinary or emergency purposes) or
pledge (mortgage) its assets as security for any indebtedness.
HOW THE FUNDS VALUE THEIR SHARES
Each Money Market Fund attempts to stabilize the net asset value of its
Trust Shares at $1.00 by valuing its portfolio securities using the amortized
cost method. The net asset value per Trust Share is determined by adding the
interest of the Trust Shares in the value of all securities and other assets
of a Money Market Fund, subtracting the interest of the Trust Shares in the
liabilities of a Money Market Fund and those attributable to Trust Shares, and
dividing the remainder by the total number of Trust Shares outstanding. A
Money Market Fund cannot guarantee that its net asset value will always remain
at $1.00 per share.
The net asset value for Trust Shares of each of the other Funds is
determined by adding the interest of the Trust Shares in the market value of
all securities and other assets of a Fund, subtracting the interest of the
Trust Shares in the liabilities of a Fund and those attributable to Trust
Shares, and dividing the remainder by the total number of Trust Shares
outstanding. The net asset value of a Fund's Trust Shares will differ from
that of Investment Shares due to the expense of the Rule 12b-1 fee applicable
to a Fund's Investment Shares.
26
<PAGE>
Securities for which market quotations are readily available are stated at
market value. Short-term investments with remaining maturities of 60 days or
less at the time of purchase are stated at amortized cost, which approximates
market value. Debt securities for which market quotations are not readily
available will be valued on the basis of valuations provided by pricing
services approved by the Trustees. Pricing services often use information with
respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, and various relationships between
securities in determining value. All other Fund assets are valued at their
fair value following procedures approved by the Trustees.
The Money Market Funds calculate net asset value per Trust Share as of the
close of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on
each Business Day. The other Funds calculate net asset value per Trust Share
as of the close of the New York Stock Exchange (currently 4:00 p.m. Eastern
Time) on each Business Day. As used herein, a "Business Day" constitutes
Monday through Friday except (i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no shares are tendered
for redemption and no orders to purchase shares are received; (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day and (iv)
other civil holidays, such as Veteran's Day and Martin Luther King Day, when
the Federal Reserve Banks or the financial markets are closed.
HOW TO BUY TRUST SHARES
Investors may purchase Trust Shares in each of the Funds through procedures
established by the Distributor in connection with the requirements of
fiduciary, advisory, agency and other similar accounts maintained by or on
behalf of customers of Huntington or its affiliates or correspondent banks
(collectively, the "Banks"). State securities laws may require banks and
financial institutions purchasing shares for their customers to register as
brokers pursuant to such laws. Trust Shares of each Fund are purchased at the
appropriate net asset value per Trust Share next determined after the order is
transmitted to the Funds' transfer agent, SEI Fund Resources (the "Transfer
Agent"). Trust Shares in each Money Market Fund other than the Ohio Municipal
Money Market Fund purchased prior to 1:00 p.m. (Eastern Time) begin earning
dividends that day; Trust Shares in the Ohio Municipal Money Market Fund
purchased prior to 10:30 a.m. (Eastern Time) begin earning dividends that day;
Trust Shares purchased after such time begin earning dividends on the
following day.
Trust Shares will normally be held in the name of the Bank effecting the
purchase on the shareholder's behalf, and it is the Bank's responsibility to
transmit purchase or redemption orders to the Transfer Agent. Shareholders
will receive a confirmation of each transaction in their account, which will
show the total number of Trust Shares of each Fund owned. The Funds will not
issue certificates representing Trust Shares.
If a shareholder pays for Trust Shares by check and the check does not
clear, the purchase will be cancelled, and such shareholder may be charged a
fee and will be liable for any losses incurred. Neither initial nor subsequent
investments will be made by third party check. If a shareholder pays for Trust
Shares with a check drawn from a bank outside the United States, the check
will be sent to the bank for collection prior to placing the trade in the
shareholder's account, and approximately four to five weeks will be required
before the trade will be processed. For more information or assistance
regarding the purchase of Trust Shares of any Fund, call the Mutual Fund
Services Center at (in Ohio) 614-480-5580, or (outside the 614 Area Code) 800-
253-0412.
27
<PAGE>
From time to time, the Trust may temporarily suspend the offering of shares
of one or more of the Funds or any class thereof. During the period of any
such suspension and depending on the reasons for the suspension, persons who
are already shareholders of any such Fund or class may be permitted to
continue to purchase additional shares and to have dividends reinvested. The
Trust or the Distributor may refuse any order to purchase shares or waive any
minimum purchase requirements.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Trust Shares of a Fund is $1,000.
Subsequent investments in a Fund may be made at any time in amounts of at
least $500.
SYSTEMATIC INVESTMENT PROGRAM
Once an account has been opened, holders of Trust Shares of a Fund may add
to their investment on a regular basis in minimum amounts of at least $50.
Under this program, funds will be automatically withdrawn periodically from
the shareholder's banking account and invested in Trust Shares of a Fund at
the applicable public offering price per share next determined after an order
is received by the Transfer Agent. Shareholders may apply for participation in
this program by contacting the Mutual Fund Services Center.
If the shareholder's automatic investment program payment does not clear,
the purchase will be cancelled and the shareholder may be charged a fee and
will be liable for any losses incurred. Any subsequent such occurrences may
result in the cancellation of the automatic investment program feature of the
shareholder's account.
HOW TO EXCHANGE TRUST SHARES AMONG THE FUNDS
Shareholders may exchange Trust Shares in any Fund for Trust Shares in any
other Fund at the respective net asset values per Trust Share next determined
after receipt of the request in good order. This privilege is available to
shareholders resident in any state in which the Fund shares being acquired may
be sold. Exchange requests received prior to 4:00 p.m. (Eastern Time) will be
effected at the next determined net asset value per Trust Share as of that
Business Day. Exchange requests received after 4:00 p.m. (Eastern Time) will
be effected at the next determined net asset value per Trust Share on the
following Business Day. Holders of Trust Shares automatically receive the
Trust's telephone exchange service unless they have instructed their Bank to
the contrary. Exchange instructions given by telephone may be electronically
recorded and will be binding upon the shareholder. Because telephone exchange
requests will be honored from anyone who provides the correct information
(described below), this service involves a possible risk of loss if someone
uses the service without the shareholder's permission.
1.By Phone:Mutual Fund Services Center (in Ohio) 614-480-5580 (outside the
614 Area Code) 800-253-0412
2.By Mail:The Huntington Trust Company, N.A. 41 South High Street (HC 1116)
Columbus, OH 43287 Attn: Mutual Fund Services Center
In order to make an exchange, shareholders will be required to maintain the
applicable minimum account balance in each Fund in which shares are owned and
must satisfy the minimum initial and subsequent purchase amounts of the Fund
into which shares are exchanged.
28
<PAGE>
To exchange by letter or by telephone, a shareholder must state (1) the name
of the Fund from which the exchange is to be made (and designating that Trust
Shares are involved), (2) the name(s) and address on the shareholder account,
(3) the account number, (4) the dollar amount or number of Trust Shares to be
exchanged, and (5) the Fund into which the Trust Shares are to be exchanged.
Written exchange requests must be endorsed by the shareholder, and it may be
necessary to have the shareholder's signature guaranteed by a member firm of a
national securities exchange or by a commercial bank, savings and loan
association or trust company. Further documentation may be required, and a
signature guarantee is generally required from corporations, executors,
administrators, trustees and guardians. (See "Redeeming By Mail" below.)
An exchange is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may
be realized.
The Trust's exchange privileges may be terminated or modified. Except as
indicated below, shareholders will be given 60 days' prior notice of any such
termination or any material amendment of existing exchange privileges. No
notice will be given when the only material effect of an amendment is to
reduce or eliminate any charges payable at the time of an exchange or under
certain extraordinary circumstances, such as in connection with the suspension
of the sale or redemption of Fund shares. If reasonable procedures are not
followed by the Funds, they may be liable for losses due to unauthorized or
fraudulent telephone instructions.
HOW TO REDEEM TRUST SHARES
Shareholders may redeem all or any portion of the Trust Shares in their
account on any Business Day at the appropriate net asset value per Trust Share
next determined after a redemption request in proper form is received by the
Transfer Agent. As described below, shareholders may redeem Trust Shares by
telephone or in writing, and may receive redemption proceeds by wire.
If an investor purchases Trust Shares by check and wishes to redeem those
Trust Shares before the check has cleared, the Trust may delay payment of any
redemption proceeds until the check clears. Under unusual circumstances, a
Fund may suspend redemptions or postpone payment for more than seven days, as
permitted by federal securities law.
REDEEMING BY TELEPHONE
Telephone requests for redemption may be made by calling the Mutual Fund
Services Center at (in Ohio) 614-480-5580 or (outside the 614 Area Code) 800-
253-0412.
Shareholders of the Money Market Fund, Ohio Municipal Money Market Fund and
U.S. Treasury Money Market Fund who request a redemption before 10:30 a.m.
(Eastern Time) will usually have the proceeds wired the same day but will not
be entitled to that day's dividend; redemption requests received after 10:30
a.m. (Eastern Time) will receive that day's dividend and the proceeds will
normally be wired the following Business Day. Telephone requests for
redemptions in the Income and Equity Funds must be received prior to 4:00 p.m.
(Eastern Time) to receive that day's net asset value and the redemption
proceeds will be paid in federal funds, normally on the next Business Day.
Holders of Trust Shares automatically receive the Trust's telephone
redemption service unless they have instructed their Bank to the contrary.
Because telephone redemption requests will be honored from anyone who provides
the correct information (described below), this service involves a possible
risk of loss if someone uses the service without the shareholder's permission.
Anyone making a telephone redemption request must furnish (1) the name and
address of record of the registered
29
<PAGE>
owner(s), (2) the account number, (3) the amount to be withdrawn, and (4) the
name of the person making the request. Checks for telephone redemptions will
be issued only to the registered shareholder(s) and mailed to the last address
of record. If at anytime the Trust shall determine it necessary to terminate
or modify this method of redemption, shareholders will be promptly notified.
Telephone redemption instructions may be recorded.
In the event of extreme economic or market conditions, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as through written request, should be
considered. If reasonable procedures are not followed by the Funds, they may
be liable for losses due to unauthorized or fraudulent telephone instructions.
REDEEMING BY MAIL
Redemption requests may be made by writing The Huntington Trust Company,
N.A., 41 South High Street (HC 1116), Columbus, Ohio 43287, Attention: Mutual
Fund Services Center. Written redemption requests must be signed by the
shareholder, and it may be necessary to have the shareholder's signature
guaranteed. Further documentation may be required, and a signature guarantee
is generally required from corporations, executors, administrators, trustees,
and guardians.
Signatures on written redemption requests must be guaranteed by:
--a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the FDIC;
--a member of the New York, American, Midwest, or Pacific Stock Exchanges;
--a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
--any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and the Transfer Agent have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Funds and the Transfer Agent reserve the
right to amend these standards at any time without notice.
Shares will be redeemed at the net asset value determined as of the end of
the Business Day on which the written redemption request is received by the
Transfer Agent.
Redemptions with a value of up to $100,000 will be wired at a shareholder's
request, and a separate charge for this service may apply. Redemption proceeds
may be wired to any bank account specified by the shareholder in writing. If a
shareholder requests a wire transfer by telephone, redemption proceeds may be
wired only to the bank previously designated by the shareholder or otherwise
designated by the shareholder in writing as described below. If a shareholder
has authorized expedited wire redemption, Trust Shares will be redeemed at the
appropriate net asset value per Trust Share next determined after receipt of
the request, and the proceeds normally will be sent to the designated bank
account the following Business Day. In other circumstances, redemption
proceeds will normally be wired within seven days. The proceeds from the
redemption of Shares purchased by check are not available, and the shares may
not be exchanged, until the check has cleared. To change the name of the bank
account to which redemption proceeds will be wired, a shareholder should send
a written request (and, if necessary, with the shareholder's signature
guaranteed) to The Huntington
30
<PAGE>
Trust Company, N.A., 41 South High Street (HC 1131), Columbus, Ohio 43287,
Attention: Mutual Fund Services Center.
If a shareholder owns fewer shares of a Fund than the minimum amount set by
the Trustees due to shareholder redemptions (presently, shares with a value of
$1,000 or less), the Trust may redeem those shares and forward the redemption
proceeds to the shareholder. A shareholder will receive at least 30 days'
written notice before the Trust redeems shares, and an additional purchase of
shares of the appropriate Fund can be made to avoid redemption. This
requirement does not apply because of changes to the Fund's net asset value.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business. The Huntington Trust Company, N.A.
("Huntington"), Huntington Center, 41 South High Street, Columbus, Ohio 43287,
serves as investment adviser to the Funds pursuant to an investment advisory
agreement with the Trust. Huntington is an indirect wholly-owned subsidiary of
Huntington Bancshares Incorporated, a registered bank holding company with
executive offices located at Huntington Center, 41 South High Street,
Columbus, Ohio 43287.
Subject to the supervision of the Trustees, Huntington provides a continuous
investment program for the Funds, including investment research and management
with respect to all securities, instruments, cash and cash equivalents in the
Funds. The Trust pays Huntington management fees, computed daily and payable
monthly, for each of the Funds at the following annual rates: Money Market
Fund and Ohio Municipal Money Market Fund: 0.30% of the first $500 million of
average daily net assets of the Fund, 0.25% of the next $500 million, and
0.20% of any amount over $1 billion; U.S. Treasury Money Market Fund: 0.20% of
the Fund's average daily net assets; Growth Fund and Income Equity Fund: 0.60%
of the Fund's average daily net assets; and Mortgage Securities Fund, Ohio
Tax-Free Fund, Fixed Income Securities Fund and Short/Intermediate Fixed
Income Securities Fund: 0.50% of the Fund's average daily net assets.
Huntington may periodically waive all or a portion of its management fee with
respect to any Fund to increase the net income of the Fund available for
distribution as dividends.
Adviser's Background. Huntington is an indirect, wholly-owned subsidiary of
Huntington Bancshares Incorporated ("HBI"). With $20.8 billion in assets as of
December 31, 1996, HBI is a major Midwest regional bank holding company.
Through its subsidiaries and affiliates, HBI offers a full range of services
to the public, including: commercial lending, depository services, cash
management, brokerage services, retail banking, international services,
mortgage banking, investment advisory services, and trust services.
Huntington, a recognized investment advisory and fiduciary services subsidiary
of HBI, provides investment advisory services for corporate, charitable,
governmental, institutional, personal trust and other assets. Huntington Trust
is responsible for $12.0 billion of assets, and has investment discretion over
approximately $2.8 billion of that amount.
Huntington has served as investment adviser to mutual funds since 1987 and
has over 75 years of experience providing investment advisory services to
fiduciary accounts.
As part of its regular banking operations, Huntington may make loans to
public companies. Thus, it may be possible, from time to time, for the Funds
to hold or acquire the securities of issuers which are also lending clients of
Huntington. The lending relationship will not be a factor in the selection of
securities for the Funds.
31
<PAGE>
Philip H. Farrington, a Vice President of Huntington, has been a co-
portfolio manager of the Growth Fund since April of 1994. Mr. Farrington has
more than 30 years of investment management experience. He has held the
positions of Chief Investment Officer, Portfolio Manager, and Director of
Research for major banks and asset management companies. He is a member of the
equity management team at Huntington. Mr. Farrington is a graduate of Harvard
University.
James Gibboney, Jr., a Vice President of Huntington, has been a co-portfolio
manager of the Growth Fund since November of 1993. Mr. Gibboney, a Chartered
Financial Analyst, serves as one of Huntington's balanced portfolio managers.
Prior to joining Huntington in 1989, he gained more than 11 years of
investment management experience as portfolio manager for a major investment
firm, a trust company, and a state government agency. He received his
undergraduate degree in Finance from the Ohio State University and an MBA from
Xavier University.
James M. Buskirk, Chief Investment Officer of Huntington, has been the
portfolio manager of the Income Equity Fund since January of 1991. As Chief
Investment Officer of Huntington, Mr. Buskirk has ultimate responsibility for
all investment activities. He brings more than 14 years of investment
experience to Huntington. His background includes extensive experience in
managing both personal and employee benefit balanced portfolios for a major
investment advisory company and bank holding company. Mr. Buskirk is a
Chartered Financial Analyst. He received his undergraduate degree in Finance
from the Ohio State University and his MBA from the University of Oregon.
William G. Doughty, a Vice President of Huntington, has been the portfolio
manager of the Ohio Tax-Free Fund since its inception. Mr. Doughty has more
than 25 years of experience in the investment field. He is responsible for
fixed income portfolio management and heads the fixed income trading operation
at Huntington. Mr. Doughty is a graduate of Franklin University with a degree
in Business Administration and has an MBA from the University of Dayton.
Stephen M. Geis, a Vice President of Huntington, has been the portfolio
manager of the Short/Intermediate Fixed Income Securities Fund and the Fixed
Income Securities Fund since October of 1989. Mr. Geis, a Chartered Financial
Analyst, serves as Huntington's senior fixed income manager. Prior to joining
Huntington in 1988, he spent nearly ten years as a fixed income manager for a
major insurance company and treasurer of a regional bank. Mr. Geis received
his undergraduate degree from the College of Wooster, his MBA from the
University of Dayton, and his Juris Doctorate from Capital University.
Sub-Adviser. Under the terms of a sub-advisory contract between Huntington
and Piper, Piper will assist Huntington in the purchase or sale of the
Mortgage Securities Fund's portfolio instruments. Huntington pays Piper
management fees, computed and paid monthly, for the Mortgage Securities Fund
at an annual rate of 0.15% of the Mortgage Securities Fund's average daily net
assets.
Sub-Adviser's Background. Piper, located at Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota 55440, was formed in 1985. Piper is a
wholly-owned subsidiary of Piper Jaffray Companies Inc., a publicly held
corporation engaged through its subsidiaries in various aspects of the
financial services industry. Piper serves as the investment adviser to a
number of open-end and closed-end investments companies and to various other
concerns, including pension and profit-sharing funds, corporate funds and
individuals. As of March 31, 1996, Piper rendered investment advice with
regard to approximately $9.3 billion in assets.
Worth Bruntjen, a Senior Vice President of Piper, has been a senior
portfolio manager of the Mortgage Securities Fund since its inception. Mr.
Bruntjen is a co-manager of one open-end mutual
32
<PAGE>
fund distributed by Piper Jaffray Inc., and three closed-end bond funds listed
on the New York Stock Exchange. He is also fixed income manager for a variety
of client portfolios, including foundations, pension plans, state funds, and
individuals. He is a graduate of the University of Minnesota. Mr. Bruntjen has
approximately 29 years of investment experience.
Bruce D. Salvog, a Senior Vice President of Piper, assists Mr. Bruntjen as a
co-manager of the portfolio investments of the Mortgage Securities Fund. Mr.
Salvog has been a Senior Vice President of Piper since 1992 and was a
portfolio manager at Kennedy Associates, Inc., in Seattle, Washington, from
1984 to 1992. He is also fixed income manager for a variety of client
portfolios, including foundations, pension plans, state funds and individuals.
He is a graduate of Harvard University and has over 26 years of financial
experience.
DISTRIBUTION OF TRUST SHARES
SEI Financial Services Company, One Freedom Valley Road, Oaks, Pennsylvania
19456, is the principal distributor for shares of each Fund. It is a Delaware
corporation and is the principal distributor for a number of investment
companies.
ADMINISTRATION OF THE FUNDS
SEI Fund Resources, an affiliate of the Distributor, provides certain
administrative personnel and services necessary to operate the Funds. For
these services, each of the Funds pays a fee, computed and payable daily, to
SEI Fund Resources at an annual rate of 0.11% of their average daily net
assets. SEI Fund Resources has entered into an agreement with Huntington
pursuant to which Huntington provides certain administrative services to the
Funds. The fees paid to Huntington under this agreement are paid by SEI Fund
Resources and not by the Funds.
CUSTODIAN, RECORDKEEPER, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Huntington acts as custodian and recordkeeper of the Trust's investments and
other assets, except for the Mortgage Securities Fund, where Huntington acts
only as custodian. Huntington receives custody and recordkeeping fees of 5.6
basis points (0.056%) for each Fund except the Mortgage Securities Fund, for
which Huntington receives 2.6 basis points (0.026%) for custody services only.
American Data Services, Inc., acts as recordkeeper for the Mortgage Securities
Fund for which it receives an annual fee of $35,000. SEI Fund Resources serves
as the Trust's transfer agent and dividend disbursing agent. SEI Fund
Resources has entered into an agreement with State Street Bank and Trust
Company and Huntington, pursuant to which State Street Bank and Huntington
provide certain transfer agency services to the Funds. The fees paid under
this agreement are paid by SEI Fund Resources and not by the Funds.
INDEPENDENT ACCOUNTANTS
Effective in 1997, the independent accountants for the Trust are KPMG Peat
Marwick, Columbus, Ohio.
DISTRIBUTIONS AND TAXES
MONEY MARKET FUNDS
All of the net income of both classes of shares of each Money Market Fund is
declared each Business Day as a dividend to shareholders of record at the time
of the declaration. A Money Market Fund's net income from the time of the
immediately preceding dividend declaration consists of interest
33
<PAGE>
accrued or discount earned during such period (including both original issue
and market discount) on the Money Market Fund's securities, less amortization
of premium and the estimated expenses of each class of shares of the Money
Market Fund. Shares purchased prior to 10:30 a.m. (Eastern Time) begin earning
dividends that day. Shares purchased after such time begin earning dividends
on the following day. Dividends are declared daily and payable monthly.
Although none of the Money Market Funds expects to realize long-term capital
gains, any net long-term capital gains that may be realized will be paid
annually. Each Money Market Fund expects to distribute any net realized short-
term gains once each year, although it may distribute them more frequently if
necessary in order to maintain the net asset value of each Money Market Fund
at $1.00 per share.
OTHER FUNDS
Dividends, if any, from the investment income of each Fund other than the
Money Market Funds are declared and paid monthly to both classes of shares.
Distributions resulting from any net realized capital gains of any Fund will
be paid at least annually.
DISTRIBUTION OPTIONS
Shareholders of the Money Market Funds may choose to receive all
distributions in cash or to reinvest all distributions in additional Trust
Shares of a Fund. Shareholders of other Funds may choose to receive all
distributions in cash, to reinvest all distributions in additional Trust
Shares, or to reinvest all capital gains distributions in additional Trust
Shares and to receive all other distributions in cash. Shareholders may choose
a distribution option by notifying the Mutual Fund Services Center of their
selection. If a shareholder fails to choose a distribution option, all
distributions will be reinvested in additional Trust Shares of the Fund making
the distribution.
FEDERAL INCOME TAXES
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for
it to be relieved of federal taxes on income (and gains, if any) paid to
shareholders in the form of dividends. In order to accomplish this goal, each
Fund must, among other things, distribute substantially all of its ordinary
income (and net short-term capital gains, if any) on a current basis and
maintain a portfolio of investments which satisfies certain diversification
criteria.
All distributions by a Fund to a shareholder (with the exception of
distributions of tax-exempt income by the Ohio Funds and other than long-term
capital gains distributions, if any) will be taxable as ordinary income to the
extent of a Fund's current and accumulated "earnings and profits." However,
shareholders not subject to tax on their income generally will not be required
to pay tax on amounts distributed to them. The dividends received deduction
for corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to the Fund if the Fund were a regular corporation, and to the
extent designated by the Fund as so qualifying. The Money Market Funds and the
Income Funds do not expect to pay any distributions that would be eligible for
the dividends received deduction. If a Fund were to have net long-term capital
gains in excess of short-term losses in a particular year, distributions by a
Fund of those gains will be taxable to a shareholder as long-term capital
gains, regardless of how long a shareholder has held the shares. If a
shareholder disposes of shares at a loss before holding such shares for longer
than six months, such loss will be treated as a long-term capital loss to the
extent the shareholder has received a long-term capital gains dividend on the
shares.
34
<PAGE>
In general, dividends paid by the Ohio Funds that are designated by the
Funds as "exempt-interest dividends" will be exempt from federal regular
income tax. However, under the Internal Revenue Code of 1986, as amended (the
"Code"), dividends paid by the Ohio Funds attributable to interest on certain
private activity bonds issued after August 7, 1986, must be included as an
item of tax preference in computing alternative minimum taxable income for the
purpose of determining liability (if any) for the 26%-28% federal alternative
minimum tax for individuals and the 20% federal alternative minimum tax for
corporations. In addition, exempt-interest dividends paid by the Ohio Funds
will be included in a corporation's "adjusted current earnings" for purposes
of the alternative minimum tax. Thus, a corporation's alternative minimum tax
base would generally be increased by 75% of interest received which is
excluded from gross income for regular federal income tax purposes (other than
dividends paid by the Ohio Funds attributable to interest on certain private
activity bonds issued after August 7, 1986, which interest would already be
included in alternative minimum taxable income as a specific item of tax
preference).
Early in each year each Fund will notify each of its shareholders of the
amount and the federal income tax status of the distributions paid or deemed
paid to the shareholders by the Fund during the preceding year.
If a shareholder receives an exempt-interest dividend with respect to a
share and holds the share for six months or less, any loss on the sale or
exchange of the share will be disallowed to the extent of the amount of such
exempt-interest dividend. The Treasury Department is authorized to issue
regulations reducing the period to not less than 31 days for regulated
investment companies that regularly distribute at least 90% of their net tax-
exempt interest. No such regulations have been issued as of the date of this
Prospectus.
Distributions will be taxable as described above whether received in cash or
in shares through the reinvestment of distributions. A dividend paid to a
shareholder by a Fund in January of a year generally is deemed to have been
received by the shareholder on December 31 of the preceding year, if the
dividend was declared and payable to shareholders of record on a date in
October, November or December of that preceding year.
Additional information regarding federal income taxes is contained in the
Statement of Additional Information. The foregoing is a general and
abbreviated summary of certain applicable provisions of the Code and Treasury
regulations currently in effect. The Code and regulations are subject to
change by legislative or administrative action. A Fund's distributions may
also be subject to state and local taxes. Shareholders should consult their
own tax adviser to determine the precise effect of an investment in a Fund on
their particular tax situation.
OHIO PERSONAL INCOME TAXES
Dividends received from the Ohio Funds that are derived from interest on
Ohio tax-exempt securities are exempt from the Ohio personal income tax.
Specific state statutes authorizing the issuance of certain Ohio tax-exempt
securities provide that the interest on and gain from the sale or other
disposition of such obligations are exempt from all taxation in the State.
Dividends on shares of an Ohio Fund which are attributable to interest on or
gain from the sale of obligations issued pursuant to such statutes should be
exempt from the Ohio personal income tax. Ohio municipalities may not impose
income taxes on dividends or any intangible property including shares of the
Ohio Funds, except that municipalities that taxed the types of intangible
income which were not exempt from municipal income taxation on or before April
1, 1986, may tax such intangible income if such a tax was approved by the
electors of the municipality in an election held on November 8, 1988. Ohio
residents
35
<PAGE>
should consult their own tax adviser regarding potential municipal income tax
liability in connection with their investment in an Ohio Fund. The description
in this paragraph, which is only a summary of the Ohio tax treatment of
dividends paid by the Ohio Funds, is based upon current statutes and
regulations and upon current policies of the Ohio Department of Taxation, all
of which are subject to change.
ORGANIZATION OF THE TRUST
The Trust was organized as a Massachusetts business trust on February 10,
1987. A copy of the Trust's Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The Commonwealth
of Massachusetts.
The Trust is an open-end management investment company, whose Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities. The
shares in any one portfolio may be offered in two or more separate classes. As
of the date of this Prospectus, the Trustees have established two classes of
shares, known as Trust Shares and Investment Shares, in the Money Market Fund,
the Ohio Municipal Money Market Fund, the U.S. Treasury Money Market Fund, the
Growth Fund, the Income Equity Fund, the Mortgage Securities Fund, the Ohio
Tax-Free Fund, the Fixed Income Securities Fund, and the Short/ Intermediate
Fixed Income Securities Fund.
Trust Shares and Investment Shares of a Fund are fully transferable. Each
class is entitled to dividends from the respective class assets of the Fund as
declared by the Trustees, and if the Trust (or the Fund) were liquidated, the
shareholders of each class would receive the net assets of the Fund
attributable to each respective class.
VOTING RIGHTS
Shareholders are entitled to one vote for each share held on the record date
for any action requiring a vote by the shareholders, and a proportionate
fractional vote for each fractional share held. Shareholders of the Trust will
vote in the aggregate and not by Fund or class except (i) as otherwise
expressly required by law or when the Trustees determine that the matter to be
voted upon affects only the interests of the shareholders of a particular Fund
or class, and (ii) only holders of Investment Shares will be entitled to vote
on matters submitted to shareholder vote with respect to the Rule 12b-1 Plan
applicable to such class.
As of April 1, 1997, Huntington, acting in various capacities for numerous
accounts, was the owner of record of approximately 353,829,388 shares (99.9%)
of the Trust Shares of the Money Market Fund; 60,342,744 shares (99.9%) of the
Trust Shares of the Ohio Municipal Money Market Fund; 493,804,763 shares
(99.9%) of the Trust Shares of the U.S. Treasury Money Market Fund; 5,115,049
shares (98.9%) of the Trust Shares of the Growth Fund; 5,774,349 shares
(98.8%) of the Trust Shares of the Income Equity Fund; 4,970,340 shares
(98.7%) of the Trust Shares of the Mortgage Securities Fund; 2,998,781 shares
(98.9%) of the Trust Shares of the Ohio Tax-Free Fund; 6,976,395 shares
(99.5%) of the Trust Shares of the Fixed Income Securities Fund; and 6,230,866
shares (99.2%) of the Trust Shares of the Short/Intermediate Fixed Income
Securities Fund, and therefore, may, for certain purposes, be deemed to
control the respective Funds and be able to affect the outcome of certain
matters presented for a vote of shareholders.
As of April 1, 1997, National Financial Services Corp., New York, New York,
was the owner of record of approximately 45,114,898 shares (44.0%) and
Huntington, acting in various capacities for numerous accounts, was the owner
of 24,157,598 shares (23.6%) of the Investment Shares of the
36
<PAGE>
Money Market Fund; as of April 1, 1997, Huntington, acting in various
capacities for numerous accounts, was the owner of record of approximately
61,293,549 shares (82.7%) of the Investment Shares of the Ohio Municipal Money
Market Fund; as of April 1, 1997, William J. Umberg, Cincinnati, OH, was the
owner of 5,307 shares (6.2%) and Cincinnati Institute of Fine Arts,
Cincinnati, OH, was the owner of 4,619 shares (5.4%) of the Investment Shares
of the Fixed Income Securities Fund; as of April 1, 1997, Alex Barna, Shaker
Heights, OH, was the owner of 26,703 Shares (13,8%) of the Investment Shares
of the Mortgage Securities Fund; as of April 1, 1997, Huntington, acting in
various capacities for numerous accounts, was the owner of 21,621,955 shares
(47.6%) and Allied Fidelity Insurance Co., Indianapolis, Indiana, was the
owner of 3,784,973 shares (8.3%) of the Investment Shares of the U.S. Treasury
Money Market Fund; as of April 1, 1997, Ursula E.M. and William J. Umberg,
Cincinnati, OH, was the owner of 9,125 shares (11.1%), Florence M. and Ralph
E. Brinkman, Grove City, OH, was the owner of 13,977 shares (16.9%), John W.
and Arlene J. Warbritton, Westerville, OH, was the owner of 6,030 shares
(7.3%), and Michael M. and Mary Ann Machowsky, Jr., Rossford, OH, was the
owner of 4,612 shares (5.6%) of the Investment Shares of the Ohio Tax-Free
Fund. Such persons or entities may, for certain purposes, be deemed to control
the respective Funds and be able to affect the outcome of certain matters
presented for a vote of shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders, but may hold special meetings from time to time.
Trustees may be removed by the Trustees or by shareholders at a meeting
called for that purpose. For information about how shareholders may call such
a meeting and communicate with other shareholders for that purpose, see the
Statement of Additional Information.
To the extent that matters arise requiring a shareholder vote in which
Huntington may have a conflict of interest, Huntington will engage in a voting
practice known as reflexive voting, whereby the votes of those shares over
which it exercises discretion will be voted in proportion to the votes cast by
the other record owners.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Trust or a particular
Fund or a particular class of shares of the Trust or a Fund means the
affirmative vote of the lesser of (a) more than 50% of the outstanding shares
of the Trust or such Fund or such class, or (b) 67% or more of the shares of
the Trust or such Fund or such class present at a meeting at which the holders
of more than 50% of the outstanding shares of the Trust or such Fund or such
class are represented in person or by proxy.
PERFORMANCE DATA AND COMPARISONS
Yield and total return data for both classes of shares may, from time to
time, be included in advertisements about the Funds.
Each of the Money Market Funds may show its yield and effective yield for
both classes of shares. A Money Market Fund's yield represents an
annualization of the change in value of a shareholder account excluding any
capital changes in the Fund for a specific seven-day period. Effective yield
compounds the Money Market Fund's yield for a year and is, for that reason,
greater than the Money Market Fund's yield.
Yield for both classes of shares of each of the other Funds is calculated by
dividing the Fund's annualized net investment income per share during a recent
30-day period by the maximum public offering price per share on the last day
of that period. With respect to the Ohio Funds, the tax-
37
<PAGE>
equivalent yield of each class of shares shows the effect on performance of
the tax-exempt status of distributions received from an Ohio Fund. Tax-
equivalent yield reflects the approximate yield that a taxable investment must
earn for shareholders at stated income levels to produce an after-tax yield
equivalent to an Ohio Fund's tax-exempt yield. Total return for the one-year
period and for the life of a Fund through the most recent calendar quarter
represents the average annual compounded rate of return on a $1,000 investment
in each class of the Fund. Total return may also be presented for other
periods.
Yield, effective yield, tax-equivalent yield, and total return will be
calculated separately for Trust Shares and Investment Shares. Because
Investment Shares are subject to 12b-1 fees, the yield, effective yield, tax-
equivalent yield, and total return for Investment Shares will be lower than
that of Trust Shares for the same period. In addition, the sales load
applicable to Investment Shares of the Growth Fund, Mortgage Securities Fund,
Ohio Tax-Free Fund and Fixed Income Securities Fund also contributes to a
lower total return for such Funds' Investment Shares. The total return figures
quoted in advertisements will normally reflect the effect of the maximum sales
load. However, from time to time, these advertisements may include total
returns which do not reflect the effect of an applicable sales load.
All data is based on a Fund's past investment results and is not intended to
indicate future performance. Investment performance for both classes is based
on many factors, including market conditions, the composition of a Fund's
portfolio, and the operating expenses of a Fund or a particular class.
Investment performance also often reflects the risks associated with the
Fund's investment objective and policies. These factors should be considered
when comparing a Fund's investment results to those of other mutual funds and
other investment vehicles.
From time to time, advertisements for a Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare a
Fund's performance to certain indices.
SHAREHOLDER INQUIRIES
Shareholder inquiries regarding the Funds should be directed to The
Huntington Trust Company N.A., Huntington Center, 41 South High Street,
Columbus, Ohio 43287, Attn: Mutual Fund Services Center.
OTHER CLASSES OF SHARES
Each of the Funds also offers another class of shares called Investment
Shares. Investment Shares are sold primarily through The Huntington Investment
Company, Huntington Personal Bankers or the Mutual Fund Services Center
pursuant to respective agreements between The Huntington Investment Company or
The Huntington Trust Company, N.A. and the Distributor. Investment Shares are
sold at net asset value plus, in the case of the Growth Fund, the Income
Equity Fund, the Mortgage Securities Fund, the Ohio Tax-Free Fund, the Fixed
Income Securities Fund and the Short/Intermediate Fixed Income Securities
Fund, an applicable sales charge. Purchases of Investment Shares are subject
to a minimum initial investment of $1,000.
Trust Shares and Investment Shares of any Fund are subject to certain of the
same expenses; however, Investment Shares are distributed under a Rule 12b-1
Plan pursuant to which the Distributor is paid a fee based upon a percentage
of the average daily net assets attributable to a Fund's Investment Shares.
Expense differences between a Fund's Trust Shares and Investment Shares may
affect the performance of each class.
38
<PAGE>
Investors may obtain information about Investment Shares by contacting The
Huntington Investment Company, Huntington Personal Bankers or the Mutual Fund
Services Center at 614/480-5580 (in Ohio) or 800/253-0412 (outside the 614
Area Code).
PENDING LEGAL PROCEEDINGS RELATING TO PIPER
A number of complaints and arbitrations have been filed against Piper
relating to several other investment companies for which Piper acts or has
acted as investment adviser or subadviser. These lawsuits and arbitrations do
not involve the Mortgage Securities Fund. Piper and its affiliate, Piper
Jaffray Companies, Inc., have also been subject to regulatory inquiries
related to various funds or assets managed by Piper. Certain regulatory
inquiries have been settled, including inquiries by the National Association
of Securities Dealers, Inc. and the State of Minnesota. Piper does not believe
that any outstanding complaint, action in arbitration or regulatory inquiry
will have a material adverse effect upon its ability to perform under its
agreement with Huntington. See "Pending Litigation Relating to Piper" in the
Combined Statement of Additional Information.
APPENDIX I
Rule 2a-7, as amended, defines the terms NRSRO, Eligible Securities, Unrated
Securities, First Tier Securities and Second Tier Securities in establishing
risk limiting conditions for money market mutual funds.
A summary of those definitions follows.
NRSRO is any nationally recognized statistical rating organization as that
term is used in the Securities Exchange Act of 1934, that is not an affiliated
person of the issuer, guarantor or provider of credit support for the
instrument. (While the Appendix to the Statement of Additional Information
identifies each NRSRO, examples include Standard & Poor's Ratings Group
("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, Inc.)
ELIGIBLE SECURITIES are defined as those with a remaining maturity of 397
days or less and which (i) have a short-term rating in one of the two highest
rating categories by an NRSRO (e.g. A-1/P-1 or A-2/P-2 by Standard & Poor's
and Moody's, respectively), (ii) securities that are comparable in priority
and security to other short-term debt of the issuer having a short-term rating
in one of the two highest rating categories or (iii) Unrated Securities that
are of comparable quality. A long-term security without a short-term rating
but with a long-term rating below the two highest rating categories (i.e. a
rating of A or below) is not an Eligible Security.
UNRATED SECURITIES include (i) securities that do not have a current short-
term rating and that are not comparable in priority or security to another
class of the issuer's securities having a short-term rating and (ii)
securities that do have a rating, but are subject to an external credit
support agreement that was not in effect when the rating was assigned.
FIRST TIER SECURITY means any Eligible Security which has, or is comparable
to short-term debt of the issuer having, the highest short-term rating by any
two NRSROs that have issued a rating with respect to a security or class of
debt obligations of an issuer. If only one NRSRO has issued a rating with
respect to such security it must be the highest short-term rating given by
such NRSRO.
SECOND TIER SECURITY means any Eligible Security that is not a First Tier
Security.
39
<PAGE>
Investment Adviser
- -------------------------------------------------------------------------------
The Huntington Trust Company, N.A.
Huntington Center
Columbus, OH 43287
1-800-253-0412
Administrator
- -------------------------------------------------------------------------------
SEI Fund Resources
One Freedom Valley Road
Oaks, PA 19456
Distributor
- -------------------------------------------------------------------------------
SEI Financial Services Company
One Freedom Valley Road
Oaks, PA 19456
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the
offering made by this Prospectus and, if given or made, such information or
representations may not
be relied upon as having been authorized by a Fund or the Distributor. This
Prospectus does not constitute an offering
by a Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
609409107 609409776
609409305 609409404
609409503 609409800
609409602 609409883
609409701 1032203A-R 15, 95
LOGO
M logo FPO
The Monitor Funds
MARBLE SCREEN F.P.O.
Trust Shares
MONEY MARKET FUNDS
- -------------------------------------------------------------------------------
The Monitor Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor U.S. Treasury Money Market Fund
EQUITY FUNDS
- -------------------------------------------------------------------------------
The Monitor Growth Fund
The Monitor Income Equity Fund
INCOME FUNDS
- -------------------------------------------------------------------------------
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate
Fixed Income Securities Fund
April 30, 1997
ART
<PAGE>
The Monitor Funds
Investment Shares and Trust Shares
of
The Monitor Money Market Fund
The Monitor Ohio Municipal Money Market Fund
The Monitor U.S. Treasury Money Market Fund
The Monitor Growth Fund
The Monitor Income Equity Fund
The Monitor Mortgage Securities Fund
The Monitor Ohio Tax-Free Fund
The Monitor Fixed Income Securities Fund
The Monitor Short/Intermediate Fixed Income Securities Fund
Form N-1A
(Part B)
Combined Statement of Additional Information
This Statement of Additional Information contains information which may be of
interest to investors in The Monitor Funds (the "Trust") but which is not
included in the applicable Prospectuses for Trust Shares or Investment Shares.
This Statement is not a prospectus and is only authorized for distribution when
accompanied or preceded by the respective Prospectus for Trust Shares or
Investment Shares of the Trust dated April 30, 1997. This Statement should be
read together with the applicable Prospectus. Investors may obtain a free copy
of a Prospectus by calling the Mutual Fund Services Center: (in Ohio) 614/480-
5580 or (outside the 614 Area Code) 800/253-0412.
April 30, 1997
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Definitions.................................................................. 1
Investment Objectives and Policies
of the Trust................................................................. 1
Foreign Securities......................................................... 1
Shares of Other Mutual Funds............................................... 2
Securities Loans........................................................... 2
When-Issued and Delayed
Delivery Transactions.................................................... 2
Ohio Tax-Exempt Securities................................................. 2
Mortgage-Related Securities................................................ 4
Options on Securities...................................................... 5
Risk Factors in Options Transactions....................................... 6
Futures Contracts.......................................................... 7
Special Risks of Transactions in
Futures Contracts and Related Options.................................... 10
Foreign Currency Transactions.............................................. 11
Zero-Coupon Securities..................................................... 13
Investment Restrictions...................................................... 14
Portfolio Turnover......................................................... 16
Management of the Trust...................................................... 16
Trustees and Officers...................................................... 16
Fund Ownership............................................................. 18
Trustees Compensation...................................................... 19
Investment Adviser......................................................... 20
Glass-Steagall Act......................................................... 21
Portfolio Transactions..................................................... 22
Brokerage and Research Services............................................ 22
Administrator.............................................................. 23
Sub-Administrator.......................................................... 24
Distributor................................................................ 24
The Distribution Plan...................................................... 24
Determination of Net Asset Value............................................. 25
Additional Purchase Information -
Payment in Kind.............................................................. 26
Taxes........................................................................ 27
Federal Income Taxation.................................................... 27
Ohio Income Taxation....................................................... 29
Dividends and Distributions.................................................. 29
Money Market Funds......................................................... 29
Other Funds................................................................ 30
Performance Information...................................................... 30
Money Market Funds......................................................... 30
Other Funds................................................................ 31
Tax-Equivalent Yield....................................................... 32
Tax-Equivalency Tables..................................................... 33
Custodian.................................................................... 34
Transfer Agent and Dividend
Disbursing Agent............................................................. 34
Independent Accountants...................................................... 35
Additional Information About the
Trust and Its Shares......................................................... 35
Shareholder Inquiries...................................................... 35
Pending Litigation Relating to Piper....................................... 35
Financial Statements......................................................... 36
Appendix..................................................................... 37
</TABLE>
i
<PAGE>
Definitions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
"Funds" -- Each of the nine separate investment portfolios
of the Trust.
"Trust" -- The Monitor Funds.
"Huntington" -- The Huntington Trust Company, N.A., the Trust's
investment adviser and sub-administrator.
"1940 Act" -- The Investment Company Act of 1940, as amended.
"SEI Administrative" -- SEI Fund Resources, the Trust's administrator.
"Prospectus" -- Each of the separate Prospectuses for the Trust
Shares and the Investment Shares of the Funds.
"SEI Financial Services" -- SEI Financial Services Company, the Trust's
distributor.
</TABLE>
The Trust consists of nine separate investment portfolios (the "Funds") with
separate investment objectives and policies. All of the Funds are offered in two
classes, Investment Shares and Trust Shares. The investment objectives and
policies of each of the Funds of the Trust are described in the applicable
Prospectuses for Trust Shares or Investment Shares. This Statement relates to
both Trust Shares and Investment Shares. A Fund's Trust Shares and Investment
Shares may be hereinafter referred to collectively as "shares". Capitalized
terms used but not defined herein have the meanings as set forth in the
Prospectus.
Investment Objectives and Policies of the Trust
- --------------------------------------------------------------------------------
Except as described below under "Investment Restrictions" or as otherwise
indicated, the investment policies described in the Prospectus and in this
Statement are not fundamental.
The investment practices and techniques described below may be used by certain
of the Funds. See the Prospectus to determine whether a particular Fund may
engage in any such practice or technique.
Foreign Securities
Except as otherwise limited by a Fund's investment objective and policies as
described in the Prospectus, a Fund may invest in securities principally traded
in markets outside the United States. Foreign investments can be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations. There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Securities of some foreign
companies are less liquid or more volatile than securities of U.S. companies,
and foreign brokerage commissions and custodian fees are generally higher than
in the United States. Investments in foreign securities can involve other risks
different from those affecting U.S. investments, including local political or
economic developments, expropriation or nationalization of assets and imposition
of withholding taxes on dividend or interest payments. Foreign securities, like
other assets of a Fund, will be held by the Trust's custodian or by a
subcustodian. For information regarding transactions relating to foreign
currency exchange rates, see "Foreign Currency Transactions" below.
1
<PAGE>
Shares of Other Mutual Funds
Each of the Growth Fund, the Fixed Income Securities Fund, the Mortgage
Securities Fund, and the Short/ Intermediate Fixed Income Securities Fund may
invest up to 5% of its total assets in the shares of money market mutual funds
(other than the Trust's Money Market Funds) for liquidity purposes. The Ohio
Municipal Money Market Fund may also invest up to 5% of its total assets in the
shares of one or more tax-exempt money market mutual funds for liquidity
purposes. When a Fund invests in the shares of other mutual funds, investment
advisory and other fees will apply, and the investment's yield will be reduced
accordingly. Under the 1940 Act, a Fund may not invest more than 5% of its
total assets in the shares of any one mutual fund, nor may a Fund own more than
3% of the shares of any one fund; in addition, although each Fund intends to
limit its investments in mutual funds to no more than 5% of total assets, under
the 1940 Act, no more than 10% of a Fund's total assets may be invested at any
one time in the shares of other funds.
Securities Loans
In order to generate additional income, a Fund may make secured loans of its
portfolio securities amounting to not more than 20% of its total assets. The
risks in lending portfolio securities, as with other extensions of credit,
consist of possible delay in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Securities loans
may be made to brokers, dealers or financial institutions pursuant to agreements
requiring that loans be continuously secured by collateral in cash or U.S.
Government obligations at least equal at all times to 102% of the value of the
securities on loan. The borrower pays to the Fund an amount equal to any
dividends or interest received on securities loaned. The Fund retains all or a
portion of the interest received on investment of the collateral or receives a
fee from the borrower. Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, a Fund retains the right
to call the loans at any time on reasonable notice, and it will do so to enable
a Fund to exercise voting rights on any matters materially affecting the
investment. A Fund may also call such loans in order to sell the securities.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for a Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of a Fund sufficient to
make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. With the exception of the
Mortgage Securities Fund, which may invest a percentage of its total assets in
securities purchased on a when-issued or delayed delivery basis which is
disclosed in the Prospectus, a Fund does not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause the segregation of
more than 20% of the total value of its assets.
Ohio Tax-Exempt Securities
As used in this Statement, the term "Ohio tax-exempt securities" refers to debt
obligations which (i) are issued by or on behalf of the State of Ohio or its
respective authorities, agencies, instrumentalities, and political subdivisions,
and (ii) produce interest which, in the opinion of bond counsel at the time of
issuance, is exempt from federal income tax and Ohio personal income taxes. Ohio
tax-exempt securities are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as bridges,
highways, roads, schools, water and sewer works, and other utilities. Other
public purposes for which Ohio tax-exempt securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities.
In addition, the Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund
(the "Ohio Funds") may invest in certain debt obligations known as "private
activity bonds" (or "industrial development bonds" under prior federal law) so
long as, in the case of the Ohio Tax-Free Fund, the interest therefrom is not
treated as a preference item for purposes of the federal alternative minimum
tax. Private activity bonds and industrial development bonds may be issued by
or on behalf of public authorities to obtain funds to provide certain privately
owned or operated facilities. The Ohio Funds
2
<PAGE>
may not be a desirable investment for "substantial users" of facilities financed
by private activity bonds or industrial development bonds or for "related
persons" of substantial users, for whom dividends attributable to interest on
such bonds may not be tax exempt. Shareholders should consult their own tax
adviser regarding the potential effect on them (if any) of any investment in the
Ohio Funds.
The two principal classifications of Ohio tax-exempt securities are general
obligation securities and limited obligation (or revenue) securities. General
obligation securities are obligations involving the credit of an issuer
possessing taxing power and are payable from the issuer's general unrestricted
revenues and not from any particular fund or source. The characteristics and
method of enforcement of general obligation securities vary according to the law
applicable to the particular issuer. Limited obligation securities are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other specific
revenue source. Private activity bonds and industrial development bonds
generally are revenue securities and thus not payable from the unrestricted
revenues of the issuer. The credit and quality of such bonds is usually
directly related to the credit of the private user of the facilities. Payment of
principal of and interest on industrial development revenue bonds is the
responsibility of the private user (and any guarantor). The Ohio Funds may also
invest in numerous types of short-term tax-exempt instruments, which may be used
to fund short-term cash requirements such as interim financing in anticipation
of tax collection, revenue receipts or bond sales to finance various public
purposes.
Prices and yields on Ohio tax-exempt securities are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions in the market for tax-exempt obligations, the
size of a particular offering, the maturity of the obligation and ratings of
particular issues, and are subject to change from time to time. Information
about the financial condition of an issuer of tax-exempt bonds or notes may not
be as extensive as that which is made available by corporations whose securities
are publicly traded.
The ratings of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Group ("S&P") represent their opinions and are not absolute standards of
quality. Ohio tax-exempt securities with the same maturity, interest rate and
rating may have different yields while tax-exempt obligations of the same
maturity and interest rate with different ratings may have the same yield.
Obligations of issuers of Ohio tax-exempt securities and notes are subject to
the provisions of bankruptcy, insolvency and other laws, such as the Federal
Bankruptcy Code, affecting the rights and remedies of creditors.
Congress or state legislatures may seek to extend the time for payment of
principal or interest, or both, or to impose other constraints upon enforcement
of such obligations. There is also the possibility that, as a result of
litigation or other conditions, the power or ability of issuers to meet their
obligations to pay interest on and principal of their tax-exempt bonds or notes
may be materially impaired or their obligations may be found to be invalid or
unenforceable. Such litigation or conditions may from time to time have the
effect of introducing uncertainties in the market for tax exempt obligations or
certain segments thereof, or may materially affect the credit risk with respect
to particular bonds or notes. Adverse economic, business, legal or political
developments might affect all or a substantial portion of the Ohio Funds' Ohio
tax-exempt securities in the same manner.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
continuing requirements on issuers of tax-exempt bonds regarding the use,
expenditure and investment of bond proceeds and the payment of rebates to the
United States of America. Failure by the issuer to comply subsequent to the
issuance of tax-exempt bonds with certain of these requirements could cause
interest on the bonds to become includable in gross income retroactive to the
date of issuance.
The Ohio Funds may invest in Ohio tax-exempt securities either by purchasing
them directly or by purchasing certificates of accrual or similar instruments
evidencing direct ownership of interest payments or principal payments, or both,
on Ohio tax-exempt securities, provided that, in the opinion of counsel to the
initial seller of each such certificate or instrument, any discount accruing on
such certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related Ohio tax-exempt securities will to the
same extent as interest on such Ohio
3
<PAGE>
tax-exempt securities be exempt from federal regular income tax and Ohio
personal income taxes and as to the Ohio Tax-Free Fund not treated as a
preference item for purposes of the federal alternative minimum tax. The Ohio
Funds may also invest in Ohio tax-exempt securities by purchasing from banks
participation interests in all or part of specific holdings of Ohio tax-exempt
securities. Such participations may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the Ohio Funds in connection with the arrangement. The
Ohio Funds will not purchase participation interests unless it receives an
opinion of counsel or a ruling of the Internal Revenue Service that interest
earned by it on Ohio tax-exempt securities in which it holds such participation
interest is exempt from federal regular income tax and Ohio personal income
taxes and as to the Ohio Tax-Free Fund not treated as a preference item for
purposes of the federal alternative minimum tax.
Risk considerations. Since the Ohio Funds invest primarily in Ohio tax-exempt
securities, the value of the Funds' shares may be especially affected by factors
pertaining to the economy of Ohio and other factors specifically affecting the
ability of issuers of Ohio tax-exempt securities to meet their obligations. As
a result, the value of the Funds' shares may fluctuate more widely than the
value of shares of a fund investing in securities relating to a number of
different states. The ability of Ohio state, county, or local governments to
meet their obligations will depend primarily on the availability of tax and
other revenues to those governments and on their fiscal conditions generally.
The amounts of tax and other revenues available to issuers of Ohio tax-exempt
securities may be affected from time to time by economic, political and
demographic conditions within the State. In addition, constitutional or
statutory restrictions may limit a government's power to raise revenues or
increase taxes. The availability of federal, state, and local aid to issuers of
Ohio tax-exempt securities may also affect the ability to meet their
obligations. Payments of principal and interest on limited obligation
securities will depend on the economic condition of the facility or specific
revenue source from whose revenues the payments will be made, which in turn
could be affected by economic, political, and demographic conditions in the
State. Any reduction in the actual or perceived ability to meet obligations on
the part of either an issuer of an Ohio tax-exempt security or a provider of
credit enhancement for such security (including a reduction in the rating of its
outstanding securities) would likely affect adversely the market value and
marketability of that Ohio tax-exempt security and could affect adversely the
values of other Ohio tax-exempt securities as well. The Ohio Municipal Money
Market Fund may have more than 40% of its total assets invested in securities
that are credit-enhanced by domestic or foreign banks. Changes in credit quality
of these banking institutions could cause losses to this Fund and effect its
share price.
Mortgage-Related Securities
A Fund may invest in mortgage-related securities issued by the Government
National Mortgage Association ("GNMA") representing GNMA Mortgage Pass-Through
Certificates (also known as "Ginnie Maes"), in other mortgage-related securities
issued or guaranteed by the U.S. Government, its agencies, or its
instrumentalities or those issued by nongovernmental entities, and in
collateralized mortgage obligations.
Mortgage-related securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the GNMA or by government-
related organizations such as the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation. Mortgage-related securities may also be
assembled and sold by nongovernment entities such as commercial banks, savings
and loan institutions, mortgage bankers, and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If a Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline in the
market value of the security whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other interest-
bearing securities, the prices of mortgage-related securities are inversely
affected by changes in interest rates. However, though the value of a mortgage-
related security may decline when interest rates rise, the converse is not
necessarily true, since in periods of declining interest rates the mortgages
underlying the security are prone to prepayment. For this and other reasons, a
mortgage-related security's effective maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the security's return to the Fund. In addition, regular
payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
4
<PAGE>
There are a number of important differences both among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities themselves. As noted above, Ginnie Maes are issued by
GNMA, which is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. Ginnie Maes are guaranteed as to the timely
payment of principal and interest by GNMA and GNMA's guarantee is backed by the
full faith and credit of the U.S. Treasury. In addition, Ginnie Maes are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under GNMA's guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA. The FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA but are not backed by or entitled to
the full faith and credit of the U.S. Treasury. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). The
FHLMC is a corporate instrumentality of the U.S. Government, created pursuant to
an Act of Congress, which is owned entirely by Federal Home Loan Banks. Freddie
Macs are not guaranteed by the U.S. Treasury or by any Federal Home Loan Banks
and do not constitute a debt or obligation of the U.S. Government or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by the FHLMC. The FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When the 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.
Options on Securities
Writing covered options. A Fund may write covered call options and covered put
options on optionable securities held in its portfolio, when in the opinion of
Huntington such transactions are consistent with the Fund's investment
objectives and policies. Call options written by a Fund give the purchaser the
right to buy the underlying securities from the Fund at a stated exercise price;
put options give the purchaser the right to sell the underlying securities to
the Fund at a stated price.
A Fund may write only covered options, which means that, so long as the Fund is
obligated as the writer of a call option, it will own the underlying securities
subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, a Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, a Fund will be considered to have
covered a put or call option if and to the extent that it holds an option that
offsets some or all of the risk of the option it has written. A Fund may write
combinations of covered puts and calls on the same underlying security.
A Fund will receive a premium from writing a put or call option, which increases
the Fund's return on the underlying security in the event that option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, a Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
a Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then current market value,
resulting in a potential capital loss unless the security substantially
appreciates in value.
A Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction, in which it purchases an
offsetting option. A Fund realizes a profit or loss from a closing transaction
if the cost of the transaction (option premium plus transaction costs) is less
or more than the premium received from writing the option. Because increases in
the market price of a call option generally reflect increases in the market
price of the security
5
<PAGE>
underlying the option, any loss resulting from a closing purchase transaction
may be offset in whole or in part by unrealized appreciation of the underlying
security owned by a Fund.
Purchasing put options. A Fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such protection is provided during the life of the put option since the Fund, as
holder of the option, is able to sell the underlying security at the option's
exercise price regardless of any decline in the underlying security's market
price. In order for a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner a Fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. A Fund may purchase call options to hedge against an
increase in the price of securities that the Fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs.
Risk Factors in Options Transactions
The successful use of a Fund's options strategies depends on the ability of
Huntington to forecast interest rate and market movements. For example, if a
Fund were to write a call option based on Huntington's expectation that the
price of the underlying security would fall, but the price were to rise instead,
the Fund could be required to sell the security upon exercise at a price below
the current market price. Similarly, if a Fund were to write a put option based
on Huntington's expectations that the price of the underlying security would
rise, but the price were to fall instead, the Fund could be required to purchase
the security upon exercise at a price higher than the current market price.
When it purchases an option, a Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, a Fund
will lose part or all of its investment in the option. This contrasts with an
investment by a Fund in the underlying security, since the Fund will not lose
any of its investment in such security if the price does not change.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when Huntington deems it desirable to do so. Although
a Fund will take an option position only if Huntington believes there is a
liquid secondary market for the option, there is no assurance that the Fund will
be able to effect closing transaction at any particular time or at an acceptable
price.
If a secondary trading market in options were to become unavailable, a Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if
unusual events--such as volume in excess of trading or clearing capability--were
to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on particular
types of options transactions, such as opening transactions. For example, if an
underlying security ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening transactions in
existing series may be prohibited. If an options market were to become
unavailable, a Fund as a holder of an option would be able to realize profits or
limit losses only by exercising the option, and the Fund, as option writer,
would remain obligated under the option until expiration.
6
<PAGE>
Disruptions in the markets for the securities underlying options purchased or
sold by a Fund could result in losses on the options. If trading is interrupted
in an underlying security, the trading of options on that security is normally
halted as well. As a result, a Fund as purchaser or writer of an option will be
unable to close out its positions until options trading resumes, and it may be
faced with considerable losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation or
other options markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has also been halted,
a Fund as a purchaser or writer of an option will be locked into its position
until one of the two restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an underlying
security appears insufficient to permit delivery by the writers of all
outstanding calls in the event of exercise, it may prohibit indefinitely the
exercise of put options by holders who would be unable to deliver the underlying
interest. A Fund, as holder of such a put option, could lose its entire
investment if the prohibition remained in effect until the put option's
expiration and the Fund was unable either to acquire the underlying security or
to sell the put option in the market.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premium may not reflect the current prices of the underlying
interest in the United States.
Risks involved in the sale of options. Options transactions involve certain
risks, including the risks that Huntington will not forecast interest rate or
market movements correctly, that a Fund may be unable at times to close out such
positions, or that hedging transactions may not accomplish their purpose because
of imperfect market correlations. The successful use of these strategies
depends on the ability of Huntington to forecast market and interest rate
movements correctly.
An exchange-listed option may be closed out only on an exchange which provides a
secondary market for an option of the same series. There is no assurance that a
liquid secondary market on an exchange will exist for any particular option or
at any particular time. If no secondary market were to exist, it would be
impossible to enter into a closing transaction to close out an option position.
As a result, a Fund may be forced to continue to hold, or to purchase at a fixed
price, a security on which it has sold an option at a time when Huntington
believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other unforeseen
events might cause the Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict a Fund's use of
options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Trust and other clients
of Huntington may be considered such a group. These position limits may
restrict the Trust's ability to purchase or sell options on particular
securities. Options which are not traded on national securities exchanges may
be closed out only with the other party to the option transaction. For that
reason, it may be more difficult to close out unlisted options than listed
options. Furthermore, unlisted options are not subject to the protection
afforded purchasers of listed options by the Options Clearing Corporation.
Futures Contracts
Futures on debt securities and related options. A futures contract on a debt
security is a binding contractual commitment which, if held to maturity, will
result in an obligation to make or accept delivery, during a particular month,
of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- a Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not in the judgment of the Trustees
reflect the fair value of the contract, in which case the positions will be
valued by or under the direction of the Trustees. Positions taken in the futures
markets are not normally held to maturity, but are instead liquidated through
offsetting transactions which may result in a profit or a loss. While futures
positions taken by a Fund will usually be liquidated in this manner, a Fund may
instead make or take delivery of the underlying securities whenever it appears
economically advantageous
7
<PAGE>
to the Fund to do so. A clearing corporation associated with the exchange on
which futures are traded assumes responsibility for such closing transactions
and guarantees that the Fund's sale and purchase obligations under closed-out
positions will be performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish more certainly
than would otherwise be possible the effective rate of return on portfolio
securities. A Fund may, for example, take a "short" position in the futures
market by selling contracts for the future delivery of debt securities held by
the Fund (or securities having characteristics similar to those held by the
Fund) in order to hedge against an anticipated rise in interest rates that would
adversely affect the value of the Fund's portfolio securities. When hedging of
this character is successful, any depreciation in the value of portfolio
securities may be offset by appreciation in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures on
debt securities. This would be done, for example, when Huntington expects to
purchase for a Fund particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset by the rise in the value of the futures position
taken in anticipation of the subsequent securities purchase.
Successful use by a Fund of futures contracts on debt securities is subject to
Huntington's ability to predict correctly movements in the direction of interest
rates and other factors affecting markets for debt securities. For example, if
a Fund has hedged against the possibility of an increase in interest rates which
would adversely affect the market prices of debt securities held by it and the
prices of such securities increase instead, the Fund will lose part or all of
the benefit of 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 margin maintenance requirements. A Fund may have to sell securities
at a time when it may be disadvantageous to do so.
A Fund may purchase and write put and call options on debt futures contracts, as
they become available. Such options are similar to options on securities except
that options on futures contracts give the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the period of the option. As with options on
securities, the holder or writer of an option may terminate its position by
selling or purchasing an option of the same series. There is no guarantee that
such closing transactions can be effected. A Fund will be required to deposit
initial margin and variation margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements, and, in
addition, net option premiums received will be included as initial margin
deposits. See "Margin Payments" below. Compared to the purchase or sale of
futures contracts, the purchase of call or put options on futures contracts
involves less potential risk to a Fund because the maximum amount at risk is the
premium paid for the options plus transactions costs. However, there may be
circumstances when the purchases of call or put options on a futures contract
would result in a loss to a Fund when the purchase or sale of the futures
contracts would not, such as when there is no movement in the prices of debt
securities. The writing of a put or call option on a futures contract involves
risks similar to those risks relating to the purchase or sale of futures
contracts.
U.S. Treasury security futures contracts and options. If a Fund invests in tax-
exempt securities issued by a governmental entity, the Fund may purchase and
sell futures contracts and related options on US. Treasury securities when, in
the opinion of Huntington, price movements in Treasury security futures and
related options will correlate closely with price movements in the tax-exempt
securities which are the subject of the hedge. U.S. Treasury security futures
contracts require the seller to deliver, or the purchaser to take delivery of,
the type of U.S. Treasury security called for in the contract at a specified
date and price. Options on U.S. Treasury securities futures contracts give the
purchaser the right in return for the premium paid to assume a position in a
U.S. Treasury security futures contract at the specified option exercise price
at anytime during the period of the option. Successful use of U.S. Treasury
security futures contracts by a Fund is subject to Huntington's ability to
predict movements in the direction of interest rates and other factors affecting
markets for debt securities. For example, if a Fund has sold U.S. Treasury
security futures contracts in order to hedge against the possibility of an
increase in interest rates which would adversely affect tax-
8
<PAGE>
exempt securities held in its portfolio, and the prices of the Fund's tax-exempt
securities increase instead as a result of a decline in interest rates, the Fund
will lose part or all of the benefit of 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 maintenance margin requirements at
a time when it may be disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury security futures
contracts and related options will not correlate closely with price movements in
markets for tax-exempt securities. For example, if a Fund has hedged against a
decline in the values of tax-exempt securities held by it by selling Treasury
securities futures and the values of Treasury securities subsequently increase
while the values of its tax-exempt securities decrease, the Fund would incur
losses on both the Treasury security futures contracts written by it and the
tax-exempt securities held in its portfolio. Huntington will seek to reduce
this risk by monitoring movements in Markets for US. Treasury security futures
and options and for tax-exempt securities closely. A Fund will only purchase or
sell Treasury security futures or related options when, in the opinion of
Huntington, price movements in Treasury security futures and related options
will correlate closely with price movements in tax-exempt securities in which
the Fund invests.
Index futures contracts and options. A Fund may invest in debt index futures
contracts and stock index futures contracts, and in related options. A debt
index futures contract is a contract to buy or sell units of a specified debt
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the index. A stock index futures
contract is a contract to buy or sell units of a stock index at a specified
future date at a price agreed upon when the contract is made. A unit is the
current value of the stock index.
The following example illustrates generally the manner in which index futures
contracts operate. The Standard & Poor's 100 Stock Index is composed of 100
selected common stocks, most of which are listed on the New York Stock Exchange.
The S&P 100 Index assigns relative weightings to the common stocks included in
the Index, and the Index fluctuates with changes in the market values of those
common stocks. In the case of the S&P 100 Index, contracts are to buy or sell
100 units. Thus, if the value of the S&P 100 Index were $180, one contract
would be worth $18,000 (100 units X $180). The stock index futures contract
specifies that no delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the contract price
and the actual level of the stock index at the expiration of the contract. For
example, if a Fund enters into a futures contract to buy 100 units of the S&P
100 Index at a specified future date at a contract price of $180 and the S&P 100
Index is at $184 on that future date, the Fund will gain $400 (100 units X gain
of $4). If the Fund enters into a futures contract to sell 100 units of the
stock index at a specified future date at a contract price of $180 and the S&P
100 Index is at $182 on that future date, the Fund will lose $200 (100 units X
loss of $2). A Fund may purchase or sell futures contracts with respect to any
stock index. Positions in index futures may be closed out only on an exchange
or board of trade which provides a secondary market for such futures.
A Fund will purchase and sell index futures in order to hedge its investments.
To hedge its investments successfully, however, a Fund must invest in futures
contracts with respect to indexes or sub-indexes the movements of which will, in
its judgment, have a significant correlation with movements in the prices of the
Fund's securities.
Options on index futures contracts are similar to options on securities except
that options on index futures contracts give the purchaser the right, in return
for the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the
premium paid.
9
<PAGE>
As an alternative to purchasing call and put options on index futures contracts,
a Fund may purchase call and put options on the underlying indexes themselves to
the extent that such options are traded on national securities exchanges. Index
options are similar to options on individual securities in that the purchaser of
an index option acquires the right to buy, and the writer undertakes the
obligation to sell, an index at a stated exercise price during the term of the
option. Instead of giving the right to take or make actual delivery of
securities, the holder of an index option has the right to receive a cash
"exercise settlement amount". This amount is equal to the amount by which the
fixed exercise price of the option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the underlying index on the
date of the exercise, multiplied by a fixed "index multiplier".
Margin payments. When a Fund purchases or sells a futures contract, it is
required to deposit with its custodian an amount of cash, US. Treasury bills, or
other permissible collateral equal to a small percentage of the amount of the
futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of in security transactions in that it
does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations. Subsequent payments to and from the broker occur on a
daily basis in a process known as "marking to market". These payments are called
"variation margin" and are made as the value of the underlying futures contract
fluctuates. For example, when a Fund sells a futures contract and the price of
the underlying debt security rises above the delivery price, the Fund's position
declines in value. The Fund then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the market price of the securities underlying the futures contract. Conversely,
if the price of the underlying security falls below the delivery price of the
contract, the Fund's futures position increases in value. The broker then must
make a variation margin payment equal to the difference between the delivery
price of the futures contract and the market price of the securities underlying
the futures contract.
When a Fund terminates a position in a futures contract, a final determination
of variation margin is made, additional cash is paid by or to the Fund, and the
Fund realizes a loss or a gain. Such closing transactions involve additional
commission costs.
Special Risks of Transactions in Futures Contracts and Related Options
Liquidity risks. Positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
Although the Trust intends to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time 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 financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain
that such a market will develop. Although a Fund generally will purchase only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options, with the result that the Fund would have to exercise the
options in order to realize any profit.
Hedging risks. There are several risks in connection with the use by a Fund of
futures contracts and related options as a hedging device. One risk arises
because of the imperfect correlation between movements in the prices of the
futures contracts and options and movements in the prices of securities which
are the subject of the hedge. Huntington will, however, attempt to reduce this
risk by purchasing and selling, to the extent possible, futures contracts and
related
10
<PAGE>
options on securities and indexes the movements of which will, in its judgment,
correlate closely with movements in the prices of the portfolio securities
sought to be hedged.
Successful use of futures contracts and options by a Fund for hedging purposes
is also subject to Huntington's ability to predict correctly movements in the
direction of the market. It is possible that, where a Fund has purchased puts
on futures contracts to hedge its portfolio against a decline in the market, the
securities or index on which the puts are purchased may increase in value and
the value of securities held in the portfolio may decline. If this occurred,
the Fund would lose money on the puts and also experience a decline in value in
its portfolio securities. In addition, the prices of futures, for a number of
reasons, may not correlate perfectly with movements in the underlying securities
or index due to certain market distortions. First, all participants in the
futures market are subject to margin deposit requirements. Such requirements
may cause investors to close futures contracts through offsetting transactions
which could distort the normal relationship between the underlying security or
index and futures markets. Second, the margin requirements in the futures
markets are less onerous than margin requirements in the securities markets in
general, and as a result the futures markets may attract more speculators than
the securities markets do. Increased participation by speculators in the
futures markets may also cause temporary price distortions. Due to the
possibility of price distortion, even a correct forecast of general market
trends by Huntington may still not result in a successful hedging transaction
over a very short time period.
Other risks. Funds will incur brokerage fees in connection with their futures
and options transactions. In addition, while futures contracts and options on
futures will be purchased and sold to reduce certain risks, those transactions
themselves entail certain other risks. Thus, while a Fund may benefit from the
use of futures and related options, unanticipated changes in interest rates or
stock price movements may result in a poorer overall performance for the Fund
than if it had not entered into any futures contracts or options transactions.
Moreover, in the event of an imperfect correlation between the futures
position and the portfolio position which is intended to be protected, the
desired protection may not be obtained and the Fund may be exposed to risk of
loss.
Foreign Currency Transactions
A Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. A Fund may engage in both "transaction hedging" and
"position hedging".
When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables generally arising
in connection with the purchase or sale of its portfolio securities. A Fund
will engage in transaction hedging when it desires to "lock in" the U.S. dollar
price of a security it has agreed to purchase or sell, or the US. dollar
equivalent of a dividend or interest payment in a foreign currency. By
transaction hedging a Fund will attempt to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the date on which the
security is purchased or sold or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.
A Fund may purchase or sell a foreign currency on a spot (or cash) basis at the
prevailing spot rate in connection with transaction hedging. A Fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts') and purchase and sell foreign currency futures contracts.
For transaction hedging purposes a Fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. A put option on a futures contract gives a Fund the
right to assume a short position in the futures contract until expiration of the
option. A put option on currency gives a Fund the right to sell a currency at
an exercise price until the expiration of the option. A call option on a
futures contract gives a Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives a
Fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, a Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which securities held by it are denominated or are quoted in their
11
<PAGE>
principle trading markets or an increase in the value of currency for securities
which the Fund expects to purchase. In connection with position hedging, a Fund
may purchase put or call options on foreign currency and foreign currency
futures contracts and buy or sell forward contracts and foreign currency futures
contracts. The Trust may also purchase or sell foreign currency on a spot
basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the values of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of a Fund's
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security or securities and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio security or
securities of a Fund if the market value of such security or securities exceeds
the amount of foreign currency the Fund is obligated to deliver.
To offset some of the costs of hedging against fluctuations in currency exchange
rates, a Fund may write covered call options on those currencies. Transaction
and position hedging do not eliminate fluctuations in the underlying prices of
the securities which a Fund owns or intends to purchase or sell. They simply
establish a rate of exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they tend to limit any potential
gain which might result from the increase in the value of such currency.
A Fund may also seek to increase its current return by purchasing and selling
foreign currency on a spot basis, and by purchasing and selling options on
foreign currencies and on foreign currency futures contracts, and by purchasing
and selling foreign currency forward contracts.
Forward foreign currency exchange contracts and foreign currency futures
contracts. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract as agreed by the parties, at a
price set at the time of the contract. In the case of a cancelable forward
contract, the holder has the unilateral right to cancel the contract at maturity
by paying a specified fee. The contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and
no commissions are charged at any stage for trades. A foreign currency futures
contract is a standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at the time of the
contract. Foreign currency futures contracts traded in the United States are
designed by and traded on exchanges regulated by the Commodity Futures Trading
Commission (the "CFTC"), such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign currency futures
contracts in certain respects. For example, the maturity date of a forward
contract may be any fixed number of days from the date of the contract agreed
upon by the parties, rather than a predetermined date in a given month. Forward
contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of
an offsetting contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to the original
forward contract. Closing transactions with respect to futures contracts are
effected on a
12
<PAGE>
commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in foreign currency futures contracts and related options may be
closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although it is intended that a Fund will
purchase or sell foreign currency futures contracts and related options only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or option or at any particular
time. Ln such event, it may not be possible to close a futures or related
option position and, in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of variation margin on its
futures positions.
Foreign currency options. Options on foreign currencies operate similarly to
options on securities, and are traded primarily in the over-the-counter market,
although options on foreign currencies have recently been listed on several
exchanges. Such options will be purchased or written only when Huntington
believes that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specific time. Options on foreign currencies are affected by all of those
factors which influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies
and there is no regulatory requirement that quotations available through dealers
or other market sources be firm or revised on a timely basis. Available
quotation information is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the US. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the U.S. options markets.
Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(the "spread') between prices at which they buy and sell various currencies.
Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while
offering a lesser rate of exchange should a Fund desire to resell that currency
to the dealer.
Zero-Coupon Securities
Zero-coupon securities in which a Fund may invest are debt obligations which are
generally issued at a discount and payable in full at maturity, and which do not
provide for current payments of interest prior to maturity. Zero-coupon
securities usually trade at a deep discount from their face or par value and are
subject to greater market value fluctuations from changing interest rates than
debt obligations of comparable maturities which make current distributions of
interest. As a result, the net asset value of shares of a Fund investing in
zero-coupon securities may fluctuate over a greater range than shares of other
Funds and other mutual funds investing in securities making current
distributions of interest and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly by the
U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus') of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and
13
<PAGE>
Certificates of Accrual on Treasuries ("CATS"). 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 owned ostensibly by the bearer or holder thereof), in trust on behalf of the
owners thereof.
In addition, the U.S. Treasury has facilitated transfers of ownership of zero-
coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on U.S. Treasury securities
through the Federal Reserve book-entry record-keeping system. The Federal
Reserve program, as established by the U.S. Treasury Department, is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities.' Under the STRIPS program, a Fund will be able to have its
beneficial ownership of U.S. Treasury zero-coupon securities recorded directly
in the book-entry record-keeping system in lieu of having to hold certificates
or other evidence of ownership of the underlying U.S. Treasury securities. When
debt obligations have been stripped of their unmatured interest coupons by the
holder, the stripped coupons are sold separately. The principal or corpus is
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
cash interest payments. Once stripped or separated, the corpus and coupons may
be sold separately. Typically, the coupons are sold separately or grouped with
other coupons with like maturity dates and sold in such bundled form.
Purchasers of stripped obligations acquire, in effect, discount obligations that
are economically identical to the zero-coupon securities issued directly by the
obligor.
Investment Restrictions
- --------------------------------------------------------------------------------
Without a vote of a majority of the outstanding shares of a Fund, the Trust
shall not take any of the following actions with respect to such Fund:
(1) Except for the Ohio Funds, invest more than 5% of the value of its total
assets in the securities of any one issuer (this limitation does not apply
to securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities or to repurchase agreements secured by such
obligations).
(2) Purchase more than 10% of the voting securities of any issuer.
(3) Invest 25% or more of the value of its total assets (i) in securities of
companies primarily engaged in any one industry (other than the U.S.
Government, its agencies and instrumentalities), and (ii) with respect to
the Ohio Funds, in municipal obligations of one issuer or which are related
in such a way that, in the opinion of Huntington, an economic, business or
political development other than an Ohio state-wide, national or
international development, affecting one such obligation would also affect
others in a similar manner. Such concentration may occur as a result of
changes in the market value of portfolio securities, but such concentration
may not result from investment.
(4) Loan more than 20% of the Funds' portfolio securities to brokers, dealers
or other financial organizations. All such loans will be collateralized by
cash or U.S. Government obligations that are maintained at all times in an
amount equal to at least 102% of the current value of the loaned
securities.
(5) Except for investments by the Money Market Fund in commercial paper issued
under Section 4(2) of the Securities Act of 1933 and certain other
restricted securities which meet the criteria for liquidity as established
by the Trustees, invest more than 10% of the value of its net assets in
illiquid securities including restricted securities, repurchase agreements
of over seven days' duration and OTC options.
(6) Borrow in excess of 5% of its total assets (borrowings are permitted only
as a temporary measure for extraordinary or emergency purposes) or pledge
(mortgage) its assets as security for an indebtedness.
14
<PAGE>
(7) Invest more than 5% of its total assets in securities of any issuer which,
together with any predecessor, has been in operation for less than three
years.
(8) Purchase or sell real estate or real estate mortgage loans; provided,
however, that the Funds may invest in securities secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein.
(9) Purchase or sell commodities or commodities contracts, or interests in oil,
gas, or other mineral exploration or development programs provided,
however, that the Funds may invest in futures contracts for bona fide
hedging transactions, as defined in the General Regulations under the
Commodity Exchange Act, or for other transactions permitted to entities
exempt from the definition of the term commodity pool operator, as long as,
immediately after entering a futures contract no more than 5% of the fair
market value of the Funds' assets would be committed to initial margins.
(10) Purchase securities on or effect short sales (except that the Funds may
obtain such short-term credits as may be necessary for the clearance of
purchases or sales of securities).
(11) Engage in the business of underwriting securities issued by others or
purchase securities, other than time deposits and restricted securities
(i.e., securities which cannot be sold without registration or an exemption
from registration), subject to legal or contractual restrictions on
disposition.
(12) Make loans to any person or firm except as provided below; provided,
however, that the making of a loan shall not be construed to include (i)
the acquisition for investment of bonds, debentures, notes or other
evidences of indebtedness of any corporation or government which are
publicly distributed or of a type customarily purchased by institutional
investors (which are debt securities, generally rated not less than A by
Moody's or S&P, or the equivalent, privately issued and purchased by such
entities as banks, insurance companies and investment companies), or (ii)
the entry into repurchase agreements. However, the Funds may lend their
portfolio securities to brokers, dealers or other institutional investors
deemed by Huntington, the Trust's manager, pursuant to criteria adopted by
the Trustees, to be creditworthy if, as a result thereof, the aggregate
value of all securities loaned does not exceed 20% of the value of the
total assets of the Funds and the loan is collateralized by cash or U.S.
Government obligations that are maintained at all times in an amount equal
to at least 102% of the current market value of the loaned securities. Such
transactions will comply with all applicable laws and regulations.
(13) Purchase from or sell portfolio securities to officers, Trustees or other
"interested persons" (as defined in the 1940 Act) of the Funds, including
its investment manager and its affiliates, except as permitted by the
Investment Company Act of 1940 and exemptive Rules or Orders thereunder.
(14) Issue senior securities.
(15) Purchase or retain the securities of any issuer if, to the Funds'
knowledge, one or more of the officers, directors or Trustees of the Trust,
the investment adviser or the administrator, individually own beneficially
more than one-half of one percent of the securities of such issuer and
together own beneficially more than 5% of such securities.
(16) Purchase the securities of other investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission or
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition and except as permitted pursuant to Section
12(d)(1) of the Investment Company Act of 1940.
All percentage limitations on investments will apply at the time of the making
of an investment and should not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.
15
<PAGE>
Portfolio Turnover
The portfolio turnover rate of a Fund is defined by the Securities and Exchange
Commission as the ratio of the lesser of annual sales or purchases to the
monthly average value of the portfolio, excluding from both the numerator and
the denominator securities with maturities at the time of acquisition of one
year or less. Under that definition, the Money Market Funds will have no
portfolio turnover. Portfolio turnover generally involves some expense to a
Fund, including brokerage commissions or dealer mark-ups and other transactions
costs on the sale of securities and reinvestment in other securities.
For the fiscal years ended December 31, 1995 and 1996, the portfolio turnover
rates for each of the following Funds were as follows:
<TABLE>
<CAPTION>
Fund 1995 1996
---- ---- ----
<S> <C> <C>
Growth Fund...................................... 37% 21%
Income Equity Fund............................... 17% 25%
Mortgage Securities Fund......................... 194% 90%
Ohio Tax-Free Fund............................... 13% 6%
Fixed Income Securities Fund..................... 20% 16%
Short/Intermediate Fixed Income Securities Fund.. 40% 39%
</TABLE>
During the fiscal year ended December 31, 1995, the Mortgage Securities Fund's
portfolio turnover rate was substantially higher than in previous years, due
primarily to a restructuring of the portfolio that the Subadviser deemed
necessary. The portfolio turnover rate of the Mortgage Securities Fund may
exceed 100%, which is higher than the portfolio turnover rate of most mutual
funds. However, the Adviser does not expect the portfolio turnover rate of the
Mortgage Securities Fund to exceed 200%. To the extent that short-term trading
results in the realization of short-term capital gains, shareholders will be
taxed on such gains at ordinary income tax rates. However, certain tax rules may
restrict the Mortgage Securities Fund's ability to sell securities in some
circumstances when the security has been held for less than three (3) months.
Increased portfolio turnover necessarily results in higher costs, including
brokerage commissions, dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities, and may result in the
acceleration of capital gains.
Management of the Trust
- --------------------------------------------------------------------------------
Trustees and Officers
Trustees and officers of the Trust and their principal occupations during the
past five years are as set forth below.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name With The Trust During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David S. Schoedinger Trustee Chairman of the Board, Schoedinger Funeral Service;
229 East State Street President of Schoedinger Financial Services, Inc.;
Columbus, Ohio Past President, Board of Directors of National Selected
Birthdate: November 27, 1942 (1992-1993).
- ------------------------------------------------------------------------------------------------------------------------
John M. Shary Trustee Former Member, Business Advisory Board, DPEC-Data
3097 Walden Ravine Processing Education Corp.; Member, Business Advisory
Columbus, Ohio 43321 Board, Hublink, Inc.; Former Member, Business Advisory
Birthdate: November 30, 1930 Board, Miratel Corporation; Member, Board of Directors,
Applied Information Technology Research Center (1988-
1992); Member, Board of Directors, AIT (1987-1992); Chief
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
Financial Officer of OCLC Online Computer Library
Center, Inc. (1972-1992).
- ------------------------------------------------------------------------------------------------------------------------------
William R. Wise Trustee Formerly, Corporate Director of Financial Services and
613 Valley Forge Court Treasurer, Childrens Hospital, Columbus, Ohio; Associate
Westerville, Ohio Executive Director and Treasurer, Childrens Hospital,
Birthdate: October 20, 1931 Columbus, Ohio (1985-1989).
- ------------------------------------------------------------------------------------------------------------------------------
Richard Sisson Trustee Senior Vice President for New Academic Affairs and Provost,
4250 Dublin Road The Ohio State University (1993-Present); Senior Vice
Columbus, Ohio 43210 Chancellor for Academic Affairs, UCLA (1991-1993).
Birthdate: October 16, 1936
- ------------------------------------------------------------------------------------------------------------------------------
David G. Lee President and Senior Vice President of SEI Administrative and SEI Financial
One Freedom Valley Road Chief Executive Services since 1993. Vice President of SEI Administrative and
Oaks, Pennsylvania 19456 Officer SEI Financial Services (1991-1993); President, GW Sierra Trust
Birthdate: April 16, 1952 prior to 1991.
- ------------------------------------------------------------------------------------------------------------------------------
Robert DellaCroce Treasurer, Director, Funds Administration and Accounting of SEI since
One Freedom Valley Road Controller and 1994. Senior audit manager, Arthur Andersen LLP, from
Oaks, Pennsylvania 19456 Chief Financial 1986 to 1994.
Birthdate: December 17, 1963 Officer
- ------------------------------------------------------------------------------------------------------------------------------
Kathryn L. Stanton Vice President Vice President and Assistant Secretary of SEI Corporation since
One Freedom Valley Road and Secretary 1994; Associate attorney with Morgan, Lewis and Bockius
Oaks, Pennsylvania 19456 (1989-1994).
Birthdate: November 19, 1958
- ------------------------------------------------------------------------------------------------------------------------------
Marc H. Cahn Vice President Vice President and Assistant Secretary of SEI Corporation
One Freedom Valley Road and Assistant since 1983.
Oaks, Pennsylvania 19456 Secretary
Birthdate: October 18, 1953
- ------------------------------------------------------------------------------------------------------------------------------
Todd Cipperman Vice President Vice President and Assistant Secretary of SEI Corporation since
One Freedom Valley Road and Assistant 1995; Associate attorney with Dewey Ballantine (1994-1995);
Oaks, Pennsylvania 19456 Secretary Associate attorney with Winston & Strawn (1991-1994).
Birthdate: February 14, 1966
- ------------------------------------------------------------------------------------------------------------------------------
Joseph M. Lydon Vice President Director of Business Administration--Fund Resources, a division
One Freedom Valley Road and Assistant of SEI Corporation since 1995; Vice President of Fund Group,
Oaks, Pennsylvania 19456 Secretary Vice President of the Advisor--Dreman Value
Birthdate: September 27, 1959 Management, L.P., and President of Dreman Financial Services,
Inc. (1989-1995).
- ------------------------------------------------------------------------------------------------------------------------------
Barbara A. Nugent Vice President Vice President and Assistant Secretary of SEI Corporation
One Freedom Valley Road and Assistant since April 1996. Associate attorney with Drinker, Biddle &
Oaks, Pennsylvania 19456 Secretary Reath (1994-1996); Assistant Vice President/Administration
Birthdate: June 18, 1956 of Delaware Service Company, Inc. (1992-93); Assistant Vice
President-Operations of Delaware Service Company, Inc. (1988-
1992).
- ------------------------------------------------------------------------------------------------------------------------------
Kevin P. Robins Vice President Senior Vice President, General Counsel and Secretary of SEI
One Freedom Valley Road and Assistant Corporation since 1994. Vice President and Assistant Secretary
Oaks, Pennsylvania 19456 Secretary (1992-1994); Associate attorney with Morgan, Lewis &
Birthdate: April 15, 1961 Bockius (1988-1992).
- ------------------------------------------------------------------------------------------------------------------------------
Bradley J. Schram Assistant President and shareholder, Hertz, Schram & Saretsky, P.C.
1760 Telegraph Road Secretary (attorneys)
Birmingham, Michigan 48302
Birthdate: July 10, 1950
</TABLE>
17
<PAGE>
Except as stated above, the principal occupations of the officers and Trustees
for the last five years have been with the employers as shown above, although in
some cases they have held different positions with such employers.
Fund Ownership
As of April 1, 1997, the Trustees and officers as a group owned less than 1% of
the shares of the Trust.
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Investment Shares of The Monitor Money Market Fund: National
Financial Services Corp., New York, NY, owned approximately 45,114,898 shares
(44.0%); Huntington Trust Company, Columbus, OH, acting in various capacities
for numerous accounts, owned approximately 24,157,598 shares (23.6%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Money Market Fund: Huntington Trust
Company, N.A., Columbus, OH, acting in various capacities for numerous accounts,
owned approximately 353,829,387 shares (99.9%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Investment Shares of The Monitor Ohio Municipal Money Market Fund:
Huntington Trust Company, Columbus, OH, acting in various capacities for
numerous accounts, owned approximately 61,293,549 shares (82.7%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Ohio Municipal Money Market Fund:
Huntington Trust Company, N.A., Columbus, OH, acting in various capacities for
numerous accounts, owned approximately 60,342,744 shares (99.9%).
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Investment Shares of The Monitor U.S. Treasury Money Market
Fund: Huntington Trust Company, Columbus, OH, acting in various capacities for
numerous accounts, owned approximately 21,621,955 shares (47.6%); and Allied
Fidelity Insurance Co., Indianapolis, IN, owned approximately 3,784,973 shares
(8.3%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor U.S. Treasury Money Market Fund:
Huntington Trust Company, N.A., Columbus, OH, acting in various capacities for
numerous accounts, owned approximately 493,804,763 shares (99.9%).
As of April 1, 1997, no shareholders of record owned 5% or more of the
outstanding Investment Shares of The Monitor Growth Fund.
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Trust Shares of The Monitor Growth Fund: Huntington Trust
Company, N.A., Columbus, OH, acting in various capacities for numerous accounts,
owned approximately 1,778,995 shares (34.4%); Huntington Trust Company, Inc.,
Columbus, OH, acting in various capacities for numerous accounts, owned
approximately 3,336,056 shares (64.5%).
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Trust Shares of The Monitor Income Equity Fund: Huntington Trust
Company, N.A., Columbus, OH, acting in various capacities for numerous accounts,
owned approximately 1,878,599 shares (32.1%); Huntington Trust Company, Inc.,
Columbus, OH, acting in various capacities for numerous accounts, owned
approximately 3,895,750 shares (66.7%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Investment Shares of The Monitor Mortgage Securities Fund: Alex
Barna, Shaker Heights, OH, owned approximately 26,703 shares (13.8%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Mortgage Securities Fund: Huntington
Trust Company, N.A., Columbus, OH, acting in various capacities for numerous
accounts, owned approximately 4,970,340 shares (98.7%).
18
<PAGE>
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Investment Shares of The Monitor Ohio Tax-Free Fund: John W. and
Arlene J. Warbritton, Westerville, OH, owned approximately 6,030 shares (7.3%);
Ursula E.M. and William J. Umberg, Cincinnati, OH, owned approximately 9,125
shares (11.1%); Florence M., Ralph E., and Gerald L. Brinkman, Grove City, OH,
owned approximately 13,977 shares (16.9%); and Mary Ann and Michael M.
Machowsky, Jr., Rossford, OH, owned approximately 4,612 shares (5.6%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Ohio Tax-Free Fund: Huntington Trust
Company, N.A., Columbus, OH, acting in various capacities for numerous accounts,
owned approximately 2,998,781 shares (98.9%).
As of April 1, 1997, the following shareholders of record owned 5% or more of
the outstanding Investment Shares of The Monitor Fixed Income Securities Fund:
William J. Umberg, Cincinnati, OH, owned approximately 5,307 shares (6.2%); and
the Cincinnati Institute of Fine Arts, Cincinnati, OH, owned approximately 4,619
shares (5.4%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Fixed Income Securities Fund: Huntington
Trust Company, N.A., Columbus, OH, acting in various capacities for numerous
accounts, owned approximately 6,976,395 shares (99.5%).
As of April 1, 1997, the following shareholder of record owned 5% or more of the
outstanding Trust Shares of The Monitor Short/Intermediate Fixed Income
Securities Fund: Huntington Trust Company, N.A., Columbus, OH, acting in various
capacities for numerous accounts, owned approximately 6,230,866 shares (99.2%).
The Declaration of Trust of the Trust provides that the Trust will, to the
fullest extent permitted by law, indemnify its Trustees and officers against all
liabilities and against all expenses reasonably incurred in connection with any
claim, action, suit or proceeding in which they may be involved because of their
offices with the Trust, except if it is determined in the manner specified in
the Declaration of Trust that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Trust or
that such indemnification would relieve any officer or Trustee of any liability
to the Trust or its shareholders by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of his or her duties. The Trust, at its
expense, may provide liability insurance for the benefit of its Trustees and
officers.
Trustees Compensation
During the fiscal year ended December 31, 1996, the Trustees received the
following total compensation from the Trust for their services with respect to
all of the Funds:
NAME AND POSITION COMPENSATION
----------------- ------------
David S. Schoedinger, Trustee $15,000
John M. Shary, Trustee $17,500
William R. Wise, Trustee $15,000
Richard Sisson, Trustee $12,000
There are no pension or retirement plans or programs in effect for Trustees of
the Trust. No officers of the Trust or of any other Fund receive compensation
from the Trust or the Funds as officers or employees of the Trust of any such
Fund.
Investment Adviser
Huntington Trust Company, National Association, a national banking association,
is an indirect, wholly-owned subsidiary of Huntington Bancshares Incorporated
("HBI"). With $20.8 billion in assets as of December 31, 1996, HBI
19
<PAGE>
is a major Midwest regional bank holding company. Piper Capital Management
Incorporated ("Piper"), sub-adviser to the Monitor Mortgage Securities Fund, is
a wholly-owned subsidiary of the publicly traded investment banking firm, Piper
Jaffray Companies Inc. ("PJI").
Under the investment advisory agreement between the Trust and Huntington (the
"Investment Advisory Agreement"), Huntington, at its expense, furnishes
continuously an investment program for the various Funds and makes investment
decisions on their behalf, all subject to such policies as the Trustees may
determine.
In providing investment advisory services to the various Funds, Huntington
regularly provides the Funds with investment research, advice, and supervision
and continuously furnishes investment programs consistent with the investment
objectives and policies of the various Funds, and determines, for the various
Funds, what securities shall be purchased, what securities shall be held or
sold, and what portion of a Fund's assets shall be held uninvested, subject
always to the provisions of the Trust's Declaration of Trust and By-laws, and of
the 1940 Act, and to a Fund's investment objectives, policies, and restrictions,
and subject further to such policies and instructions as the Trustees may, from
time to time, establish.
During the fiscal years ended 1994, 1995, and 1996, each of the Funds in
operation during such periods paid fees to Huntington pursuant to the Investment
Advisory Agreement as follows:
<TABLE>
<CAPTION>
Fund 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund................. $1,018,586 $1,080,916 $1,267,812
Ohio Municipal Money Market Fund.. $ 102,856* $ 157,618* $ 213,103*
U.S. Treasury Money Market Fund... $ 495,003 $ 648,805 $ 904,683
Growth Fund....................... $ 647,947 $ 790,352 $1,028,360
Income Equity Fund................ $ 754,255 $ 764,733 $ 958,682
Mortgage Securities Fund.......... $ 379,126* $ 20,000* $ 101,228*
Ohio Tax-Free Fund................ $ 299,882 $ 307,084 $ 313,954
Fixed Income Securities Fund...... $ 578,719 $ 672,320 $ 697,359
Short/Intermediate Fixed Income
Securities Fund................. $ 636,447 $ 660,192 $ 627,097
</TABLE>
- ------------
* During the fiscal year ended December 31, 1994, gross investment advisory
fees were $205,712 and $387,126, of which $102,856 and $8,000 were
voluntarily waived for the Ohio Municipal Money Market Fund and the
Mortgage Securities Fund, respectively. In addition, the Mortgage
Securities Fund was reimbursed for other operating expenses in the amount
of $50,000. During the fiscal year ended December 31, 1995, gross
investment advisory fees were $284,343 and $289,413, of which $126,725 and
$269,413 were voluntarily waived for the Ohio Municipal Money Market Fund
and the Mortgage Securities Fund, respectively. In addition, the Mortgage
Securities Fund was reimbursed for other operating expenses in the amount
of $15,000. During the fiscal year ended December 31, 1996, gross
investment advisory fees were $355,171 and $236,184, of which $142,068 and
$134,956 were voluntarily waived for the Ohio Municipal Money Market Fund
and the Mortgage Securities Fund, respectively.
The Investment Advisory Agreement provides that Huntington shall not be subject
to any liability for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which the Investment
Advisory Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties on the part of Huntington.
The Investment Advisory Agreement may be terminated without penalty with respect
to any Fund at any time by the vote of the Trustees or by the shareholders of
that Fund upon 60 days' written notice, or by Huntington on 90 days' written
notice. It may be amended only by a vote of the shareholders of the affected
Fund(s). The Agreement also terminates without payment of any penalty in the
event of its assignment. The Investment Advisory Agreement provides
20
<PAGE>
that it will continue in effect from year to year only so long as such
continuance is approved at least annually with respect to each Fund by the vote
of either the Trustees or the shareholders of the Fund, and, in either case, by
a majority of the Trustees who are not "interested persons" of Huntington.
Because of the internal controls maintained by The Huntington Trust Company,
N.A., to restrict the flow of non-public information, the Funds' investments are
typically made without any knowledge of Huntington's or its affiliates' lending
relationships with an issuer. In February 1996, Huntington also began serving
as a sub-administrator to the Trust. See "Sub-Administrator" below.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company Institute v.
Camp that the federal statute commonly referred to as the Glass-Steagall Act
prohibits a national bank from operating a mutual fund for the collective
investment of managing 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: (a) forbid a bank
holding company registered under the Federal Bank Holding Company Act of 1956
(the "Holding Company Act) or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) 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 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. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complies with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
Huntington believes that it possesses the legal authority to perform the
services for the Trust contemplated by the Investment Advisory Agreement.
Future changes in either federal or state statutes and regulations relating to
the permissible activities of banks or bank holding companies and the
subsidiaries or affiliates of those entities, as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could prevent or restrict Huntington from continuing to perform such
services for the Trust. Depending upon the nature of any changes in the
services which could be provided by Huntington, the Board of Trustees of the
Trust would review the Trust's relationship with Huntington and consider taking
all action necessary in the circumstances.
Should further legislative, judicial, or administrative action prohibit or
restrict the activities of Huntington, its affiliates, and its correspondent
banks in connection with customer purchases of shares of the Trust, such banks
might be required to alter materially or discontinue the services offered by
them to customers. It is not anticipated, however, that any change in the
Funds' method of operations would affect their net asset values per share or
result in financial losses to any customer.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
Portfolio Transactions
Huntington may place portfolio transactions with broker-dealers which furnish,
without cost, certain research, statistical, and quotation services of value to
Huntington and its affiliates in advising the Trust and other clients, provided
that they shall always seek best price and execution with respect to the
transactions. Certain investments may be appropriate for the Trust and for
other clients advised by Huntington. Investment decisions for the Trust and
other clients are made with a view to achieving their respective investment
objectives and after consideration of such factors as their current
21
<PAGE>
holdings, availability of cash for investment, and the size of their investments
generally. Frequently, a particular security may be bought or sold for only one
client or in different amounts and at different times for more than one but less
than all clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In addition,
purchases or sales of the same security may be made for two or more clients of
an investment adviser on the same day. In such event, such transactions will be
allocated among the clients in a manner believed by Huntington to be equitable
to each. In some cases, this procedure could have an adverse effect on the price
or amount of the securities purchased or sold by the Trust. Purchase and sale
orders for the Trust may be combined with those of other clients of Huntington
in the interest of achieving the most favorable net results for the Trust.
Brokerage and Research Services
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by a Fund of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. Transactions in foreign securities often involve the payment of
fixed brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid by a Fund usually
includes an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by a Fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer.
Huntington places all orders for the purchase and sale of portfolio securities
for a Fund and buys and sells securities for a Fund through a substantial number
of brokers and dealers. In so doing, it uses its best efforts to obtain for a
Fund the best price and execution available. In seeking the best price and
execution, Huntington, having in mind a Fund's best interests, considers all
factors it deems relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience, and financial stability of the broker-dealer
involved, and the quality of service rendered by the broker-dealer in other
transactions.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive research, statistical, and quotation services from broker-dealers that
execute portfolio transactions for the clients of such advisers. Consistent
with this practice, Huntington receives research, statistical, and quotation
services from many broker-dealers with which it places a Fund's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities, and recommendations as
to the purchase and sale of securities. Some of these services are of value to
Huntington and its affiliates in advising various of their clients (including
the Trust), although not all of these services are necessarily useful and of
value in managing the Trust. The fee paid by a Fund to Huntington is not
reduced because Huntington and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and by the Investment Advisory Agreement, Huntington may cause a Fund
to pay a broker-dealer that provides brokerage and research services to
Huntington an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Huntington's authority to
cause a Fund to pay any such greater commissions is also subject to such
policies as the Trustees may adopt from time to time.
In the fiscal years ended December 31, 1994, 1995 and 1996, the Funds named
below paid the following brokerage commissions:
<TABLE>
<CAPTION>
Fund 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C>
Growth Fund............ $121,407 $88,688 $ 76,783
Income Equity Fund..... $121,749 $53,998 $107,966
</TABLE>
22
<PAGE>
Administrator
SEI Administrative serves as administrator to the Trust pursuant to an
Administration Agreement dated January 11, 1996 (the "Administration
Agreement"). Pursuant to the Administration Agreement, SEI Administrative
maintains office facilities for the Trust, maintains the Trust's financial
accounts and records, and furnishes the Trust statistical and research data,
data processing, clerical, accounting, and bookkeeping services, and certain
other services required by the Trust. In addition, SEI Administrative prepares
annual and semi-annual reports to the Securities and Exchange Commission,
prepares federal and state tax returns, prepares filings with state securities
commissions, and generally assists in all aspects of the Trust's operations.
The Administration Agreement became effective on January 11, 1996, and will
continue in effect for a period of one year, and thereafter will continue for
successive one year periods, unless terminated by either party on not less than
60 days' prior written notice. Under certain circumstances, the Administration
Agreement may be terminated by the Trust immediately, without prior notice.
Prior to January 11, 1996, the Trust had retained Federated Administrative
Services ("Federated") as its administrator.
The Administration Agreement provides that SEI Administrative shall not be
liable for any error of judgment or mistake of law or any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or
negligence in the performance of its duties, or from the disregard by SEI
Administrative of its obligations and duties thereunder.
For the fiscal years ended December 31, 1994, 1995, and 1996, the Funds paid the
following fees pursuant to its administration agreement with Federated or SEI
Administrative, as the case may be:
<TABLE>
<CAPTION>
Fund 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund........................ $433,373* $436,919* $465,136
Ohio Municipal Money Market Fund......... $ 73,218* $ 73,144* $129,904
U.S. Treasury Money Market Fund.......... $310,007* $392,753* $495,079
Growth Fund.............................. $119,967* $128,230* $188,542
Income Equity Fund....................... $131,350 $132,530 $175,636
Mortgage Securities Fund................. $ 78,753* $ 9,502* $ 52,094
Ohio Tax-Free Fund....................... $ 62,952* $ 45,020* $ 68,973
Fixed Income Securities Fund............. $130,878* $134,965* $153,157
Short/Intermediate Fixed Income
Securities Fund........................ $133,654 $136,602 $137,753
</TABLE>
------------
* During the fiscal year ended December 31, 1994, gross administrator fees
were $506,567, $102,392, $370,331, $160,907, $115,132, $89,540, and
$172,811, of which $73,194, $29,174, $60,324, $40,940, $36,379, $26,588,
and $41,933 were voluntarily waived for the Money Market Fund, Ohio
Municipal Money Market Fund, U.S. Treasury Money Market Fund, Growth Fund,
Mortgage Securities Fund, Ohio Tax-Free Fund, and Fixed Income Securities
Fund, respectively. During the fiscal year ended December 31, 1995, gross
administrator fees were $536,546, $141,152, $483,058, $196,498, $84,644,
$91,463, and $200,254, of which $99,627, $68,008, $90,305, $68,268,
$75,142, $46,443, and $65,289 were voluntarily waived for the Money Market
Fund, Ohio Municipal Money Market Fund, U.S. Treasury Money Market Fund,
Growth Fund, Mortgage Securities Fund, Ohio Tax-Free Fund, and Fixed Income
Securities Fund, respectively.
Sub-Administrator
SEI Administrative has entered into a Sub-Administration Agreement with
Huntington pursuant to which Huntington provides certain administrative services
to the Trust. Under this Agreement, during the fiscal year ended December 31,
1996, SEI Administrative (and not the Trust) paid Huntington a periodic fee at
the annual rate of 0.04% of the average daily net assets of all Funds.
Effective in January 1997, this fee increased to increase to an annual rate of
0.05% of average daily net assets because at such time Huntington began to
perform a substantial portion of certain additional designated administrative
services.
23
<PAGE>
Distributor
The Trust has a Distribution Agreement with SEI Financial Services, under which
the Distributor sells and distributes shares of each of the Funds. The
Distributor is not obligated to sell any specific amount of shares of any Fund.
The Distribution Agreement may be terminated at any time as to any Fund on not
more than 60 days' notice by vote of a majority of the Trustees who are not
parties to such agreement or "interested persons" of any such party or by the
vote of a majority of the outstanding voting securities of the Fund.
The Distribution Plan
The services provided and the fees payable under the Distribution Plan to which
Investment Shares are subject are described in the Prospectus for Investment
Shares under "Distribution of Investment Shares-Distribution Plan."
The Distribution Plan for all Funds other than the Income Equity Fund and the
Short/Intermediate Fixed Income Securities Fund was initially approved by the
Trustees on November 8, 1995, including a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees"), and it was similarly approved for the Income Equity Fund and the
Short/Intermediate Fixed Income Securities Fund on October 23, 1996.
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan may be
terminated with respect to any Fund by a vote of a majority of the Independent
Trustees, or by a vote of a majority of the outstanding Investment Shares of
that Fund. The Distribution Plan may be amended by vote of the Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for such purpose, except that any change in the Distribution Plan that
would materially increase the fee payable thereunder with respect to a Fund
requires the approval of the holders of that Fund's Investment Shares. The
Trustees will review on a quarterly and annual basis written reports of the
amounts received and expended under the Distribution Plan (including amounts
expended by the Distributor to brokers, dealers and administrators pursuant to
the agreement entered into under the Distribution Plan) indicating the purposes
for which such expenditures were made.
The Distribution Plan provides that it will continue in effect with respect to
each Fund for successive one-year periods, provided that each such continuance
is specifically approved (i) by the vote of a majority of the Independent
Trustees and (ii) by the vote of a majority of all the Trustees, cast in person
at a meeting called for such purpose. For so long as the Distribution Plan
remains in effect, the selection and nomination of those Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) shall be committed
to the discretion of such disinterested persons.
For the fiscal years ended December 31, 1994, 1995 and 1996, the Funds named
below paid the following fees pursuant to the Distribution Plan (the Income
Equity Fund and the Short/Intermediate Fixed Income Securities Fund had not
commenced operations of their respective Investment Shares as of December 31,
1996):
<TABLE>
<CAPTION>
Fund 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund........................ $26,329 $70,305 $95,463
Ohio Municipal Money Market Fund......... $31,216 $43,700 $64,977
U.S. Treasury Money Market Fund.......... $ 6,160* $30,675* $43,791*
Growth Fund.............................. $ 8,652 $ 8,749 $10,181
Mortgage Securities Fund................. $15,644* $ 5,345* $ 4,596*
Ohio Tax-Free Fund....................... $ 6,638 $ 5,634 $ 5,106
Fixed Income Securities Fund............. $ 5,746 $ 5,079 $ 5,032
</TABLE>
------------
* For the fiscal year ended December 31, 1994, gross distribution fees were
$15,399 and $31,289, of which $9,239 and $15,645 were voluntarily waived
for the U.S. Treasury Money Market Fund and the Mortgage Securities Fund,
respectively. For the fiscal year ended December 31, 1995, gross
distribution fees were $76,912 and $10,690 of which $46,237 and $5,345 were
voluntarily waived for the U.S. Treasury Money
24
<PAGE>
Market Fund and the Mortgage Securities Fund, respectively. For the fiscal
year ended December 31, 1996, gross distribution fees were $109,476 and
$9,189, of which $65,686 and $4,593 were voluntarily waived for the U.S.
Treasury Money Market Fund, and the Mortgage Securities Fund, respectively.
Determination of Net Asset Value
- --------------------------------------------------------------------------------
The times and days on which the net asset value of each of the Funds is
calculated is described in the Prospectus.
The Money Market Funds have elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method
involves valuing an instrument at its cost initially and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. This
method may result in periods during which value, as determined by amortized
cost, is higher or lower than the price a Fund would receive if it sold the
instrument. The value of securities in a Fund can be expected to vary inversely
with changes in prevailing interest rates. Pursuant to Rule 2a-7, each of the
Money Market Funds will maintain a dollar-weighted average portfolio maturity
appropriate to maintaining a stable net asset value per share, provided that no
Fund will purchase any security with a remaining maturity of more than 397 days
(except as described below) nor maintain a dollar-weighted average maturity of
greater than 90 days. Repurchase agreements involving the purchase of securities
with remaining maturities of greater than 397 days will be treated as having a
maturity equal to the period remaining until the date on which the repurchase is
scheduled to occur or, where no date is specified and the agreement is subject
to a demand feature, the notice period applicable to the demand to repurchase
those securities. A variable rate instrument, the principal amount of which is
scheduled to be repaid in more than 397 days but which is subject to a demand
feature, shall be deemed to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount may be recovered through exercise of the
demand feature. A floating rate instrument, the principal amount of which is
scheduled to be repaid in more than 397 days but which is subject to a demand
feature, shall be deemed to have a maturity equal to the period remaining until
the principal amount can be recovered through demand. The Trustees have
undertaken to establish procedures reasonably designed, taking into account
current market conditions and each of the Money Market Funds' investment
objective, to stabilize the net asset value per share of each Money Market Fund
for purposes of sales and redemptions at $1.00. These procedures include a
review by the Trustees, at such intervals as they deem appropriate, to determine
the extent, if any, to which the net asset value per share of each Fund,
calculated by using available market quotations, deviates from $1.00 per share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Trustees promptly consider what action, if any, should be initiated. If
the Trustees believe that the extent of any deviation from a Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to investors, the Trustees will take such steps as they deem appropriate
to eliminate or reduce to the extent reasonably practicable any such dilution or
unfair results. These steps may include selling portfolio instruments prior to
maturity, shortening the Fund's average portfolio maturity, withholding or
reducing dividends, reducing the number of a Fund's outstanding shares without
monetary consideration, or utilizing a net asset value per share based on
available market quotations. In addition, if Huntington becomes aware that any
Second Tier Security or Unrated Security held by a Fund has received a rating
from any NRSRO below the NRSRO's two highest rating categories, the procedures
adopted by the Trustees in accordance with Rule 2a-7 require Huntington to
dispose of such security unless (i) the sale would cause the deviation between
the Fund's amortized cost and market-determined values per share to exceed 0.40
of 1% (in which case the Trustees will meet to determine what action to take) or
(ii) the Trustees reassess the credit quality of the security and determine that
it is in the best interests of shareholders to retain the investment. In the
event a Fund holds a defaulted security, a security that has ceased to be an
Eligible Security, or a security that has been determined to no longer present
minimal credit risks, Rule 2a-7 requires the Fund to dispose of the security
unless the Trustees determine that such action is not in the best interest of
shareholders. The Rule requires each Fund to limit its investments to securities
determined to present minimal credit risks based on factors in addition to
ratings assigned a security by an NRSRO and which are at the time of acquisition
Eligible Securities. (See Appendix I to the Prospectus for a summary of the
definition under Rule 2a-7 of capitalized terms used above and see
25
<PAGE>
the Appendix to this Statement of Additional Information for a description of
the ratings assigned by the NRSROs utilized by Huntington in managing the Funds'
investments.)
Securities traded on a national securities exchange or quoted on the NASDAQ
National Market System are valued at their last-reported sale price on the
principal exchange or reported by NASDAQ or, if there is no reported sale, and
in the case of over-the-counter securities not included in the NASDAQ National
Market System, at a bid price estimated by a broker or dealer. Debt securities,
including zero-coupon securities, and certain foreign securities will be valued
by a pricing service. Other foreign securities will be valued by the Trust's
custodian. Securities for which current market quotations are not readily
available and all other assets are valued at fair value as determined in good
faith by the Trustees, although the actual calculations may be made by persons
acting pursuant to the direction of the Trustees.
If any securities held by a Fund are restricted as to resale, their fair value
is generally determined as the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over a reasonable period
of time. The valuation procedures applied in any specific instance are likely
to vary from case to case. However, consideration is generally given to the
financial position of the issuer and other fundamental analytical data relating
to the investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Fund
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Fund's shares are computed as of such times. Also, because
of the amount of time required to collect and process trading information as to
large numbers of securities issues, the values of certain securities (such as
convertible bonds and U.S. Government securities) are determined based on market
quotations collected earlier in the day at the latest practicable time prior to
the close of the Exchange. Occasionally, events affecting the value of such
securities may occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value, in the manner described
above.
The proceeds received by each Fund for each issue or sale of its shares, and all
income, earnings, profits, and proceeds thereof, subject only to the rights of
creditors, will be specifically allocated to such Fund, and constitute the
underlying assets of that Fund. The underlying assets of each Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of such Fund and with a share of the general liabilities
of the Trust. Expenses with respect to any two or more Funds are to be
allocated in proportion to the net asset values of the respective Funds except
where allocations of direct expenses can otherwise be fairly made.
Additional Purchase Information--Payment in Kind
- --------------------------------------------------------------------------------
In addition to payment by check, shares of a Fund may be purchased by customers
of Huntington in exchange for securities held by an investor which are
acceptable to that Fund. Investors interested in exchanging securities must
first telephone Huntington at (800) 253-0412 for instructions regarding
submission of a written description of the securities the investor wishes to
exchange. Within five business days of the receipt of the written description,
Huntington will advise the investor by telephone whether the securities to be
exchanged are acceptable to the Fund whose shares the investor desires to
purchase and will instruct the investor regarding delivery of the securities.
There is no charge for this review.
Securities accepted by a Fund are valued in the manner and on the days described
in the section entitled "Determination of Net Asset Value" as of 4:00 p.m.
(Eastern Time). Acceptance may occur on any day during the five day period
26
<PAGE>
afforded Huntington to review the acceptability of the securities. Securities
which have been accepted by a Fund must be delivered within five days following
acceptance.
The value of the securities to be exchanged and of the shares of the Fund may be
higher or lower on the day Fund shares are offered than on the date of receipt
by Huntington of the written description of the securities to be exchanged. The
basis of the exchange of such securities for shares of the Fund will depend on
the value of the securities and the net asset value of Fund shares next
determined following acceptance on the day Fund shares are offered. Securities
to be exchanged must be accompanied by a transmittal form which is available
from Huntington.
A gain or loss for federal income tax purposes may be realized by the investor
upon the securities exchange depending upon the cost basis of the securities
tendered. All interest, dividends, subscription or other rights with respect to
accepted securities which go "ex" after the time of valuation become the
property of the Fund and must be delivered to the Fund by the investor forthwith
upon receipt from the issuer. Further, the investor must represent and agree
that all securities offered to the Fund are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933, or otherwise.
Taxes
- --------------------------------------------------------------------------------
Federal Income Taxation
It is intended that each Fund qualifies each year as a regulated investment
company under Subchapter M of the Code. In order to qualify for the special tax
treatment accorded regulated investment companies and their shareholders, a Fund
must, among other things:
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, securities and foreign currencies, or other income
(including but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing in such stock,
securities, or currencies;
(b) derive less 30% of its gross income from gains from the sale or other
disposition of certain assets (including securities) held for less than
three months;
(c) distribute with respect to each taxable year at least 90% of its
"investment company taxable income" (as that term is defined in the Code)
and tax-exempt income (less deductions attributable to that income) for
such year; and
(d) diversify its holdings so that, at the end of each fiscal quarter (i) at
least 50% of the market value of the Fund's assets is represented by cash
or cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities limited in respect of any one
issuer to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the
securities (other than those of the U.S. Government or other regulated
investment companies) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades
or businesses.
If a Fund qualifies as a regulated investment company that is accorded special
tax treatment, the Fund will not be subject to federal income tax on income paid
to its shareholders in the form of dividends (including capital gain dividends).
If a Fund fails to qualify as a regulated investment company accorded special
tax treatment in any taxable year, the Fund would be subject to tax on its
income at corporate rates, and could be required to recognize unrealized gains,
pay substantial taxes and interest and make substantial distributions before
requalifying as a regulated investment company
27
<PAGE>
that is accorded special tax treatment. In addition, all distributions by the
Fund would be taxed as if made by a regular corporation thus a Fund could not
pay exempt-interest or capital gains dividends.
If a Fund fails to distribute in a calendar year substantially all of its
ordinary income for such year and substantially all of its net capital gains for
the year ending October 31 (or later if the Fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the Fund will be subject
to a 4% excise tax on the undistributed amounts. Each Fund intends generally to
make distributions sufficient to avoid imposition of the 4% excise tax.
Return of capital distributions. If a Fund makes a distribution in excess of
its current and accumulated "earnings and profits" in any taxable year, the
excess distribution will be treated as a non-taxable return of capital to the
extent of a shareholder's tax basis in his shares. If the shareholder's basis
has been reduced to zero, any additional return of capital distributions will be
taxable as capital gain.
Exempt-interest dividends. A Fund will be qualified to pay exempt-interest
dividends to its shareholders only if, at the close of each quarter of the
Fund's taxable year, at least 50% of the total value of the Fund's assets
consists of obligations the interest on which is exempt from federal income tax.
If a Fund intends to pay only exempt-interest dividends, the Fund may be limited
in its ability to engage in such taxable transactions as forward commitments,
repurchase agreements, financial futures, and options contracts on financial
futures, tax-exempt bond indices, and other assets. In general, exempt-interest
dividends, if any, attributable to interest received on certain private activity
bonds and certain industrial development bonds will not be tax-exempt to any
shareholders who are "substantial users" of the facilities financed by such
bonds or who are "related persons" of such substantial users (within the meaning
of Section 147(a) of the Code). Recipients of certain Social Security and
Railroad Retirement benefits may have to take into account exempt-interest
dividends from the Fund in determining the taxability of such benefits.
Shareholders should consult their own tax adviser regarding the potential effect
on them (if any) of any investment in the Fund. A Fund which is qualified to
pay exempt-interest dividends will inform investors within 60 days of the Fund's
fiscal year end of the percentage of its income distributions designated as tax-
exempt. The percentage is applied uniformly to all distributions made during
the year.
Hedging transactions. Certain investment and hedging activities of a Fund,
including transactions in options, futures contracts, straddles, forward
contracts, foreign currencies, foreign securities, or other similar
transactions, will be subject to special tax rules. In a given case, these
rules may accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's assets, or convert short-term
capital losses into long-term capital losses. These rules could therefore affect
the amount, timing, and character of the Fund's income and distributions to
shareholders. Income earned as a result of these transactions would, in
general, not be eligible for the dividends received deduction or for treatment
as exempt-interest dividends when distributed to shareholders. Each Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund. Under the 30% of gross
income test described above (see "Federal Income Taxation"), a Fund will be
restricted in selling assets held or considered under Code rules to have been
held for less than three months, and in engaging in certain hedging transactions
(including hedging transactions in options and futures) that could cause certain
Fund assets to be treated as held for less than three months.
Foreign currency-denominated securities and related hedging transactions. A
Fund's transactions in foreign currency-denominated debt securities, certain
foreign currency options, futures contracts, and forward contracts may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
Foreign Tax Credit. If more than 50% of a Fund's assets at year end consists of
the debt and equity securities of foreign corporations, that Fund intends to
qualify for and make the election permitted under Section 853 of the Code so
that shareholders will be able to claim a credit or deduction on their income
tax returns for, and will be required to treat as part of the amount distributed
to them, their pro rata portion of qualified taxes paid by the Fund to foreign
countries (which taxes relate primarily to investment income). Shareholders who
do not itemize on their federal income tax returns may claim a credit (but no
deduction) for such foreign taxes. A shareholder's ability to claim such a
foreign tax
28
<PAGE>
credit will be subject to certain limitations imposed by the Code, as a result
of which shareholders may not get a full credit or deduction for the amount of
foreign taxes so paid by the Fund. A Fund's investments in foreign securities
may be subject to withholding taxes at the source on dividends or interest
payments.
Backup Withholding. In general, a Fund is required to withhold 31% of the
taxable dividends and other distributions paid to any shareholder who fails to
furnish the Fund with a correct taxpayer identification number, who has
underreported dividends or interest income, or who fails to certify to the Fund
that he or she is not subject to such withholding.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting purchases of shares of a Fund. No attempt is
made to present a detailed explanation of the federal income tax treatment of
each Fund or its shareholders, and this discussion is not intended as a
substitute for careful tax planning. Accordingly, investors are urged to consult
their tax advisers with specific reference to their own tax situation.
Ohio Income Taxation
For a summary of the Ohio income tax treatment of dividends paid by the Ohio
Funds, see "Distributions and Taxes-Ohio Personal Income Taxes" in the
Prospectus.
Dividends and Distributions
- --------------------------------------------------------------------------------
Money Market Funds
The net investment income of each class of shares of each Money Market Fund is
determined as of 4:00 p.m. (Eastern Time) each Business Day. All of the net
investment income so determined normally will be declared as a dividend daily to
shareholders of record of each class as of the close of business and prior to
the determination of net asset value. Unless the Business Day before a weekend
or holiday is the last day of an accounting period, the dividend declared on
that day will include an amount in respect of the Fund's income for the
subsequent non-business day or days. No daily dividend will include any amount
of net income in respect of a subsequent semiannual accounting period.
Dividends declared during any month will be invested as of the close of business
on the last calendar day of that month (or the next Business Day after the last
calendar day of the month if the last calendar day of the month is a non-
business day) in additional shares of the same class of the Fund at the net
asset value per share, normally $1.00, determined as of the close of business on
that day, unless payment of the dividend in cash has been requested.
Net income of a class of shares of a Money Market Fund consists of all interest
income accrued on portfolio assets less all expenses of the Fund and the class
and amortized market premium. Amortized market discount is included in interest
income. None of the Money Market Funds anticipates that it will normally
realize any long-term capital gains with respect to its portfolio securities.
Normally each class of shares of the Money Market Funds will have a positive net
income at the time of each determination thereof. Net income may be negative if
an unexpected liability must be accrued or a loss realized. If the net income of
a class or classes of shares of a Money Market Fund determined at any time is a
negative amount, the net asset value per share of such class or classes will be
reduced below $1.00 unless one or more of the following steps, for which the
Trustees have authority, are taken: (1) reduce the number of shares in each
shareholder's account of the applicable class or classes, (2) offset each
shareholder's pro rata portion of negative net income against the shareholder's
accrued dividend account or against future dividends with regard to the
applicable class or classes, or (3) combine these methods in order to seek to
obtain the net asset value per share of the applicable class or classes at
$1.00. The Trustees may endeavor to restore a Fund's net asset value per share
to $1.00 by not declaring dividends from net income on subsequent days until
restoration, with the result that the net asset value per share will increase to
the extent of positive net income which is riot declared as a dividend.
29
<PAGE>
Should a Money Market Fund incur or anticipate, with respect to its portfolio,
any unusual or unexpected significant expense or loss which would affect
disproportionately the Fund's income for a particular period, the Trustees would
at that time consider whether to adhere to the dividend policy described above
or to revise it in light of the then prevailing circumstances in order to
ameliorate, to the extent possible, the disproportionate effect of such expense
or loss on then existing shareholders. Such expenses or losses may nevertheless
result in a shareholder's receiving no dividends for the period during which the
shares are held and receiving upon redemption a price per share lower than that
which was paid.
Other Funds
Each of the Funds other than the Money Market Funds will declare and distribute
dividends from net investment income of each class of shares, if any, and will
distribute its net realized capital gains, with respect to each class of shares,
if any, at least annually.
Performance Information
- --------------------------------------------------------------------------------
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance, investors
should consider all relevant factors, such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which a Fund uses in advertising may include:
Morningstar, Inc., Lipper Analytical Services, Inc., CDA Investment
Technologies, Wisenberger Dealer Services, Computer Directions Advisor Services,
Inc., Moody's Bond Survey Index, Salomon Brothers Corporate Bond Rate-of-Return
Index, Lehman Brothers Municipal Bond Index, Bond-20 Index, Standard & Poor's
Daily Stock Price Index of 500 Common Stocks, Dow Jones Industrial Average,
Lehman Brothers Government/Corporate (Total) Index, Merrill Lynch 2-Year
Treasury Index, Merrill Lynch 3-Year Treasury Index, Donaghue's Money Fund
Report, Lehman Brothers Intermediate Government/Corporate Index, Lehman Brothers
5-Year Bond Index, and Lehman Brothers Government (LT) Index. Advertisements
may quote performance information which does not reflect the effect of the sales
load. In addition, data may be used comparing the differences between the yields
of income funds, Ginnie Maes and U.S. Treasury notes. All data is based on past
performance and is not intended to indicate future results.
Money Market Funds
Based on the seven-day period ended December 31, 1996 (the "base period"), the
yield and effective yield of the Trust Shares of each of the Money Market Funds
were as follows:
<TABLE>
<CAPTION>
Fund-Trust Shares Yield Effective Yield
----------------- ----- ---------------
<S> <C> <C>
Money Market Fund................. 4.92% 5.04%
Ohio Municipal Money Market Fund.. 3.49% 3.55%
U.S. Treasury Money Market Fund... 4.96% 5.08%
</TABLE>
Based on the seven-day period ended December 31, 1996 (the "base period"), the
yield and effective yield of the Investment Shares of the Money Market Funds
listed below were as follows:
<TABLE>
<CAPTION>
Fund-Investment Shares Yield Effective Yield
---------------------- ----- ---------------
<S> <C> <C>
Money Market Fund................. 4.82% 4.93%
Ohio Municipal Money Market Fund.. 3.39% 3.45%
U.S. Treasury Money Market Fund... 4.86% 4.98%
</TABLE>
The yield for each class of shares of a Fund is computed by determining the
percentage net change, excluding capital changes, in the value of an investment
in one share of the class over the base period, and multiplying the net change
by 365/7 (or approximately 52 weeks). The effective yield for each class of
shares of a Fund represents a compounding
30
<PAGE>
of the yield by adding 1 to the number representing the percentage change in
value of the investment during the base period, raising the sum to a power equal
to 365/7, and subtracting 1 from the result.
Other Funds
A Fund's yield for each class of shares is presented for a specified 30-day
period (the "base period"). Yield is based on the amount determined by (i)
calculating the aggregate of dividends and interest earned by the class during
the base period less expenses accrued for that period by the class, and (ii)
dividing that amount by the product of (A) the average daily number of shares of
the class outstanding during the base period and entitled to receive dividends
and (B) the maximum offering price per share of the class on the last day of the
base period. The result is annualized on a compounding basis to determine the
yield of the class of shares of the Fund. For this calculation, interest earned
on debt obligations held by a Fund is generally calculated using the yield to
maturity (or first expected call date) of such obligations based on their market
values (or, in the case of receivables-backed securities such as Ginnie Maes,
based on cost). Dividends on equity securities are accrued daily at their
stated dividend rates.
The yield of Trust Shares of each of the following Funds for the 30-day period
ended December 31, 1996, was as follows:
Fund-Trust Shares Yield
----------------- -----
Growth Fund........................................... 1.04%
Income Equity Fund.................................... 3.80%
Ohio Tax-Free Fund.................................... 3.78%
Fixed Income Securities Fund.......................... 5.72%
Short/Intermediate Fixed Income Securities Fund....... 5.26%
Mortgage Securities Fund.............................. 6.59%
The yield of Investment Shares of each of the following Funds based on the
maximum offering price per share of the Funds for the 30-day period ended
December 31, 1996, was as follows:
Fund-Investment Shares Yield
---------------------- -----
Growth Fund........................................... 0.83%
Ohio Tax-Free Fund.................................... 3.44%
Fixed Income Securities Fund.......................... 5.37%
Mortgage Securities Fund.............................. 6.21%
The average annual total returns for Trust Shares of each of the following Funds
for the one-year and five-year periods and for the life of the respective Fund
through December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Five Years Ended Inception through
Fund-Trust Shares December 31, 1996 December 31, 1996 December 31, 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Growth Fund...................... 16.72% 11.76% 11.82%
Income Equity Fund............... 16.88% 12.06% 10.06%
Ohio Tax-Free Fund............... 3.48% 5.17% 5.98%
Fixed Income Securities Fund..... 2.56% 6.28% 7.72%
Short/Intermediate Fixed Income
Securities Fund................ 4.08% 5.82% 7.31%
Mortgage Securities Fund......... 6.56% N/A 5.88%
</TABLE>
The average annual total returns for Investment Shares of each of the following
Funds for the one-year and five-year periods and for the life of the respective
Fund through December 31, 1996, were as follows:
31
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended Five Years Ended Inception through
Fund-Investment Shares December 31, 1996 December 31, 1996 December 31, 1996
---------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Growth Fund.............................. 16.43% 11.48% 11.78%
Ohio Tax-Free Fund....................... 3.20% 4.90% 5.35%
Fixed Income Securities Fund............. 2.32% 6.01% 7.43%
Mortgage Securities Fund................. 6.25% N/A 5.69%
</TABLE>
The average annual total return for each Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the
monthly/quarterly reinvestment of all dividends and distributions. Any
applicable redemption fee is deducted from the ending value of the investment
based on the lesser of the original purchase price or the net asset value of
shares redeemed.
From time to time, Huntington and/or SEI Administrative may reduce its
compensation or assume expenses of a Fund in order to reduce the Fund's
expenses, as described in the Prospectus. Any such waiver or assumption would
increase a Fund's yield and total return during the period of the waiver or
assumption.
Tax-Equivalent Yield
With respect to the Ohio Funds, the Funds' tax-equivalent yield (or effective
yield) for each class of shares during the applicable base period may be
presented for shareholders in one or more stated tax brackets. Tax-equivalent
yield is calculated by adjusting a Fund's tax-exempt yield with respect to the
class by a factor designed to show the approximate yield that a taxable
investment would have to earn to produce the same after-tax yield for that
period. A Fund's tax-equivalent yield with respect to each class will differ
for shareholders in different tax brackets. In calculating the yields shown
below, additional state and local taxes paid on comparable taxable investments
were not used to increase federal deductions.
The tax-equivalent yield for Trust Shares of the Ohio Municipal Money Market
Fund for the seven-day period ended December 31, 1996, was 6.60% (assuming a
39.6% federal income tax bracket and a 7.5% Ohio income tax bracket).
The tax-equivalent yield for the Trust Shares of the Ohio Tax-Free Fund for the
thirty-day period ended December 31, 1996, was 7.15% (assuming a 39.6% federal
income tax bracket and a 7.5% Ohio income tax bracket).
The tax-equivalent yield for Investment Shares of the Ohio Municipal Money
Market Fund for the seven-day period ended December 31, 1996, was 6.41%
(assuming a 39.6% federal income tax bracket and a 7.5% Ohio income tax
bracket).
The tax-equivalent yield for the Investment Shares of the Ohio Tax-Free Fund for
the thirty-day period ended December 31, 1996, was 6.50% (assuming a 39.6%
federal income tax bracket and a 7.5% Ohio income tax bracket).
32
<PAGE>
Tax-Equivalency Tables
Ohio Municipal Money Market Fund and Ohio Tax-Free Fund
The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund, with respect to
both classes of shares, may use a tax equivalency table in advertising and sales
literature. The interest earned on tax-exempt securities in a Fund's portfolio
generally remains free from federal regular income tax and is free from Ohio
personal income taxes. Some portion of a Fund's income may result in liability
under the federal alternative minimum tax and may be subject to state and local
taxes. The table below provides tax-equivalent yields for selected tax-exempt
yields. As the table below indicates, a "tax-free" investment is an attractive
choice for investors, particularly in times of narrow spreads between tax-free
and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF OHIO
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%
- ------------------------------------------------------------------------------------
$1- $24,001- $58,151- $121,301- OVER
Single Return: $24,000 $ 58,150 $121,300 $ 263,750 $263,750
- ------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
</TABLE>
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING THE
TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE AND LOCAL TAXES PAID ON
COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO INCREASE FEDERAL DEDUCTIONS.
33
<PAGE>
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF OHIO
<TABLE>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
20.201% 33.943% 37.900% 43.500% 47.100%
- ------------------------------------------------------------------------------------
$1- $40,101- $96,901- $147,701- OVER
Joint Return: $40,100 $ 96,900 $147,700 $ 263,750 $263.750
- ------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------
1.50% 1.88% 2.27% 2.42% 2.65% 2.84%
2.00% 2.51% 3.03% 3.22% 3.54% 3.78%
2.50% 3.13% 3.78% 4.03% 4.42% 4.73%
3.00% 3.76% 4.54% 4.83% 5.31% 5.67%
3.50% 4.39% 5.30% 5.64% 6.19% 6.62%
4.00% 5.01% 6.06% 6.44% 7.08% 7.56%
4.50% 5.64% 6.81% 7.25% 7.96% 8.51%
5.00% 6.27% 7.57% 8.05% 8.85% 9.45%
5.50% 6.89% 8.33% 8.86% 9.73% 10.40%
6.00% 7.52% 9.08% 9.66% 10.62% 11.34%
</TABLE>
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING
THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE AND LOCAL TAXES
PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO INCREASE FEDERAL
DEDUCTIONS.
The above charts, which are based on the federal income tax schedule effective
January 1, 1997, are for illustrative purposes only. They are not indicators of
past or future performance of a Fund.
Custodian
- --------------------------------------------------------------------------------
The Huntington Trust Company, N.A., is the custodian of the Trust's assets. The
custodian's responsibilities include safeguarding and controlling the Trust's
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Trust's investments. The custodian
does not determine the investment policies of the Funds or decide which
securities the Funds will buy or sell. The custodian's fees for custody and
record keeping services are based on a percentage of the average daily net
assets of the Funds.
Transfer Agent and Dividend Disbursing Agent
- --------------------------------------------------------------------------------
SEI Administrative serves as transfer agent and dividend disbursing agent for
the Funds. The fee paid to the transfer agent is based upon the size, type and
number of accounts and transactions made by shareholders. SEI Administrative
has, in turn, contracted with The Huntington Trust Company and with State Street
Bank and Trust Company, for certain shareholder accounting and servicing
functions in support of its role as transfer agent and dividend disbursing agent
for the Trust. The fees and expenses of these two Sub-Transfer Agents are paid
by SEI Administrative, and not by the Trust or any of the Funds.
34
<PAGE>
SEI Administrative also maintains the Funds' accounting records. The fee paid
for this service is based upon the level of the Funds' average net assets for
the period plus out-of-pocket expenses.
Independent Accountants
- --------------------------------------------------------------------------------
The independent accountants for the Trust were Price Waterhouse LLP, Columbus,
Ohio, through December 31, 1996. Effective January 1, 1997, the independent
accountants for the Trust are KPMG Peat Marwick, Columbus, Ohio.
Additional Information About the Trust and Its Shares
- --------------------------------------------------------------------------------
The Trust is not required to hold annual meetings of shareholders for the
purpose of electing Trustees except that (i) the Trust is required to hold a
shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders and
(ii) if, as a result of a vacancy on the Board of Trustees, less than two-thirds
of the Trustees holding office have been elected by the shareholders, that
vacancy may only be filled by a vote of the shareholders. In addition, Trustees
may be removed from office by a written consent signed by the holders of shares
representing two-thirds of the outstanding shares of the Trust at a meeting duly
called for the purpose, which meeting must be held upon written request of not
less than 10% of the outstanding shares of the Trust. Upon written request by
the holders of shares representing 1% of the outstanding shares of the Trust
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust will provide a list of shareholders or
disseminate appropriate materials (at the expense of the requesting
shareholders). Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust provides for indemnification out of a
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of a Fund. Thus the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations.
Shareholder Inquiries
Shareholder inquiries regarding those Funds offering Trust Shares should be
directed to The Huntington Trust Company, N.A., 41 South High Street, Columbus,
Ohio 43215, Attn: Mutual Fund Services Center.
Shareholder inquiries regarding those Funds offering Investment Shares should be
directed to The Huntington Investment Company, 41 South High Street, Columbus,
Ohio 43287, Attn: Mutual Fund Services Center.
Pending Litigation Relating to Piper
Several federal and state court complaints and arbitrations before self-
regulatory organizations have been filed against Piper, Piper Jaffray Companies
Inc. ("PJI") and certain affiliated companies, and certain individuals
affiliated with Piper. These actions relate to one mutual fund and a number of
closed-end investment companies managed by Piper and to two mutual funds for
which Piper has acted as sub-adviser. An Amended Consolidated Class Action
Complaint, representing a consolidation of a number of previously filed
complaints, was filed on October 5, 1994 in the United States District Court for
the District of Minnesota, by several plaintiffs purporting to represent a class
of investors in one of these funds. This complaint alleged certain violations
of federal and state securities laws, common law negligent misrepresentation,
and breach of fiduciary duty. In February 1996 a settlement agreement was
approved by the Court
35
<PAGE>
and became effective. A number of other complaints and arbitrations have also
settled. The pending litigation and arbitration proceedings generally allege
certain violations of federal and state securities laws, the federal Racketeer
Influenced and Corrupt Organizations Act, state consumer protection laws, common
law negligent misrepresentation, breach of contract, breach of fiduciary duty,
and fraud. Piper and its affiliates intend to defend or, in some cases,
negotiate to settle these actions. None of these complaints involve the
Mortgage Securities Fund. Piper, PJI and certain other affiliates have also
been subject to regulatory inquiries relating to various funds or assets managed
by Piper. Without admitting or denying any findings, PJI has agreed to a
settlement with the National Association of Securities Dealers, Inc.
Additionally, both PJI and Piper have agreed to a settlement with the Minnesota
Department of Commerce, which resolved a joint investigation primarily related
to disclosure and sales practices with respect to one of the other funds managed
by Piper. PJI and Piper are continuing to cooperate in an investigation being
conducted by the U.S. Securities and Exchange Commission, and have been
responding to requests for information from a number of other regulatory
authorities.
Financial Statements
- --------------------------------------------------------------------------------
The report of Price Waterhouse LLP, independent accountants, and the audited
financial statements of The Monitor Funds for the year ended December 31,
1996, are incorporated herein by reference from the Trust's Combined Annual
Report to Shareholders for the year ended December 31, 1996, which has been
previously sent to shareholders of each Fund pursuant to Section 30(d) of the
1940 Act and previously filed with the Securities and Exchange Commission. A
copy of the Annual Report to Shareholders may be obtained without charge by
contacting the Trust.
36
<PAGE>
Appendix
- --------------------------------------------------------------------------------
Standard & Poor's Ratings Group Corporate and Municipal Bond Rating Definitions
AAA - Debt rated 'AAA' has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
S&P may apply a plus (+) or minus (-) to the above rating classifications to
show relative standing within the classifications.
Moody's Investors Service, Inc. Corporate and Municipal Bond Rating Definitions
Aaa - Bonds which are rated Aaa 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 which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A 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.
Duff & Phelps, Inc. Corporate Bond Rating Definitions
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA - High credit quality protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A - Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
Fitch Investors Service, Inc. Corporate Bond Rating Definitions
AAA - Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issues is generally rated 'F-I+.' A-Bonds
considered to be investment grade and of high credit quality. The obligor's
ability
37
<PAGE>
to pay interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
IBCA Long-Term Rating Definitions
AAA - Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly.
AA - Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may increase investment
risk albeit not very significantly.
A - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
Standard & Poor's Ratings Group Short-Term Municipal Obligation Rating
Definitions
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Municipal Obligation Rating
Definitions
MIG1/VMIG1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG2/VMIG2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
IBCA Short-Term Rating Definitions
A1+ - Obligations supported by the highest capacity for timely repayment.
A1 - Obligations supported by a very strong capacity for timely repayment.
A2 - Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic or
financial conditions.
Standard and Poor's Ratings Group Commercial Paper Rating Definitions
A-1 - This designation indicates that the degree of safety regarding timely
payment strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus (+) sign.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
38
<PAGE>
Moody's Investors Service, Inc. Commercial Paper Rating Definitions
P-1-Issuers (or supporting institutions) rated Prime-1 (P-1) have a superior
capacity for repayment of senior short-term promissory obligations. P-1
repayment capacity will normally 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.
. Well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2-Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
capacity for repayment of senior short-term debt obligations. n& will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
NR indicates the bonds are not currently rated by Moody's or S&P. However,
management considers them to be of good quality.
Duff & Phelps, Inc. Commercial Paper Rating Definitions
Duff 1+ - Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
Duff 1 - Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
Duff 1-High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
Duff 2-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.
Fitch Investors Service, Inc. Commercial Paper Rating Definitions
Plus or minus signs are used with a rating symbol to indicate the relative
portion of the credit within the rating category:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F1+.
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is riot as
great as for issues assigned F-1 + or F-1 ratings.
39
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: The following financial statements have been
incorporated into the Combined Statement of Additional Information by reference
to the Trust's Combined Annual Report to Shareholders, dated December 31, 1996:
Statements of Operations for the year ended December 31, 1996
Statements of Assets and Liabilities as of December 31, 1996
Statements of Changes in Net Assets for the year ended December 31, 1996
Statements of Cash Flows for the year ended December 31, 1996
Portfolios of Investments as of December 31, 1996
Financial Highlights for the years ended December 31, 1996 Combined Notes
to Financial Statements as of and for the year ended December 31, 1996
Report of Price Waterhouse LLP, Independent Accountants
(b) Exhibits:
(1) Amended and Restated Declaration of Trust of the Registrant
(previously filed as Exhibit 1 to Post-Effective Amendment No. 19 and
incorporated herein by reference)
(2) By-Laws of the Registrant (previously filed as Exhibit 2 to Post-
Effective Amendment No. 19 and incorporated herein by reference)
(3) Not applicable
(4) Not applicable
(5) (i) Investment Advisory Agreement of the Registrant (previously filed
as Exhibit 5(i) to Post-Effective Amendment No. 19 and incorporated
herein by reference)
(ii) Sub-Advisory Agreement of the Registrant (previously filed as
Exhibit 5(ii) to Post-Effective Amendment No. 19 and incorporated
herein by reference)
(6) Distribution Agreement, dated January 11, 1996, between the Registrant
and SEI Financial Services Company (previously filed as Exhibit 6 to
Post-Effective Amendment No. 20 and incorporated herein by reference)
(7) Not applicable
(8) Custodian Contract of the Registrant (previously filed as Exhibit 8 to
Post-Effective Amendment No. 19 and incorporated herein by reference)
(9) (i) Transfer Agency and Service Agreement, dated January 11, 1996,
between the Registrant and SEI Financial Management Corporation
(previously filed as Exhibit 9(i) to Post-Effective Amendment No. 20
and incorporated herein by reference)
(ii) Sub-Transfer Agency and Service Agreement, dated February 10,
1996, between SEI Financial Management Corporation and State Street
Bank and Trust Company (previously filed as Exhibit 9(ii) to Post-
Effective Amendment No. 20 and incorporated herein by reference)
(iii) Administration Agreement, dated January 11, 1996, between the
Registrant and SEI Financial Management Corporation (previously filed
as Exhibit 9(iii) to Post-
C-1
<PAGE>
Effective Amendment No. 20 and incorporated herein by reference)
(iv) Sub-Administration Agreement, dated January 11, 1996, between
SEI Financial Management Corporation and The Huntington Trust
Company, N.A. (previously filed as Exhibit 9(iv) to Post-Effective
Amendment No. 20 and incorporated herein by reference)
(v) Consent to Assignment and Assumption Agreement for the
Administration and Transfer Agency Agreements, dated January 30,
1997, between the Registrant and SEI Financial Management Corporation
(filed herewith)
(10) Opinion and Consent of Counsel as to legality of shares being
registered (filed herewith)
(11) Consent of Independent Accountants (filed herewith)
(12) Not applicable
(13) Initial Capital Understanding (previously filed as Exhibit 13 to
Post-Effective Amendment No. 20 and incorporated herein by reference)
(14) Not applicable
(15) Distribution and Shareholder Services Plan, adopted on November 8,
1995 (previously filed as Exhibit 15 to Post-Effective Amendment No.
21 and incorporated herein by reference)
(16) Not applicable
(17) Financial Data Schedules (EDGAR filing only) (filed herewith)
(18) Multiple Class Plan (previously filed as Exhibit 18 to Post-Effective
Amendment No. 21 and incorporated herein by reference)
(24) Powers of Attorney (filed herewith)
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of April 1, 1997
- -------------- ------------------------
Shares of Beneficial Interest of:
The Monitor Money Market Fund
Trust Shares................................. 76
Investment Shares............................ 1,786
The Monitor Ohio Municipal Money Market Fund
Trust Shares................................. 9
Investment Shares............................ 262
The Monitor U.S. Treasury Money Market Fund
Trust Shares................................. 9
Investment Shares............................ 361
C-2
<PAGE>
The Monitor Growth Fund
Trust Shares............................. 98
Investment Shares........................ 841
The Monitor Income Equity Fund
Trust Shares............................. 76
Investment Shares........................ 0
The Monitor Mortgage Securities Fund
Trust Shares............................. 48
Investment Shares........................ 248
The Monitor Ohio Tax-Free Fund
Trust Shares............................. 21
Investment Shares........................ 155
The Monitor Fixed Income Securities Fund
Trust Shares............................. 58
Investment Shares........................ 288
The Monitor Short/Intermediate Fixed
Income Securities Fund
Trust Shares............................. 70
Investment Shares........................ 0
Item 27. Indemnification
The response to this Item is incorporated by reference to Registrant's
Post-Effective Amendment No. 18 on Form N-1A filed April 26, 1994.
Item 28. Business and Other Connections of Investment Adviser
The Adviser. The Huntington Trust Company, Inc., N.A. ("Huntington")
serves as investment adviser to the Registrant. Huntington is wholly-owned
subsidiary of The Huntington Financial Services Company which in turn is a
wholly-owned subsidiary of Huntington Bancshares Incorporated ("Bancshares").
Huntington conducts a variety of trust activities. To the knowledge of
Registrant, none of the directors or executive officers of Huntington, except
those set forth below, is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and executive officers also
hold various positions with and engage in business for Bancshares. Set forth
below are the names and principal businesses of the directors and executive
officers of Huntington who are or during the past two fiscal years have been
engaged in any other business, profession, vocation or employment of a
substantial nature for their own account or in the capacity of director,
officer, employee, partner or trustee.
C-3
<PAGE>
Name of Principal Other Business(es) During
Officers and Directors of Huntington at Least the Last Two Fiscal Years
- ------------------------------------ -----------------------------------
Elaine H. Hairston....................... Chancellor, Ohio Board of Regents
Edgar W. Ingram III...................... Chairman and Chief Executive
Officer of White Castle Systems
Norman A. Jacobs......................... President and Chief Executive
Officer, The Huntington Trust
Company, National Association
Robert W. Rahal.......................... President, Bobby Rahal, Inc.
Zuheir Sofia............................. President and Chief Operating
Officer, Huntington Bancshares
Incorporated
Rodney Wasserstrom....................... President and Chief Executive
Officer, The Wasserstrom Company
Frank Wobst.............................. Chairman and Chief Executive
Officer, Huntington Bancshares
Incorporated
The Subadviser. Piper Capital Management Incorporated was formed in 1985
and is a wholly-owned subsidiary of Piper Jaffray Companies Inc., a publicly
held corporation engaged through its subsidiaries in various aspects of the
financial services industry. The officers and directors of Piper Capital
Management Incorporated are as follows:
Name Title
- ---- -----
William H. Ellis Director and President
Bruce C. Huber Director
David E. Rosedahl Director
Charles N. Hayssen Director
Momchilo Vucenich Director
Worth Bruntjen Senior Vice President
Richard Daly Senior Vice President
Michael C. Derck Senior Vice President
Paul Dow Senior Vice President
Richard W. Filippone Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
Jerry F. Gudmundson Senior Vice President
Robert C. Hannah Senior Vice President
Lynne Harrington Senior Vice President
Kim Jenson Senior Vice President
Russ Kappenman Senior Vice President
Kimberly F. Kaul Senior Vice President
Lisa A. Kenyon Senior Vice President
C-4
<PAGE>
Steven B. Markusen Senior Vice President
Thomas S. McGlinch Senior Vice President
Curt D. McLeod Senior Vice President
Paula R. Meyer Senior Vice President
Susan S. Miley Senior Vice President and General Counsel
Robert H. Nelson Senior Vice President
Gary Norstrem Senior Vice President
Nancy S. Olsen Senior Vice President
Ronald R. Reuss Senior Vice President
Bruce D. Salvog Senior Vice President
Sandra K. Shrewsbury Senior Vice President
Eric L. Siedband Senior Vice President
David M. Steele Senior Vice President
Jill Thompson Senior Vice President
Robert H. Weidenhammer Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
Cythia K. Castle Vice President
Molly J. Destro Vice President
Julie Deutz Vice President
Rochelle Gonzo Vice President
Joyce Halbe Vice President
Joan L. Harrod Vice President
Mary Hoyme Vice President
Amy K. Johnson Vice President
John Kightlinger Vice President
Wan-Chong Kung Vice President
Jane Longueville Vice President
Brent Mellum Vice President
Stephen C. Meyer Vice President
Thomas Moore Vice President
Chris Neuharth Vice President
Paul D. Pearson Vice President
Scott Richter Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jane K. Welter Vice President
Fong P. Woo Vice President.
Item 29. Principal Underwriters
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing securities of the
Registrant also acts as a principal
C-5
<PAGE>
underwriter, distributor or investment adviser:
SEI Financial Services Company ("SEI Financial") is the Distributor of the
Registrant's shares. SEI Financial also acts as distributor for the following
other investment companies:
SEI Daily Income Trust
SEI Liquid Asset Trust
SEI Tax Exempt Trust
SEI Index Funds
SEI Institutional Managed Trust
SEI International Trust
Stepstone Funds
The Advisors' Inner Circle Fund
The Pillar Funds
CUFUND
STI Classic Funds
CoreFunds, Inc.
First American Funds, Inc.
First American Investment Funds, Inc.
The Arbor Fund
1784 Funds(R)
The PBHG Funds, Inc.
Marquis Funds (R)
Morgan Grenfell Investment Trust
The Achievement Funds Trust
Bishop Street Funds
CrestFunds, Inc.
STI Classic Variable Trust
ARK Funds
FMB Funds, Inc.
SEI Asset Allocation Trust
Turner Funds
SEI Institutional Investments Trust
First American Strategy Funds, Inc.
High Mark Funds
Armada Funds.
SEI Financial provides numerous financial services to investment managers,
pension plan sponsors and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services and
automated execution, clearing and settlement of securities transactions.
(b) Furnish the information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise
C-6
<PAGE>
noted, the business address of each director or officer is One Freedom
Valley Road, Oaks, Pennsylvania 19456:
<TABLE>
<CAPTION>
Position and Office Position and Office
Name with Underwriter with Registrant
- ---- ------------------- -------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman and CEO None
Henry H. Greer Director, President and COO None
Carmen V. Romeo Director, Executive Vice President and Treasurer None
Gilbert L. Beebower Executive Vice President None
Richard B. Lieb Executive Vice President None
Leo J. Dolan, Jr. Senior Vice President None
Carl A. Guarino Senior Vice President None
Jerome Hickey Senior Vice President None
Larry Hutchison Senior Vice President None
Steven Kramer Senior Vice President None
David G. Lee Senior Vice President President and CEO
Jack May Senior Vice President None
William Madden Senior Vice President None
A. Keith McDowell Senior Vice President None
Dennis J. McGonigle Senior Vice President None
Hartland J. McKeown Senior Vice President None
Barbara Moore Senior Vice President None
James V. Morris Senior Vice President None
Steven Onofrio Senior Vice President None
Kevin P. Robins Senior Vice President, General Counsel and Vice President and
Secretary Assistant Secretary
Robert Wagner Senior Vice President None
Patrick K. Walsh Senior Vice President None
Kenneth Zimmer Senior Vice President None
Robert Aller Vice President None
Marc H. Cahn Vice President and Assistant Secretary Vice President and
Assistant Secretary
Gordon W. Carpenter Vice President None
Todd Cipperman Vice President and Assistant Secretary Vice President and
Assistant Secretary
Robert Crudup Vice President and Managing Director None
Ed Daly Vice President None
Jeff Drennen Vice President None
Mick Duncan Vice President and Team Leader None
Vic Galef Vice President and Managing Director None
Kathy Heilig Vice President None
Michael Kantor Vice President None
Samuel King Vice President None
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C> <C>
Kim Kirk Vice President and Managing Director None
Donald H. Korytowski Vice President None
John Krzeminski Vice President and Managing Director None
Robert S. Ludwig Vice President and Team Leader None
Vicki Malloy Vice President and Team Leader None
Carolyn McLaurin Vice President and Managing Director None
W. Kelso Morrill Vice President None
Barbara A. Nugent Vice President and Assistant Secretary Vice President and
Assistant Secretary
Sandra K. Orlow Vice President and Assistant Secretary Vice President and
Assistant Secretary
Donald Pepin Vice President and Managing Director None
Larry Pokora Vice President None
Kim Rainey Vice President None
Paul Sachs Vice President None
Mark Samuels Vice President and Managing Director None
Steve Smith Vice President None
Daniel Spaventa Vice President None
Kathryn L. Stanton Vice President and Assistant Secretary Vice President and
Assistant Secretary
Wayne M. Withrow Vice President and Managing Director None
William Zawaski Vice President None
James Dougherty Director of Brokerage Services None
</TABLE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
SEI Fund Resources One Freedom Valley Road
(Administrator, Transfer Agent and Oaks, PA 19456
Dividend Disbursing Agent)
The Huntington Trust Company, N.A. Huntington Center
(Adviser, Custodian and Portfolio 41 South High Street
Recordkeeper) Columbus, OH 43287
Item 31. Management Services
Not applicable.
C-8
<PAGE>
Item 32. Undertakings
(a) Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) Registrant hereby undertakes to comply with the provisions of Section 16(c)
of the 1940 Act with respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders.
(c) Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act") and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, as amended, and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Oaks, Commonwealth of Pennsylvania, on the 28th
day of April, 1997.
THE MONITOR FUNDS
By: /S/ DAVID G. LEE
-------------------------
David G. Lee, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
person in the capacity and on the date indicated:
NAME TITLE DATE
/S/ DAVID G. LEE President and Chief Executive April 28, 1997
- ----------------------- Officer
David G. Lee
/S/ ROBERT DELLACROCE Controller, Treasurer and Chief April 28, 1997
- ----------------------- Financial Officer
Robert DellaCroce
* Trustee April 28, 1997
- -----------------------
David S. Schoedinger
* Trustee April 28, 1997
- -----------------------
William R. Wise
* Trustee April 28, 1997
- -----------------------
John M. Shary
* Trustee April 28, 1997
- -----------------------
Richard Sisson
*Executed on behalf of the indicated person by the undersigned, pursuant to
power of attorney previously filed and incorporated herein by reference.
By: /S/ DAVID G. LEE
--------------------------------
David G. Lee, Attorney-in-fact
C-10
<PAGE>
EXHIBIT INDEX
(9) (v) Consent to Assignment and Assumption Agreement for the Administration
and Transfer Agency Agreements, dated January 30, 1997, between the
Registrant and SEI Financial Management Corporation
(10) Opinion and Consent of Counsel as to legality of shares being registered
(11) Consent of Independent Accountants
(24) Powers of Attorney
(27) Financial Data Schedules (EDGAR filing only)
<PAGE>
Exhibit 9(v)
CONSENT TO ASSIGNMENT AND ASSUMPTION
1. SEI Financial Management Corporation ("Assignor") hereby notifies The
Monitor Funds (the "Trust") that it intends to assign all of its rights and
delegate its obligations under (i) the Administration Agreement between The
Monitor Funds and SEI Financial Management Corporation and (ii) the
Transfer Agency and Service Agreement between The Monitor Funds and SEI
Financial Management Corporation, both dated January 11, 1996 (the
"Agreements") to SEI Fund Resources, (the "Assignment and Assumption
Agreements"), no later than February 1, 1997, in connection with the
transition of Assignor's fund administration and distribution business to
SEI Fund Resources ("Assignee");
2. The Trust releases Assignor from its rights and obligations under the
Agreement on or after the date the Assignment and Assumption Agreement is
executed and any liability or responsibility for (i) breach of the
Agreements by Assignee or (ii) demands and claims made against the Trust or
damages, losses or expenses incurred by the Trust on or after the date of
the Assignment and Assumption Agreement, unless such demands, claims,
losses, damages or expenses arose out of or resulted from an act or
omission of Assignor prior to the date of the Assignment and Assumption
Agreement.
3. This consent is not a waiver or estoppel with respect to any rights the
Trust may have by reason of the past performance or failure to perform by
Assignor.
4. This consent is conditioned upon the execution of an Assignment and
Assumption Agreement between Assignor and Assignee that require(s) Assignee
(i) to assume all rights and obligations of Assignor under the Agreements
and (ii) to be liable to the Trust for any default or breach of the
Agreements to the extent the default or breach occurs on or after the date
of execution of the Assignment and Assumption Agreement.
5. Except as provided herein, neither this consent nor the Assignment and
Assumption Agreement shall alter or modify the terms or conditions of the
Agreements.
Trust: Assignor:
The Monitor Funds SEI Financial Management Corporation
By: /S/ By: /S/
Title: Vice President Title: Senior Vice President
Date: 1/30/97 Date: 1/30/97
<PAGE>
Exhibit 10
[ROPES & GRAY LETTERHEAD]
April 28, 1997
The Monitor Funds
The Huntington Trust Company, N.A.
41 South High Street
Columbus, Ohio 43215
Gentlemen:
You have registered under the Securities Act of 1933, as amended (the "1933
Act") an indefinite number of shares of beneficial interest ("Shares") of the
Monitor Funds ("Trust"), as permitted by Rule 24f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). You propose to file a post-effective
amendment on Form N-1A (the "Post-Effective Amendment") to your Registration
Statement as required by Section 10(a)(3) in order to register under the 1933
Act Investment and Trust Shares of each Fund of the Trust (the "Series").
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale of
the authorized but unissued Investment and Trust Shares of the Series have been
duly authorized under Massachusetts law. Upon the original issue and sale of
your authorized but unissued Investment and Trust Shares and upon receipt of the
authorized consideration therefor in an amount not less than the net asset value
of the Investment and Trust Shares established and in force at the time of their
sale, the Investment and Trust Shares issued will be validly issued, fully paid
and non-assessable.
The Monitor Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of Shares for all
loss and expenses of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
<PAGE>
We understand that this opinion is to be used in connection with the filing
of the Post-Effective Amendment. We consent to the filing of this opinion with
and as part of your Post-Effective Amendment.
Sincerely,
/S/ ROPES & GRAY
Ropes & Gray
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 22 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 14, 1997, relating to the financial
statements and financial highlights appearing in the December 31, 1996 Annual
Report to Shareholders of The Monitor Funds, which is also incorporated by
reference into the Registration Statement. We also consent to the reference to
us under the headings "Financial Highlights" in the Prospectuses and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/S/ PRICE WATERHOUSE LLP
Columbus, Ohio
April 24, 1997
<PAGE>
Exhibit 24
MONITOR FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Monitor Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Kevin Robins, and Stephen G. Meyer, and each of them singly, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including post-
effective amendments) to the Trust's Registration Statement on Form N-1A under
the provisions of the Investment Company Act of 1940 and the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
acting alone, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/S/ DAVID SCHOEDINGER DATE: 3-25-96
<PAGE>
MONITOR FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Monitor Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Kevin Robins, and Stephen G. Meyer, and each of them singly, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including post-
effective amendments) to the Trust's Registration Statement on Form N-1A under
the provisions of the Investment Company Act of 1940 and the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
acting alone, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/S/ DR. RICHARD SISSON DATE: MARCH 28, 1996
<PAGE>
MONITOR FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Monitor Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Kevin Robins, and Stephen G. Meyer, and each of them singly, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including post-
effective amendments) to the Trust's Registration Statement on Form N-1A under
the provisions of the Investment Company Act of 1940 and the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
acting alone, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/S/ WILLIAM R. WISE DATE: 3/29/96
<PAGE>
MONITOR FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Monitor Funds (the "Trust"), a business trust organized under the
laws of The Commonwealth of Massachusetts, hereby constitutes and appoints David
G. Lee, Kevin Robins, and Stephen G. Meyer, and each of them singly, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including post-
effective amendments) to the Trust's Registration Statement on Form N-1A under
the provisions of the Investment Company Act of 1940 and the Securities Act of
1933, each such Act as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
acting alone, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/S/ JOHN SHARY DATE: 4-1-96
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 010
<NAME> MONEY MARKET TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 436964
<INVESTMENTS-AT-VALUE> 436964
<RECEIVABLES> 470
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437434
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1915
<TOTAL-LIABILITIES> 1915
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 435519
<SHARES-COMMON-STOCK> 337962
<SHARES-COMMON-PRIOR> 296764
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 435519
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22875
<OTHER-INCOME> 0
<EXPENSES-NET> 2319
<NET-INVESTMENT-INCOME> 20556
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20556
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15979
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 771826
<NUMBER-OF-SHARES-REDEEMED> 730666
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 41197
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2319
<AVERAGE-NET-ASSETS> 326665
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 011
<NAME> MONEY MARKET INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 436964
<INVESTMENTS-AT-VALUE> 436964
<RECEIVABLES> 470
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 437434
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1915
<TOTAL-LIABILITIES> 1915
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 435519
<SHARES-COMMON-STOCK> 97557
<SHARES-COMMON-PRIOR> 91288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 435519
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22875
<OTHER-INCOME> 0
<EXPENSES-NET> 2319
<NET-INVESTMENT-INCOME> 20556
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20556
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4577
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135440
<NUMBER-OF-SHARES-REDEEMED> 133105
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 6270
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2319
<AVERAGE-NET-ASSETS> 95461
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 020
<NAME> OHIO MUNICIPAL MONEY MARKET TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 130667
<INVESTMENTS-AT-VALUE> 130667
<RECEIVABLES> 837
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131504
<PAYABLE-FOR-SECURITIES> 320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 428
<TOTAL-LIABILITIES> 748
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130756
<SHARES-COMMON-STOCK> 56654
<SHARES-COMMON-PRIOR> 56551
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 130756
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4165
<OTHER-INCOME> 0
<EXPENSES-NET> 560
<NET-INVESTMENT-INCOME> 3605
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3605
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1654
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93400
<NUMBER-OF-SHARES-REDEEMED> 93303
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 98
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 355
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 702
<AVERAGE-NET-ASSETS> 53414
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 021
<NAME> OHIO MUNICIPAL MONEY MARKET INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 130667
<INVESTMENTS-AT-VALUE> 130667
<RECEIVABLES> 837
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131504
<PAYABLE-FOR-SECURITIES> 320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 428
<TOTAL-LIABILITIES> 748
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130756
<SHARES-COMMON-STOCK> 74102
<SHARES-COMMON-PRIOR> 55469
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 130756
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4165
<OTHER-INCOME> 0
<EXPENSES-NET> 560
<NET-INVESTMENT-INCOME> 3605
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3605
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1951
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 118303
<NUMBER-OF-SHARES-REDEEMED> 100077
<SHARES-REINVESTED> 412
<NET-CHANGE-IN-ASSETS> 18638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 355
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 702
<AVERAGE-NET-ASSETS> 64976
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 030
<NAME> U.S. TREASURY MONEY MARKET TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 524530
<INVESTMENTS-AT-VALUE> 524530
<RECEIVABLES> 216
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 524746
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2269
<TOTAL-LIABILITIES> 2269
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 522477
<SHARES-COMMON-STOCK> 474593
<SHARES-COMMON-PRIOR> 277142
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 522477
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23912
<OTHER-INCOME> 0
<EXPENSES-NET> 1946
<NET-INVESTMENT-INCOME> 21966
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21966
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19879
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1116651
<NUMBER-OF-SHARES-REDEEMED> 919223
<SHARES-REINVESTED> 23
<NET-CHANGE-IN-ASSETS> 197451
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2011
<AVERAGE-NET-ASSETS> 408186
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 031
<NAME> U.S. TREASURY MONEY MARKET INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 524530
<INVESTMENTS-AT-VALUE> 524530
<RECEIVABLES> 216
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 524746
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2269
<TOTAL-LIABILITIES> 2269
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 522477
<SHARES-COMMON-STOCK> 47884
<SHARES-COMMON-PRIOR> 38973
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 522477
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23912
<OTHER-INCOME> 0
<EXPENSES-NET> 1946
<NET-INVESTMENT-INCOME> 21966
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21966
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2087
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114039
<NUMBER-OF-SHARES-REDEEMED> 106412
<SHARES-REINVESTED> 1284
<NET-CHANGE-IN-ASSETS> 8911
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2011
<AVERAGE-NET-ASSETS> 43790
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 050
<NAME> GROWTH TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 129039
<INVESTMENTS-AT-VALUE> 179933
<RECEIVABLES> 313
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180246
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 197
<TOTAL-LIABILITIES> 197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129151
<SHARES-COMMON-STOCK> 5175
<SHARES-COMMON-PRIOR> 4654
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50894
<NET-ASSETS> 180049
<DIVIDEND-INCOME> 3018
<INTEREST-INCOME> 461
<OTHER-INCOME> 0
<EXPENSES-NET> 1436
<NET-INVESTMENT-INCOME> 2043
<REALIZED-GAINS-CURRENT> 8154
<APPREC-INCREASE-CURRENT> 15748
<NET-CHANGE-FROM-OPS> 25945
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2017
<DISTRIBUTIONS-OF-GAINS> 7963
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 897
<NUMBER-OF-SHARES-REDEEMED> 475
<SHARES-REINVESTED> 98
<NET-CHANGE-IN-ASSETS> 520
<ACCUMULATED-NII-PRIOR> 19
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1028
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1436
<AVERAGE-NET-ASSETS> 167344
<PER-SHARE-NAV-BEGIN> 30.81
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> 4.72
<PER-SHARE-DIVIDEND> .40
<PER-SHARE-DISTRIBUTIONS> (1.56)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.97
<EXPENSE-RATIO> .83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 051
<NAME> GROWTH INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 129039
<INVESTMENTS-AT-VALUE> 179933
<RECEIVABLES> 313
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 180246
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 197
<TOTAL-LIABILITIES> 197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129151
<SHARES-COMMON-STOCK> 126
<SHARES-COMMON-PRIOR> 123
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50894
<NET-ASSETS> 180049
<DIVIDEND-INCOME> 3018
<INTEREST-INCOME> 461
<OTHER-INCOME> 0
<EXPENSES-NET> 1436
<NET-INVESTMENT-INCOME> 2043
<REALIZED-GAINS-CURRENT> 8154
<APPREC-INCREASE-CURRENT> 15748
<NET-CHANGE-FROM-OPS> 25945
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40
<DISTRIBUTIONS-OF-GAINS> 192
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15
<NUMBER-OF-SHARES-REDEEMED> 18
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 4
<ACCUMULATED-NII-PRIOR> 19
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1028
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1436
<AVERAGE-NET-ASSETS> 4076
<PER-SHARE-NAV-BEGIN> 30.81
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> 4.73
<PER-SHARE-DIVIDEND> .33
<PER-SHARE-DISTRIBUTIONS> (1.56)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.96
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 060
<NAME> INCOME EQUITY TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 118828
<INVESTMENTS-AT-VALUE> 172050
<RECEIVABLES> 852
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172902
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 135
<TOTAL-LIABILITIES> 135
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 119485
<SHARES-COMMON-STOCK> 5710
<SHARES-COMMON-PRIOR> 5207
<ACCUMULATED-NII-CURRENT> 61
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53221
<NET-ASSETS> 172767
<DIVIDEND-INCOME> 4938
<INTEREST-INCOME> 1943
<OTHER-INCOME> 0
<EXPENSES-NET> 1302
<NET-INVESTMENT-INCOME> 5579
<REALIZED-GAINS-CURRENT> 2817
<APPREC-INCREASE-CURRENT> 16650
<NET-CHANGE-FROM-OPS> 25046
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5542
<DISTRIBUTIONS-OF-GAINS> 2850
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 940
<NUMBER-OF-SHARES-REDEEMED> 532
<SHARES-REINVESTED> 95
<NET-CHANGE-IN-ASSETS> 503
<ACCUMULATED-NII-PRIOR> 24
<ACCUMULATED-GAINS-PRIOR> 33
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 959
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1302
<AVERAGE-NET-ASSETS> 159859
<PER-SHARE-NAV-BEGIN> 27.25
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 3.51
<PER-SHARE-DIVIDEND> 1.00
<PER-SHARE-DISTRIBUTIONS> .50
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30.26
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 070
<NAME> OHIO TAX-FREE TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 63398
<INVESTMENTS-AT-VALUE> 66058
<RECEIVABLES> 722
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66783
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84
<TOTAL-LIABILITIES> 84
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64014
<SHARES-COMMON-STOCK> 3016
<SHARES-COMMON-PRIOR> 2750
<ACCUMULATED-NII-CURRENT> 31
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2660
<NET-ASSETS> 66699
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3435
<OTHER-INCOME> 0
<EXPENSES-NET> 484
<NET-INVESTMENT-INCOME> 2951
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> (769)
<NET-CHANGE-FROM-OPS> 2186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2861
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 648
<NUMBER-OF-SHARES-REDEEMED> 390
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 266
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (10)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 484
<AVERAGE-NET-ASSETS> 60713
<PER-SHARE-NAV-BEGIN> 21.77
<PER-SHARE-NII> 1.01
<PER-SHARE-GAIN-APPREC> (.28)
<PER-SHARE-DIVIDEND> 1.01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.49
<EXPENSE-RATIO> .76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 071
<NAME> OHIO TAX-FREE INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 63398
<INVESTMENTS-AT-VALUE> 66058
<RECEIVABLES> 722
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66783
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84
<TOTAL-LIABILITIES> 84
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64014
<SHARES-COMMON-STOCK> 88
<SHARES-COMMON-PRIOR> 99
<ACCUMULATED-NII-CURRENT> 31
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2660
<NET-ASSETS> 66699
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3435
<OTHER-INCOME> 0
<EXPENSES-NET> 484
<NET-INVESTMENT-INCOME> 2951
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> (769)
<NET-CHANGE-FROM-OPS> 2186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 92
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12
<NUMBER-OF-SHARES-REDEEMED> 26
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (11)
<ACCUMULATED-NII-PRIOR> 34
<ACCUMULATED-GAINS-PRIOR> (10)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 484
<AVERAGE-NET-ASSETS> 2042
<PER-SHARE-NAV-BEGIN> 21.77
<PER-SHARE-NII> .96
<PER-SHARE-GAIN-APPREC> (.29)
<PER-SHARE-DIVIDEND> .96
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.48
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 080
<NAME> FIXED INCOME TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 141009
<INVESTMENTS-AT-VALUE> 144902
<RECEIVABLES> 2466
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 147368
<PAYABLE-FOR-SECURITIES> 1335
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 144
<TOTAL-LIABILITIES> 1479
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143203
<SHARES-COMMON-STOCK> 6879
<SHARES-COMMON-PRIOR> 6494
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1225)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3893
<NET-ASSETS> 145889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9922
<OTHER-INCOME> 0
<EXPENSES-NET> 1032
<NET-INVESTMENT-INCOME> 8890
<REALIZED-GAINS-CURRENT> 996
<APPREC-INCREASE-CURRENT> (6268)
<NET-CHANGE-FROM-OPS> 3618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8840
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1065
<NUMBER-OF-SHARES-REDEEMED> 845
<SHARES-REINVESTED> 164
<NET-CHANGE-IN-ASSETS> 384
<ACCUMULATED-NII-PRIOR> 92
<ACCUMULATED-GAINS-PRIOR> (2221)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 697
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1032
<AVERAGE-NET-ASSETS> 137359
<PER-SHARE-NAV-BEGIN> 21.78
<PER-SHARE-NII> 1.34
<PER-SHARE-GAIN-APPREC> (.83)
<PER-SHARE-DIVIDEND> 1.35
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.94
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 081
<NAME> FIXED INCOME INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 141009
<INVESTMENTS-AT-VALUE> 144902
<RECEIVABLES> 2466
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 147368
<PAYABLE-FOR-SECURITIES> 1335
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 144
<TOTAL-LIABILITIES> 1479
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143203
<SHARES-COMMON-STOCK> 88
<SHARES-COMMON-PRIOR> 100
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1225)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3893
<NET-ASSETS> 145889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9922
<OTHER-INCOME> 0
<EXPENSES-NET> 1032
<NET-INVESTMENT-INCOME> 8890
<REALIZED-GAINS-CURRENT> 996
<APPREC-INCREASE-CURRENT> (6268)
<NET-CHANGE-FROM-OPS> 3618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 124
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 25
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (12)
<ACCUMULATED-NII-PRIOR> 92
<ACCUMULATED-GAINS-PRIOR> (2221)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 697
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1032
<AVERAGE-NET-ASSETS> 2011
<PER-SHARE-NAV-BEGIN> 21.78
<PER-SHARE-NII> 1.29
<PER-SHARE-GAIN-APPREC> (.83)
<PER-SHARE-DIVIDEND> 1.29
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.95
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 090
<NAME> SHORT/INTERMEDIATE TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 122560
<INVESTMENTS-AT-VALUE> 124152
<RECEIVABLES> 1467
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125619
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105
<TOTAL-LIABILITIES> 105
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124277
<SHARES-COMMON-STOCK> 6287
<SHARES-COMMON-PRIOR> 6583
<ACCUMULATED-NII-CURRENT> 23
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (378)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1592
<NET-ASSETS> 125514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8203
<OTHER-INCOME> 0
<EXPENSES-NET> 907
<NET-INVESTMENT-INCOME> 7296
<REALIZED-GAINS-CURRENT> 80
<APPREC-INCREASE-CURRENT> (2269)
<NET-CHANGE-FROM-OPS> 5107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7408
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752
<NUMBER-OF-SHARES-REDEEMED> 1210
<SHARES-REINVESTED> 162
<NET-CHANGE-IN-ASSETS> (296)
<ACCUMULATED-NII-PRIOR> 135
<ACCUMULATED-GAINS-PRIOR> (457)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 627
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 907
<AVERAGE-NET-ASSETS> 125256
<PER-SHARE-NAV-BEGIN> 20.35
<PER-SHARE-NII> 1.17
<PER-SHARE-GAIN-APPREC> (.37)
<PER-SHARE-DIVIDEND> 1.19
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.96
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 100
<NAME> MORTGAGE INVESTMENT CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 42624
<INVESTMENTS-AT-VALUE> 42991
<RECEIVABLES> 267
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43264
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2032
<TOTAL-LIABILITIES> 2032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64878
<SHARES-COMMON-STOCK> 206
<SHARES-COMMON-PRIOR> 247
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (24014)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368
<NET-ASSETS> 41232
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3562
<OTHER-INCOME> 0
<EXPENSES-NET> 321
<NET-INVESTMENT-INCOME> 3241
<REALIZED-GAINS-CURRENT> (1934)
<APPREC-INCREASE-CURRENT> 1547
<NET-CHANGE-FROM-OPS> 2854
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 120
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8
<NUMBER-OF-SHARES-REDEEMED> 59
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (41)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (21884)
<OVERDISTRIB-NII-PRIOR> (362)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 1831
<PER-SHARE-NAV-BEGIN> 8.12
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.08
<EXPENSE-RATIO> .92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000810695
<NAME> MONITOR FUNDS
<SERIES>
<NUMBER> 101
<NAME> MORTGAGE TRUST CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 42624
<INVESTMENTS-AT-VALUE> 42991
<RECEIVABLES> 267
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43264
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2032
<TOTAL-LIABILITIES> 2032
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64878
<SHARES-COMMON-STOCK> 4907
<SHARES-COMMON-PRIOR> 6510
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (24014)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368
<NET-ASSETS> 41232
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3562
<OTHER-INCOME> 0
<EXPENSES-NET> 321
<NET-INVESTMENT-INCOME> 3241
<REALIZED-GAINS-CURRENT> (1934)
<APPREC-INCREASE-CURRENT> 1547
<NET-CHANGE-FROM-OPS> 2854
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3067
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 320
<NUMBER-OF-SHARES-REDEEMED> 1951
<SHARES-REINVESTED> 28
<NET-CHANGE-IN-ASSETS> (1603)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (21884)
<OVERDISTRIB-NII-PRIOR> (362)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 461
<AVERAGE-NET-ASSETS> 45498
<PER-SHARE-NAV-BEGIN> 8.09
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .54
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.06
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
