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As filed with the Securities and Exchange Commission on May 1, 2000
Registration Nos. 33-11905, 811-5010
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment NO. 33 [X]
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 34 [X]
THE HUNTINGTON 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)
Ronald J. Corn
The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
(Name and Address of Agent for Service)
Copies to:
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Melanie Mayo West, Esq. Alyssa Albertelli, Esq.
Dykema Gossett PLLC Ropes & Gray
1577 N. Woodward Avenue, Suite 300 One Franklin Square
Bloomfield Hills, Michigan 48304-2820 1301 K Street, N.W., Suite 800 East
Fax: (248) 203-0763 Washington, D.C. 20005-3333
Fax: (202) 626-3961
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Approximate Date of Proposed Public Offering: Immediately, upon effectiveness.
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It is proposed that this filing will be come effective (check appropriate box):
[ ] 60 days after filing pursuant to Rule 485(a)(1), or
[ ] On , pursuant to Rule 485(a)(1), or
[ ] 75 days after filing pursuant to Rule 485(a)(2), or
[ ] On , pursuant to Rule 485(a)(2).
[X] Immediately upon filing pursuant to Rule 485(b), or
[ ] On April 30, 2000 pursuant to Rule 485(b)
If appropriate, check this box:
[X] This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
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The Registrant has previously registered an indefinite number of shares
pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Title of Securities Being Registered: Shares of Beneficial Interest.
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PROSPECTUS
TRUST SHARES
MAY 1, 2000
[ARTWORK]
[HUNTINGTON FUNDS(TM) LOGO]
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES, NOR HAS IT PASSED UPON
THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS PROSPECTUS.
IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
ALSO, LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND.
YOUR INVESTMENT IN A FUND IS NOT A BANK DEPOSIT AND IT IS NOT INSURED
OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
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The Huntington Funds are a series of mutual funds advised by professional
portfolio managers at The Huntington National Bank.
MONEY MARKET FUNDS
Huntington Money Market Fund
Huntington Ohio Municipal Money Market Fund
Huntington U.S. Treasury Money Market Fund
Huntington Florida Tax-Free Money Fund
EQUITY FUNDS
Huntington Growth Fund
Huntington Income Equity Fund
INCOME FUNDS
Huntington Mortgage Securities Fund
Huntington Ohio Tax-Free Fund
Huntington Michigan Tax-Free Fund
Huntington Fixed Income Securities Fund
Huntington Intermediate Government Income Fund
Huntington Short/Intermediate Fixed Income Securities Fund
In connection with the offering made by this Prospectus, The Huntington Funds
have not authorized any person to give any information or to make any
representations other than those contained in this Prospectus. Consequently, you
may not rely upon any such information given or representations made 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. As of the
date of this Prospectus, the Funds are not being offered for sale, other than to
existing shareholders, in Delaware, Idaho, Iowa, Mississippi, Montana, Nebraska,
Nevada, New Hampshire, New Mexico, North Dakota, Puerto Rico, Rhode Island,
South Dakota or Vermont.
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TABLE OF CONTENTS
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INTRODUCTION TO THE HUNTINGTON FUNDS... 1
FUND SUMMARIES......................... 1
Money Market Funds..................... 1
Money Market Fund................. 1
Ohio Municipal Money Market
Fund............................ 2
U.S. Treasury Money Market Fund... 3
Florida Tax-Free Money Fund....... 3
Equity Funds........................... 4
Growth Fund....................... 4
Income Equity Fund................ 5
Income Funds........................... 5
Mortgage Securities Fund.......... 5
Ohio Tax-Free Fund................ 6
Michigan Tax-Free Fund............ 8
Fixed Income Securities Fund...... 9
Intermediate Government Income
Fund............................ 9
Short/Intermediate Fixed Income
Securities Fund................. 10
Principal Investments.................. 12
More Fund Information.................. 14
RISK/RETURN INFORMATION................ 15
Money Market Fund................. 15
Ohio Municipal Money Market
Fund............................ 15
U.S. Treasury Money Market Fund... 16
Florida Tax-Free Money Fund....... 16
Growth Fund....................... 17
Income Equity Fund................ 17
Mortgage Securities Fund.......... 18
Ohio Tax-Free Fund................ 18
Michigan Tax-Free Fund............ 19
Fixed Income Securities Fund...... 19
Intermediate Government Income
Fund............................ 20
Short/Intermediate Fixed Income
Securities Fund................. 20
FEES AND EXPENSES...................... 21
FINANCIAL HIGHLIGHTS................... 22
ORGANIZATION OF THE TRUST.............. 30
DISTRIBUTION OF THE FUNDS.............. 30
ABOUT PURCHASING TRUST SHARES.......... 30
How to Buy Trust Shares........... 31
Systematic Investment Program..... 31
ABOUT EXCHANGING TRUST SHARES AMONG THE
FUNDS................................ 32
How to Exchange Trust Shares...... 32
ABOUT REDEEMING TRUST SHARES........... 33
Redemption of Accounts with
Balances Under $1,000........... 33
How to Redeem Trust Shares........ 34
MANAGEMENT OF THE TRUST................ 35
Investment Adviser................ 35
Sub-Adviser....................... 35
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Portfolio Managers................ 36
DIVIDENDS AND DISTRIBUTIONS............ 36
Distribution Options.............. 36
TAX CONSEQUENCES....................... 37
Federal Income Taxes.............. 37
State Income Taxes................ 37
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INTRODUCTION
TO THE HUNTINGTON FUNDS
The Huntington Funds offered by this Prospectus are subject to a number of
important risks, including:
- market risk--market values of securities move up and down, sometimes
rapidly and unpredictably;
- investment strategy risk--as market conditions change, the success of a
Fund's particular investment strategy will vary;
- management risk--the Adviser may not be able to achieve a Fund's desired
investment objective;
- liquidity risk--at any particular time, the Adviser may have difficulty
selling a certain security at its expected price; and
- year 2000 risk--a Fund could be adversely affected if the computer
systems used by Huntington or other service providers do not properly
process and calculate date-related information and data beginning on
January 1, 2000.
Specific risks associated with each Fund are described in the Fund
Summaries below. As with all mutual funds, loss of money is a risk of investing.
Your investment in a Fund is not a bank deposit and it is not insured or
guaranteed by the FDIC or any other government agency.
FUND SUMMARIES
For convenience, we may refer to The Huntington Funds as "the Trust" and to
The Huntington National Bank as "Huntington" or "the Adviser."
You may only purchase Trust Shares if you have a fiduciary, advisory,
agency or other similar account with Huntington or its affiliates or
correspondent banks.
MONEY MARKET FUNDS
As with all mutual funds, loss of money is a risk of investing. This is
true even for the Money Market Funds which seek to preserve the value of your
investment at $1.00 per share.
MONEY MARKET FUND
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Money Market Fund by investing in commercial
paper and other short-term money market instruments for the Money Market Fund
which are either rated in the highest rating category by a Nationally Recognized
Statistical Rating Organization or unrated and deemed to be of comparable
quality by the Adviser. In managing the portfolio, the Adviser determines an
appropriate maturity range for the Fund (currently between 25 and 60 days) and
each individual security held and endeavors to diversify the portfolio across
market sectors. In addition, the Adviser analyzes cash flows, maturities,
settlements, tax payments, yields and credit quality and monitors new issue
calendars for potential purchases.
PRINCIPAL RISKS--As a Fund which invests in short-term fixed income
securities, the Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
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- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
For more information about the investments or risks of the Money Market
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Ohio Municipal Money Market Fund by investing
substantially all of the Fund's assets in short-term Ohio tax-exempt securities
which are either rated in the highest rating category by a Nationally Recognized
Statistical Rating Organization or unrated and deemed to be of comparable
quality by the Adviser. In managing the portfolio, the Adviser determines an
appropriate maturity range for the Fund (currently between 35 and 80 days) and
each individual security held and endeavors to diversify the portfolio's
holdings within Ohio as much as possible. In addition, the Adviser analyzes cash
flows, maturities, settlements, tax payments, yields and credit quality and
monitors new issue calendars for potential purchases.
"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.
Fundamental Policy: at least 65% of total assets invested in Ohio
tax-exempt securities.
Fundamental Policy: at least 80% of annual interest income exempt from
federal regular income tax. Income which is subject to alternative minimum tax
will not be counted towards satisfying this policy.
PRINCIPAL RISKS--As a non-diversified Fund, the Ohio Municipal Money Market
Fund may invest a greater percentage of its assets in the securities of a single
issuer than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Ohio and therefore more vulnerable to unfavorable
developments in Ohio than funds that invest in obligations of many
states; and
- Ohio risk--the economy of Ohio is largely concentrated in agriculture,
motor vehicles and equipment, steel, rubber products and household
appliances, and therefore tends to be more cyclical than some other
states and the nation as a whole.
As a Fund which invests in short-term fixed income securities, the Ohio
Municipal Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
For temporary defensive or liquidity purposes, the Fund may invest in
securities,
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the interest on which is subject to federal income tax or Ohio personal income
taxes.
For more information about the investments and risks of the Ohio Municipal
Money Market Fund, call (800) 253-0412 for a free copy of the Trust's Statement
of Additional Information.
U.S. TREASURY MONEY MARKET FUND
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the U.S. Treasury Money Market Fund by investing
substantially all of the Fund's assets in short-term obligations of the U.S.
government. In managing the portfolio, the Adviser determines an appropriate
maturity range for the Fund (currently between 25 and 60 days) and each
individual security held. In addition, the Adviser analyzes cash flows,
maturities, settlements, tax payments and yields and monitors new issue
calendars for potential purchases.
Fundamental Policy: at least 65% of total assets invested in direct
obligations of the U.S. Treasury and repurchase agreements collateralized by
such obligations.
PRINCIPAL RISKS--As a Fund which invests in U.S. Treasury securities, the
U.S. Treasury Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction.
For more information about the investments and risks of the U.S. Treasury
Money Market Fund, call (800) 253-0412 for a free copy of the Trust's Statement
of Additional Information.
FLORIDA TAX-FREE MONEY FUND
INVESTMENT OBJECTIVE--The Florida Tax-Free Money Fund seeks to provide the
highest level of interest income exempt from federal income tax, consistent with
liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Florida Tax-Free Money Fund by investing
substantially all of the Fund's assets in short-term Florida tax-exempt
securities which are either rated in the highest rating category by a Nationally
Recognized Statistical Rating Organization or unrated and deemed to be of
comparable quality by the Adviser.
In managing the portfolio, the Adviser determines an appropriate maturity
range for the Fund (currently between 35 and 80 days) and each individual
security held and endeavors to diversify the portfolio's holdings within Florida
as much as possible. In addition, the Adviser analyzes cash flows, maturities,
settlements, tax payments, yields and credit quality and monitors new issue
calendars for potential purchases.
"Florida tax-exempt securities" are debt obligations which (i) are issued
by or on behalf of the state of Florida 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 the value of which is exempt from the Florida intangible personal
property tax.
Fundamental Policy: at least 65% of total assets invested in Florida
tax-exempt securities.
Fundamental Policy: at least 80% of annual interest income exempt from
federal
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regular income tax. Income which is subject to alternative minimum tax will not
be counted towards satisfying this policy.
PRINCIPAL RISKS--As a non-diversified Fund, the Florida Tax-Free Money Fund
may invest a greater percentage of its assets in the securities of a single
issuer than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--the performance is strongly dependent on the economy
of the state of Florida and therefore more vulnerable to unfavorable
developments in Florida than funds that invest in obligations of many
states; and
- Florida risk--the economy of Florida is largely concentrated in
agriculture, tourism and construction and is adversely affected by severe
weather conditions. It is also impacted by changes in the economies of
Central and South America.
As a Fund which invests in short-term fixed income securities, the Florida
Tax-Free Money Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
As part of the Adviser's strategy to take advantage of the exemption from
Florida's intangible tax in any year, the Adviser may engage, on an annual
basis, in significant portfolio restructuring to sell non-exempt assets.
Transaction costs involved in such restructuring may adversely affect the Fund's
performance and possibly offset any gains achieved by investing in the assets
sold.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax.
For more information about the investments and risks of the Florida
Tax-Free Money Fund, call (800) 253-0412 for a free copy of the Trust's
Statement of Additional Information.
EQUITY FUNDS
GROWTH FUND
INVESTMENT OBJECTIVE--The Growth Fund seeks to achieve long-term capital
appreciation primarily through investing in equity securities.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser intends to invest in common
stock and other equity securities of medium or large companies which it believes
offer opportunities for growth. The Adviser frequently invests in established
companies which it believes have temporarily depressed prices. In selecting
investments, the Adviser reviews historical earnings, revenue and cash flow to
identify the best companies in each industry and to evaluate the growth
potential of these companies. On an ongoing basis, the Adviser also monitors the
Fund's existing positions to determine the benefits of retention.
Fundamental Policy: at least 65% of total assets invested in equity
securities.
PRINCIPAL RISKS--As a Fund which invests in equity securities, the Growth
Fund is subject to:
- equity risk--stock values can rise and fall quickly and dramatically in
response to changes in earnings or other conditions affecting the
issuer's
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profitability. As a result, total returns can fluctuate within a wide
range, so an investor could lose money over the short or long term.
For more information about the investments and risks of the Growth Fund,
call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
INCOME EQUITY FUND
INVESTMENT OBJECTIVE--The Income Equity Fund seeks to achieve high current
income and moderate appreciation of capital primarily through investment in
income-producing equity securities.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser focuses primarily on equity
securities which have a history of increasing or paying high dividends. As an
additional income source, the Adviser also invests in investment grade corporate
debt obligations. At least 65% of the Fund's total assets will be invested in
income-producing equity securities. The Adviser selects securities which it
believes will maintain or increase the Fund's current income while maintaining a
price/earnings ratio below the market.
In evaluating the current yield of a security, the Adviser considers
dividend growth to be most important, followed by capital appreciation. The
Adviser actively monitors market activity which impacts dividend decisions. In
general, the Fund will sell a security when dividends are no longer expected to
increase.
Fundamental Policy: at least 65% of total assets invested in common stock,
securities convertible into common stock and securities deemed by the Adviser to
have common stock characteristics.
PRINCIPAL RISKS--As a Fund which invests in income-producing equity
securities, the Income Equity Fund is subject to:
- equity risk--stock values can rise and fall quickly and dramatically in
response to changes in earnings or other conditions affecting the
issuer's profitability. As a result, total returns can fluctuate within a
wide range, so an investor could lose money over the short or long term;
and
- dividend risk--an issuer's dividend policy may change in response to
strategic changes or other management decisions affecting the need for
available funds.
As a Fund which invests in corporate debt obligations, the Income Equity
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
For more information about the investments and risks of the Income Equity
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
INCOME FUNDS
MORTGAGE SECURITIES FUND
INVESTMENT OBJECTIVE--The Mortgage Securities Fund seeks to achieve current
income.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Mortgage Securities Fund in mortgage-related securities. The
Adviser especially focuses on securities which it expects to be
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less susceptible to prepayment of principal. The Adviser endeavors to maintain a
dollar-weighted average portfolio life for the Fund of between three and ten
years.
In making its investment decisions, the Adviser considers various economic
factors, Federal Reserve policy, interest rate trends and spreads between
different types of fixed income securities. In managing the portfolio, the
Adviser monitors the Fund's cash flow, maturities and interest payments and
tracks a variety of other portfolio security statistics.
"Mortgage-related securities" are securities, including derivative mortgage
securities such as collateralized mortgage obligations (CMOs), whose income is
generated by payments of principal and interest on pools of mortgage loans.
Fundamental Policy: at least 65% of total assets invested in
mortgage-related securities, including derivative mortgage securities.
Collateralized mortgage obligations (CMOs) issued by private entities will not
be counted towards satisfying this requirement.
PRINCIPAL RISKS--As a Fund which invests in mortgage-related securities,
the Mortgage Securities Fund is subject to:
- prepayment risk--as interest rates fall, mortgage-related securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the
investment;
- reinvestment risk--as prepayment increases as a result of lower interest
rates, the proceeds from maturing mortgage-related securities will be
reinvested at lower interest rates, thus reducing income; and
- extension risk--as interest rates rise, mortgage-related securities tend
to mature later, thus effectively converting shorter-term securities into
more volatile long-term securities. This will also affect the Adviser's
ability to manage the average life of the Fund.
The above risks are more pronounced with respect to derivative mortgage
securities and can result in reduced liquidity. The principal derivative
mortgage securities in which the Mortgage Securities Fund invests are
collateralized mortgage obligations (CMOs).
As a Fund which invests in fixed income securities, the Mortgage Securities
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Mortgage
Securities Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
OHIO TAX-FREE FUND
INVESTMENT OBJECTIVE--The Ohio Tax-Free Fund seeks to provide current
income exempt from federal income tax and Ohio personal income taxes.
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PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Ohio Tax-Free Fund (at least 80% of net assets) in Ohio
tax-exempt securities. The securities selected by the Adviser are: (i) rated in
one of the top four categories by a Nationally Recognized Statistical Rating
Organization; or (ii) not rated, but deemed by the Adviser to be of comparable
quality. In addition, these securities will have remaining maturities of no more
than 15 years and the Fund's anticipated dollar-weighted average maturity will
be between four and ten years. The Adviser also establishes a desired yield
level for new issues relative to U.S. Treasury securities.
In managing the portfolio, the Adviser attempts to diversify the Fund's
holdings within Ohio as much as possible. In selecting securities, the Adviser
monitors economic activity and interest rate trends, reviews financial
information relating to each issuer and looks for attractively priced issues. To
determine the tax implications of each portfolio transaction, the Adviser
evaluates seasonal cash flows from coupon payments, maturities, settlements and
tax payments.
"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.
Fundamental Policy: at least 80% of total assets invested in Ohio
tax-exempt securities.
Fundamental Policy: no investment in securities which generate income
treated as a preference item for federal alternative minimum tax purposes.
PRINCIPAL RISKS--As a non-diversified Fund, the Ohio Tax-Free Fund may
invest a greater percentage of its assets in the securities of a single issuer
than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Ohio and therefore more vulnerable to unfavorable
developments in Ohio than funds that invest in obligations of many
states; and
- Ohio risk--the economy of Ohio is largely concentrated in agriculture,
motor vehicles and equipment, steel, rubber products and household
appliances, and therefore tends to be more cyclical than some other
states and the nation as a whole.
As a Fund which invests in fixed income securities, the Ohio Tax-Free Fund
is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities;
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments; and
- call risk--as interest rates fall, an issuer may choose to call or repay
a security prior to its maturity date, sometimes resulting in a loss on
the investment and/or forcing the Fund to reinvest at lower interest
rates, thus reducing income.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax or Ohio
personal income taxes.
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For more information about the investments and risks of the Ohio Tax-Free
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
MICHIGAN TAX-FREE FUND
INVESTMENT OBJECTIVE--The Michigan Tax-Free Fund seeks to provide investors
with current income exempt from both federal and Michigan personal income taxes.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Michigan Tax-Free Fund in Michigan tax-exempt securities. At
least 80% of the Fund's annual interest income will be exempt from federal
income tax, including the alternative minimum tax. The securities selected by
the Adviser for investment will have remaining maturities of no more than 15
years. The Adviser also establishes a desired yield level for new issues
relative to U.S. Treasury securities.
In managing the portfolio, the Adviser attempts to diversify the Fund's
holdings within Michigan as much as possible. In selecting securities, the
Adviser monitors economic activity and interest rate trends, reviews financial
information relating to each issuer and looks for attractively priced issues. To
determine the tax implications of each portfolio transaction, the Adviser
evaluates seasonal cash flows from coupon payments, maturities, settlements and
tax payments.
"Michigan tax-exempt securities" are debt obligations which (i) are issued
by or on behalf of the state of Michigan 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 Michigan personal income taxes.
Fundamental Policy: at least 65% of total assets invested in Michigan
tax-exempt securities.
Fundamental Policy: no more than 20% of net assets invested in securities
which generate income treated as a preference item for federal alternative
minimum tax purposes.
PRINCIPAL RISKS--As a non-diversified Fund, the Michigan Tax-Free Fund may
invest a greater percentage of its assets in the securities of a single issuer
than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Michigan and therefore more vulnerable to unfavorable
developments in Michigan than funds that invest in obligations of many
states; and
- Michigan risk--the economy of Michigan is principally dependent upon
three sectors: manufacturing (particularly durable goods, automotive
products and office equipment), tourism and agriculture. It, therefore,
tends to be more cyclical than some other states and the nation as a
whole.
As a Fund which invests in fixed income securities, the Michigan Tax-Free
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities;
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments; and
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- call risk--as interest rates fall, an issuer may choose to call or repay
a security prior to its maturity date, sometimes resulting in a loss on
the investment and/or forcing the Fund to reinvest at lower interest
rates, thus reducing income.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax or Michigan
personal income taxes.
For more information about the investments and risks of the Michigan
Tax-Free Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
FIXED INCOME SECURITIES FUND
INVESTMENT OBJECTIVE--The Fixed Income Securities Fund seeks to achieve
high current income through investment in fixed income securities where the
average maturity of the Fund will not exceed 10 years.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser principally invests in a
combination of corporate debt and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The selection of corporate debt
obligations is limited to those: (i) rated in one of the top four categories by
a Nationally Recognized Statistical Rating Organization or (ii) not rated, but
deemed by the Adviser to be of comparable quality. Within these parameters, the
Adviser focuses on securities which offer the highest level of income. For all
types of investments, the Adviser considers various economic factors, Federal
Reserve policy, interest rate trends, spreads between different types of fixed
income securities and the credit quality of existing holdings.
In managing the portfolio, the Adviser monitors the Fund's cash flow,
maturities and
interest payments and tracks a variety of other portfolio security statistics.
The Adviser also follows closely new issue and secondary activity in the
corporate debt market.
Fundamental Policy: at least 65% of total assets invested in fixed income
securities.
PRINCIPAL RISKS--As a Fund which invests in fixed income securities, the
Fixed Income Securities Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Fixed Income
Securities Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
INTERMEDIATE GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE--The Intermediate Government Income Fund seeks to
provide investors with a high level of current income.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests primarily in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and mortgage-related securities with dollar-weighted average
9
<PAGE> 16
maturities of not less than three nor more than ten years. Within this range,
the Adviser focuses on securities which offer the highest level of income. In
general, in order to reduce volatility during periods of interest rate
fluctuation, the Adviser invests in securities with a wide range of intermediate
maturities. For all types of investments, the Adviser considers various economic
factors, Federal Reserve policy, interest rate trends and spreads between
different types of fixed income securities.
In managing the portfolio, the Adviser monitors the Fund's cash flow,
maturities and interest payments and tracks a variety of other portfolio
security statistics.
"Mortgage-related securities" are securities, including derivative mortgage
securities such as collateralized mortgage obligations (CMOs), whose income is
generated by payments of principal and interest on pools of mortgage loans.
Fundamental Policy: at least 65% of total assets in the above securities.
PRINCIPAL RISKS--As a Fund which invests in fixed income securities, the
Intermediate Government Income Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities.
As a Fund which invests in mortgage-related securities, the Intermediate
Government Income Fund is subject to:
- prepayment risk--as interest rates fall, mortgage-related securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the
investment;
- reinvestment risk--as prepayment increases as a result of lower interest
rates, the proceeds from maturing mortgage-related securities will be
reinvested at lower interest rates, thus reducing income; and
- extension risk--as interest rates rise, mortgage-related securities tend
to mature later, thus effectively converting shorter-term securities into
more volatile long-term securities. This will also affect the Adviser's
ability to manage the average life of the Fund.
The above risks are more pronounced with respect to derivative mortgage
securities and can result in reduced liquidity. The principal derivative
mortgage securities in which the Intermediate Government Income Fund invests are
collateralized mortgage obligations (CMOs).
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Intermediate
Government Income Fund, call (800) 253-0412 for a free copy of the Trust's
Statement of Additional Information.
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND
INVESTMENT OBJECTIVE--The Short/ Intermediate Fixed Income Securities Fund
seeks 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.
10
<PAGE> 17
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests primarily in corporate
debt and U.S. Government securities. The selection of corporate debt obligations
is limited to those: (i) rated in one of the top four categories by a Nationally
Recognized Statistical Rating Organization or (ii) not rated, but deemed by the
Adviser to be of comparable quality. For all types of investments, the Adviser
considers various economic factors, Federal Reserve policy, interest rate
trends, spreads between different types of fixed income securities and the
credit quality of existing holdings.
In managing the portfolio, the Adviser monitors the Fund's cash flow,
maturities and interest payments and tracks a variety of other portfolio
security statistics. The Adviser also follows closely new issue and secondary
activity in the corporate debt market.
Fundamental Policy: at least 65% of total assets in fixed income
securities.
PRINCIPAL RISKS--As a Fund which invests in fixed income securities, the
Short/ Intermediate Fixed Income Securities Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the
Short/Intermediate Fixed Income Securities Fund, call (800) 253-0412 for a free
copy of the Trust's Statement of Additional Information.
11
<PAGE> 18
PRINCIPAL INVESTMENTS
The table below summarizes the principal investments for each of the Funds
offered by this Prospectus. Each of these Funds may also invest up to 100% of
its assets in cash, money market instruments, repurchase agreements and other
short-term securities for temporary
defensive or liquidity purposes. In these situations, a Fund may not achieve its
investment objective.
A detailed description of each of the principal investments, as well as
other permissible investments and strategies, is contained in the Statement of
Additional Information.
<TABLE>
<CAPTION>
OHIO U.S.
MUNICIPAL TREASURY FLORIDA FIXED INTERM
MONEY MONEY MONEY TAX-FREE INCOME MORTGAGE OHIO MICHIGAN INCOME GOVT
MARKET MARKET MARKET MONEY GROWTH EQUITY SECURITIES TAX-FREE TAX-FREE SECURITIES INCOME
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--
secured and unsecured
short-term promissory
notes issued by
corporations and other
entities. Maturities are
generally six months or
less. X X X X X
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--
agreements to purchase a
security and return the
security to the seller
at an agreed upon price
and date. This is
treated as a loan. X X X X X
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK--shares of
ownership in a company. X X
- -----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK--shares
of ownership in a
company with a
preferential right to
receive dividends. X X
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT--fixed
income securities, such
as bonds, issued by
corporations. X X
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT
SECURITIES--securities
issued or guaranteed by
the U.S. government, its
agencies or
instrumentalities. X X X X X
- -----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED
SECURITIES--securities,
including derivatives
such as CMOs, whose
income is generated by
payments of principal
and interest on pools of
mortgage loans. X X
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT/
INTERM
FIXED
INCOME
SECURITIES
FUND
<S> <C>
COMMERCIAL PAPER--
secured and unsecured
short-term promissory
notes issued by
corporations and other
entities. Maturities are
generally six months or
less. X
- -----------------------------------------------
REPURCHASE AGREEMENTS--
agreements to purchase a
security and return the
security to the seller
at an agreed upon price
and date. This is
treated as a loan.
- ----------------------------------------------------------
COMMON STOCK--shares of
ownership in a company.
- ---------------------------------------------------------------------
PREFERRED STOCK--shares
of ownership in a
company with a
preferential right to
receive dividends.
- --------------------------------------------------------------------------------
CORPORATE DEBT--fixed
income securities, such
as bonds, issued by
corporations. X
- -------------------------------------------------------------------------------------------
U.S. GOVERNMENT
SECURITIES--securities
issued or guaranteed by
the U.S. government, its
agencies or
instrumentalities. X
- ------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED
SECURITIES--securities,
including derivatives
such as CMOs, whose
income is generated by
payments of principal
and interest on pools of
mortgage loans.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 19
<TABLE>
<CAPTION>
OHIO U.S.
MUNICIPAL TREASURY FLORIDA FIXED INTERM
MONEY MONEY MONEY TAX-FREE INCOME MORTGAGE OHIO MICHIGAN INCOME GOVT
MARKET MARKET MARKET MONEY GROWTH EQUITY SECURITIES TAX-FREE TAX-FREE SECURITIES INCOME
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OHIO TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Ohio or its
respective authorities,
agencies,
instrumentalities and
political subdivisions. X X
- -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Michigan or its
respective authorities,
agencies,
instrumentalities and
political subdivisions. X
- -----------------------------------------------------------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Florida or its
respective authorities,
agencies,
instrumentalities and
political subdivisions. X
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT/
INTERM
FIXED
INCOME
SECURITIES
FUND
<S> <C>
OHIO TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Ohio or its
respective authorities,
agencies,
instrumentalities and
political subdivisions.
- ----------------------------------------------------------------------------------------------------------------------------
MICHIGAN TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Michigan or its
respective authorities,
agencies,
instrumentalities and
political subdivisions.
- -----------------------------------------------------------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT
SECURITIES--tax-exempt
debt obligations issued
by or on behalf of the
state of Florida or its
respective authorities,
agencies,
instrumentalities and
political subdivisions.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 20
MORE FUND INFORMATION
In the Fund Summaries above, we discuss the investment objectives for each
of the Funds offered by this Prospectus. Each Fund's investment objective is
fundamental and may be changed only by a vote of a majority of that Fund's
outstanding shares.
We also summarize the principal investment strategies used under normal
market conditions. The Adviser may employ other strategies and investment
techniques on a less frequent basis. Unless otherwise noted, the investment
policies of these Funds are not fundamental and the Trust's Board of Trustees
may change them without shareholder approval. Please note that when a limitation
on an investment or strategy is expressed in terms
of a percentage of assets, we apply the restriction at the time of the
investment. Also as part of each Fund summary, we discuss the principal
investment risks (the risks associated with the Fund's investment objective and
principal investment strategies) of each of the Funds offered by this
Prospectus. There are other risks applicable to investing in each of the Funds.
Finally, we have provided a table illustrating the principal investments of
each Fund offered by this Prospectus.
By calling (800) 253-0412, you can obtain a copy of the Trust's Statement
of Additional Information which includes more detailed information about all of
the types of investments and risks associated with each Fund.
14
<PAGE> 21
RISK/RETURN INFORMATION
The bar charts and tables below provide some indication of the risks and
volatility of investments in the Funds offered by this Prospectus. The charts
illustrate changes in each Fund's Trust Shares performance from year to year and
the tables show how each Fund's average annual returns compare with those of one
or more broad measures of market performance. Total returns shown assume
reinvestment of dividends and distributions. The way a Fund has performed in the
past is not necessarily an indication of the way it will perform in the future.
MONEY MARKET FUND
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------
<S> <C>
1989 9.13
1990 8.10
1991 5.85
1992 3.44
1993 2.74
1994 3.86
1995 5.58
1996 5.01
1997 5.17
1998 5.13
1999 4.77
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/90) Worst Quarter (6/30/93)
2.01% 0.66%
</TABLE>
OHIO MUNICIPAL MONEY MARKET FUND
<TABLE>
<S> <C>
Ohio Municipal Money Market Fund
1989 6.01
1990 5.43
1991 4.07
1992 2.61
1993 2.08
1994 2.41
1995 3.57
1996 3.14
1997 3.27
1998 3.07
1999 2.79
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/90) Worst Quarter (3/31/94)
1.36% 0.46%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares
------------
<S> <C>
1 Year 4.77%
5 Years 5.13%
10 Years 4.96%
Since Inception
(6/11/87) 5.54%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares
------------
<S> <C>
1 Year 2.79%
5 Years 3.17%
10 Years 3.24%
Since Inception
(6/10/87) 3.62%
</TABLE>
15
<PAGE> 22
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<S> <C>
U.S. Treasury Money Market Fund
1990 7.97
1991 5.66
1992 3.43
1993 2.77
1994 3.79
1995 5.53
1996 4.98
1997 5.06
1998 4.95
1999 4.53
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/90) Worst Quarter (6/30/93)
1.98% 0.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares
------------
<S> <C>
1 Year 4.53%
5 Years 5.01%
10 Years 4.86%
Since Inception
(10/2/89) 4.87%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares
------------
<S> <C>
Since Inception
(1/6/99) 2.78%
</TABLE>
FLORIDA TAX-FREE MONEY FUND
No graph is provided for the Florida
Tax-Free Money Fund since it has not yet
had a full calendar year of operations.
16
<PAGE> 23
GROWTH FUND
<TABLE>
<CAPTION>
GROWTH FUND
-----------
<S> <C>
1990 0.16
1991 26.47
1992 7.88
1993 3.53
1994 2.28
1995 30.75
1996 16.72
1997 35.37
1998 18.55
1999 13.59
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/97) Worst Quarter (9/30/90)
19.62% -13.09%
</TABLE>
INCOME EQUITY FUND
<TABLE>
<CAPTION>
INCOME EQUITY FUND
------------------
<S> <C>
1990 -8.86
1991 23.20
1992 7.49
1993 10.85
1994 -1.82
1995 29.26
1996 16.88
1997 25.99
1998 17.79
1999 -6.75
</TABLE>
<TABLE>
<S> <C>
Best Quarter (12/31/98) Worst Quarter (9/30/90)
12.24% -11.53%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares S&P 500
------------ -------
<S> <C> <C>
1 Year 13.59% 21.04%
5 Years 22.71% 28.55%
10 Years 14.94% 18.20%
Since Inception
(7/3/89) 14.68% 17.81%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Trust Shares S&P 500
------------ -------
<S> <C> <C>
1 Year -6.75% 21.04%
5 Years 15.89% 28.55%
10 Years 10.63% 18.20%
Since Inception
(7/3/89) 10.45% 17.81%
</TABLE>
17
<PAGE> 24
MORTGAGE SECURITIES FUND
<TABLE>
<S> <C>
Mortgage Securities Fund
1993 12.89
1994 -24.59
1995 31.10
1996 6.56
1997 8.77
1998 6.41
1999 1.01
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (6/30/94)
10.82% -13.60%
</TABLE>
OHIO TAX-FREE FUND
<TABLE>
<S> <C>
Ohio Tax-Free Fund
1989 7.37
1990 6.28
1991 9.06
1992 6.04
1993 8.08
1994 -2.57
1995 11.35
1996 3.48
1997 6.11
1998 5.16
1999 -0.92
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/95) Worst Quarter (3/31/94)
4.26% -2.70%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
TRUST MORTGAGE-
SHARES BACKED INDEX
<C> <S> <S>
1 Year 1.01% 1.85%
5 Years 10.31% 7.98%
Since Inception
(5/2/92) 5.67% 6.47%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
5-YEAR
TRUST GEN. OBS.
SHARES INDEX
<C> <S> <S>
1 Year -0.92% 0.72%
5 Years 4.96% 5.80%
10 Years 5.13% 6.16%
Since Inception
(10/18/88) 5.25% 6.27%
</TABLE>
18
<PAGE> 25
MICHIGAN TAX-FREE FUND*
<TABLE>
<CAPTION>
MICHIGAN TAX-FREE FUND
----------------------
<S> <C>
1992 7.10
1993 9.52
1994 -1.70
1995 12.27
1996 3.85
1997 7.18
1998 5.18
1999 -0.54
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/95) Worst Quarter (3/31/94)
4.69% -3.21%
</TABLE>
* Returns from 1992-1998
include the performance of
the predecessor FMB
Michigan Tax-Free Fund.
FIXED INCOME SECURITIES FUND
<TABLE>
<S> <C>
Fixed Income Securities Fund
1990 7.49
1991 16.13
1992 6.54
1993 10.32
1994 -4.62
1995 17.95
1996 2.56
1997 8.83
1998 9.18
1999 -3.84
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (3/31/94)
6.21% -3.47%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
5-YEAR
TRUST MUNI BOND
SHARES INDEX
<C> <S> <S>
1 Year -0.54% 0.74%
5 Years 5.51% 5.71%
Since Inception
(12/2/91) 5.34% 5.38%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
GOVT/CORP
TRUST BOND
SHARES INDEX
<C> <S> <S>
1 Year -3.84% 2.15%
5 Years 6.69% 7.60%
10 Years 6.82% 7.66%
Since Inception
(7/3/89) 6.80% 7.59%
</TABLE>
19
<PAGE> 26
INTERMEDIATE GOVERNMENT INCOME FUND*
<TABLE>
<S> <C>
Intermediate Government Income Fund
1992 6.58
1993 8.71
1994 -2.30
1995 12.94
1996 3.84
1997 7.52
1998 8.00
1999 -1.09
</TABLE>
<TABLE>
<S> <C>
Best Quarter (9/30/98) Worst Quarter (3/31/94)
4.52% -1.77%
</TABLE>
* Returns for 1992-1998
include performance of the
predecessor FMB
Intermediate Government
Income Fund.
SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND
<TABLE>
<S> <C>
Short/Intermediate Fixed Income Securities Fund
1990 8.34
1991 13.62
1992 6.25
1993 7.43
1994 -0.98
1995 12.81
1996 4.08
1997 6.56
1998 7.13
1999 1.05
</TABLE>
<TABLE>
<S> <C>
Best Quarter (12/31/91) Worst Quarter (3/31/94)
4.57% -1.09%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
INTERIM
TRUST GOVT/CORP
SHARES INDEX
<C> <S> <S>
1 Year -1.09% 0.39%
5 Years 6.14% 7.09%
Since Inception
(12/2/91) 5.60% 6.14%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
MERRILL LYNCH
1-5 YEAR
TRUST GOVT/CORP
SHARES INDEX
<C> <S> <S>
1 Year 1.05% 2.19%
5 Years 6.25% 6.66%
10 Years 6.54% 7.00%
Since Inception
(7/3/89) 6.61% 6.98%
</TABLE>
20
<PAGE> 27
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
Trust Shares of the Funds offered by this Prospectus.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT (12B-1) OTHER FUND OPERATING
FEES(1) FEES EXPENSES(1) EXPENSES
---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Money Market Fund............................. 0.27% None 0.22% 0.49%
Ohio Municipal Money Market Fund.............. 0.30% None 0.23% 0.53%
U.S. Treasury Money Market Fund............... 0.20% None 0.20% 0.40%
Florida Tax-Free Money Fund................... 0.30% None 0.30% 0.60%
Growth Fund................................... 0.60% None 0.22% 0.82%
Income Equity Fund............................ 0.60% None 0.22% 0.82%
Mortgage Securities Fund...................... 0.50% None 0.45% 0.95%
Ohio Tax-Free Fund............................ 0.50% None 0.32% 0.82%
Michigan Tax-Free Fund........................ 0.50% None 0.30% 0.80%
Fixed Income Securities Fund.................. 0.50% None 0.24% 0.74%
Intermediate Government Income Fund........... 0.50% None 0.29% 0.79%
Short/Intermediate Fixed Income Securities
Fund........................................ 0.50% None 0.23% 0.73%
</TABLE>
- ------------
(1) Management fees and other expenses have been restated to reflect current
fees.
EXAMPLE
This Example is intended to help you compare the cost of investing in a
Fund offered by this Prospectus with the cost of investing in other mutual
funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that a
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund....................................... $50 $157 $274 $ 616
Ohio Municipal Money Market Fund........................ $54 $170 $296 $ 665
U.S. Treasury Money Market Fund......................... $41 $128 $224 $ 505
Florida Tax-Free Money Fund............................. $61 $192 $335 $ 750
Growth Fund............................................. $84 $262 $455 $1,014
Income Equity Fund...................................... $84 $262 $455 $1,014
Mortgage Securities Fund................................ $97 $303 $525 $1,166
Ohio Tax-Free Fund...................................... $84 $262 $455 $1,014
Michigan Tax-Free Fund.................................. $82 $255 $444 $ 990
Fixed Income Securities Fund............................ $76 $237 $411 $ 918
Intermediate Government Income Fund..................... $81 $252 $439 $ 978
Short/Intermediate Fixed Income Securities Fund......... $75 $233 $406 $ 906
</TABLE>
21
<PAGE> 28
FINANCIAL HIGHLIGHTS--MONEY MARKET FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997, 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET ASSET SHAREHOLDERS NET ASSET
VALUE, NET FROM NET VALUE,
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL
DECEMBER 31, OF PERIOD INCOME INCOME PERIOD RETURN EXPENSES
------------ --------- ---------- ---------------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
TRUST SHARES
MONEY MARKET
1999 $1.00 $0.05 $(0.05) $1.00 4.77% 0.49%
1998 1.00 0.05 (0.05) 1.00 5.13% 0.50%
1997 1.00 0.05 (0.05) 1.00 5.17% 0.51%
1996 1.00 0.05 (0.05) 1.00 5.01% 0.53%
1995 1.00 0.05 (0.05) 1.00 5.58% 0.53%
OHIO MUNICIPAL MONEY MARKET
1999 $1.00 $0.03 $(0.03) $1.00 2.79% 0.48%
1998 1.00 0.03 (0.03) 1.00 3.07% 0.47%
1997 1.00 0.03 (0.03) 1.00 3.27% 0.45%
1996 1.00 0.03 (0.03) 1.00 3.14% 0.42%
1995 1.00 0.04 (0.04) 1.00 3.57% 0.42%
U.S. TREASURY MONEY MARKET
1999 $1.00 $0.04 $(0.04) $1.00 4.53% 0.40%
1998 1.00 0.05 (0.05) 1.00 4.95% 0.40%
1997 1.00 0.05 (0.05) 1.00 5.06% 0.42%
1996 1.00 0.05 (0.05) 1.00 4.98% 0.42%
1995 1.00 0.05 (0.05) 1.00 5.53% 0.43%
FLORIDA TAX-FREE MONEY
1999 $1.00 $0.03 $(0.03) $1.00 2.78% 0.49%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) This voluntary expense decrease, as a result of a waiver by the Adviser, is
reflected in both the expense and net investment income ratios shown above.
22
<PAGE> 29
<TABLE>
<CAPTION>
NET NET ASSETS,
INVESTMENT EXPENSE WAIVER/ END OF PERIOD
INCOME REIMBURSEMENT(a) (000 OMITTED)
- ---------- ---------------- -------------
<S> <C> <C>
4.67% -- $633,055
4.99% -- 700,540
5.06% -- 424,050
4.90% -- 337,962
5.44% 0.03% 296,764
2.74% 0.05% $ 90,804
3.03% 0.05% 102,606
3.23% 0.07% 72,667
3.10% 0.12% 56,654
3.52% 0.20% 56,551
4.42% -- $404,501
4.84% -- 447,305
4.95% -- 483,548
4.87% -- 474,593
5.40% 0.01% 277,142
2.78% 0.30% $ 25,295
- ---------------------------------------------
</TABLE>
23
<PAGE> 30
FINANCIAL HIGHLIGHTS--EQUITY FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS TO
NET ASSET AND SHAREHOLDERS FROM NET SHAREHOLDERS
VALUE, NET UNREALIZED TOTAL FROM FROM NET REALIZED GAIN IN EXCESS OF
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT NET INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME
------------ --------- ---------- -------------- ---------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRUST SHARES
GROWTH
1999 $49.78 $0.30 $ 6.16 $ 6.46 $(0.30) $(6.42) --
1998 43.48 0.29 7.69 7.98 (0.29) (1.21) $(0.18)
1997 33.97 0.29 11.63 11.92 (0.29) (2.12) --
1996 30.81 0.40 4.72 5.12 (0.40) (1.56) --
1995 26.30 0.43 7.62 8.05 (0.43) (3.11) --
INCOME EQUITY
1999 $40.85 $1.16 $(3.87) $(2.71) $(1.14) $(0.27) $(0.02)
1998 36.30 1.09 5.26 6.35 (1.09) (0.71) --
1997 30.26 1.03 6.70 7.73 (1.04) (0.65) --
1996 27.25 1.00 3.51 4.51 (1.00) (0.50) --
1995 21.93 0.94 5.34 6.28 (0.96) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) This voluntary expense decrease, as a result of a waiver by the Adviser, is
reflected in both the expense and net investment income ratios shown above.
24
<PAGE> 31
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURN EXPENSES INCOME REIMBURSEMENT(B) (000 OMITTED) RATE
- ------------- --------- ------ -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(6.72)... $49.52 13.59% 0.82% 0.57% -- $295,268 10%
(1.68)... 49.78 18.55% 0.79% 0.62% -- 322,564 11%
(2.41)... 43.48 35.37% 0.80% 0.73% -- 228,138 12%
(1.96)... 33.97 16.72% 0.83% 1.20% -- 175,764 21%
(3.54)... 30.81 30.75% 0.86% 1.34% 0.05% 143,421 37%
$(1.43)... $36.71 (6.75)% 0.82% 2.93% -- $225,647 20%
(1.80)... 40.85 17.79% 0.81% 2.83% -- 249,051 13%
(1.69)... 36.30 25.99% 0.81% 3.08% -- 214,625 24%
(1.50)... 30.26 16.88% 0.82% 3.50% -- 172,767 25%
(0.96)... 27.25 29.26% 0.82% 3.85% -- 141,892 17%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 32
FINANCIAL HIGHLIGHTS--INCOME FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997, 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET AND SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET 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(a)
------------ --------- ---------- -------------- ---------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRUST SHARES
OHIO TAX-FREE
1999 $21.83 $0.95 $(1.15) $(0.20) $(0.94) $(0.01) --
1998 21.74 0.98 0.11 1.09 (0.98) (0.02) --
1997 21.49 1.01 0.27 1.28 (1.02) (0.01) --
1996 21.77 1.01 (0.28) 0.73 (1.01) -- --
1995 20.50 1.01 1.27 2.28 (1.01) -- --
FIXED INCOME
1999 $21.78 $1.23 $(2.05) $(0.82) $(1.22) -- --
1998 21.41 1.26 0.65 1.91 (1.26) $(0.28) --
1997 20.94 1.31 0.47 1.78 (1.31) -- --
1996 21.78 1.34 (0.83) 0.51 (1.35) -- --
1995 19.69 1.34 2.09 3.43 (1.34) -- --
MORTGAGE SECURITIES
1999 $ 8.25 $0.47 $(0.39) $ 0.08 $(0.47) -- --
1998(c) 8.24 0.50 0.01 0.51 (0.50) -- --
1997(d) 8.06 0.52 0.16 0.68 (0.50) -- --
1996(d) 8.09 0.55 (0.04) 0.51 (0.54) -- --
1995(d) 6.69 0.55 1.46 2.01 (0.55) -- $(0.06)
SHORT/INTERMEDIATE FIXED INCOME
1999 $20.13 $1.10 $(0.90) $ 0.20 $(1.09) -- --
1998 20.04 1.15 0.24 1.39 (1.15) $(0.15) --
1997 19.96 1.19 0.08 1.27 (1.19) -- --
1996 20.35 1.17 (0.37) 0.80 (1.19) -- --
1995 19.14 1.18 1.21 2.39 (1.18) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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.
(b) This voluntary expense decrease, as a result of a waiver by the Adviser, is
reflected in both the expense and net investment income ratios shown above.
(c) Effective April 24, 1998, Piper Capital Management, Inc. ceased to serve as
subadviser for Mortgage Securities Fund.
(d) 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.
26
<PAGE> 33
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURN EXPENSES INCOME REIMBURSEMENT(B) (000 OMITTED) RATE
- ------------- --------- ------ -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.95) $20.68 (0.92)% 0.82% 4.44% -- $ 52,723 11%
(1.00) 21.83 5.16% 0.73% 4.50% -- 63,148 9%
(1.03) 21.74 6.11% 0.72% 4.72% -- 64,325 14%
(1.01) 21.49 3.48% 0.76% 3.48% -- 64,799 6%
(1.01) 21.77 11.35% 0.78% 4.74% 0.08% 59,869 13%
$(1.22) $19.74 (3.84)% 0.74% 5.99% -- $150,787 44%
(1.54) 21.78 9.18% 0.70% 5.78% -- 168,453 47%
(1.31) 21.41 8.83% 0.70% 6.26% -- 153,374 116%
(1.35) 20.94 2.56% 0.74% 6.39% -- 144,038 16%
(1.34) 21.78 17.95% 0.77% 6.41% 0.05% 141,423 20%
$(0.47) $ 7.86 1.01% 0.95% 5.81% 0.20% $ 32,193 20%
(0.50) 8.25 6.41% 0.63% 6.09% 0.20% 34,991 17%
(0.50) 8.24 8.77% 0.66% 6.39% 0.20% 37,057 63%
(0.54) 8.06 6.56% 0.67% 6.86% 0.29% 39,566 90%
(0.61) 8.09 31.10% 0.49% 7.29% 0.63% 52,667 194%
$(1.09) $19.24 1.05% 0.73% 5.60% -- $113,341 92%
(1.30) 20.13 7.13% 0.71% 5.68% -- 127,715 61%
(1.19) 20.04 6.56% 0.71% 5.94% -- 126,845 160%
(1.19) 19.96 4.08% 0.72% 5.83% -- 125,514 39%
(1.18) 20.35 12.81% 0.74% 5.93% -- 133,951 40%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 34
FINANCIAL HIGHLIGHTS--INCOME FUNDS (CONT'D)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1999, the seven-month period ended December 31, 1998 and the six-month
period ended May 31, 1998 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995,
1996 and 1997 have been derived from the financial statements for the Consumer
Class of shares of the FMB Michigan Tax-Free Bond Fund and the FMB Intermediate
Government Income Fund (the "FMB Funds"), the funds which were reorganized to
create the Michigan Tax-Free Fund and the Intermediate Government Income Fund,
respectively on April 6, 1998, and were audited by the FMB Funds' auditors. KPMG
LLP's report is included in the Trust's 1999 Annual Report to Shareholders and
is incorporated by reference into (considered a legal part of) the Statement of
Additional Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS
NET ASSET AND SHAREHOLDERS FROM NET
VALUE, NET UNREALIZED TOTAL FROM FROM NET REALIZED GAIN
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT
PERIOD ENDED,(a) OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS
---------------- --------- ---------- -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
TRUST SHARES
MICHIGAN TAX-FREE
1999 $10.99 $0.49 $(0.55) $(0.06) $(0.49) --
1998(c) 10.97 0.29 0.06 0.35 (0.31) $(0.02)
1998(d) 10.89 0.25 0.06 0.31 (0.23) --
1997(e) 10.79 0.50 0.10 0.60 (0.50) --
1996(e) 10.79 0.50 -- 0.50 (0.50) --
1995(e) 9.97 0.49 0.82 1.31 (0.49) --
INTERMEDIATE GOVERNMENT INCOME
1999 $10.42 $0.55 $(0.66) $(0.11) $(0.55) --
1998(c) 10.23 0.33 0.21 0.54 (0.35) --
1998(d) 10.16 0.29 0.04 0.33 (0.26) --
1997(e) 10.13 0.59 0.02 0.61 (0.58) --
1996(e) 10.24 0.59 (0.10) 0.49 (0.60) --
1995(e) 9.66 0.61 0.58 1.19 (0.61) --
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The fiscal year end of Huntington Michigan Tax-Free Fund and Huntington
Intermediate Government Income Fund was changed from November 30 to May 31,
and subsequently to December 31 to coincide with the other Huntington Funds.
(b) This voluntary expense decrease, as a result of a waiver by the Adviser, is
reflected in both the expense and net investment income ratios shown above.
(c) Seven months ended December 31.
(d) Six months ended May 31.
(e) Year ended November 30.
(f) Expense ratios reflect operating expenses in effect during the period prior
to and subsequent to the reorganization with the FMB Funds.
(g) Computed on an annualized basis.
(h) Not annualized.
28
<PAGE> 35
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURN EXPENSES INCOME REIMBURSEMENT(b) (000 OMITTED) RATE
- ------------- --------- ------ -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.49) $10.44 (0.54)% 0.74% 4.57% 0.07% $20,809 6%
(0.33) 10.99 3.31%(h) 0.67%(g) 4.57%(g) 0.07%(g) 23,995 7%(h)
(0.23) 10.97 2.86%(h) 0.75%(f)(g) 4.55%(g) 0.14%(g) 27,440 2%(h)
(0.50) 10.89 5.73% 0.73% 4.66% 0.27% 24,954 7%
(0.50) 10.79 4.78% 0.68% 4.72% 0.37% 23,082 16%
(0.49) 10.79 13.21% 0.70% 4.62% 0.48% 20,700 35%
$(0.55) $ 9.76 (1.09)% 0.73% 5.45% 0.05% $99,566 14%
(0.35) 10.42 5.34%(h) 0.69%(g) 5.38%(g) 0.05%(g) 109,261 7%(h)
(0.26) 10.23 3.33%(h) 0.76%(f)(g) 5.67%(g) 0.02%(g) 116,317 14%(h)
(0.58) 10.16 6.27% 0.79% 5.91% -- 115,064 28%
(0.60) 10.13 4.97% 0.79% 5.89% -- 108,047 16%
(0.61) 10.24 12.64% 0.78% 6.09% -- 114,646 27%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 36
ORGANIZATION OF THE TRUST
The Trust is organized as a Massachusetts business trust which offers
several Funds for investment. As of April 30, 2000, each of the Funds offered by
this Prospectus offers up to three classes of shares: Investment A Shares
(formerly, Investment Shares), Investment B Shares and Trust Shares.
Only Trust Shares are offered by this Prospectus. Trust Shares carry no
sales charges and are not subject to 12b-1 fees. Trust Shares are only offered
to fiduciary, advisory, agency and other similar clients of The Huntington
National Bank, its affiliates or correspondent banks. Investment A Shares are
offered to all types of investors, carry a front-end sales charge, except with
respect to the Money Market Funds, and are subject to 12b-1 fees. Investment B
Shares are available to all types of investors, carry a contingent deferred
sales charge and are subject to higher 12b-1 fees than Investment A Shares. Each
share class bears Fund expenses based on its proportional share of assets,
except that 12b-1 fees of 0.25% are borne only by Investment A Shares and 12b-1
fees of 1.00% are borne only by Investment B Shares.
DISTRIBUTION OF THE FUNDS
SEI Investments Distribution Co., whose address is One Freedom Valley Road,
Oaks, Pennsylvania 19456, serves as the Distributor of the Funds offered by this
Prospectus.
ABOUT PURCHASING TRUST SHARES
You may purchase Trust Shares of the Funds offered by this Prospectus on
any business day when both the Federal Reserve Bank and the New York Stock
Exchange are open.
WHAT SHARES COST
The offering price of a Trust Share is its net asset value (determined
after the order is considered received). The Trust calculates the net asset
value per share for each Fund offered by this Prospectus as of the close of
business of the New York Stock Exchange (generally 4:00 p.m. Eastern Time).
There are no sales charges imposed on the purchase of Trust Shares.
The Trust attempts to stabilize the net asset value per share for each of
the Money Market Funds at $1.00 per share by valuing its portfolio securities
using the amortized cost method. The Trust calculates net asset value for each
of the other Funds offered by this Prospectus by valuing securities held based
on market value. These valuation methods are more fully described in the Trust's
Statement of Additional Information.
In order to purchase Trust Shares on a particular day, the Trust must
receive payment before 4:00 p.m. (Eastern Time) that day. You will begin earning
dividends on the day of your investment in the Money Market Fund or the U.S.
Treasury Money Market Fund if the Trust receives payment before 1:00 p.m.
(Eastern Time). The applicable cut-off time for the Ohio Municipal Money Market
Fund and the Florida Tax-Free Money Fund is 10:30 a.m. (Eastern Time). Orders
placed through an intermediary, such as your Account Administrator, must be
received and transmitted to the Trust before the applicable cut-off time in
order for shares to be purchased that day. It is the intermediary's
responsibility to transmit orders promptly, however, you should allow sufficient
time for orderly processing and transmission.
The Trust reserves the right to suspend the sale of shares of any of the
Funds temporarily and the right to refuse any order to purchase shares of any of
the Funds.
If the Trust receives insufficient payment for a purchase, it will cancel
the purchase and may charge you a fee. In addition, you will be liable for any
losses incurred by the Trust in connection with the transaction.
30
<PAGE> 37
HOW TO BUY TRUST SHARES
1. MINIMUM INVESTMENT REQUIREMENTS:
- $1,000 for initial investments outside the Systematic Investment Program
- $500 for subsequent investments
- $50 for initial and subsequent investments through the Systematic
Investment Program
2. CALL
- Your Huntington Account Administrator
3. MAKE PAYMENT
- By check payable to the applicable Huntington Fund-Trust Shares to:
The Huntington Funds
P.O. Box 8526
Boston, MA 02266
(The Trust will treat your order as having been received once payment is
converted to federal funds by the Trust's transfer agent)
OR
- Through the Systematic Investment Program
(Once you become a participant in the Program, your investments will be
made automatically at your requested intervals)
Other methods of acceptable payment are discussed in the Statement of
Additional Information.
SYSTEMATIC INVESTMENT PROGRAM
You may invest on a regular basis in Trust Shares of one or more Funds
offered by this Prospectus through the Systematic Investment Program. To
participate, you must open an account with the Trust by calling (800) 253-0412
and invest at least $50 at periodic intervals.
Once you have signed up for the Program, the Trust will automatically
withdraw money from your bank account and invest it in Trust Shares of the Fund
or Funds you specify. Your participation in the Program may be canceled if you
do not maintain sufficient funds in your bank account to pay for your
investment.
31
<PAGE> 38
ABOUT EXCHANGING TRUST SHARES AMONG THE FUNDS
On any business day when both the Federal Reserve Bank and the New York
Stock Exchange are open, you may exchange Trust Shares of any Huntington Fund
for Trust Shares of any other Huntington Fund offering such shares. The Trust
makes these exchanges at net asset value (determined after the order is
considered received).
In order to exchange Trust Shares on a particular day, the Trust must
receive your request before 4:00 p.m. (Eastern Time) that day.
The Trust may terminate or modify the exchange privilege at any time. In
the case of termination or material changes other than the elimination of
applicable sales charges, you will be given 60 days' prior notice.
An exchange is treated as a sale for federal income tax purposes and,
depending on the circumstances, you may realize a short or long-term capital
gain or loss.
The Statement of Additional Information contains more information about
exchanges.
HOW TO EXCHANGE TRUST SHARES
1. SATISFY THE MINIMUM ACCOUNT BALANCE REQUIREMENTS
- You must maintain the required minimum account balance in the Fund out of
which you are exchanging shares.
2. CALL
- Your Huntington Account Administrator
OR
WRITE
- The Huntington Funds
P.O. Box 8526
Boston, MA 02266
3. PROVIDE THE REQUIRED INFORMATION
- Name of the Fund from which you wish to make the exchange (exchange OUT
OF)
- Specify the Trust Shares class
- Your account number
- The name and address on your account
- The dollar amount or number of shares to be exchanged
- Name of the Fund into which you wish to make the exchange (exchange INTO)
- Your signature (for written requests)
(For corporations, executors, administrators, trustees and guardians, and
in certain other special circumstances, telephone exchanges will not be
available and you will need a signature guarantee in order to make an exchange)
32
<PAGE> 39
ABOUT REDEEMING TRUST SHARES
You may redeem Trust Shares of the Funds offered by this Prospectus on any
business day when both the Federal Reserve Bank and the New York Stock Exchange
are open. The price at which the Trust will redeem a Trust Share will be its net
asset value (determined after the order is considered received). The Trust
calculates the net asset value per share for each Fund offered by this
Prospectus as of the close of business of the New York Stock Exchange (generally
4:00 p.m. Eastern Time).
In order to redeem Trust Shares of the Money Market Fund or the U.S.
Treasury Money Market Fund on a particular day, the Trust must receive your
request before 1:00 p.m. (Eastern Time) that day. The applicable cut-off time is
10:30 a.m. (Eastern Time) for the Ohio Municipal Money Market Fund and the
Florida Tax-Free Money Fund and 3:00 p.m. (Eastern Time) for each of the Equity
and Income Funds.
For shareholders who request redemptions prior to the applicable cut-off
time for the Fund being redeemed, usually the proceeds will be wired or a check
will be mailed on the same day; for redemption requests received after the
applicable cut-off time, usually proceeds will be wired or a check will be
mailed the following business day after net asset value is next determined.
Proceeds are wired to an account designated in writing by the shareholder at any
domestic commercial bank which is a member of the Federal Reserve System.
Proceeds to be paid by check are sent to the shareholder's address of record.
To the extent permitted by federal securities laws, the Trust reserves the
right to suspend the redemption of shares of any of the Funds temporarily under
extraordinary market conditions such as market closures or suspension of trading
by the Securities and Exchange Commission. The Trust also reserves the right to
postpone payment for more than seven days where payment for shares to be
redeemed has not yet cleared.
The Trust may terminate or modify the methods of redemption at any time. In
such case, you will be promptly notified.
REDEMPTION OF ACCOUNTS WITH BALANCES UNDER $1,000
Due to the high cost of maintaining accounts with low balances, if your
Trust Shares account balance in any one Fund falls below $1,000, the Trust may
choose to redeem those shares and close that account without your consent. The
Trust will not close any account which is held through a retirement plan or any
account whose value falls below $1,000 as a result of changes in a Fund's net
asset value. If the Trust plans to close your account, it will notify you and
provide you with 30 days to add to your account balance.
33
<PAGE> 40
HOW TO REDEEM TRUST SHARES
1. CALL
- Your Account Administrator
OR
WRITE
- The Huntington Funds
P.O. Box 8526
Boston, MA 02266
2. PROVIDE THE REQUIRED INFORMATION
- The name of the Fund from which you wish to redeem shares
- Specify the Trust Shares class
- Your account number
- The name and address on your account
- Your bank's wire transfer information (for wire transfers)
- The dollar amount or number of shares you wish to redeem
- Your signature (for written requests)
(If you request a redemption of over $50,000, request any redemption to be
sent to an address other than the address on record with the Trust or request
any redemption to be paid to a person or persons other than the shareholder(s)
of record, you will need a signature guarantee in order to redeem)
34
<PAGE> 41
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business. Huntington, whose address is Huntington Center,
41 South High Street, Columbus, Ohio 43287, serves as investment adviser to the
Funds pursuant to investment advisory agreements with the Trust.
Fort Washington Investment Advisors, Inc., whose address is 420 E. Fourth
Street, Cincinnati, Ohio 45202, serves as sub-adviser to the Florida Tax-Free
Money Fund.
INVESTMENT ADVISER
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. During the fiscal year ended December 31, 1999, the
Trust paid Huntington management fees as a percentage of average net assets as
follows:
<TABLE>
<S> <C>
Money Market Fund....................... 0.27%
Ohio Municipal Money Market Fund........ 0.25%
U.S. Treasury Money Market Fund......... 0.20%
Florida Tax-Free Money Fund............. 0.20%
Growth Fund............................. 0.60%
Income Equity Fund...................... 0.60%
Mortgage Securities Fund................ 0.30%
Ohio Tax-Free Fund...................... 0.50%
Michigan Tax-Free Fund.................. 0.43%
Fixed Income Securities Fund............ 0.50%
Intermediate Government Income Fund..... 0.45%
Short/Interm. Fixed Income Securities
Fund.................................. 0.50%
</TABLE>
Huntington is an indirect, wholly-owned subsidiary of Huntington Bancshares
Incorporated ("HBI"), a registered bank holding company with executive offices
located at Huntington Center, 41 South High Street, Columbus, Ohio 43287. With
$28.7 billion in assets as of December 31, 1999, HBI is a major Midwest regional
bank holding company. 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 is responsible for $22.0 billion of assets, and has investment
discretion over approximately $8.8 billion of that amount.
Huntington has served as a mutual fund investment adviser since 1987 and
has over 75 years of experience providing investment advisory services to
fiduciary accounts.
Huntington is also responsible for providing administration, accounting and
custodian services to the Trust. Huntington receives 0.11% of each Fund's
average daily net assets for administrative services, 0.03% for accounting
services and 0.026% for custodian services.
SUB-ADVISER
Effective May 1, 2000, the sub-adviser for the Florida Tax-Free Money Fund,
Countrywide Investments, Inc. ("Countrywide"), an indirect subsidiary of The
Western and Southern Life Insurance Company, reorganized part of its investment
advisory operations into its affiliate, Fort Washington Investment Advisors,
Inc. ("Fort Washington").
As of May 1, 2000, Fort Washington will serve as the sub-adviser of the
Florida Tax-Free Money Fund pursuant to an interim sub-advisory agreement with
Huntington approved by the Trust's Board of Trustees on April 26, 2000. The
interim sub-advisory agreement will remain in effect until September 28, 2000 or
until the shareholders of the Florida Tax-Free Money Fund approve a new
sub-advisory agreement with Fort Washington, whichever is earlier.
Following shareholder approval of the new sub-advisory agreement on or
before
35
<PAGE> 42
September 28, 2000, Fort Washington will serve as sub-adviser under the new
agreement. In the event that shareholders do not approve the new sub-advisory
agreement, shareholders will be notified of alternative arrangements.
Fort Washington, like Countrywide, is part of Western-Southern Enterprise,
a dynamic group of financial services companies owned by The Western and
Southern Life Insurance Company of Cincinnati, Ohio. Western-Southern Enterprise
provides life insurance, annuities, mutual funds, business planning insurance,
health insurance, asset management and other related financial services for
millions of customers nationwide. Fort Washington offers professional and
comprehensive investment management services for foundations, endowments,
corporate pension funds, insurance companies, mutual funds, colleges and
universities, religious organizations and high net worth individuals. As of
December 31, 1999, Fort Washington had over $12.9 billion in assets under
management.
PORTFOLIO MANAGERS
James M. Buskirk, Chief Investment Officer of Huntington, has been the
portfolio manager of the Income Equity Fund since 1990. As Chief Investment
Officer of Huntington, Mr. Buskirk has ultimate responsibility for all
investment management activities. He brings more than 20 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 in 1988. He also assumed
investment responsibility for all of the Huntington Income Funds in 1999. 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.
James Gibboney, Jr., a Vice President of Huntington, has been a
co-portfolio manager of the Growth Fund since November of 1993, and assumed full
responsibility for its management in 1999. 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 12 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.
DIVIDENDS AND DISTRIBUTIONS
The Money Market Funds declare dividends on investment income daily and pay
them monthly. These Funds also make distributions of net capital gains, if any,
at least annually.
Each of the other Funds offered by this Prospectus declares and pays
dividends on investment income monthly. These Funds also make distributions of
net capital gains, if any, at least annually.
DISTRIBUTION OPTIONS
All dividends and distributions payable to a holder of Trust Shares will be
automatically reinvested in additional Trust Shares of the income-producing
Fund, unless the shareholder
36
<PAGE> 43
makes an alternative election. Shareholders of any of the Funds offered by this
Prospectus may choose to receive all distributions in cash. Shareholders of any
of the Equity or Income Funds offered by this Prospectus may choose to reinvest
capital gains distributions, but receive all other distributions in cash.
TAX CONSEQUENCES
There are many important tax consequences associated with investment in the
Funds offered by this Prospectus. Please read the summary below and consult your
tax advisor regarding the specific federal, state and local tax consequences
applicable to your investment.
FEDERAL INCOME TAXES
Each of the Funds offered by this Prospectus intends to distribute to
shareholders dividends of its net investment income and distributions of capital
gains. The income dividends distributed by the Ohio Municipal Money Market Fund,
the Florida Tax-Free Money Fund, the Ohio Tax-Free Fund and the Michigan
Tax-Free Fund are generally intended to be tax-exempt. For any portion of these
Funds not invested in tax-exempt securities, and for all other Funds offered by
this Prospectus, distributions of income, whether or not they are reinvested in
Fund shares, may be subject to federal income tax. In addition, if you are
subject to the alternative minimum tax, you will have to pay tax on any portion
of income dividends attributable to investments in certain "private activity"
bonds.
For all of the Funds offered by this Prospectus, capital gains
distributions may be subject to federal taxation. The rate at which you may be
taxed can vary depending on the length of time a Fund holds a security.
An exchange of a Fund's shares for shares of another Fund will be treated
as a sale of the Fund's shares and, as with all sales of Fund shares, any gain
on the transaction will be subject to federal income tax.
STATE INCOME TAXES
In addition to the exemption from federal income taxes, the income
dividends distributed by the Ohio Municipal Money Market Fund and the Ohio
Tax-Free Fund are generally intended to be exempt from Ohio personal income
taxes. Similarly, the income dividends distributed by the Michigan Tax-Free Fund
are generally intended to be exempt from Michigan city and state personal income
taxes and the Michigan single business tax. For any portion of these Funds not
invested in tax-exempt securities, distributions of income dividends may be
subject to state taxation.
With respect to the Florida Tax-Free Money Fund, the state of Florida does
not currently impose an income tax on individuals, but does impose such a tax on
corporations. Consequently, the income dividends distributed by the Florida
Tax-Free Money Fund will not be subject to Florida taxation for individuals, but
may be taxable to corporate shareholders (including limited liability company
shareholders that are taxed as corporations for federal income tax purposes).
The Florida Tax-Free Money Fund is also intended to exempt its shareholders
from Florida's intangible personal property tax. If on the last business day of
any year, the Florida Tax-Free Money Fund consists solely of notes, bonds and
other obligations issued by the State of Florida or its municipalities, counties
and other taxing districts, or by the U.S. government, its agencies and certain
U.S. territories and possessions (such as Guam, Puerto Rico and the Virgin
Islands) the Fund's shares will be exempt from the Florida intangible tax
payable in the following year.
37
<PAGE> 44
In order to take advantage of the exemption from the intangible tax in any
year, the Florida Tax-Free Money Fund must sell any non-exempt assets held in
its portfolio during the year and reinvest the proceeds in exempt assets on or
before the last business day of the calendar year. Transactions costs involved
in restructuring a fund in this manner would likely reduce investment return and
might exceed any increased investment return the Fund achieved by investing in
non-exempt assets during the year.
38
<PAGE> 45
More information about the Funds is available free upon request, including the
following:
ANNUAL AND SEMI-ANNUAL REPORTS
The Semi-Annual Report includes unaudited information about the performance of
the Funds, portfolio holdings and other financial information. The Annual Report
includes similar audited information as well as a letter from the Huntington
Funds portfolio managers discussing recent market conditions, economic trends
and investment strategies that significantly affected performance during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
Provides more detailed information about the Funds and its policies. A current
Statement of Additional Information is on file with the Securities and Exchange
Commission and is incorporated by reference into (considered a legal part of)
this Prospectus.
THE HUNTINGTON NATIONAL BANK, a subsidiary of Huntington Bancshares,
Incorporated, is the Investment Adviser, Administrator and Custodian of
Huntington Funds.
SEI INVESTMENTS DISTRIBUTION CO. is the Distributor and is not affiliated with
The Huntington National Bank.
For copies of Annual or Semi-Annual Reports, the Statement of Additional
Information, other information or for any other inquiries:
CALL (800) 253-0412
WRITE
The Huntington Funds
41 South High Street
Columbus, OH 43287
LOG ON TO THE INTERNET
The SEC's website, http://www.sec.gov, contains text-only versions of The
Huntington Funds documents.
CONTACT THE SEC
Call (202) 942-8090 about visiting the SEC's Public Reference Room in Washington
D.C. to review and copy information about the Funds.
Alternatively, you may send your request to the SEC by e-mail at
[email protected] or by mail with a duplicating fee to the SEC's Public
Reference Section, 450 Fifth Street, NW, Washington, D.C. 20549-0102.
[HUNTINGTON LOGO TO COME]
- NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
SEC FILE NO. 811-5010
BH/235568.1
ID/MMW
<PAGE> 46
INVESTMENT A SHARES PROSPECTUS
(FORMERLY, INVESTMENT SHARES)
INVESTMENT B SHARES PROSPECTUS
MAY 1, 2000
[ARTWORK]
[LOGO] HUNTINGTON FUNDS(TM)
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE
SECURITIES, NOR HAS IT PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS.
IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
ALSO, LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND.
YOUR INVESTMENT IN A FUND IS
NOT A BANK DEPOSIT AND IT IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
<PAGE> 47
Huntington Funds are a series of mutual funds advised by professional portfolio
managers at The Huntington National Bank.
MONEY MARKET FUNDS
Huntington Money Market Fund
Huntington Ohio Municipal Money Market Fund
Huntington U.S. Treasury Money Market Fund
Huntington Florida Tax-Free Money Fund
EQUITY FUNDS
Huntington Growth Fund
Huntington Income Equity Fund
INCOME FUNDS
Huntington Mortgage Securities Fund
Huntington Ohio Tax-Free Fund
Huntington Michigan Tax-Free Fund
Huntington Fixed Income Securities Fund
Huntington Intermediate Government Income Fund
In connection with the offering made by this Prospectus, The Huntington Funds
have not authorized any person to give any information or to make any
representations other than those contained in this Prospectus. Consequently, you
may not rely upon any such information given or representations made 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. As of the
date of this Prospectus, the Funds are not being offered for sale, other than to
existing shareholders, in Delaware, Idaho, Iowa, Mississippi, Montana, Nebraska,
Nevada, New Hampshire, New Mexico, North Dakota, Puerto Rico, Rhode Island,
South Dakota or Vermont.
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION TO THE HUNTINGTON FUNDS... 1
FUND SUMMARIES......................... 1
Money Market Funds..................... 1
Money Market Fund................. 1
Ohio Municipal Money Market
Fund............................ 2
U.S. Treasury Money Market Fund... 3
Florida Tax-Free Money Fund....... 3
Equity Funds........................... 4
Growth Fund....................... 4
Income Equity Fund................ 5
Income Funds........................... 5
Mortgage Securities Fund.......... 5
Ohio Tax-Free Fund................ 6
Michigan Tax-Free Fund............ 8
Fixed Income Securities Fund...... 9
Intermediate Government Income
Fund............................ 9
Principal Investments.................. 12
More Fund Information.................. 14
RISK/RETURN INFORMATION................ 15
Money Market Fund................. 15
Ohio Municipal Money Market
Fund............................ 15
U.S. Treasury Money Market Fund... 16
Florida Tax-Free Money Fund....... 16
Growth Fund....................... 17
Income Equity Fund................ 17
Mortgage Securities Fund.......... 18
Ohio Tax-Free Fund................ 18
Michigan Tax-Free Fund............ 19
Fixed Income Securities Fund...... 19
Intermediate Government Income
Fund............................ 20
FEES AND EXPENSES
(INVESTMENT A SHARES)................ 21
FEES AND EXPENSES
(INVESTMENT B SHARES)................ 23
FINANCIAL HIGHLIGHTS................... 24
ORGANIZATION OF THE TRUST.............. 32
DISTRIBUTION OF THE FUNDS.............. 32
Distribution Plan (12b-1 Fees).... 32
Sales Charges..................... 32
Contingent Deferred Sales
Charges......................... 34
ABOUT PURCHASING SHARES................ 35
What Shares Cost.................. 35
Investment B Shares Conversion
Feature......................... 35
Systematic Investment Program..... 36
ABOUT EXCHANGING SHARES AMONG THE
FUNDS................................ 37
Exchanging Investment A Shares.... 37
Exchanging Investment B Shares.... 37
ABOUT REDEEMING SHARES................. 39
Systematic Withdrawal Program..... 40
Redemption of Accounts with
Balances Under $1,000........... 39
MANAGEMENT OF THE TRUST................ 41
Investment Adviser................ 41
Sub-Adviser....................... 41
Portfolio Managers................ 42
DIVIDENDS AND DISTRIBUTIONS............ 42
Distribution Options.............. 42
TAX CONSEQUENCES....................... 43
Federal Income Taxes.............. 43
State Income Taxes................ 43
</TABLE>
<PAGE> 49
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<PAGE> 50
INTRODUCTION
TO THE HUNTINGTON FUNDS
The Huntington Funds offered by this Prospectus are subject to a number of
important risks, including:
- market risk--market values of securities move up and down, sometimes
rapidly and unpredictably;
- investment strategy risk--as market conditions change, the success of a
Fund's particular investment strategy will vary;
- management risk--the Adviser may not be able to achieve a Fund's desired
investment objective;
- liquidity risk--at any particular time, the Adviser may have difficulty
selling a certain security at its expected price; and
- year 2000 risk--a Fund could be adversely affected if the computer
systems used by Huntington or other service providers do not properly
process and calculate date-related information and data beginning on
January 1, 2000.
Specific risks associated with each Fund are described in the Fund
Summaries below. As with all mutual funds, loss of money is a risk of investing.
Your investment in a Fund is not a bank deposit and it is not insured or
guaranteed by the FDIC or any other government agency.
FUND SUMMARIES
For convenience, we may refer to The Huntington Funds as "the Trust" and to
The Huntington National Bank as "Huntington" or "the Adviser."
MONEY MARKET FUNDS
As with all mutual funds, loss of money is a risk of investing. This is
true even for the Money Market Funds which seek to preserve the value of your
investment at $1.00 per share.
MONEY MARKET FUND
(Investment A Shares and Investment B Shares)
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Money Market Fund by investing in commercial
paper and other short-term money market instruments for the Money Market Fund
which are either rated in the highest rating category by a Nationally Recognized
Statistical Rating Organization or unrated and deemed to be of comparable
quality by the Adviser. In managing the portfolio, the Adviser determines an
appropriate maturity range for the Fund (currently between 25 and 60 days) and
each individual security held and endeavors to diversify the portfolio across
market sectors. In addition, the Adviser analyzes cash flows, maturities,
settlements, tax payments, yields and credit quality and monitors new issue
calendars for potential purchases.
PRINCIPAL RISKS--As a Fund which invests in short-term fixed income
securities, the Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may
1
<PAGE> 51
no longer be able to make principal and interest payments.
For more information about the investments or risks of the Money Market
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
OHIO MUNICIPAL MONEY MARKET FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Ohio Municipal Money Market Fund by investing
substantially all of the Fund's assets in short-term Ohio tax-exempt securities
which are either rated in the highest rating category by a Nationally Recognized
Statistical Rating Organization or unrated and deemed to be of comparable
quality by the Adviser. In managing the portfolio, the Adviser determines an
appropriate maturity range for the Fund (currently between 35 and 80 days) and
each individual security held and endeavors to diversify the portfolio's
holdings within Ohio as much as possible. In addition, the Adviser analyzes cash
flows, maturities, settlements, tax payments, yields and credit quality and
monitors new issue calendars for potential purchases.
"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.
Fundamental Policy: at least 65% of total assets invested in Ohio
tax-exempt securities.
Fundamental Policy: at least 80% of annual interest income exempt from
federal regular income tax. Income which is subject to alternative minimum tax
will not be counted towards satisfying this policy.
PRINCIPAL RISKS--As a non-diversified Fund, the Ohio Municipal Money Market
Fund may invest a greater percentage of its assets in the securities of a single
issuer than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Ohio and therefore more vulnerable to unfavorable
developments in Ohio than funds that invest in obligations of many
states; and
- Ohio risk--the economy of Ohio is largely concentrated in agriculture,
motor vehicles and equipment, steel, rubber products and household
appliances, and therefore tends to be more cyclical than some other
states and the nation as a whole.
As a Fund which invests in short-term fixed income securities, the Ohio
Municipal Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax or Ohio
personal income taxes.
2
<PAGE> 52
For more information about the investments and risks of the Ohio Municipal
Money Market Fund, call (800) 253-0412 for a free copy of the Trust's Statement
of Additional Information.
U.S. TREASURY MONEY MARKET FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The 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.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the U.S. Treasury Money Market Fund by investing
substantially all of the Fund's assets in short-term obligations of the U.S.
government. In managing the portfolio, the Adviser determines an appropriate
maturity range for the Fund (currently between 25 and 60 days) and each
individual security held. In addition, the Adviser analyzes cash flows,
maturities, settlements, tax payments and yields and monitors new issue
calendars for potential purchases.
Fundamental Policy: at least 65% of total assets invested in direct
obligations of the U.S. Treasury and repurchase agreements collateralized by
such obligations.
PRINCIPAL RISKS--As a Fund which invests in U.S. Treasury securities, the
U.S. Treasury Money Market Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction.
For more information about the investments and risks of the U.S. Treasury
Money Market Fund, call (800) 253-0412 for a free copy of the Trust's Statement
of Additional Information.
FLORIDA TAX-FREE MONEY FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The Florida Tax-Free Money Fund seeks to provide the
highest level of interest income exempt from federal income tax, consistent with
liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser strives to maintain a $1.00
net asset value per share for the Florida Tax-Free Money Fund by investing
substantially all of the Fund's assets in short-term Florida tax-exempt
securities which are either rated in the highest rating category by a Nationally
Recognized Statistical Rating Organization or unrated and deemed to be of
comparable quality by the Adviser.
In managing the portfolio, the Adviser determines an appropriate maturity
range for the Fund (currently between 35 and 80 days) and each individual
security held and endeavors to diversify the portfolio's holdings within Florida
as much as possible. In addition, the Adviser analyzes cash flows, maturities,
settlements, tax payments, yields and credit quality and monitors new issue
calendars for potential purchases.
"Florida tax-exempt securities" are debt obligations which (i) are issued
by or on behalf of the state of Florida 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 the value of which is exempt from the Florida intangible personal
property tax.
Fundamental Policy: at least 65% of total assets invested in Florida
tax-exempt securities.
Fundamental Policy: at least 80% of annual interest income exempt from
federal regular income tax. Income which is subject to alternative minimum tax
will not be counted towards satisfying this policy.
3
<PAGE> 53
PRINCIPAL RISKS--As a non-diversified Fund, the Florida Tax-Free Money Fund
may invest a greater percentage of its assets in the securities of a single
issuer than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--the performance is strongly dependent on the economy
of the state of Florida and therefore more vulnerable to unfavorable
developments in Florida than funds that invest in obligations of many
states; and
- Florida risk--the economy of Florida is largely concentrated in
agriculture, tourism and construction and is adversely affected by severe
weather conditions. It is also impacted by changes in the economies of
Central and South America.
As a Fund which invests in short-term fixed income securities, the Florida
Tax-Free Money Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
As part of the Adviser's strategy to take advantage of the exemption from
Florida's intangible tax in any year, the Adviser may engage, on an annual
basis, in significant portfolio restructuring to sell non-exempt assets.
Transaction costs involved in such restructuring may adversely affect the Fund's
performance and possibly offset any gains achieved by investing in the assets
sold.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax.
For more information about the investments and risks of the Florida
Tax-Free Money Fund, call (800) 253-0412 for a free copy of the Trust's
Statement of Additional Information.
EQUITY FUNDS
GROWTH FUND
(Investment A Shares and Investment B Shares)
INVESTMENT OBJECTIVE--The Growth Fund seeks to achieve long-term capital
appreciation primarily through investing in equity securities.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser intends to invest in common
stock and other equity securities of medium or large companies which it believes
offer opportunities for growth. The Adviser frequently invests in established
companies which it believes have temporarily depressed prices.
In selecting investments, the Adviser reviews historical earnings, revenue
and cash flow to identify the best companies in each industry and to evaluate
the growth potential of these companies. On an ongoing basis, the Adviser also
monitors the Fund's existing positions to determine the benefits of retention.
Fundamental Policy: at least 65% of total assets invested in equity
securities.
PRINCIPAL RISKS--As a Fund which invests in equity securities, the Growth
Fund is subject to:
- equity risk--stock values can rise and fall quickly and dramatically in
response to changes in earnings or other conditions affecting the
issuer's profitability. As a result, total returns can
4
<PAGE> 54
fluctuate within a wide range, so an investor could lose money over the
short or long term.
For more information about the investments and risks of the Growth Fund,
call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
INCOME EQUITY FUND
(Investment A Shares and Investment B Shares)
INVESTMENT OBJECTIVE--The Income Equity Fund seeks to achieve high current
income and moderate appreciation of capital primarily through investment in
income-producing equity securities.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser focuses primarily on equity
securities which have a history of increasing or paying high dividends. As an
additional income source, the Adviser also invests in investment grade corporate
debt obligations. At least 65% of the Fund's total assets will be invested in
income-producing equity securities. The Adviser selects securities which it
believes will maintain or increase the Fund's current income while maintaining a
price/earnings ratio below the market.
In evaluating the current yield of a security, the Adviser considers
dividend growth to be most important, followed by capital appreciation. The
Adviser actively monitors market activity which impacts dividend decisions. In
general, the Fund will sell a security when dividends are no longer expected to
increase.
Fundamental Policy: at least 65% of total assets invested in common stock,
securities convertible into common stock and securities deemed by the Adviser to
have common stock characteristics.
PRINCIPAL RISKS--As a Fund which invests in income-producing equity
securities, the Income Equity Fund is subject to:
- equity risk--stock values can rise and fall quickly and dramatically in
response to changes in earnings or other conditions affecting the
issuer's profitability. As a result, total returns can fluctuate within a
wide range, so an investor could lose money over the short or long term;
and
- dividend risk--an issuer's dividend policy may change in response to
strategic changes or other management decisions affecting the need for
available funds.
As a Fund which invests in corporate debt obligations, the Income Equity
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
For more information about the investments and risks of the Income Equity
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
INCOME FUNDS
MORTGAGE SECURITIES FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The Mortgage Securities Fund seeks to achieve current
income.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Mortgage Securities Fund in mortgage-related securities. The
Adviser especially focuses on securities which it expects to be
5
<PAGE> 55
less susceptible to prepayment of principal. The Adviser endeavors to maintain a
dollar-weighted average portfolio life for the Fund of between three and ten
years.
In making its investment decisions, the Adviser considers various economic
factors, Federal Reserve policy, interest rate trends and spreads between
different types of fixed income securities. In managing the portfolio, the
Adviser monitors the Fund's cash flow, maturities and interest payments and
tracks a variety of other portfolio security statistics.
"Mortgage-related securities" are securities, including derivative mortgage
securities such as collateralized mortgage obligations (CMOs), whose income is
generated by payments of principal and interest on pools of mortgage loans.
Fundamental Policy: at least 65% of total assets invested in
mortgage-related securities, including derivative mortgage securities.
Collateralized mortgage obligations (CMOs) issued by private entities will not
be counted towards satisfying this requirement.
PRINCIPAL RISKS--As a Fund which invests in mortgage-related securities,
the Mortgage Securities Fund is subject to:
- prepayment risk--as interest rates fall, mortgage-related securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the
investment;
- reinvestment risk--as prepayment increases as a result of lower interest
rates, the proceeds from maturing mortgage-related securities will be
reinvested at lower interest rates, thus reducing income; and
- extension risk--as interest rates rise, mortgage-related securities tend
to mature later, thus effectively converting shorter-term securities into
more volatile long-term securities. This will also affect the Adviser's
ability to manage the average life of the Fund.
The above risks are more pronounced with respect to derivative mortgage
securities and can result in reduced liquidity. The principal derivative
mortgage securities in which the Mortgage Securities Fund invests are
collateralized mortgage obligations (CMOs).
As a Fund which invests in fixed income securities, the Mortgage Securities
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Mortgage
Securities Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
OHIO TAX-FREE FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The Ohio Tax-Free Fund seeks to provide current
income exempt from federal income tax and Ohio personal income taxes.
6
<PAGE> 56
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Ohio Tax-Free Fund (at least 80% of net assets) in Ohio
tax-exempt securities. The securities selected by the Adviser are: (i) rated in
one of the top four categories by a Nationally Recognized Statistical Rating
Organization; or (ii) not rated, but deemed by the Adviser to be of comparable
quality. In addition, these securities will have remaining maturities of no more
than 15 years and the Fund's anticipated dollar-weighted average maturity will
be between four and ten years. The Adviser also establishes a desired yield
level for new issues relative to U.S. Treasury securities.
In managing the portfolio, the Adviser attempts to diversify the Fund's
holdings within Ohio as much as possible. In selecting securities, the Adviser
monitors economic activity and interest rate trends, reviews financial
information relating to each issuer and looks for attractively priced issues. To
determine the tax implications of each portfolio transaction, the Adviser
evaluates seasonal cash flows from coupon payments, maturities, settlements and
tax payments.
"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.
Fundamental Policy: at least 80% of total assets invested in Ohio
tax-exempt securities.
Fundamental Policy: no investment in securities which generate income
treated as a preference item for federal alternative minimum tax purposes.
PRINCIPAL RISKS--As a non-diversified Fund, the Ohio Tax-Free Fund may
invest a greater percentage of its assets in the securities of a single issuer
than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Ohio and therefore more vulnerable to unfavorable
developments in Ohio than funds that invest in obligations of many
states; and
- Ohio risk--the economy of Ohio is largely concentrated in agriculture,
motor vehicles and equipment, steel, rubber products and household
appliances, and therefore tends to be more cyclical than some other
states and the nation as a whole.
As a Fund which invests in fixed income securities, the Ohio Tax-Free Fund
is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities;
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments; and
- call risk--as interest rates fall, an issuer may choose to call or repay
a security prior to its maturity date, sometimes resulting in a loss on
the investment and/or forcing the Fund to reinvest at lower interest
rates, thus reducing income.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax or Ohio
personal income taxes.
7
<PAGE> 57
For more information about the investments and risks of the Ohio Tax-Free
Fund, call (800) 253-0412 for a free copy of the Trust's Statement of Additional
Information.
MICHIGAN TAX-FREE FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The Michigan Tax-Free Fund seeks to provide investors
with current income exempt from both federal and Michigan personal income taxes.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests substantially all of
the assets of the Michigan Tax-Free Fund in Michigan tax-exempt securities. At
least 80% of the Fund's annual interest income will be exempt from federal
income tax, including the alternative minimum tax. The securities selected by
the Adviser for investment will have remaining maturities of no more than 15
years. The Adviser also establishes a desired yield level for new issues
relative to U.S. Treasury securities.
In managing the portfolio, the Adviser attempts to diversify the Fund's
holdings within Michigan as much as possible. In selecting securities, the
Adviser monitors economic activity and interest rate trends, reviews financial
information relating to each issuer and looks for attractively priced issues. To
determine the tax implications of each portfolio transaction, the Adviser
evaluates seasonal cash flows from coupon payments, maturities, settlements and
tax payments.
"Michigan tax-exempt securities" are debt obligations which (i) are issued
by or on behalf of the state of Michigan 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 Michigan personal income taxes.
Fundamental Policy: at least 65% of total assets invested in Michigan
tax-exempt securities.
Fundamental Policy: no more than 20% of net assets invested in securities
which generate income treated as a preference item for federal alternative
minimum tax purposes.
PRINCIPAL RISKS--As a non-diversified Fund, the Michigan Tax-Free Fund may
invest a greater percentage of its assets in the securities of a single issuer
than do other mutual funds, and is therefore subject to:
- diversification risk--Fund performance can be significantly affected by
the performance of one or a small number of issuers;
- concentration risk--performance is strongly dependent on the economy of
the state of Michigan and therefore more vulnerable to unfavorable
developments in Michigan than funds that invest in obligations of many
states; and
- Michigan risk--the economy of Michigan is principally dependent upon
three sectors: manufacturing (particularly durable goods, automotive
products and office equipment), tourism and agriculture. It, therefore,
tends to be more cyclical than some other states and the nation as a
whole.
As a Fund which invests in fixed income securities, the Michigan Tax-Free
Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities;
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments; and
8
<PAGE> 58
- call risk--as interest rates fall, an issuer may choose to call or repay
a security prior to its maturity date, sometimes resulting in a loss on
the investment and/or forcing the Fund to reinvest at lower interest
rates, thus reducing income.
For temporary defensive or liquidity purposes, the Fund may invest in
securities the interest on which is subject to federal income tax or Michigan
personal income taxes.
For more information about the investments and risks of the Michigan
Tax-Free Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
FIXED INCOME SECURITIES FUND
(Investment A Shares and Investment B Shares)
INVESTMENT OBJECTIVE--The Fixed Income Securities Fund seeks to achieve
high current income through investment in fixed income securities where the
average maturity of the Fund will not exceed 10 years.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser principally invests in a
combination of corporate debt and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The selection of corporate debt
obligations is limited to those: (i) rated in one of the top four categories by
a Nationally Recognized Statistical Rating Organization or (ii) not rated, but
deemed by the Adviser to be of comparable quality. Within these parameters, the
Adviser focuses on securities which offer the highest level of income. For all
types of investments, the Adviser considers various economic factors, Federal
Reserve policy, interest rate trends, spreads between different types of fixed
income securities and the credit quality of existing holdings.
In managing the portfolio, the Adviser monitors the Fund's cash flow,
maturities and interest payments and tracks a variety of other portfolio
security statistics. The Adviser also follows closely new issue and secondary
activity in the corporate debt market.
Fundamental Policy: at least 65% of total assets invested in fixed income
securities.
PRINCIPAL RISKS--As a Fund which invests in fixed income securities, the
Fixed Income Securities Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities; and
- credit (or default) risk--due to economic or governmental factors, an
issuer may no longer be able to make principal and interest payments.
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Fixed Income
Securities Fund, call (800) 253-0412 for a free copy of the Trust's Statement of
Additional Information.
INTERMEDIATE GOVERNMENT INCOME FUND
(Investment A Shares only)
INVESTMENT OBJECTIVE--The Intermediate Government Income Fund seeks to
provide investors with a high level of current income.
PRINCIPAL INVESTMENT STRATEGIES--The Adviser invests primarily in
obligations issued or guaranteed by the U.S. Government, its
9
<PAGE> 59
agencies or instrumentalities and mortgage-related securities with
dollar-weighted average maturities of not less than three nor more than ten
years. Within this range, the Adviser focuses on securities which offer the
highest level of income. In general, in order to reduce volatility during
periods of interest rate fluctuation, the Adviser invests in securities with a
wide range of intermediate maturities. For all types of investments, the Adviser
considers various economic factors, Federal Reserve policy, interest rate trends
and spreads between different types of fixed income securities.
In managing the portfolio, the Adviser monitors the Fund's cash flow,
maturities and interest payments and tracks a variety of other portfolio
security statistics.
"Mortgage-related securities" are securities, including derivative mortgage
securities such as collateralized mortgage obligations (CMOs), whose income is
generated by payments of principal and interest on pools of mortgage loans.
Fundamental Policy: at least 65% of total assets in the above securities.
PRINCIPAL RISKS--As a Fund which invests in fixed income securities, the
Intermediate Government Income Fund is subject to:
- interest rate risk--as interest rates change, the value of these
securities moves in the opposite direction. This risk is more significant
for securities with longer maturities.
As a Fund which invests in mortgage-related securities, the Intermediate
Government Income Fund is subject to:
- prepayment risk--as interest rates fall, mortgage-related securities tend
to mature earlier than expected as a result of an increase in mortgage
refinancing or prepayment, sometimes resulting in a loss on the
investment;
- reinvestment risk--as prepayment increases as a result of lower interest
rates, the proceeds from maturing mortgage-related securities will be
reinvested at lower interest rates, thus reducing income; and
- extension risk--as interest rates rise, mortgage-related securities tend
to mature later, thus effectively converting shorter-term securities into
more volatile long-term securities. This will also affect the Adviser's
ability to manage the average life of the Fund.
The above risks are more pronounced with respect to derivative mortgage
securities and can result in reduced liquidity. The principal derivative
mortgage securities in which the Intermediate Government Income Fund invests are
collateralized mortgage obligations (CMOs).
From time to time, the Adviser may, as part of its investment strategy,
engage in active and frequent trading. Higher portfolio turnover generally
results in increased transaction costs and may result in the acceleration of
capital gains, each of which may adversely affect the Fund's performance. In
addition, short-term capital gains are taxed as ordinary income.
For more information about the investments and risks of the Intermediate
Government Income Fund, call (800) 253-0412 for a free copy of the Trust's
Statement of Additional Information.
10
<PAGE> 60
[This page intentionally left blank.]
11
<PAGE> 61
PRINCIPAL INVESTMENTS
The table below summarizes the principal investments for each of the Funds
offered by this Prospectus. Each of these Funds may also invest up to 100% of
its assets in cash, money market instruments, repurchase agreements and other
short-term securities for temporary defensive or liquidity purposes. In these
situations, a Fund may not achieve its investment objective.
A detailed description of each of the principal investments, as well as
other permissible investments and strategies, is contained in the Statement of
Additional Information.
<TABLE>
<CAPTION>
OHIO U.S.
MUNICIPAL TREASURY FLORIDA
MONEY MONEY MONEY TAX-FREE INCOME MORTGAGE OHIO MICHIGAN
MARKET MARKET MARKET MONEY GROWTH EQUITY SECURITIES TAX-FREE TAX-FREE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--secured and
unsecured short-term promissory
notes issued by corporations and
other entities. Maturities are
generally six months or less. X X X X
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--
agreements to purchase a security
and return the security to the
seller at an agreed upon price and
date. This is treated as a loan. X X X X
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCK--shares of ownership
in a company. X X
- --------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK--shares of
ownership in a company with a
preferential right to receive
dividends. X X
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT--fixed income
securities, such as bonds, issued
by corporations. X
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--
securities issued or guaranteed by
the U.S. government, its agencies
or instrumentalities. X X X
- --------------------------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES--
securities, including derivatives
such as CMOs, whose income is
generated by payments of principal
and interest on pools of mortgage
loans. X
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FIXED INTERM
INCOME GOVT
SECURITIES INCOME
FUND FUND
<S> <C> <C>
COMMERCIAL PAPER--secured and
unsecured short-term promissory
notes issued by corporations and
other entities. Maturities are
generally six months or less. X
- --------------------------------------------------------------
REPURCHASE AGREEMENTS--
agreements to purchase a security
and return the security to the
seller at an agreed upon price and
date. This is treated as a loan. X
- ----------------------------------------------------------------------
COMMON STOCK--shares of ownership
in a company.
- ------------------------------------------------------------------------------
PREFERRED STOCK--shares of
ownership in a company with a
preferential right to receive
dividends.
- --------------------------------------------------------------------------------------
CORPORATE DEBT--fixed income
securities, such as bonds, issued
by corporations. X
- ----------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--
securities issued or guaranteed by
the U.S. government, its agencies
or instrumentalities. X X
- ------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES--
securities, including derivatives
such as CMOs, whose income is
generated by payments of principal
and interest on pools of mortgage
loans. X
- --------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 62
<TABLE>
<CAPTION>
OHIO U.S.
MUNICIPAL TREASURY FLORIDA
MONEY MONEY MONEY TAX-FREE INCOME MORTGAGE OHIO MICHIGAN
MARKET MARKET MARKET MONEY GROWTH EQUITY SECURITIES TAX-FREE TAX-FREE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OHIO TAX-EXEMPT SECURITIES--tax-
exempt debt obligations issued by
or on behalf of the state of Ohio
or its respective authorities,
agencies, instrumentalities and
political subdivisions. X X
- --------------------------------------------------------------------------------------------------------------------------
MICHIGAN TAX-EXEMPT SECURITIES--
tax-exempt debt obligations issued
by or on behalf of the state of
Michigan or its respective
authorities, agencies,
instrumentalities and political
subdivisions. X
- --------------------------------------------------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT SECURITIES--tax-
exempt debt obligations issued by
or on behalf of the state of
Florida or its respective
authorities, agencies,
instrumentalities and political
subdivisions. X
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FIXED INTERM
INCOME GOVT
SECURITIES INCOME
FUND FUND
<S> <C> <C>
OHIO TAX-EXEMPT SECURITIES--tax-
exempt debt obligations issued by
or on behalf of the state of Ohio
or its respective authorities,
agencies, instrumentalities and
political subdivisions.
- ----------------------------------------------------------------------------------------------------------------------
MICHIGAN TAX-EXEMPT SECURITIES--
tax-exempt debt obligations issued
by or on behalf of the state of
Michigan or its respective
authorities, agencies,
instrumentalities and political
subdivisions.
- --------------------------------------------------------------------------------------------------------------------------
FLORIDA TAX-EXEMPT SECURITIES--tax-
exempt debt obligations issued by
or on behalf of the state of
Florida or its respective
authorities, agencies,
instrumentalities and political
subdivisions.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 63
MORE FUND INFORMATION
In the Fund Summaries above, we discuss the investment objectives for each
of the Funds offered by this Prospectus. Each Fund's investment objective is
fundamental and may be changed only by a vote of a majority of that Fund's
outstanding shares.
We also summarize the principal investment strategies used under normal
market conditions. The Adviser may employ other strategies and investment
techniques on a less frequent basis. Unless otherwise noted, the investment
policies of these Funds are not fundamental and the Trust's Board of Trustees
may change them without shareholder approval. Please note that when a limitation
on an investment or strategy is expressed in terms of a percentage of assets, we
apply the restriction at the time of the investment.
Also as part of each Fund summary, we discuss the principal investment
risks(the risks associated with the Fund's investment objective and principal
investment strategies) of each of the Funds offered by this Prospectus. There
are other risks applicable to investing in each of the Funds.
Finally, we have provided a table illustrating the principal investments of
each Fund offered by this Prospectus.
By calling (800) 253-0412, you can obtain a copy of the Trust's Statement
of Additional Information which includes more detailed information about all of
the types of investments and risks associated with each Fund.
14
<PAGE> 64
RISK/RETURN INFORMATION
The bar charts and tables below provide some indication of the risks and
volatility of investments in the Funds offered by this Prospectus. The charts
illustrate changes in each Fund's Investment A Shares performance from year to
year and the tables show how each Fund's average annual returns compare with
those of one or more broad measures of market performance. Total returns shown
assume reinvestment of dividends and distributions. The way a Fund has performed
in the past is not necessarily an indication of the way it will perform in the
future.
[MONEY MARKET FUND BAR GRAPH]
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------
<S> <C>
1992 3.34
1993 2.63
1994 3.76
1995 5.48
1996 4.90
1997 5.07
1998 5.03
1999 4.67
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (6/30/93)
1.38% 0.63%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
A SHARES B SHARES*
<C> <S> <S>
1 Year 4.67% 3.89%
5 Years 5.03% 4.25%
Since Inception
(5/1/91) 4.44% 3.65%
</TABLE>
* Prior to 5/1/00 (the
inception date for
Investment B Shares),
performance for Investment
B Shares is based on the
performance of Investment A
Shares, adjusted for the
Investment B Shares 12b-1
fees.
[OHIO MUNICIPAL MONEY MARKET FUND BAR GRAPH]
<TABLE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND
--------------------------------
<S> <C>
1992 2.51
1993 1.98
1994 2.31
1995 3.47
1996 3.04
1997 3.17
1998 2.97
1999 2.69
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (3/31/94)
0.91% 0.44%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT
A SHARES
<C> <S>
1 Year 2.69%
5 Years 3.07%
Since Inception
(5/1/91) 2.85%
</TABLE>
15
<PAGE> 65
U.S. TREASURY MONEY MARKET FUND
[U.S. TREASURY MONEY BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
1994 3.68
1995 5.43
1996 4.87
1997 4.95
1998 4.85
1999 4.42
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (3/31/94)
1.38% 0.68%
</TABLE>
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT
A SHARES
<C> <S>
1 Year 4.42%
5 Years 4.90%
Since Inception
(10/19/93) 4.63%
</TABLE>
FLORIDA TAX-FREE MONEY FUND
No graph is provided for the Florida
Tax-Free Money Fund since it has not yet
had a full calendar year of operations.
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT
A SHARES
<C> <S>
Since Inception
(10/19/93) 2.54%
</TABLE>
16
<PAGE> 66
GROWTH FUND
[GROWTH FUND BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
1992 7.57
1993 3.25
1994 2.08
1995 30.40
1996 16.43
1997 35.04
1998 18.25
1999 13.25
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/97) Worst Quarter (9/30/98)
19.57% -10.99%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
A SHARES B SHARES S&P 500
<S> <C> <C> <C>
1 Year 8.73% 7.41% 21.04%
5 Years 21.39% 21.24% 28.55%
Since Inception
(5/1/91) 14.66% 14.27% 19.42%
</TABLE>
* Prior to 5/1/00 (the
inception date for
Investment B Shares),
performance for Investment B
Shares is based on the
performance of Investment A
Shares, adjusted for the
Investment B Shares 12b-1
fees.
INCOME EQUITY FUND
[INCOME EQUITY FUND BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
1990 -9.09
1991 22.93
1992 7.22
1993 10.57
1994 -2.07
1995 28.93
1996 16.56
1997 17.28
1998 17.56
1999 -7.00
</TABLE>
<TABLE>
<S> <C>
Best Quarter (11/30/98) Worst Quarter (10/31/90)
14.46% -12.26%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
A SHARES B SHARES S&P 500
<C> <S> <S> <S>
1 Year -12.12% -12.24% 21.04%
5 Years 14.30% 14.41% 28.55%
10 Years 9.73% 9.46% 18.20%
Since Inception
(7/3/89)** 9.59% 9.29% 25.50%
</TABLE>
* Prior to 5/1/00 (the
inception date for
Investment B Shares),
performance for Investment B
Shares is based on the
performance of Investment A
Shares (and Trust Shares),
adjusted for the Investment
B Shares 12b-1 fees.
** Prior to 5/14/97 (the
inception date for
Investment A Shares),
performance for Investment A
Shares is based on the
performance of the Income
Equity Fund's Trust Shares,
adjusted for the Investment
A Shares sales charge and
12b-1 fees.
17
<PAGE> 67
MORTGAGE SECURITIES FUND
[MORTGAGE SECURITIES FUND BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
1993 12.61
1994 -24.72
1995 31.13
1996 6.25
1997 8.54
1998 6.09
1999 0.88
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (6/30/94)
10.89% -13.65%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
MORTGAGE-
INVESTMENT BACKED
A SHARES INDEX
<C> <S> <S>
1 Year -1.15% 1.85%
5 Years 9.66% 7.98%
Since Inception
(6/2/92) 5.19% 6.47%
</TABLE>
OHIO TAX-FREE FUND
[OHIO TAX-FREE FUND]
<TABLE>
<CAPTION>
<S> <C>
1992 5.76
1993 7.78
1994 -2.83
1995 11.10
1996 3.20
1997 5.88
1998 4.90
1999 -1.17
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/95) Worst Quarter (3/31/94)
4.21% -2.72%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
Average Annual Total Returns
(on a calendar year basis)
<TABLE>
<CAPTION>
LEHMAN
5-YEAR
INVESTMENT GEN. OBS.
A SHARES INDEX
<C> <S> <S>
1 Year -3.17% 0.72%
5 Years 4.28% 5.80%
Since Inception
(5/1/91) 4.35% 5.87%
</TABLE>
18
<PAGE> 68
MICHIGAN TAX-FREE FUND*
[MICHIGAN TAX-FREE FUND BAR GRAPH]
<TABLE>
<CAPTION>
MICHIGAN TAX-FREE FUND
----------------------
<S> <C>
1992 6.97
1993 9.52
1994 -1.70
1995 12.27
1996 3.66
1997 6.92
1998 4.91
1999 -0.77
</TABLE>
<TABLE>
<S> <C>
Best Quarter (3/31/95) Worst Quarter (3/31/94)
4.69% -3.21%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Lehman
Investment 5-Year
A Shares Muni Index
---------- ----------
<S> <C>
1 Year -2.72% 0.74%
5 Years 4.88% 5.71%
Since inception
(12/2/91) 4.94% 5.38%
</TABLE>
* Returns for 1992-1998
include the performance of
the predecessor FMB Michigan
Tax-Free Bond Fund.
FIXED INCOME SECURITIES FUND
[FIXED INCOME SECURITIES FUND BAR GRAPH]
<TABLE>
<CAPTION>
FIXED INCOME SECURITIES FUND
----------------------------
<S> <C>
1992 6.25
1993 10.07
1994 -4.88
1995 17.63
1996 2.32
1997 8.54
1998 8.93
1999 -4.07
</TABLE>
<TABLE>
<S> <C>
Best Quarter (6/30/95) Worst Quarter (3/31/94)
6.17% -3.58%
</TABLE>
The reported returns in the bar chart do
not include the effect of sales loads. If the
effect of sales loads were reflected, returns
would be less than those shown.
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Lehman
Investment Investment Govt/Corp
A Shares B Shares Bond Index
---------- ---------- ----------
<S> <C> <C>
1 Year -5.96% -9.45% -2.15%
5 Years 6.00% 5.15% 7.60%
Since inception
(12/2/91) 6.10% 5.39% 7.43%
</TABLE>
* Prior to 5/1/00 (the
inception date for
Investment B Shares),
performance for Investment B
Shares is based on the
performance of Investment A
Shares (and Trust Shares),
adjusted for the Investment
B Shares 12b-1 fees.
19
<PAGE> 69
INTERMEDIATE GOVERNMENT INCOME FUND*
<TABLE>
<CAPTION>
[INTERMEDIATE GOVERNMENT INCOME FUND BAR GRAPH]
<S> <C>
1992 6.4
1993 8.71
1994 -2.3
1995 12.94
1996 3.64
1997 7.25
1998 7.72
1999 -1.33
</TABLE>
<TABLE>
<S> <C>
Best Quarter (9/30/98) Worst Quarter (3/31/94)
4.46% -1.77%
</TABLE>
The reported returns do not include the
effect of sales loads. If the effect of sales
loads were reflected, returns would be less
than those shown.
AVERAGE ANNUAL TOTAL RETURNS
(on a calendar year basis)
<TABLE>
<CAPTION>
Lehman
Investment Govt/Corp
A Shares Bond Index
---------- ----------
<S> <C>
1 Year -3.28% 0.39%
5 Years 5.50% 7.01%
Since inception
(12/2/91) 5.20% 6.14%
</TABLE>
* Returns for 1992-1998
include the performance of
the predecessor FMB
Intermediate Government
Income Fund.
20
<PAGE> 70
FEES AND EXPENSES (INVESTMENT A SHARES)
This table describes the fees and expenses you may pay if you buy and hold
Investment A Shares of the Funds offered by this Prospectus.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
FIXED INTERMEDIATE
INCOME MORTGAGE OHIO MICHIGAN INCOME GOVERNMENT
GROWTH EQUITY SECURITIES TAX-FREE TAX-FREE SECURITIES INCOME
FUND FUND FUND FUND FUND FUND FUND
------ ------ ---------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of
offering price)................... 5.75% 5.75% 4.75% 4.75% 4.75% 4.75% 4.75%
Redemption Fee (as a percentage of
amount redeemed)*................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
</TABLE>
- ------------
None of the Money Market Funds imposes any sales charge (load) on purchases of
Investment A Shares.
* Sales within one year of the date of purchase of Investment A Shares purchased
without paying a sales charge as a result of a quantity discount will be
subject to a redemption fee of 1.00%.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT (12B-1) OTHER FUND OPERATING
FEES(1) FEES(1) EXPENSES(1) EXPENSES
---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Money Market Fund............................. 0.27% 0.25% 0.22% 0.74%
Ohio Municipal Money Market Fund.............. 0.30% 0.25% 0.23% 0.78%
U.S. Treasury Money Market Fund............... 0.20% 0.25% 0.20% 0.65%
Florida Tax-Free Money Fund................... 0.30% 0.25% 0.30% 0.85%
Growth Fund................................... 0.60% 0.25% 0.22% 1.07%
Income Equity Fund............................ 0.60% 0.25% 0.22% 1.07%
Mortgage Securities Fund...................... 0.50% 0.25% 0.45% 1.20%
Ohio Tax-Free Fund............................ 0.50% 0.25% 0.32% 1.07%
Michigan Tax-Free Fund........................ 0.50% 0.25% 0.30% 1.05%
Fixed Income Securities Fund.................. 0.50% 0.25% 0.24% 0.99%
Intermediate Government Income Fund........... 0.50% 0.25% 0.29% 1.02%
</TABLE>
- ------------
(1) Management fees, distribution (12b-1) fees and other expenses have been
restated to reflect current fees.
21
<PAGE> 71
INVESTMENT A SHARES EXAMPLE
This Example is intended to help you compare the cost of investing in
Investment A Shares of a Fund offered by this Prospectus with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Investment A Shares of a
Fund for the time periods indicated and then redeem all your shares at the end
of those periods. The Example also assumes that your investment has a 5% return
each year and that a Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund....................................... $ 76 $237 $ 411 $ 918
Ohio Municipal Money Market Fund........................ $ 80 $249 $ 433 $ 966
U.S. Treasury Money Market Fund......................... $ 66 $208 $ 362 $ 810
Florida Tax-Free Money Fund............................. $ 87 $271 $ 471 $1,049
Growth Fund............................................. $678 $896 $1,131 $1,806
Income Equity Fund...................................... $678 $896 $1,131 $1,806
Mortgage Securities Fund................................ $591 $838 $1,103 $1,860
Ohio Tax-Free Fund...................................... $579 $799 $1,037 $1,718
Michigan Tax-Free Fund.................................. $577 $793 $1,027 $1,697
Fixed Income Securities Fund............................ $571 $775 $ 996 $1,630
Intermediate Government Income Fund..................... $574 $784 $1,011 $1,664
</TABLE>
Because of the annual distribution (12b-1) fees, 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.
22
<PAGE> 72
FEES AND EXPENSES (INVESTMENT B SHARES)
This table describes the fees and expenses you may pay if you buy and hold
Investment B Shares of the Funds offered by this Prospectus.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
FIXED
MONEY INCOME INCOME
MARKET GROWTH EQUITY SECURITIES
FUND FUND FUND FUND
------ ------ ------ ----------
<S> <C> <C> <C> <C>
Maximum Deferred Sales Charge (Load) (as a percentage
of original purchase price or redemption proceeds, as
applicable).......................................... 5.00% 5.00% 5.00% 5.00%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT (12B-1) OTHER FUND OPERATING
FEES FEES EXPENSES(1) EXPENSES
---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Money Market Fund............................. 0.27% 1.00% 0.22% 1.49%
Growth Fund................................... 0.60% 1.00% 0.22% 1.82%
Income Equity Fund............................ 0.60% 1.00% 0.22% 1.82%
Fixed Income Securities Fund.................. 0.50% 1.00% 0.24% 1.84%
</TABLE>
- ------------
(1) Other expenses are based on estimates for the current fiscal year.
INVESTMENT B SHARES EXAMPLE
This Example is intended to help you compare the cost of investing in
Investment B Shares of a Fund offered by this Prospectus with the cost of
investing in other mutual funds.
The Example assumes that you invest $10,000 in Investment B Shares of a
Fund for the time periods indicated and then either redeem all your shares or
continue to hold all your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year and that a Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 1 YEAR 3 YEARS 3 YEARS 5 YEARS 5 YEARS 10 YEARS 10 YEARS
(REDEEM (HOLD (REDEEM (HOLD (REDEEM (HOLD (REDEEM (HOLD
SHARES) SHARES) SHARES) SHARES) SHARES) SHARES) SHARES) SHARES)
------- ------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund........ $652 $152 $771 $471 $1,013 $813 $1,575 $1,575
Growth Fund.............. $685 $185 $873 $573 $1,185 $985 $1,938 $1,938
Income Equity Fund....... $685 $185 $873 $573 $1,185 $985 $1,938 $1,938
Fixed Income Securities
Fund................... $687 $187 $879 $579 $1,195 $995 $1,934 $1,934
</TABLE>
Because of the annual distribution (12b-1) fees, 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.
23
<PAGE> 73
FINANCIAL HIGHLIGHTS--MONEY MARKET FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997, 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET ASSET SHAREHOLDERS NET ASSET
VALUE, NET FROM NET VALUE,
YEAR ENDED BEGINNING INVESTMENT INVESTMENT END OF TOTAL
DECEMBER 31, OF PERIOD INCOME INCOME PERIOD RETURN EXPENSES
------------ --------- ---------- ---------------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT A SHARES*
MONEY MARKET
1999 $1.00 $0.05 $(0.05) $1.00 4.67% 0.60%
1998 1.00 0.05 (0.05) 1.00 5.03% 0.60%
1997 1.00 0.05 (0.05) 1.00 5.07% 0.61%
1996 1.00 0.05 (0.05) 1.00 4.90% 0.63%
1995 1.00 0.05 (0.05) 1.00 5.48% 0.63%
OHIO MUNICIPAL MONEY MARKET
1999 $1.00 $0.03 $(0.03) $1.00 2.69% 0.59%
1998 1.00 0.03 (0.03) 1.00 2.97% 0.57%
1997 1.00 0.03 (0.03) 1.00 3.17% 0.55%
1996 1.00 0.03 (0.03) 1.00 3.04% 0.52%
1995 1.00 0.03 (0.03) 1.00 3.47% 0.52%
U.S. TREASURY MONEY MARKET
1999 $1.00 $0.04 $(0.04) $1.00 4.42% 0.49%
1998 1.00 0.05 (0.05) 1.00 4.85% 0.50%
1997 1.00 0.05 (0.05) 1.00 4.95% 0.52%
1996 1.00 0.05 (0.05) 1.00 4.87% 0.52%
1995 1.00 0.05 (0.05) 1.00 5.43% 0.53%
FLORIDA TAX-FREE MONEY
1999 $1.00 $0.03 $(0.03) $1.00 2.74% 0.57%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* No information is provided for Investment B Shares, as that share class had
not commenced operation as of December 31, 1999.
(a) This voluntary expense decrease, as a result of waivers by the Adviser
and/or Distributor, is reflected in both the expense and net investment
income ratios shown above.
24
<PAGE> 74
<TABLE>
<CAPTION>
NET NET ASSETS,
INVESTMENT EXPENSE WAIVER/ END OF PERIOD
INCOME REIMBURSEMENT(a) (000 OMITTED)
- ---------- ---------------- -------------
<S> <C> <C>
4.57% 0.15% $336,085
4.89% 0.15% 272,374
4.96% 0.15% 140,385
4.80% -- 97,557
5.30% 0.03% 91,288
2.64% 0.20% $121,623
2.93% 0.20% 133,295
3.13% 0.22% 82,897
3.00% 0.12% 74,102
3.42% 0.20% 55,469
4.34% 0.15% $ 40,788
4.74% 0.15% 54,522
4.85% 0.15% 57,758
4.77% 0.15% 47,884
5.28% 0.18% 38,973
2.70% 0.43% $ 19,567
- ---------------------------------------------
</TABLE>
25
<PAGE> 75
FINANCIAL HIGHLIGHTS--EQUITY FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997, 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS
NET ASSET AND SHAREHOLDERS FROM NET DISTRIBUTIONS
VALUE, NET UNREALIZED TOTAL FROM FROM NET REALIZED GAIN IN EXCESS OF
YEAR ENDED BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT NET INVESTMENT
DECEMBER 31, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS INCOME
------------ --------- ---------- -------------- ---------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT A SHARES*
GROWTH
1999 $49.76 $0.18 $ 6.12 $ 6.30 $(0.17) $(6.42) --
1998 43.46 0.19 7.67 7.86 (0.17) (1.21) $(0.18)
1997 33.96 0.19 11.63 11.82 (0.20) (2.12) --
1996 30.81 0.31 4.73 5.04 (0.33) (1.56) --
1995 26.31 0.35 7.61 7.96 (0.35) (3.11) --
INCOME EQUITY
1999 $40.86 $1.03 $(3.85) $(2.82) $(1.03) $(0.27) $(0.02)
1998 36.29 0.98 5.29 6.27 (0.99) (0.71) --
1997** 31.20 0.65 5.72 6.37 (0.63) (0.65) --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* No information is provided for Investment B Shares, as that share class had
not commenced operation as of December 31, 1999.
** Reflects operations for the period from May 1, 1997 (date of initial public
investment) to December 31, 1997.
+ Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Not annualized.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease, as a result of a waiver by the Adviser, is
reflected in both the expense and net investment income ratios shown above.
26
<PAGE> 76
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURN+ EXPENSES INCOME REIMBURSEMENT(c) (000 OMITTED) RATE
- ------------- --------- ------- -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(6.59) $49.47 13.25% 1.07% 0.33% -- $17,290 10%
(1.56) 49.76 18.25% 1.04% 0.37% -- 16,501 11%
(2.32) 43.46 35.04% 1.05% 0.48% -- 5,485 12%
(1.89) 33.96 16.43% 1.08% 0.93% -- 4,285 21%
(3.46) 30.81 30.40% 1.11% 1.08% 0.05% 3,777 37%
$(1.32) $36.72 (7.00)% 1.07% 2.68% -- $ 1,667 20%
(1.70) 40.86 17.56% 1.06% 2.58% -- 1,885 13%
(1.28) 36.29 16.09%(a) 1.08%(b) 2.76%(b) -- 279 24%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 77
FINANCIAL HIGHLIGHTS--INCOME FUNDS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1997, 1998 and 1999 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995
and 1996 were audited by the Trust's former auditors. KPMG LLP's report is
included in the Trust's 1999 Annual Report to Shareholders and is incorporated
by reference into (considered a legal part of) the Statement of Additional
Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS DISTRIBUTIONS
NET ASSET AND SHAREHOLDERS FROM NET IN EXCESS
VALUE, NET 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+
------------ --------- ---------- -------------- ---------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT A SHARES*
OHIO TAX-FREE
1999 $21.82 $0.87 $(1.12) $(0.25) $(0.89) $(0.01) --
1998 21.73 0.93 0.11 1.04 (0.93) (0.02) --
1997 21.48 0.98 0.25 1.23 (0.97) (0.01) --
1996 21.77 0.96 (0.29) 0.67 (0.96) -- --
1995 20.50 0.96 1.27 2.23 (0.96) -- --
FIXED INCOME SECURITIES
1999 $21.78 $1.08 $(1.95) $(0.87) $(1.17) -- --
1998 21.41 1.20 0.66 1.86 (1.21) $(0.28) --
1997 20.95 1.25 0.47 1.72 (1.26) -- --
1996 21.78 1.29 (0.83) 0.46 (1.29) -- --
1995 19.70 1.29 2.09 3.38 (1.30) -- --
MORTGAGE SECURITIES
1999(b) $ 8.27 $0.45 $(0.38) $ 0.07 $(0.45) -- --
1998(b) 8.26 0.48 0.01 0.49 (0.48) -- --
1997(b) 8.08 0.50 0.17 0.67 (0.49) -- --
1996(b) 8.12 0.53 (0.04) 0.49 (0.53) -- --
1995(b) 6.70 0.55 1.46 2.01 (0.55) -- $(0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* No information is provided for Investment B Shares, as that share class had
not commenced operation as of December 31, 1999.
+ 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) This voluntary expense decrease, as a result of waivers by the Adviser
and/or Distributor, is reflected in both the expense and net investment
income ratios shown above.
(b) 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.
28
<PAGE> 78
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURNS++ EXPENSES INCOME REIMBURSEMENT(a) (000 OMITTED) RATE
- ------------- --------- --------- -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.90) $20.67 (1.17)% 1.07% 4.44% -- $1,310 11%
(0.95) 21.82 4.90% 0.98% 4.25% -- 1,519 9%
(0.98) 21.73 5.88% 0.97% 4.47% -- 1,468 14%
(0.96) 21.48 3.20% 1.01% 3.24% -- 1,900 6%
(0.96) 21.77 11.10% 1.03% 4.49% 0.08% 2,163 13%
$(1.17) $19.74 (4.07)% 1.06% 5.65% -- $1,293 44%
(1.49) 21.78 8.93% 0.95% 5.53% -- 1,586 47%
(1.26) 21.41 8.54% 0.95% 6.01% -- 1,615 116%
(1.29) 20.95 2.32% 0.99% 6.12% -- 1,851 16%
(1.30) 21.78 17.63% 1.02% 6.17% 0.05% 2,176 20%
$(0.45) $ 7.89 0.88% 1.45% 5.54% 0.45% $1,025 20%
(0.48) 8.27 6.09% 0.88% 5.84% 0.45% 1,068 17%
(0.49) 8.26 8.54% 0.91% 6.16% 0.45% 1,082 63%
(0.53) 8.08 6.25% 0.92% 6.57% 0.53% 1,666 90%
(0.59) 8.12 31.13% 0.76% 7.40% 0.73% 2,008 194%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 79
FINANCIAL HIGHLIGHTS--INCOME FUNDS (CONT'D)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights for the periods or years ended December
31, 1999, the seven-month period ended December 31, 1998 and the six-month
period ended May 31, 1998 were audited by the Trust's independent auditors, KPMG
LLP. The financial highlights for the periods or years ended December 31, 1995,
1996 and 1997 have been derived from the financial statements for the Consumer
Class of shares of the FMB Michigan Tax-Free Bond Fund and the FMB Intermediate
Government Income Fund (the "FMB Funds"), the funds which were reorganized to
create the Michigan Tax-Free Fund and the Intermediate Government Income Fund,
respectively on April 6, 1998, and were audited by the FMB Funds' auditors. KPMG
LLP's report is included in the Trust's 1999 Annual Report to Shareholders and
is incorporated by reference into (considered a legal part of) the Statement of
Additional Information.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET REALIZED DISTRIBUTIONS TO SHAREHOLDERS
NET ASSET AND SHAREHOLDERS FROM NET
VALUE, NET UNREALIZED TOTAL FROM FROM NET REALIZED GAIN
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT ON INVESTMENT
PERIOD ENDED,(a) OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME TRANSACTIONS
---------------- --------- ---------- -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT A SHARES*
MICHIGAN TAX-FREE
1999 $10.99 $0.46 $(0.55) $(0.09) $(0.46) --
1998(c) 10.97 0.28 0.06 0.34 (0.30) $(0.02)
1998(d) 10.89 0.24 0.06 0.30 (0.22) --
1997(e) 10.79 0.47 0.10 0.57 (0.47) --
1996(e) 10.79 0.48 -- 0.48 (0.48) --
1995(e) 9.97 0.49 0.82 1.31 (0.49) --
INTERMEDIATE GOVERNMENT INCOME
1999 $10.42 $0.54 $(0.68) $(0.14) $(0.52) --
1998(c) 10.24 0.31 0.20 0.51 (0.33) --
1998(d) 10.16 0.28 0.05 0.33 (0.25) --
1997(e) 10.13 0.57 0.02 0.59 (0.56) --
1996(e) 10.24 0.57 (0.10) 0.47 (0.58) --
1995(e) 9.66 0.61 0.58 1.19 (0.61) --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* No information is provided for Investment B Shares, as that share class had
not commenced operation as of December 31, 1999.
+ Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) The fiscal year end of Huntington Michigan Tax-Free Fund and Huntington
Intermediate Government Income Fund was changed from November 30 to May 31,
and subsequently to December 31 to coincide with the other Huntington Funds.
(b) This voluntary expense decrease, as a result of waivers by the Adviser
and/or Distributor, is reflected in both the expense and net investment
income ratios shown above.
(c) Seven months ended December 31.
(d) Six months ended May 31.
(e) Year ended November 30.
(f) Expense ratios reflect operating expenses in effect during the period prior
to and subsequent to the reorganization with the FMB Funds.
(g) Computed on an annualized basis.
(h) Not annualized.
30
<PAGE> 80
<TABLE>
<CAPTION>
NET ASSET
VALUE, NET NET ASSETS, PORTFOLIO
TOTAL END OF TOTAL INVESTMENT EXPENSE WAIVER/ END OF PERIOD TURNOVER
DISTRIBUTIONS PERIOD RETURNS+ EXPENSES INCOME REIMBURSEMENT(b) (000 OMITTED) RATE
- ------------- --------- -------- -------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.46) $10.44 (0.77)% 0.98% 4.33% 0.07% $7,183 6%
(0.32) 10.99 3.14%(h) 0.92%(g) 4.32%(g) 0.07%(g) 8,764 7%(h)
(0.22) 10.97 2.75%(h) 1.00%(f)(g) 4.30%(g) 0.21%(g) 9.946 2%(h)
(0.47) 10.89 5.47% 0.98% 4.41% 0.37% 9,426 7%
(0.48) 10.79 4.61% 0.84% 4.55% 0.56% 9,050 16%
(0.49) 10.79 13.21% 0.70% 4.62% 0.48% 12,619 35%
$(0.52) $ 9.76 (1.33)% 0.74% 5.46% 0.04% $2,055 14%
(0.33) 10.42 5.06%(h) 0.94%(g) 5.13%(g) 0.05%(g) 3,084 7%(h)
(0.25) 10.24 3.31%(h) 1.01%(f)(g) 5.42%(g) 0.09%(g) 3,217 14%(h)
(0.56) 10.16 5.99% 1.04% 5.66% 0.10% 3,518 28%
(0.58) 10.13 4.80% 0.95% 5.73% 0.19% 5,230 16%
(0.61) 10.24 12.64% 0.78% 6.09% -- 7,610 27%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 81
ORGANIZATION OF THE TRUST
The Trust is organized as a Massachusetts business trust which offers
several Funds for investment. As of April 30, 2000, each of the Funds offered by
this Prospectus offers up to three classes of shares: Investment A Shares
(formerly, Investment Shares), Investment B Shares and Trust Shares.
Only Investment A Shares and Investment B Shares are offered by this
Prospectus. Investment A Shares are offered to all types of investors, carry a
front-end sales charge, except with respect to the Money Market Funds, and are
subject to 12b-1 fees. Investment B Shares are also offered to all types of
investors, carry a contingent deferred sales charge and are subject to higher
12b-1 fees. Trust Shares carry no sales charges and are not subject to 12b-1
fees. Trust Shares are only offered to fiduciary, advisory, agency and other
similar clients of The Huntington National Bank, its affiliates or correspondent
banks. Each share class bears Fund expenses based on its proportional share of
assets, except that 12b-1 fees of 0.25% are borne only by Investment A Shares
and 12b-1 fees of 1.00% are borne only by Investment B Shares.
DISTRIBUTION OF THE FUNDS
SEI Investments Distribution Co., whose address is One Freedom Valley Road,
Oaks, Pennsylvania 19456, serves as the Distributor of the Funds offered by this
Prospectus.
In connection with the sale of Investment A Shares, the Distributor
collects the applicable sales charge and, if the sale is made through a
registered broker-dealer, generally pays the selling broker-dealer up to 90% of
that amount. The Distributor retains any portion not paid to a broker-dealer.
The Distributor also collects any applicable contingent deferred sales charges
in connection with the redemption of Investment B Shares and retains the amounts
collected. The Distributor may use these funds to pay banks for providing sales
and/or administrative services on behalf of its customers who purchase
Investment A Shares or Investment B Shares.
DISTRIBUTION PLAN (12b-1 FEES)
Consistent with Rule 12b-1 under the Investment Company Act of 1940, the
Trust has adopted a Distribution Plan which permits the Trust to pay brokers,
dealers and other financial institutions distribution and/or administrative
services fees (so-called 12b-1 fees) in connection with the sale and
distribution of Investment A Shares and Investment B Shares and the provision of
shareholder services to such classes of shareholders. Because these fees are
paid out of a Fund's assets on an on-going basis, over time they will increase
the cost of your investment and may cost you more than other types of sales
charges.
For each of the Funds offered by this Prospectus, the maximum 12b-1 fee is
0.25% of the applicable Fund's Investment A Shares average daily net assets and
1.00% of the applicable Fund's Investment B Shares average daily net assets. For
Investment A Shares, fees are accrued daily, payable quarterly and calculated on
an annual basis. For Investment B Shares, fees are accrued daily, payable
monthly and calculated on an annual basis.
SALES CHARGES
Purchases of Investment A Shares of any of the Equity or Income Funds are
subject to front-end sales charges.
32
<PAGE> 82
INVESTMENT A SHARES SALES CHARGES AND QUANTITY DISCOUNTS
EQUITY FUNDS
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------- --------------------- -------------------
<S> <C> <C>
Under $100,000 5.75% 6.12%
$100,000-$249,999 4.75% 5.00%
$250,000-$499,999 4.00% 4.16%
$500,000-$749,999 2.95% 3.04%
$750,000-$1,000,000 2.20% 2.24%
Over $1,000,000 0.00%* 0.00%*
</TABLE>
INCOME FUNDS
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------- --------------------- -------------------
<S> <C> <C>
Under $100,000 4.75% 5.00%
$100,000-$249,999 3.75% 3.88%
$250,000-$499,999 2.75% 2.84%
$500,000-$1,000,000 2.25% 2.32%
Over $1,000,000 0.00%* 0.00%*
</TABLE>
MONEY MARKET FUNDS
No Sales Charges Apply
* Sales of these shares within one year of the date of purchase will be subject
to a redemption fee of 1.00%.
Quantity discounts and other reductions may also apply in certain special
situations described below. If you think you qualify, please call The Huntington
Funds at (800) 253-0412. The Distributor will reduce or eliminate the sales
charge, as applicable, once it confirms your qualification.
33
<PAGE> 83
NO SALES CHARGES WILL APPLY TO PURCHASES OF INVESTMENT A SHARES MADE:
- Through the automatic reinvestment of dividends and capital gains
distributions
- By current Trustees and officers of the Trust, their spouses and
immediate family members
- By current officers, directors and employees of Huntington Bancshares
Incorporated (HBI) or its subsidiaries, their spouses and immediate
family members
- By retired officers and employees of HBI or its subsidiaries and their
spouses
- By participants in certain financial services programs offered by HBI
subsidiaries
- By members of certain affinity groups which have entered into
arrangements with the Adviser or the Distributor
- By investors who have sold shares of an Equity or Income Fund within the
last 30 days (not available more than once)
REDUCED SALES CHARGES ON INVESTMENT A SHARES (BASED ON THE QUANTITY DISCOUNTS
NOTED ABOVE) WILL APPLY TO PURCHASES MADE:
- By investors whose multiple investments over time in the same Fund total
an amount subject to a quantity discount
- By investors whose investment in a Fund, plus investments by their spouse
and children under 21 made at the same time, total an amount subject to a
quantity discount
- By investors who sign a letter of intent to invest at least $100,000
total in the Equity or Income Funds within a 13-month period
- By investors whose investments in multiple Funds at the same time total
an amount subject to a quantity discount
- By trustees or fiduciaries whose investments on behalf of a single trust
estate or fiduciary account total an amount subject to a quantity
discount
More information about these reductions is provided in the Statement of
Additional Information.
CONTINGENT DEFERRED SALES CHARGES
Purchases of Investment B Shares are not subject to any front-end sales
charges; however, we will assess a contingent deferred sales charge (CDSC) when
you redeem Investment B Shares, based on the amount of time you have held those
shares as follows:
<TABLE>
<CAPTION>
YEAR OF
REDEMPTION
(BASED ON DATE
OF PURCHASE) CDSC
- -------------- -----
<S> <C>
Year 1 5.00%
Year 2 4.00%
Year 3 3.00%
Year 4 3.00%
Year 5 2.00%
Year 6 1.00%
Year 7 or later 0.00%
</TABLE>
For each redemption, we will first redeem shares which are not subject to
CDSCs, if any, and then shares which you have held for the longest period of
time. The applicable CDSC will then be charged on the lesser of current market
value and the original cost of the Investment B Shares being redeemed.
NO CDSC WILL APPLY TO REDEMPTIONS OF SHARES:
- Acquired through dividend or capital gains reinvestments
34
<PAGE> 84
- Redeemed in order to meet Internal Revenue Code minimum required
distributions from Individual Retirement Accounts (IRAs)
- Redeemed following the death of the shareholder in whose name such shares
are held
ABOUT PURCHASING SHARES
You may purchase Investment A Shares of any of the Funds offered by this
Prospectus or Investment B Shares of the Money Market Fund, the Growth Fund, the
Income Equity Fund or the Fixed Income Securities Fund on any business day when
both the Federal Reserve Bank and the New York Stock Exchange are open. In
connection with the sale of a Fund's Investment A Shares or Investment B Shares,
the Distributor may from time to time offer certain items of nominal value to
any shareholder.
WHAT SHARES COST
The offering price of an Investment A Share is its net asset value
(determined after the order is considered received), plus any applicable sales
charge. The offering price of an Investment B Share is simply its net asset
value (determined after the order is considered received).
The Trust calculates the net asset value per share for each Fund offered by
this Prospectus as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern Time).
The Trust attempts to stabilize the net asset value per share for each of
the Money Market Funds at $1.00 per share by valuing its portfolio securities
using the amortized cost method. The Trust calculates net asset value for each
of the other Funds offered by this Prospectus by valuing securities held based
on market value. These valuation methods are more fully described in the Trust's
Statement of Additional Information.
In order to purchase Investment A Shares or Investment B Shares on a
particular day, the Trust must receive payment before 4:00 p.m. (Eastern Time)
that day. You will begin earning dividends on the day of your investment in the
Money Market Fund or the U.S. Treasury Money Market Fund if the Trust receives
payment before 1:00 p.m. (Eastern Time). The applicable cut-off time for the
Ohio Municipal Money Market Fund and the Florida Tax-Free Money Fund is 10:30
a.m. (Eastern Time). Orders placed through an intermediary, such as your
Huntington Personal Banker or the Huntington Investment Company, must be
received and transmitted to the Trust before the applicable cut-off time in
order for shares to be purchased that day. It is the intermediary's
responsibility to transmit orders promptly, however, you should allow sufficient
time for orderly processing and transmission.
The Trust reserves the right to suspend the sale of shares of any of the
Funds temporarily and the right to refuse any order to purchase shares of any of
the Funds.
If the Trust receives insufficient payment for a purchase, it will cancel
the purchase and may charge you a fee. In addition, you will be liable for any
losses incurred by the Trust in connection with the transaction.
INVESTMENT B SHARES CONVERSION FEATURE
Once you hold Investment B Shares for eight years, they will automatically
convert tax-free into Investment A Shares of the same Fund. After the
conversion, you will have the same dollar value investment, although you may
have more or less shares due to differences in the net asset values of
Investment A Shares and Investment B Shares.
Investment A Shares carry lower distribution (12b-1) fees than Investment B
Shares. Although Investment A Shares also carry a front-end sales charge, you
will not incur any sales charges upon conversion.
35
<PAGE> 85
HOW TO BUY INVESTMENT A SHARES OR INVESTMENT B SHARES
1. MINIMUM INVESTMENT REQUIREMENTS:
- $1,000 for initial investments outside the Systematic Investment Program
- $50 for initial investments through the Systematic Investment Program
- $50 for subsequent investments
2. CALL
- The Huntington Funds at (800) 253-0412
- The Huntington Investment Company at (800) 322-4600
- Your Huntington Personal Banker
3. MAKE PAYMENT
- By check payable to the applicable Huntington Fund and share class (e.g.
Huntington Growth Fund--Investment B Shares) to:
The Huntington Funds
P.O. Box 8526
Boston, MA 02266
(The Trust will treat your order as having been received once payment is
converted to federal funds by the Trust's transfer agent)
OR
- Through the Systematic Investment Program
(Once you become a participant in the Program, your investments will be
made automatically at your requested intervals)
Other methods of acceptable payment are discussed in the Statement of
Additional Information.
SYSTEMATIC INVESTMENT PROGRAM
You may invest on a regular basis in Investment A Shares or Investment B
Shares of one or more Funds offered by this Prospectus through the Systematic
Investment Program. To participate, you must open an account with the Trust by
calling (800) 253-0412 and invest at least $50 at periodic intervals.
Once you have signed up for the Program, the Trust will automatically
withdraw money from your bank account and invest it, subject to any applicable
sales charges, in Investment A Shares or Investment B Shares of the Fund or
Funds you specify. Your participation in the Program may be canceled if you do
not maintain sufficient funds in your bank account to pay for your investment.
36
<PAGE> 86
ABOUT EXCHANGING SHARES
AMONG THE FUNDS
On any business day when both the Federal Reserve Bank and the New York
Stock Exchange are open, you may exchange shares of any Huntington Fund for the
same class of shares of any other Huntington Fund offering such shares.
In order to exchange shares of a Fund on a particular day, the Trust must
receive your request before 4:00 p.m. (Eastern Time) that day.
The Trust may terminate or modify the exchange privilege at any time. In
the case of termination or material changes other than the elimination of
applicable sales charges, you will be given 60 days' prior notice.
An exchange is treated as a sale for federal income tax purposes and,
depending on the circumstances, you may realize a short or long-term capital
gain or loss. In addition, if you exchange shares of a Fund that imposes a sales
charge into another Fund that imposes such a charge, there may be special tax
consequences.
The Statement of Additional Information contains more information about
exchanges.
EXCHANGING INVESTMENT A SHARES
For Investment A Shares, the Trust makes exchanges at net asset value
(determined after the order is considered received), plus any applicable sales
charges.
<TABLE>
<CAPTION>
- -----------------------------------------------
EXCHANGE EXCHANGE
OUT OF INTO SALES CHARGE
- -------------- -------- ------------
<S> <C> <C>
Any Money Any Money NO
Market Fund Market Fund
Any Money Any Equity YES--See
Market Fund or Income "Sales Charges"
Fund
Any Income or Any Money NO
Equity Fund Market,
Equity or
Income Fund
- -----------------------------------------------
</TABLE>
EXCHANGING INVESTMENT B SHARES
For Investment B Shares, the Trust makes exchanges at net asset value
(determined after the order is considered received) without any contingent
deferred sales charge.
Once you make an exchange, the Trust carries over the holding period of
your exchanged Investment B Shares to your new Investment B Shares for purposes
of calculating any CDSC upon redemption.
37
<PAGE> 87
HOW TO EXCHANGE SHARES
1. SATISFY THE MINIMUM ACCOUNT BALANCE REQUIREMENTS
- You must maintain the required minimum account balance in the Fund out of
which you are exchanging shares.
2. CALL (You must have completed the appropriate section on your account
application)
- The Huntington Funds at (800) 253-0412
- The Huntington Investment Company at (800) 322-4600
- Your Huntington Personal Banker
OR
WRITE
- The Huntington Funds
P.O. Box 8526
Boston, MA 02266
3. PROVIDE THE REQUIRED INFORMATION
- Name of the Fund from which you wish to make the exchange (exchange OUT
OF)
- Specify the Investment A Shares or Investment B Shares class
- Your account number
- The name and address on your account
- The dollar amount or number of shares to be exchanged
- Name of the Fund into which you wish to make the exchange (exchange
INTO)--(Make sure this Fund offers the applicable class of shares)
- Your signature (for written requests)
(For corporations, executors, administrators, trustees and guardians, and
in certain other special circumstances, telephone exchanges will not be
available and you will need a signature guarantee in order to make an exchange)
38
<PAGE> 88
ABOUT REDEEMING SHARES
You may redeem Investment A Shares or Investment B Shares of the Funds
offered by this Prospectus on any business day when both the Federal Reserve
Bank and the New York Stock Exchange are open.
The price at which the Trust will redeem an Investment A Share will be its
net asset value (determined after the order is considered received). The price
at which the Trust will redeem an Investment B Share will be its net asset value
(determined after the order is considered received), less any applicable
contingent deferred sales charge (CDSC). All Funds offering Investment B Shares,
including the Money Market Fund, are subject to CDSCs.
The Trust calculates the net asset value per share for each Fund offered by
this Prospectus as of the close of business of the New York Stock Exchange
(generally 4:00 p.m. Eastern Time).
In order to redeem Investment Shares of the Money Market Fund or the U.S.
Treasury Money Market Fund on a particular day, the Trust must receive your
request before 1:00 p.m. (Eastern Time) that day. The applicable cut-off time is
10:30 a.m. (Eastern Time) for the Ohio Municipal Money Market Fund and the
Florida Tax-Free Money Fund and 4:00 p.m. (Eastern Time) for each of the Equity
and Income Funds.
For shareholders who request redemptions prior to the applicable cut-off
time for the Fund being redeemed, usually the proceeds will be wired or a check
will be mailed on the same day for Investment A Shares and on the following
business day for Investment B Shares; for redemption requests received after the
applicable cut-off time, usually proceeds will be wired or a check will be
mailed the following business day after net asset value is next determined for
Investment A Shares and the second business day after net asset value is next
determined for Investment B Shares. Redemption requests made through The
Huntington Investment Company or a Huntington Personal Banker will be promptly
submitted to the Trust. Proceeds are wired to an account designated in writing
by the shareholder at any domestic commercial bank which is a member of the
Federal Reserve System. Proceeds to be paid by check are sent to the
shareholder's address of record.
To the extent permitted by federal securities laws, the Trust reserves the
right to suspend the redemption of shares of any of the Funds temporarily under
extraordinary market conditions such as market closures or suspension of trading
by the Securities and Exchange Commission. The Trust also reserves the right to
postpone payment for more than seven days where payment for shares to be
redeemed has not yet cleared.
The Trust may terminate or modify the methods of redemption at any time. In
such case, you will be promptly notified.
REDEMPTION OF ACCOUNTS WITH BALANCES UNDER $1,000
Due to the high cost of maintaining accounts with low balances, if your
account balance in any one Fund falls below $1,000, the Trust may choose to
redeem those shares, subject to any applicable CDSCs, and close that account
without your consent. The Trust will not close any account which is held through
a retirement plan or any account whose value falls below $1,000 as a result of
changes in a Fund's net asset value. If the Trust plans to close your account,
it will notify you and provide you with 30 days to add to your account balance.
39
<PAGE> 89
HOW TO REDEEM INVESTMENT A SHARES OR INVESTMENT B SHARES
1. CALL (You must have completed the appropriate section on your account
application)
- The Huntington Funds at (800) 253-0412;
- The Huntington Investment Company at (800) 322-4600; or
- your Huntington Personal Banker.
OR
WRITE
- The Huntington Funds
P.O. Box 8526
Boston, MA 02266
OR
WRITE A CHECK (INVESTMENT A SHARES OF THE MONEY MARKET FUNDS ONLY)
- In an amount of at least $250 from your Money Market Fund checking
account
(You may not use a check to close an account)
2. PROVIDE THE REQUIRED INFORMATION
- The name of the Fund from which you wish to redeem shares
- Specify Investment A Shares or Investment B Shares
- Your account number
- The name and address on your account
- Your bank's wire transfer information (for wire transfers)
- The dollar amount or number of shares you wish to redeem
- Your signature (for written requests)
(If you request a redemption of over $50,000, request any redemption to be
sent to an address other than the address on record with the Trust or request
any redemption to be paid to a person or persons other than the shareholder(s)
of record, you will need a signature guarantee in order to redeem)
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive periodic payments from redemptions of Investment
A Shares or Investment B Shares, subject to any applicable CDSCs, of one or more
Funds you hold through the Systematic Withdrawal Program. To participate, you
must have an account balance with the Trust of at least $10,000. Once you have
signed up for the Program by calling the Trust, The Huntington Investment
Company or your Personal Banker, the Trust will automatically redeem shares from
your account and electronically send the proceeds to the bank account you
specify.
40
<PAGE> 90
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business. Huntington, whose address is Huntington Center,
41 South High Street, Columbus, Ohio 43287, serves as investment adviser to the
Funds pursuant to investment advisory agreements with the Trust. Fort Washington
Investment Advisors, Inc., whose address is 420 E. Fourth Street, Cincinnati,
Ohio 45202, serves as sub-adviser to the Florida Tax-Free Money Fund.
INVESTMENT ADVISER
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. During the fiscal year ended December 31, 1999, the
Trust paid Huntington management fees as a percentage of average net assets as
follows:
<TABLE>
<S> <C>
Money Market Fund....................... 0.27%
Ohio Municipal Money Market Fund........ 0.25%
U.S. Treasury Money Market Fund......... 0.20%
Florida Tax-Free Money Fund............. 0.20%
Growth Fund............................. 0.60%
Income Equity Fund...................... 0.60%
Mortgage Securities Fund................ 0.30%
Ohio Tax-Free Fund...................... 0.50%
Michigan Tax-Free Fund.................. 0.43%
Fixed Income Securities Fund............ 0.50%
Intermediate Government Income Fund..... 0.45%
</TABLE>
Huntington is an indirect, wholly-owned subsidiary of Huntington Bancshares
Incorporated ("HBI"), a registered bank holding company with executive offices
located at Huntington Center, 41 South High Street, Columbus, Ohio 43287. With
$28.7 billion in assets as of December 31, 1999, HBI is a major Midwest regional
bank holding company. 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 is responsible for $22.0 billion of assets, and has investment
discretion over approximately $8.8 billion of that amount.
Huntington has served as a mutual fund investment adviser since 1987 and
has over 75 years of experience providing investment advisory services to
fiduciary accounts.
Huntington is also responsible for providing administration, accounting and
custodian services to the Trust. Huntington receives 0.11% of each Fund's
average daily net assets for administrative services, 0.03% for accounting
services, and 0.026% for custodian services.
SUB-ADVISER
Effective May 1, 2000, the sub-adviser for the Florida Tax-Free Money Fund,
Countrywide Investments, Inc. ("Countrywide"), an indirect subsidiary of The
Western and Southern Life Insurance Company, reorganized part of its investment
advisory operations into its affiliate, Fort Washington Investment Advisors,
Inc. ("Fort Washington").
As of May 1, 2000, Fort Washington will serve as the sub-adviser of the
Florida Tax-Free Money Fund pursuant to an interim sub-advisory agreement with
Huntington approved by the Trust's Board of Trustees on April 26, 2000. The
interim sub-advisory agreement will remain in effect until September 28, 2000 or
until the shareholders of the Florida Tax-Free Money Fund approve a new
sub-advisory agreement with Fort Washington, whichever is earlier.
Following shareholder approval of the new sub-advisory agreement on or
before September 28, 2000, Fort Washington will serve as sub-adviser under the
new agreement.
41
<PAGE> 91
In the event that shareholders do not approve the new sub-advisory agreement,
shareholders will be notified of alternative arrangements.
Fort Washington, like Countrywide, is part of Western-Southern Enterprise,
a dynamic group of financial services companies owned by The Western and
Southern Life Insurance Company of Cincinnati, Ohio. Western-Southern Enterprise
provides life insurance, annuities, mutual funds, business planning insurance,
health insurance, asset management and other related financial services for
millions of customers nationwide. Fort Washington offers professional and
comprehensive investment management services for foundations, endowments,
corporate pension funds, insurance companies, mutual funds, colleges and
universities, religious organizations and high net worth individuals. As of
December 31, 1999, Fort Washington had over $12.9 billion in assets under
management.
PORTFOLIO MANAGERS
James M. Buskirk, Chief Investment Officer of Huntington, has been the
portfolio manager of the Income Equity Fund since 1990. As Chief Investment
Officer of Huntington, Mr. Buskirk has ultimate responsibility for all
investment management activities. He brings more than 20 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 in 1988. He also assumed
investment responsibility for all of the Huntington Income Funds in 1999. 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.
James Gibboney, Jr., a Vice President of Huntington, has been a
co-portfolio manager of the Growth Fund since November of 1993, and assumed full
responsibility for its management in 1999. 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 12 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.
DIVIDENDS AND DISTRIBUTIONS
The Money Market Funds declare dividends on investment income daily and pay
them monthly. These Funds also make distributions of net capital gains, if any,
at least annually.
Each of the other Funds offered by this Prospectus declares and pays
dividends on investment income monthly. These Funds also make distributions of
net capital gains, if any, at least annually.
DISTRIBUTION OPTIONS
All dividends and distributions payable to a holder of Investment A Shares
or Investment B Shares will be automatically reinvested in additional shares of
the same class of the income-producing Fund, unless the shareholder makes an
alternative election. Shareholders of
42
<PAGE> 92
any of the Funds offered by this Prospectus may choose to receive all
distributions in cash. Shareholders of any of the Equity or Income Funds offered
by this Prospectus may choose to reinvest capital gains distributions, but
receive all other distributions in cash.
TAX CONSEQUENCES
There are many important tax consequences associated with investment in the
Funds offered by this Prospectus. Please read the summary below and consult your
tax advisor regarding the specific federal, state and local tax consequences
applicable to your investment.
FEDERAL INCOME TAXES
Each of the Funds offered by this Prospectus intends to distribute to
shareholders dividends of its net investment income and distributions of capital
gains. The income dividends distributed by the Ohio Municipal Money Market Fund,
the Florida Tax-Free Money Fund, the Ohio Tax-Free Fund and the Michigan
Tax-Free Fund are generally intended to be tax-exempt. For any portion of these
Funds not invested in tax-exempt securities, and for all other Funds offered by
this Prospectus, distributions of income, whether or not they are reinvested in
Fund shares, may be subject to federal income tax. In addition, if you are
subject to the alternative minimum tax, you will have to pay tax on any portion
of income dividends attributable to investments in certain "private activity"
bonds.
For all of the Funds offered by this Prospectus, capital gains
distributions may be subject to federal taxation. The rate at which you may be
taxed can vary depending on the length of time a Fund holds a security.
An exchange of a Fund's shares for shares of another Fund will be treated
as a sale of the Fund's shares and, as with all sales of Fund shares, any gain
on the transaction will be subject to federal income tax.
STATE INCOME TAXES
In addition to the exemption from federal income taxes, the income
dividends distributed by the Ohio Municipal Money Market Fund and the Ohio
Tax-Free Fund are generally intended to be exempt from Ohio personal income
taxes. Similarly, the income dividends distributed by the Michigan Tax-Free Fund
are generally intended to be exempt from Michigan city and state personal income
taxes and the Michigan single business tax. For any portion of these Funds not
invested in tax-exempt securities, distributions of income dividends may be
subject to state taxation.
With respect to the Florida Tax-Free Money Fund, the state of Florida does
not currently impose an income tax on individuals, but does impose such a tax on
corporations. Consequently, the income dividends distributed by the Florida
Tax-Free Money Fund will not be subject to Florida taxation for individuals, but
may be taxable to corporate shareholders (including limited liability company
shareholders that are taxed as corporations for federal income tax purposes).
The Florida Tax-Free Money Fund is also intended to exempt its shareholders
from Florida's intangible personal property tax. If on the last business day of
any year, the Florida Tax-Free Money Fund consists solely of notes, bonds and
other obligations issued by the State of Florida or its municipalities, counties
and other taxing districts, or by the U.S. government, its agencies and certain
U.S. territories and possessions (such as Guam, Puerto Rico and the Virgin
Islands) the Fund's shares will be exempt from the Florida intangible tax
payable in the following year.
In order to take advantage of the exemption from the intangible tax in any
year,
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the Florida Tax-Free Money Fund must sell any non-exempt assets held in its
portfolio during the year and reinvest the proceeds in exempt assets on or
before the last business day of the calendar year. Transactions costs involved
in restructuring a fund in this manner would likely reduce investment return and
might exceed any increased investment return the Fund achieved by investing in
non-exempt assets during the year.
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More information about the Funds is available free upon request, including the
following:
ANNUAL AND SEMI-ANNUAL REPORTS
The Semi-Annual Report includes unaudited information about the performance of
the Funds, portfolio holdings and other financial information. The Annual Report
includes similar audited information as well as a letter from the Huntington
Funds portfolio managers discussing recent market conditions, economic trends
and investment strategies that significantly affected performance during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
Provides more detailed information about the Funds and its policies. A current
Statement of Additional Information is on file with the Securities and Exchange
Commission and is incorporated by reference into (considered a legal part of)
this Prospectus.
THE HUNTINGTON NATIONAL BANK, a subsidiary of Huntington Bancshares,
Incorporated, is the Investment Adviser, Administrator and Custodian of
Huntington Funds.
SEI INVESTMENTS DISTRIBUTION CO. is the Distributor and is not affiliated with
The Huntington National Bank.
For copies of Annual or Semi-Annual Reports, the Statement of Additional
Information, other information or for any other inquiries:
CALL (800) 253-0412
WRITE
The Huntington Funds
41 South High Street
Columbus, OH 43287
LOG ON TO THE INTERNET
The SEC's website, http://www.sec.gov, contains text-only versions of The
Huntington Funds documents.
CONTACT THE SEC
Call (202) 942-8090 about visiting the SEC's Public Reference Room in Washington
D.C. to review and copy information about the Funds.
Alternatively, you may send your request to the SEC by e-mail at
[email protected] or by mail with a duplicating fee to the SEC's Public
Reference Section, 450 Fifth Street, NW, Washington, D.C. 20549-0102.
[LOGO] HUNTINGTON FUNDS(TM)
HUNTINGTON FUNDS SHAREHOLDER SERVICES: 1-800-253-0412
HUNTINGTON INVESTMENT COMPANY, MEMBER NASD: 1-800-322-4600
- NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
SEC FILE NO. 811-5010
BH/240933.2
ID/MMW
<PAGE> 95
THE HUNTINGTON FUNDS
INVESTMENT A SHARES (FORMERLY, INVESTMENT SHARES)
INVESTMENT B SHARES AND
TRUST SHARES
OF
HUNTINGTON MONEY MARKET FUND
HUNTINGTON OHIO MUNICIPAL MONEY MARKET FUND
HUNTINGTON U.S. TREASURY MONEY MARKET FUND
HUNTINGTON FLORIDA TAX-FREE MONEY FUND
HUNTINGTON GROWTH FUND
HUNTINGTON INCOME EQUITY FUND
HUNTINGTON MORTGAGE SECURITIES FUND
HUNTINGTON OHIO TAX-FREE FUND
HUNTINGTON MICHIGAN TAX-FREE FUND
HUNTINGTON FIXED INCOME SECURITIES FUND
HUNTINGTON INTERMEDIATE GOVERNMENT INCOME FUND
HUNTINGTON SHORT/INTERMEDIATE FIXED INCOME SECURITIES FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains information which may be of
interest to investors in The Huntington Funds (the "Trust") but which is not
included in the applicable Prospectuses for Investment A Shares, Investment B
Shares or Trust Shares. This Statement is not a prospectus and is only
authorized for distribution when accompanied or preceded by the applicable
Prospectus dated May 1, 2000 for Investment A Shares, Investment B Shares or
Trust Shares. This Statement should be read together with the applicable
Prospectus. Investors may obtain a free copy of a Prospectus by calling The
Huntington Funds at 800-253-0412.
May 1, 2000
<PAGE> 96
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS.......................................................................................................1
INVESTMENT PRACTICES AND RISKS....................................................................................1
Common Stock.................................................................................................2
Convertible Securities.......................................................................................2
Concentration Risk...........................................................................................2
Corporate Debt...............................................................................................2
Credit (or Default) Risk.....................................................................................2
Credit-Enhanced Securities...................................................................................2
Defensive Investments........................................................................................3
Dollar Roll Transactions.....................................................................................3
Equity Risk..................................................................................................3
Equity Securities............................................................................................4
Extension Risk...............................................................................................4
Fixed Income Securities......................................................................................4
Foreign Currency Options.....................................................................................4
Foreign Currency Transactions................................................................................5
Forward Foreign Currency and Foreign Currency Futures Contracts..............................................5
Foreign Securities...........................................................................................6
Futures Contracts and Options on Futures Contracts...........................................................7
Index Futures Contracts and Options on Index Futures Contracts...............................................9
Interest Rate Risk..........................................................................................10
Lending Portfolio Securities................................................................................11
Liquidity Risk..............................................................................................11
Market Risk.................................................................................................11
Money Market Instruments....................................................................................11
Commercial Paper...............................................................................12
Bank Obligations...............................................................................12
Variable Rate Demand Notes.....................................................................12
Money Market Mutual Funds...................................................................................12
Mortgage-Related Securities.................................................................................13
Mortgage Pass-Through Securities...............................................................14
Adjustable Rate Mortgage Securities............................................................14
Derivative Mortgage Securities.................................................................14
Options.....................................................................................................16
Preferred Stock.............................................................................................18
Prepayment Risk.............................................................................................18
Repurchase Agreements.......................................................................................19
Restricted and Illiquid Securities..........................................................................19
Security-Specific Risk......................................................................................19
Tax-Exempt Securities.......................................................................................20
U.S. Government Securities..................................................................................21
U.S. Treasury Security Futures Contracts and Options........................................................22
When-Issued and Delayed Delivery Transactions...............................................................23
Year 2000 Risk..............................................................................................23
Zero-Coupon Securities......................................................................................23
Special Risk Factors Applicable to the Ohio Tax-Exempt Funds................................................24
Special Risk Factors Applicable to the Michigan Tax-Free Fund...............................................28
Special Risk Factors Applicable to the Florida Tax-Free Money Fund..........................................31
INVESTMENT RESTRICTIONS..........................................................................................32
Portfolio Turnover..........................................................................................34
MANAGEMENT OF THE TRUST..........................................................................................35
Trustees and Officers.......................................................................................35
Trustee Compensation........................................................................................36
Investment Adviser..........................................................................................37
Sub-Adviser.................................................................................................39
Portfolio Transactions......................................................................................40
Brokerage Allocation and Other Practices....................................................................40
Code of Ethics..............................................................................................42
Administrator...............................................................................................42
Sub-Administrator...........................................................................................43
Distributor.................................................................................................43
Distribution Plan (12b-1 Fees)..............................................................................43
Custodian...................................................................................................45
Transfer Agent and Dividend Disbursing Agent................................................................45
Independent Auditors........................................................................................45
Principal Holders of Securities.............................................................................45
SHAREHOLDER RIGHTS...............................................................................................45
ADDITIONAL INFORMATION ON PURCHASES, EXCHANGES AND REDEMPTIONS...................................................47
Other Purchase Information..................................................................................47
Payment in Kind................................................................................47
Sales Charge Reductions (Investment A Shares)..................................................48
Other Exchange Information..................................................................................49
Other Redemption Information................................................................................49
DETERMINATION OF NET ASSET VALUE.................................................................................49
TAXES............................................................................................................53
Federal Income Taxation.....................................................................................53
State Taxation..............................................................................................54
DIVIDENDS AND DISTRIBUTIONS......................................................................................56
Money Market Funds..........................................................................................56
Other Funds.................................................................................................57
PERFORMANCE INFORMATION..........................................................................................57
Money Market Funds..........................................................................................57
Other Funds.................................................................................................58
Tax-Equivalency Tables......................................................................................61
FINANCIAL STATEMENTS.............................................................................................64
APPENDIX--DESCRIPTION OF BOND RATINGS ...........................................................................65
</TABLE>
<PAGE> 97
DEFINITIONS
For convenience, we will use the following terms throughout this
Statement of Additional Information.
<TABLE>
<S> <C> <C>
"1940 Act" -- The Investment Company Act of 1940, as amended.
"Funds" -- Each of the separate investment portfolios of the Trust.
"Tax-Exempt Funds" -- Ohio Municipal Money Market Fund, Ohio Tax-Free Fund, Michigan Tax-Free Fund and
Florida Tax-Free Money Fund.
"Money Market Funds" -- Money Market Fund, Ohio Municipal Money Market Fund, U.S.
Treasury Money Market Fund and Florida Tax-Free Money Fund.
"Trust" -- The Huntington Funds.
"Huntington" -- The Huntington National Bank, the Trust's investment adviser and administrator.
"Independent Trustees" -- Trustees who are not "interested persons" of the Trust, as defined in the 1940
Act.
"NRSRO" -- Nationally Recognized Statistical Ratings Organization such as Moody's Investor
Service or Standard and Poor's Ratings Group.
"SEI Administrative" -- SEI Investments Mutual Fund Services, the Trust's sub-administrator.
"Prospectus" -- Each of the separate Prospectuses of the Funds.
"SAI" -- Statement of Additional Information.
"SEI Investments" -- SEI Investments Distribution Co., the Trust's distributor.
</TABLE>
The Trust was organized as a Massachusetts business trust on February
10, 1987. Originally known as The Monitor Funds, the Trust's name was changed to
The Huntington Funds on January 1, 1999.
The Trust is an open-end, management investment company consisting of
twelve separate Funds with separate investment objectives and policies. Each of
these Funds, except the Tax-Exempt Funds, is diversified. The Funds may offer
one or more of the following classes of shares: Investment A Shares, Investment
B Shares and Trust Shares. This SAI relates to all classes of shares. As of the
date of this SAI, the Funds are not being offered for sale in Delaware, Idaho,
Iowa, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North
Dakota, Puerto Rico, Rhode Island, South Dakota or Vermont.
INVESTMENT PRACTICES AND RISKS
The Prospectuses discuss the principal investment strategies and risks
of investing in each of the Funds. Below you will find more detail about the
types of investments and investment practices permitted by each Fund, including
those which are not part of a Fund's principal investment strategy. In
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addition, we have included discussions relating to the special risks associated
with investment in each of the Tax-Exempt Funds.
COMMON STOCK
Common stock is a type of equity security which represents an ownership
interest in a corporation and the right to a portion of the assets of the
corporation in the event of liquidation. This right, however, is subordinate to
that of preferred stockholders and any creditors, including holders of debt
issued by the corporation. Owners of common stock are generally entitled to vote
on important matters. A corporation may pay dividends on common stock.
Each of the Equity Funds may invest in common stock.
CONVERTIBLE SECURITIES
Convertible securities include fixed income securities that may be
exchanged or converted into a predetermined number of shares of the issuer's
underlying common stock at the option of the holder during a specified period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for a variety of investment strategies. A
Fund will exchange or convert the convertible securities held in its portfolio
into shares of the underlying common stock when, in its investment adviser's
opinion, the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objective. Otherwise the Fund may
hold or trade convertible securities.
Each of the Equity Funds may invest in convertible securities.
CONCENTRATION RISK
When a Fund invests more than 25% of its net assets in securities of
issuers within a particular geographic region, it is subject to increased risk.
As is the case with respect to each of the Single State Funds, performance will
generally depend on the region's performance, which may differ in direction and
degree from that of the overall stock market. In addition, financial, economic,
business and political developments affecting the region may have a greater
effect on these Funds.
CORPORATE DEBT (INCLUDING BONDS, NOTES AND DEBENTURES)
Corporate debt includes any obligation of a corporation to repay a
borrowed amount at maturity and usually to pay the holder interest at specific
intervals. Corporate debt can have a long or short maturity and is often rated
by one or more nationally recognized statistical rating organizations. See the
Appendix to this SAI for a description of these ratings.
Each of the Funds, except the U.S. Treasury Money Market Fund and the
Growth Fund, may invest in corporate bonds.
CREDIT (OR DEFAULT) RISK
To the extent that a Fund invests in corporate debt, U.S. Government
securities, mortgage-related securities or other fixed income securities, it is
subject to the risk that an issuer of those securities may default on its
obligation to pay interest and repay principal. Also, changes in the financial
strength of an issuer or changes in the credit rating of a security may affect
its value. Credit risk includes "counterparty risk," -- the risk that the other
party to a transaction will not fulfill its contractual obligation. This risk
applies, for example, to repurchase agreements into which a Fund may enter.
Securities rated below investment grade are particularly subject to credit risk.
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CREDIT-ENHANCED SECURITIES
Credit-enhanced securities are securities whose credit rating has been
enhanced, typically by the existence of a guarantee, letter of credit, insurance
or unconditional demand feature. In most cases, Huntington 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, except where prohibited by Rule 2a-7
under the 1940 Act, credit-enhanced securities will not be treated as having
been issued by the credit enhancer for diversification purposes, unless the 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. A
default on the underlying security or other event that terminates a demand
feature prior to its exercise will adversely affect the liquidity of the
underlying security.
All of the Funds may invest in credit-enhanced securities. The Money
Market Funds are subject to the diversification requirements relating to
credit-enhanced securities imposed by Rule 2a-7 of the 1940 Act. The Ohio
Municipal Money Market Fund may not invest, with respect to 75% of its total
assets, more than 10% of its total assets in the credit-enhanced securities of
one credit enhancer.
DEFENSIVE INVESTMENTS
At times Huntington may determine that conditions in securities markets
may make pursuing a Fund's principal investment strategies 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 Single State Funds, a Fund's alternative
strategies may give rise to income which is not exempt from federal or state
taxes.
DOLLAR ROLL TRANSACTIONS
A dollar roll transaction is a transactions through which a Fund sells
certain of its securities to financial institutions such as banks and
broker-dealers, and agrees to repurchase substantially similar securities at a
mutually agreed upon date and price. At the time a Fund enters into a dollar
roll agreement, it will place in a segregated custodial account assets such as
U.S. Government securities or other liquid high grade debt securities consistent
with its investment restrictions having a value equal to the repurchase price
(including accrued interest), and will subsequently continually monitor the
account to insure that such equivalent value is maintained at all times. Dollar
roll agreements involve the risk that the market value of securities sold by a
Fund may decline below the price at which it is obligated to repurchase the
securities. Dollar roll agreements are considered to be borrowings by an
investment company under the 1940 Act and, therefore, a form of leverage. A Fund
may experience a negative impact on its net asset value if interest rates rise
during the term of a dollar roll agreement. A Fund generally will invest the
proceeds of such borrowings only when such borrowings will enhance a Fund's
liquidity or when the Fund reasonably expects that the interest income to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction.
Only the Mortgage Securities Fund engages in dollar roll transactions
with respect to its mortgage-related securities.
EQUITY RISK
Equity risk is the risk that stock prices will fall quickly and
dramatically over short or extended periods of time. Stock markets tend to move
in cycles, with periods of rising prices and period of falling
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prices. Often, dramatic movements in prices occur in response to reports of a
company's earnings, economic statistics or other factors which affect an
issuer's profitability.
To the extent that a Fund invests in smaller capitalization stocks, it
may be subject to greater risks than those associated with investment in larger,
more established companies. Small companies tend to have limited product lines,
markets or financial resources, and may be dependent on a small management
group. Small company stocks may be subject to more abrupt or erratic price
movements, for reasons such as lower trading volumes, greater sensitivity to
changing conditions and less certain growth prospects. Additionally, there are
fewer market makers for these stocks and wider spreads between quoted bid and
asked prices in the over-the-counter market for these stocks. Small cap stocks
also tend to be subject to greater liquidity risk, particularly during periods
of market disruption, and there is often less publicly available information
concerning these securities.
EQUITY SECURITIES
Equity securities include both foreign and domestic common stocks,
preferred stocks, securities convertible or exchangeable into common or
preferred stocks, and other securities which the Adviser believes have common
stock characteristics, such as rights and warrants.
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.
FIXED INCOME SECURITIES
Fixed income securities include corporate debt securities, U.S.
Government securities, mortgage-related securities, tax-exempt securities and
any other securities which provide a stream of fixed payments to the holder.
FOREIGN CURRENCY OPTIONS (ALSO SEE "OPTIONS")
Options on foreign currencies operate similarly to options on
securities, and are traded primarily in the over-the-counter market (so-called
"OTC options"), although options on foreign currencies have recently been listed
on several exchanges. 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.
Purchases and sales of options may be used to increase current return.
They are also used in connection with hedging transactions. See "Foreign
Currency Transactions."
Writing covered call options on currencies may offset some of the costs
of hedging against fluctuations in currency exchange rates. For transaction
hedging purposes a Fund may also purchase exchange-listed and OTC put and call
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 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.
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
maybe disadvantaged by
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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 U.S. 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.
Each of the Growth Fund, Income Equity Fund, Fixed Income Securities
Fund and Short/Intermediate Fixed Income Securities Fund may invest in foreign
currency options.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions include purchasing and selling foreign
currencies, entering into forward or futures contracts to purchase or sell
foreign currencies (see "Forward Foreign Currency and Foreign Currency Futures
Contracts"), and purchasing and selling options on foreign currencies (see
"Foreign Currency Options"). Foreign currency transactions may be used to hedge
against uncertainty in the level of future foreign currency exchange rates and
to increase current return.
Purchases and sales of foreign currencies on a spot basis are used to
increase current return. They are also used in connection with both "transaction
hedging" and "position hedging."
Transaction hedging involves entering into foreign currency
transactions with respect to specific receivables or payables generally arising
in connection with the purchase or sale of portfolio securities. Transaction
hedging is used to "lock in" the U.S. dollar price of a security to be purchased
or sold, or the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. The goal is 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.
Position hedging involves entering into foreign currency transactions
either to protect against: (i) a decline in the value of a foreign currency in
which a security held or to be sold is denominated; or (ii) an increase in the
value of a foreign currency in which a security to be purchased is denominated.
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.
Neither transaction nor position hedging eliminates 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 can be achieved 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 also
tend to limit any potential gain which might result from the increase in the
value of such currency
Hedging transactions are subject to correlation risk due to the fact
that the amounts of foreign currency exchange transactions and the value of the
portfolio securities involved will not generally be perfectly matched. This is
because 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.
Each of the Growth Fund, Income Equity Fund, Fixed Income Securities
Fund and Short/Intermediate Fixed Income Securities Fund may use foreign
currency transactions.
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FORWARD FOREIGN CURRENCY AND FOREIGN CURRENCY FUTURES CONTRACTS
A forward foreign currency 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 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 currency 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 commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Forward foreign currency contracts and foreign currency futures
contracts can be used to increase current return. They are also used in
connection with both "transaction hedging" and "position hedging." See "Foreign
Currency Transactions."
Among the risks of using foreign currency futures contracts is the fact
that positions in these contracts (and any related options) may be closed out
only on an exchange or board of trade which provides a secondary market.
Although it is intended that any Fund using foreign currency futures contracts
and related options will only purchase or sell them 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. In 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.
In addition, it is impossible to forecast with precision the market
value of a security at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security being hedged is less than the amount of foreign
currency a Fund is obligated to deliver and if a decision is made to sell the
security 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 hedged portfolio security if the market value of such security
exceeds the amount of foreign currency a Fund is obligated to deliver.
Each of the Growth Fund, Income Equity Fund, Fixed Income Securities
Fund and Short/Intermediate Fixed Income Securities Fund may invest in forward
foreign currency and foreign currency futures contracts.
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FOREIGN SECURITIES
Foreign securities are those securities which are issued by companies
located outside the United States and principally traded in foreign markets.
This includes equity and debt securities of foreign entities and obligations of
foreign branches of U.S. and foreign banks. Investment in foreign securities is
subject to a number of special risks.
Since foreign securities are normally denominated and traded in foreign
currencies, the value of a Fund's assets invested in such securities 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. Additionally, 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.
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.
Each of the Growth Fund, Income Equity Fund, Fixed Income Securities
Fund and Short/Intermediate Fixed Income Securities Fund may invest in foreign
securities. Each of the Fixed Income Securities Fund and Short/Intermediate
Fixed Income Securities Fund, however, may only invest up to 10% of its net
assets in non-U.S. dollar-denominated bonds.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A futures contract is a binding contractual commitment which, if held
to maturity, will result in an obligation to make or accept delivery of a
security at a specified future time and price. By purchasing futures (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
(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 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.
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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.
Margin payments. When a Fund purchases or sells a futures contract, it
is required to deposit with its custodian an amount of cash, U.S. 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
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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.
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 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
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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.
INDEX FUTURES CONTRACTS AND OPTIONS ON INDEX FUTURES CONTRACTS
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.
Purchases and sales of index futures may be used to hedge an
investment. To hedge an investment successfully, however, a Fund must invest in
futures contracts with respect to indices or sub-indices the movements of which
will 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 assumes the underlying futures position
and receives 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 is 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.
As an alternative to purchasing call and put options on index futures
contracts, a Fund may purchase put and call options on the underlying indices
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
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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."
All of the Funds may utilize index futures or options on index futures.
INTEREST RATE RISK
Interest rate risk is the risk that changes in interest rates may cause
a decline in the market value of an investment. With bonds and other fixed
income securities, a rise in interest rates typically causes a fall in bond
values, while a fall in interest rates typically causes a rise in bond values.
Fixed income securities with longer maturities are more susceptible to changes
in value due to interest rate changes than are those with shorter maturities.
Recent market experience has shown that certain derivative mortgage
securities have a higher degree of interest rate risk 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 which are unacceptable to the
Adviser based on market conditions.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend its
portfolio securities on a short-term basis to brokers, dealers or other
financial institutions which Huntington has determined are creditworthy under
guidelines established by the Trustees. Consistent with guidelines established
by the SEC requirements, any loans made will 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. 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.
While portfolio securities are on loan, the borrower will pay to the
lending Fund any dividends or interest received on the securities. In addition,
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,
the lending 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.
One of the risks in lending portfolio securities, as with other
extensions of credit, is the possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
There is also 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.
LIQUIDITY RISK
Certain securities may be difficult or impossible to sell at the time
and price that a Fund would like. A Fund may have to accept a lower price, sell
other securities or forego an investment opportunity, and this could have a
negative effect on performance. This risk applies to restricted securities, Rule
144A Securities certain over-the-counter options, securities not traded in the
U.S. markets and other securities that may trade in U.S. markets but are not
registered under the federal securities laws.
MARKET RISK
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Market risk is the risk that the value of a security will move up or
down, sometimes rapidly and unpredictably. These fluctuations, which are often
referred to as "volatility," may cause a security to be worth less than it was
worth at an earlier time. Market risk may affect a single issuer, industry or
sector of the economy or the market as a whole. Market risk is common to most
investments, including stocks and bonds, and the mutual funds that invest in
them. Bonds and other fixed income securities generally involve less market risk
than stocks. The risks of investing in bonds, however, can vary significantly
depending upon factors such as issuer and maturity. The bonds of some companies
may be riskier than the stocks of others.
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MONEY MARKET INSTRUMENTS
Except where otherwise noted, all of the Funds may, for temporary
defensive or liquidity purposes, invest up to 100% of their assets in money
market instruments.
COMMERCIAL PAPER
Commercial paper represents an unsecured promissory note
issued by a corporation. Generally, issues of commercial paper have
maturities of less than nine months and rates of return which are
fixed.
The commercial paper in which any of the Money Market Funds
may invest is subject to the issuer diversification and quality
restrictions imposed by Rule 2a-7 under the 1940 Act. The commercial
paper in which the Mortgage Securities Fund may invest must be: (i)
rated A-1 or better by Standard & Poor's Ratings Group ("S&P") or P-1
or better by Moody's Investors Service, Inc. ("Moody's"); or (ii)
unrated, but issued by companies with outstanding debt issues rated AAA
by S&P or Aaa by Moody's.
BANK OBLIGATIONS
Bank obligations are short-term obligations issued by U.S. and
foreign banks, including bankers' acceptances, certificates of deposit,
time deposits and similar securities.
The Money Market Fund, Ohio Municipal Money Market Fund and
Florida Tax-Free Money Fund may only invest in bank obligations issued
by domestic banks and U.S. branches of foreign banks subject to U.S.
banking regulation. In addition, at the time of the investment, the
issuing bank must have capital, surplus and undivided profits in excess
of $100 million. Issuing banks of obligations in which the Mortgage
Securities Fund invests must have capital, surplus and undivided
profits in excess of $1 billion.
The Michigan Tax-Free Fund is limited to investing only in
dollar-denominated obligations of: (i) U.S., Canadian, Asian or
European banks with at least $500 million in total assets; or (ii) U.S.
savings and loan associations with at least $1 billion in total assets.
VARIABLE RATE DEMAND NOTES
Variable rate demand notes ("VRDNs") are unsecured, direct
lending arrangements between a Fund, as the lender, and a corporation,
financial institution, government agency, municipality or other entity.
VRDNs have interest rates which float or which are adjusted at
regular intervals ranging from daily to annually. Although the VRDNs
are not generally traded, a Fund may demand payment of principal and
accrued interest according to its arrangement with the borrower
(usually upon no more than seven days' notice). VRDNs are, therefore,
treated as maturing on the later of the next interest adjustment or the
date on which a Fund may next demand payment. Some VRDNs are backed by
bank letters of credit.
Each of the Funds may only invest in VRDNs which satisfy its
credit requirements for commercial paper.
MONEY MARKET MUTUAL FUNDS
Under the 1940 Act, a Fund may not invest more than 10% of its total
assets at any one time in the shares of other funds, 5% of its total assets in
the shares of any one mutual fund, or more than 3% of the shares of any one
fund. 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.
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Each of the Growth Fund, the Income Equity Fund, the Mortgage
Securities Fund, the Ohio Tax- Free Fund, the Michigan Tax-Free Fund, the Fixed
Income 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 Tax-Free Fund may not, however, invest in shares of a money market mutual
fund which generates income treated as a preference item for federal alternative
minimum tax purposes.
The Ohio Municipal Money Market Fund may invest up to 5% of its total
assets in the shares of one or more tax-exempt money market mutual funds for
liquidity purposes.
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 include mortgage
pass-through securities, adjustable rate mortgage securities and derivative
securities such as collateralized mortgage obligations and stripped
mortgage-backed 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 U.S. 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 include originators of investors in mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
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. Ginnie Maes are Mortgage Pass-Through
Certificates 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 Bank 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.
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
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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.
The Mortgage Securities Fund, Fixed Income Securities Fund,
Intermediate Government Income Fund and Short/Intermediate Fixed Income
Securities Fund may invest in mortgage-related securities issued by the U.S.
government, its agencies or instrumentalities, and the derivative mortgage
securities described above. In addition, the Mortgage Securities Fund may invest
in mortgage-related securities issued by private entities.
MORTGAGE PASS-THROUGH SECURITIES
Mortgage pass-through securities 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.
ADJUSTABLE RATE MORTGAGE SECURITIES
Adjustable rate mortgage securities ("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 the prices of ARMS fluctuate with
changes in interest rates will also be affected by the indices
underlying the ARMS. Some indices, such s 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.
DERIVATIVE MORTGAGE SECURITIES
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Collateralized mortgage obligations are derivative mortgage
securities and 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. Both are considered derivative mortgage securities and are
collectively referred to as "CMOs." 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.
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 provide only the principal or interest feature of the
underlying security. 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, stripped mortgage-backed securities, 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.
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 change 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 a Fund in an 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.
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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.
Stripped mortgage-backed securities ("SMBSs") may represent an
interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities). 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 a Fund might not recover its original investment on
interest-only SMBSs if there are substantial prepayments on the
underlying mortgages. A 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 intends to use these
characteristics of interest-only SMBSs to reduce the effects of
interest rate changes on the value of a Fund's portfolio, while
continuing to pursue current income.
OPTIONS
A call option gives the purchaser of the option the right to buy a
security at a stated price from the writer (seller) of the option. A put option
gives the purchaser of the option the right to sell a security at a stated price
to the writer of the option. In a covered call option, during the option period
the writer owns the security (or a comparable security sufficient to satisfy
securities exchange requirements) which may be sold pursuant to the option. In a
covered put option, the writer holds cash and/or short-term debt instruments
sufficient in an amount equal to the exercise price of the option. In addition,
a put or call option will be considered covered if and to the extent that some
or all of the risk of the option has been offset by another option. A Fund may
write combinations of covered puts and calls on the same underlying security.
In general, a Fund may write options in an attempt to increase returns
or purchase options for hedging purposes.
The premium received from writing a put or call option, increases a
Fund's return on the underlying security in the event that the 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. A put option locks in the price at which a Fund may
sell a security it holds, thus hedging against market declines and a call option
locks in the price at which a Fund may purchase a security, thus hedging against
inflation. 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.
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
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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 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.
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.
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.
Each of the Equity and Income Funds may write or purchase put and call
options. All call options written must be covered.
The successful use of options 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 will fall, but the price rises 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 will rise, but the price
falls instead, the Fund could be required to purchase the security upon exercise
at a price higher than the current market price.
When a Fund purchases an option, it 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 use of options also involves the risk of imperfect correlation
between movements in option prices and movements in the value of the underlying
securities.
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.
The Funds generally expect that their options 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.
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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.
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.
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.
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PREFERRED STOCK
Preferred stock is a type of equity security which represents an
ownership interest in a corporation and the right to a portion of the assets of
the corporation in the event of a liquidation. This right, however, is
subordinate to that of any creditors, including holders of debt issued by the
corporation. Owners of preferred stock ordinarily do not have voting rights, but
are entitled to dividends at a specified rate.
Each of the Equity Funds may invest in preferred stock.
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. A Fund which holds mortgage-related securities which are
prepaid must 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 a Fund: (1) when interest rates fall and additional
mortgage prepayments must be reinvested at lower interest rates, income will be
reduced; and (2) 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.
Recent market experience has shown that certain derivative mortgage
securities have a higher degree of prepayment risk and, as a result, the prices
of such securities may be highly volatile.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements through which banks,
broker-dealers and other financial institutions approved by the Trustees sell
securities (usually U.S. Government securities) to a Fund and agree to
repurchase those securities at a specified price and time (usually not more than
seven days from the original sale). The seller's obligation to pay the
repurchase price is secured by the securities to be repurchased. These
securities are required to be held by the Fund, its custodian or a third-party
custodian. In order to protect the Fund's interest, collateral securities must
have a value of at least 100% of the resale price at all times. (The seller must
provide additional collateral in the event that this condition is not met). In
general, the Adviser will require collateral securities to have a value of at
least 102% of the resale price at the time the repurchase agreement is made. The
collateral is marked to market on a daily basis, thus enabling the Adviser to
determine when to request additional collateral from the seller.
If a seller defaults on its repurchase obligation, a Fund could realize
a loss on the sale of the underlying securities to the extent that the proceeds
of the sale (including accrued interest) are less than the resale price. In
addition, even though the U.S. Bankruptcy Code provides protection to a Fund if
the seller becomes bankrupt or insolvent, the Fund may suffer losses in such
event.
RESTRICTED AND ILLIQUID SECURITIES
Restricted securities are any securities which are subject to
restriction on resale under federal securities law, including commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. Illiquid securities are any securities for which
there is a limited trading market and may, therefore, be difficult to sell at
market value. Because restricted and illiquid securities may be difficult to
sell at an acceptable price, they may be subject to greater volatility and may
result in a loss to a Fund.
Section 4(2) commercial paper is generally sold to institutional
investors, such as mutual funds, 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
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paper is normally resold to other institutional investors 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 Trust 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 Trust
intends, therefore, with respect to the Money Market Fund's investments, to
treat these securities as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because Section 4(2) commercial
paper is liquid, the Trust intends not to subject such paper to any limitation
applicable to restricted securities.
Each of the Funds may invest in illiquid securities (including
restricted securities, repurchase agreements providing for settlement on more
than seven days' notice and OTC options). Except for the Florida Tax-Free Money
Fund and the Intermediate Government Income Fund, none of the Fund will invest
more than 10% of its total assets in such securities. The Florida Tax-Free Money
Fund is limited to 10% of its net assets, while the Intermediate Government
Income Fund may invest up to 15% of its total assets in illiquid securities.
SECURITY-SPECIFIC RISK
Security-specific risk is the risk that the value of a particular
security may or may not move in the same direction as the market as a whole. All
Funds are subject to this type of risk.
TAX-EXEMPT SECURITIES
Tax-exempt securities are debt obligations the interest on which is, in
the opinion of bond counsel for the issuing governmental entity or agency,
excluded from gross income for federal income tax purposes. Examples of
tax-exempt securities include fixed and floating or variable rate municipal
obligations, tax-exempt notes, participation, trust and partnership interests in
municipal obligations, tax-exempt commercial paper, stand-by commitments and
private activity bonds.
Tax-exempt securities are issued to obtain monies 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 tax-exempt securities may be issued
include refunding outstanding obligations, obtaining monies for general
operating expenses and to lend to other public institutions and facilities. The
two principal classifications of tax-exempt securities are general obligation
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 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 or facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source, and
generally are not payable from the unrestricted revenues of the issuer. Private
activity 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. Payment of principal of and interest on these bonds is the
responsibility of the private user (and any guarantor).
Tax-exempt notes and tax-exempt commercial paper are generally used to
provide for short-term capital needs, seasonal working capital needs of
municipalities or to provide interim construction financing, and generally have
maturities of one year or less. Tax-exempt notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs") and bond anticipation notes
("BANs"). TANs are issued to finance working capital needs of municipalities.
Generally, they are issued in anticipation of various seasonal tax revenues,
such as income, sales, use and business taxes, and are payable from these
specific future taxes. RANs are issued in expectation of receipt of other kinds
of revenue, such as federal revenues available under the federal revenue sharing
programs. BANs are issued to provide interim financing until long-term financing
can be arranged. In most cases, the long-term bonds then
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provide the money for the repayment of the notes. In most cases, tax-exempt
commercial paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions and is actively traded.
Private activity bonds (sometimes called "industrial development
bonds") may be issued by or on behalf of public authorities to obtain funds to
provide certain privately owned or operated facilities. Because dividends
attributable to interest on such bonds may not be tax exempt, it may not be
desirable for an investor to purchase shares of a Fund which invests in private
activity bonds, if such investor is a "substantial user" of facilities which are
financed by private activity bonds or industrial development bonds or a "related
person" of such a substantial user.
Tax-exempt securities may be purchased through the acquisition of
certificates of accrual or similar instruments evidencing direct ownership of
interest payments or principal payments, or both, on tax-exempt securities. In
such arrangements, any discount accruing on a certificate or instrument that is
purchased at a yield not greater than the coupon rate of interest on the related
tax-exempt securities must be exempt from federal income tax and applicable
state income taxes to the same extent as interest on such tax-exempt securities,
in the opinion of counsel to the initial seller of each such certificate or
instrument.
Tax-exempt securities may also be acquired by purchasing from banks
participation interests in all or part of specific holdings of 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. A Fund will have
the right to sell the interest back to the bank or other financial institutions
and draw on the letter of credit on demand, generally on seven days' notice, for
all or any part of the Fund's participation interest in the par value of the
municipal obligation plus accrued interest. Huntington will generally exercise
the demand on a letter of credit only under the following circumstances: (1)
upon default of any of the terms of the documents of the municipal obligation,
(2) as needed to provide liquidity in order to meet redemptions, or (3) in order
to maintain a high quality investment portfolio. The selling bank may receive a
fee in connection with the arrangement. Banks and financial institutions are
subject to extensive governmental regulations which may limit the amounts and
types of loans and other financial commitments that may be made and interest
rates and fees which may be charged. The profitability of banks and financial
institutions is largely dependent upon the availability and cost of capital
funds to finance lending operations under prevailing money market conditions.
General economic conditions also play an important part in the operations of
these entities and exposure to credit losses arising from possible financial
difficulties of borrowers may affect the ability of a bank or financial
institution to meet its obligations with respect to a participation interest. A
Fund which purchases a participation interest must receive an opinion of counsel
or a ruling of the Internal Revenue Service stating that interest earned by it
on the tax-exempt securities in which it holds such participation interest is
excluded from gross income for federal regular income tax purposes and
applicable state income taxes.
Prices and yields on 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.
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 tax-exempt securities. 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
securities 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
tax-exempt securities in the same manner. Obligations of issuers of tax-exempt
securities are
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subject to the provisions of bankruptcy, insolvency and other laws, such as the
Federal Bankruptcy Code, affecting the rights and remedies of creditors.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes
certain continuing requirements on issuers of tax-exempt securities 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.
Each of the Income Funds, the Ohio Municipal Money Market Fund and the
Florida Tax-Free Money Fund may invest in tax-exempt securities. The Ohio
Tax-Free Fund may not invest in private activity bonds if the interest is
treated as a preference item for purposes of the federal alternative minimum
tax. Shareholders should consult their own tax adviser regarding the potential
effect on them (if any) of any investment in the Tax-Exempt Funds.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are securities that are either issued or
guaranteed as to payment of principal and interest by the U.S. Government, its
agencies or instrumentalities. U.S. Government securities are limited to: direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds
and notes, bonds, and discount notes of U.S. Government agencies or
instrumentalities, including certain mortgage securities.
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.
Other such obligations are only supported by: the issuer's right to
borrow an amount limited to a specific line of credit from the U.S. Treasury;
the discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality; or the credit of the agency or
instrumentality.
All of the Funds may invest in U.S. Government securities and may use
them for defensive purposes.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS
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 any time during the period of the
option. U.S. Treasury security futures contracts and options on such contracts
are used to hedge against movements in the value of tax-exempt securities.
Successful use of U.S. Treasury security futures contracts depends on
the ability to predict the direction of interest rate movements and the effects
of other factors on the value of debt securities. For example, the sale of U.S.
Treasury security futures contracts is used to hedge against the possibility of
an increase in interest rates which would adversely affect the value of
tax-exempt securities held in a Fund's portfolio. If, unexpectedly, the prices
of the tax-exempt securities increase following 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
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example, if a Fund has hedged against a decline in the values of tax-exempt
securities held by it by selling U.S. Treasury securities futures and the value
of U.S. Treasury securities subsequently increases while the value of its
tax-exempt securities decreases, the Fund will incur losses on both its U.S.
Treasury security futures contracts and its tax-exempt securities. Huntington
will seek to reduce this risk by monitoring movements in markets for U.S.
Treasury security futures and options and for tax-exempt securities closely.
Each of the Tax-Exempt Funds may purchase and sell futures contracts
and related options on U.S. Treasury securities when, in the opinion of
Huntington, price movements in U.S. Treasury security futures and related
options will correlate closely with price movements in the tax-exempt securities
which are the subject of the hedge.
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WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common stock
at issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However, most
warrants have expiration dates after which they are worthless. In addition, if
the market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. The percentage increase
or decrease in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.
Each of the Equity Funds may invest in warrants.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
When-issued and delayed delivery transactions are arrangements through
which a Fund purchases securities with payment and delivery scheduled for a
future time. No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the purchasing Fund sufficient to make
payment for the securities are segregated on the Fund's records at the trade
date. These assets are then marked to market daily and maintained until the
transaction has been settled. A seller's failure to complete a transaction may
cause a Fund to miss a desired price or yield. In addition, because of delayed
settlement, a Fund may pay more than market value on the settlement date. The
Adviser may choose to dispose of a commitment prior to settlement.
With the exception of the Mortgage Securities Fund, which may invest up
to 35% of its total assets in securities purchased on a when-issued or delayed
delivery basis, none of the Funds 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.
All of the Funds may engage in when-issued and delayed delivery
transactions.
YEAR 2000 RISK
Year 2000 Risk is the risk that a Fund could be adversely affected if
the computer systems used by its investment adviser or other service providers
do not properly process and calculate date-related information and data
beginning on January 1, 2000. Year 2000 Risk exists because most computer
systems were designed only to recognize a two-digit year, not a four-digit year.
Beginning on January 1, 2000, these computers may interpret "00" as the year
1900 and either stop processing date-related computations or process them
incorrectly. These failures could have a negative impact on the handling of
securities trades, pricing and account services. Huntington has taken steps
designed to address Year 2000 Risk with respect to the computer systems that it
uses and to obtain satisfactory assurances that comparable steps have been taken
by each of the Trust's other service providers.
As of the date of this SAI, it is not anticipated that Year 2000 Risk
relating to the investment adviser or the Trust's other major service providers
will result in shareholders experiencing negative effects on their investment,
or on the services provided in connection therewith. There can be no assurances,
however, that the steps taken by Huntington and the Trust's other service
providers will be sufficient to avoid any adverse impact on the Funds. Year 2000
Risk also affects the companies in which the Funds invest, communications and
public utility companies, governmental entities, financial processors and other
companies upon which all investment companies rely.
ZERO-COUPON SECURITIES
Zero-coupon securities 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.
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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 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 maybe
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.
Each of the Income Funds may invest in zero-coupon securities.
SPECIAL RISK FACTORS APPLICABLE TO THE OHIO TAX-EXEMPT FUNDS
"Ohio tax-exempt securities" refer to tax-exempt securities issued by
or on behalf of the State of Ohio or its authorities, agencies,
instrumentalities, and political subdivisions, the interest on which, in the
opinion of bond counsel at the time of issuance, is exempt from both federal
income tax and Ohio personal income taxes. Since the Ohio Tax-Free Fund and the
Ohio Municipal Money Market Fund invest primarily in Ohio tax-exempt securities,
the value of these 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 Ohio Municipal Money Market Fund may invest in Ohio tax-exempt
securities only if rated at the time of purchase within the two highest grades
assigned by any two nationally recognized statistical rating organizations
("NRSROs") (or by any one NRSRO if the obligation is rated by only that NRSRO).
In addition, the Ohio Municipal Money Market Fund may have more than 40% of its
total assets invested in securities that are credit-enhanced by domestic and
foreign banks. Changes in credit quality of these banking institutions could
cause losses to this Fund and affect its share price.
As described above, the Ohio Municipal Money Market Fund and the Ohio
Tax-Free Fund will each invest most of its net assets in Ohio tax-exempt
securities. The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund are
therefore susceptible to general or particular economic, political
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or regulatory factors that may affect issuers of Ohio tax-exempt securities. The
following information constitutes only a brief summary of some of the many
complex factors that may have an effect. The information does not apply to
"conduit" obligations on which the public issuer itself has no financial
responsibility. This information is derived from official statements of certain
Ohio issuers published in connection with their issuance of securities and from
other publicly available information, and is believed to be accurate. No
independent verification has been made of any of the following information.
Generally, the creditworthiness of Ohio tax-exempt securities of local
issuers is unrelated to that of obligations of the State itself, and the State
has no responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in
connection with investment in particular Ohio tax-exempt securities or in those
obligations of particular Ohio issuers. It is possible that the investment may
be in particular Ohio tax-exempt securities, or in those of particular issuers,
as to which those factors apply. However, the information below is intended only
as a general summary, and is not intended as a discussion of any specific
factors that may affect any particular obligation or issuer.
Ohio is the seventh most populous state. The 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census estimate
for 1998 was 11,209,000.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods manufacturing
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, 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 is an important segment of the
economy, with over half the State's area devoted to farming and approximately
16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported 1990 average
monthly State rate was 5.7%, compared to the 5.5% national figure. However, in
recent years the annual State rates were below or at the national rates (4.3%
vs. 4.5% in 1998, both at 4.2% in 1999). The unemployment rate and its effects
vary among geographic areas of the State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
tax-exempt securities held in the Ohio Municipal Money Market Fund and/or the
Ohio Tax-Free Fund or the ability of particular obligors to make timely payments
of debt service on (or lease payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences an interim appropriations act was enacted effective July 1, 1991; it
included GRF debt service and lease rental appropriations for the entire
biennium, while continuing most other appropriations for a month. Pursuant to
the general appropriations act for the entire biennium, passed on July 11, 1991,
$200 million was transferred from the Budget Stabilization Fund (BSF, a cash and
budgetary management fund) to the GRF in FY 1992.
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Based on updated results and forecasts in the course of that FY, both
in light of a continuing uncertain nationwide economic situation, there was
projected and then timely addressed an FY 1992 imbalance in GRF resources and
expenditures. In response, the Governor ordered most State agencies to reduce
GRF spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance and additional amounts from certain
other funds were transferred late in the FY to the GRF, and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million in
selected GRF spending reductions and subsequent executive and legislative action
(a combination of tax revisions and additional spending reductions). The June
30, 1993 ending GRF fund balance was approximately $111 million, of which, as a
first step to replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed
for debt service or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture.
Based on June 30, 1994 balances, an additional $260 million was deposited in the
BSF. The biennium ended June 30, 1995 with a GRF ending fund balance of $928
million, of which $535.2 million was transferred into the BSF. The significant
GRF fund balance, after leaving in the GRF an unreserved and undesignated
balance of $70 million, was transferred to the BSF and other funds including
school assistance funds and, in anticipation of possible federal program
changes, a human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer network
purposes and $30 million to a new State transportation infrastructure fund.
Approximately $400.8 million served as a basis for temporary 1996 personal
income tax reductions aggregating that amount. The 1996-97 biennium-ending GRF
fund balance was $834.9 million. Of that, $250 million went to school building
construction and renovation, $94 million to the school computer network, $44.2
million for school textbooks and instructional materials and a distance learning
program, and $34 million to the BSF, and the $263 million balance to a State
income tax reduction fund.
The 1998-99 biennium ending GRF balances were $1.5 billion (cash) and
$976 million (fund). Of that fund balance, $325.7 million has been transferred
to school building assistance, $46.3 million to the BSF, $90 million to supply
classroom computers and for interactive video distance learning, and the
remaining amount to the State income tax reduction fund. The BSF had a December
16, 1999 balance of over $953 million.
The GRF appropriations acts for the current 2000-01 biennium (one for
all education purposes, and one for general GRF purposes) were passed on June 24
and June 28, 1999, respectively, and promptly signed (after selective vetoes) by
the Governor. Those acts provided for total GRF biennial expenditures of over
$39.8 billion. Necessary GRF debt service and lease-rental appropriations for
the entire biennium were requested in the Governor's proposed budget and
incorporated in the appropriations bills as introduced, and were included in the
bill versions as passed by the House and the Senate and in the acts as passed
and signed.
The State's incurrence or assumption of debt without a vote of the
people is, with exceptions noted below, prohibited by current State
constitutional provisions. The State may incur debt, limited in amount to
$750,000, to cover casual deficits or failures in revenues or to meet expenses
not otherwise provided for. The Constitution expressly precludes the State from
assuming the debts of any local government or corporation. (An exception is made
in both cases for any debt incurred to repel invasion, suppress insurrection or
defend the State in war.)
By 16 constitutional amendments approved from 1921 to date (the latest
adopted in 1999) Ohio voters authorized the incurrence of State debt and the
pledge of taxes or excises to its payment. At
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February 11, 2000, over $1.4 billion (excluding certain highway bonds payable
primarily from highway use receipts) of this debt was outstanding or awaiting
delivery. The only such State debt currently at that date authorized to be
incurred were portions of the highway bonds, and the following: (a) up to $100
million of obligations for coal research and development may be outstanding at
any one time ($19.3 million outstanding); (b) $240 million of obligations
previously authorized for local infrastructure improvements, no more than $120
million of which may be issued in any calendar year (over $1.06 billion
outstanding); and (c) up to $200 million in general obligation bonds for parks,
recreation and natural resources purposes which may be outstanding at any one
time ($109.1 million outstanding, with no more than $50 million to be issued in
any one year).
The electors in 1995 approved a constitutional amendment extending the
local infrastructure bond program (authorizing an additional $1.2 billion of
State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizing additional highway bonds (expected to be payable
primarily from highway use receipts). The latter authorizes not more than $1.2
billion to be outstanding at any time and not more than $220 million to be
issued in a fiscal year.
A constitutional amendment approved by the voters in November 1999
authorizes State general obligation debt to pay costs of facilities for a system
of common schools throughout the State and facilities for state supported and
assisted institutions of higher education. That, and other debt represented by
direct obligations of the State (including that authorized by the Ohio Public
Facilities Commission and Ohio Building Authority, and some authorized by the
Treasurer), may not be issued if future FY total debt service on those direct
obligations to be paid from the GRF or net lottery proceeds exceeds 5% of total
estimated revenues of the State for the GRF and from net State lottery proceeds
during the FY of issuance.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include obligations
issued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $5.2 billion of
which were outstanding or awaiting delivery at February 11, 2000.
In recent years, State agencies have participated in transportation and
office building projects that may have some local as well as State use and
benefit, in connection with which the State enters into lease purchase
agreements with terms ranging from 7 to 20 years. Certificates of participation,
or special obligation bonds of the State or a local agency, are issued that
represent fractionalized interests in or are payable from the State's
anticipated payments. The State estimates highest future FY payments under those
agreements (as of February 11, 2000) to be approximately $34.6 million (of which
$30.7 million is payable from sources other than the GRF, such as federal
highway money distributions). State payments under all those agreements are
subject to biennial appropriations, with the lease terms being two years subject
to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and credit).
A 1994 constitutional amendment pledges the full faith and credit and
taxing power of the State to meeting certain guarantees under the State's
tuition credit program which provides for purchase of tuition credits, for the
benefit of State residents, guaranteed to cover a specified amount when applied
to the cost of higher education tuition. (A 1965 constitutional provision that
authorized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially from
program revenues.)
State and local agencies issue obligations that are payable from
revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio
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public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide
aggregate of approximately 47% in FY 1998) of their operating moneys from State
subsidies, but are dependent on local property taxes, and in 126 districts (as
of February 11, 2000) on voter-authorized income taxes, for significant portions
of their budgets. Litigation, similar to that in other states, has been pending
questioning the constitutionality of Ohio's system of school funding. The Ohio
Supreme Court has concluded that aspects of the system (including basic
operating assistance and the loan program referred to below) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision. The State has appealed to
the Supreme Court, before which oral arguments were heard on November 16, 1999.
That Court has issued a stay, pending appeal, of the implementation of the trial
court's order. A small number of the State's 612 local school districts have in
any year required special assistance to avoid year-end deficits. A now
superseded program provided for school district cash need borrowing directly
from commercial lenders, with diversion of State subsidy distributions to
repayment if needed. Recent borrowings under this program totalled $87.2 million
for 20 districts in FY 1996 (including $42.1 million for one), $113.2 million
for 12 districts in FY 1997 (including $90 million to one for restructuring its
prior loans), and $23.4 million for 10 districts in FY 1998.
Ohio's 943 incorporated cities and villages rely primarily on property
and municipal income taxes for their operations. With other subdivisions, they
also receive local government support and property tax relief moneys distributed
by the State.
For those few municipalities and school districts that on occasion have
faced significant financial problems, there are statutory procedures for a joint
State/local commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar procedures
have recently been extended to counties and townships.) Since inception for
municipalities in 1979, these "fiscal emergency" procedures have been applied to
27 cities and villages; for 21 of them the fiscal situation was resolved and the
procedures terminated (one municipality is currently in preliminary "fiscal
watch" status). As of February 11, 2000, a school district "fiscal emergency"
provision was applied to 11 districts, and eight were on preliminary "fiscal
watch" status.
At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political subdivisions and
other local taxing districts. The Constitution has since 1934 limited to 1% of
true value in money the amount of the aggregate levy (including a levy for
unvoted general obligations) of property taxes by all overlapping subdivisions,
without a vote of the electors or a municipal charter provision, and statutes
limit the amount of that aggregate levy to 10 mills per $1 of assessed valuation
(commonly referred to as the "ten-mill limitation"). Voted general obligations
of subdivisions are payable from property taxes that are unlimited as to amount
or rate.
SPECIAL RISK FACTORS APPLICABLE TO THE MICHIGAN TAX-FREE FUND
"Michigan tax-exempt securities" refer to tax-exempt securities issued
by or on behalf of the State of Michigan or its authorities, agencies,
instrumentalities, and political subdivisions, the interest on which, in the
opinion of bond counsel at the time of issuance, is exempt from both federal
income tax and Michigan personal income taxes. Because the Michigan Tax-Free
Fund will invest primarily in Michigan tax-exempt securities, its investment
performance is especially dependent on Michigan's prevailing economic
conditions. As a result, the value of this Fund's shares may fluctuate more
widely than the value of shares of a fund investing in securities relating to a
number of states. In addition, to provide somewhat greater investment
flexibility, the Michigan Tax-Free Fund is also a "non-diversified" fund and, as
such, is not required to meet any diversification requirements under the 1940
Act. The Michigan Tax-Free Fund may use its ability as a non-diversified fund to
concentrate its assets in the
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securities of a smaller number of issuers which the Adviser deems to be
attractive investments, rather than invest in a larger number of securities
merely to satisfy non-tax diversification requirements. While the Adviser
believes that the ability to concentrate its investments in particular issuers
is an advantage when investing in Michigan tax-exempt securities, such
concentration also involves a risk of loss should the issuer be unable to make
interest or principal payments or should the market value of such securities
decline. Investment in a non-diversified fund could therefore entail greater
risks than investment in a "diversified" fund, including a risk of greater
fluctuations in yield and share price. The Michigan Tax-Free Fund must
nevertheless meet certain diversification tests to qualify as a "regulated
investment company" under the Code.
The following highlights some of Michigan's more significant financial
trends and problems, and is based on information drawn from official statements
and prospectuses relating to securities offerings of the State of Michigan, its
agencies and instrumentalities as available on December 31, 1999. The Trust has
not independently verified any of the information contained in such official
statements and other publicly available documents, but is not aware of any fact
that would render such information inaccurate.
Constitutional State Revenue Limitations. In 1978 the State
Constitution was amended to limit the amount of total State revenues raised from
taxes and other sources. State revenues (excluding federal aid and revenues for
payment of principal and interest on general obligation bonds) in any fiscal
year are limited to a fixed percentage of State personal income in the prior
calendar year or average of the prior three calendar years, whichever is
greater. The percentage is fixed by the amendment to equal the ratio of the
1978-79 fiscal year revenues to total 1977 State personal income.
If any fiscal year revenues exceed the revenue limitation by one
percent or more, the entire amount of such excess shall be rebated in the
following fiscal year's personal income tax or single business tax. Any excess
of less than one percent may be transferred to the State's Budget Stabilization
Fund.
The State may raise taxes in excess of the limit for emergencies when
deemed necessary by the Governor and two-thirds of the members of each house of
the Legislature.
The State Constitution provides that the proportion of State spending
paid to all units of local government to total State spending may not be reduced
below the proportion in effect in the 1978-79 fiscal year. The percentage,
originally determined for the base year 1978-79 at 41.6 percent, was
recalculated effective with the fiscal year 1992-93 as a result of a legal
settlement with Oakland County, Michigan. As part of the settlement, the State
agreed to recalculate the base year determination to ensure a consistent base of
expenditures to local units of government. The recalculated base year percentage
is 48.97%. If such spending does not meet the required level in a given year, an
additional appropriation for local governmental units is required by the
"following fiscal year," which means the year following the determination of the
shortfall, according to an opinion issued by the State's Attorney General.
Spending for local units met this requirement for fiscal years 1990-91 through
1995-96.
The State Constitution also requires the State to finance any new or
expanded activity of local governments mandated by State law. Any expenditures
required by this provision would be counted as State spending for local units of
government for purposes of determining compliance with the provision cited
above.
Constitutional Local Tax Limitations. Under the Michigan Constitution,
the total amount of general ad valorem taxes imposed on taxable property in any
year cannot exceed certain millage limitations specified by the Constitution,
statute or charter. The Constitution was amended by popular vote in November
1978 (effective December 23, 1978) to prohibit local units of government from
levying any tax not authorized by law or charter, or from increasing the rate of
an existing tax above the rate authorized by law or charter, at the time the
amendments were ratified, without the approval of a majority of the electors of
the local unit voting on the question.
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Local units of government and local authorities are authorized to issue
bonds and other evidences of indebtedness in a variety of situations without the
approval of electors, but the ability of the obligor to levy taxes for the
payment of such obligations is subject to the foregoing limitations unless the
obligations were authorized before December 23, 1978 or approved by the
electors.
The 1978 amendments to the Constitution also contain millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of new construction and improvements) increase at a percentage
greater than the percentage increase in the Consumer Price Index, the maximum
authorized tax rate would be reduced by a factor which would result in the same
maximum potential tax revenues to the local taxing unit as if the valuation of
taxable property (less new construction and improvements) had grown only at the
Consumer Price Index rate instead of at the higher actual growth rate. Thus, if
taxable property values rise faster than consumer prices, the maximum authorized
tax rate would be reduced accordingly.
Michigan School Finance and Property Tax Changes. On March 15, 1994,
the people of the State of Michigan approved an amendment to the State
Constitution (the "Constitutional Amendment") which resulted in reduced local
property taxes. The Constitutional Amendment increased the state sales and use
tax from 4 percent to 6 percent; limits the ability of local school districts to
levy taxes; and limits assessment increases for each parcel of property to the
lesser of 5 percent or the rate of inflation. When property is subsequently
sold, its taxable value will revert to the current assessment level of 50
percent of true cash value.
The Constitutional Amendment, together with legislation enacted in
conjunction with the Constitutional Amendment, has substantially increased the
revenues dedicated to the State's school aid fund. Pursuant to the
Constitutional Amendment, the State's school aid fund directly receives (i) 60%
of all taxes imposed at a rate of 4% on retailers on taxable sales at retail of
tangible personal property and (ii) 100% of the proceeds of the sales and use
taxes imposed at the additional rate of 2%. Pursuant to companion legislation,
the State's school aid fund directly receives (i) all of the proceeds generated
from the tax levied on cigars, noncigarette smoking tobacco and smokeless
tobacco at a rate of 16% of the wholesale price thereof, (ii) 63.4% of the
proceeds generated by the tax levied on cigarettes at the rate of 3.75 cents per
cigarette (75(cent) per pack), (iii) all of the proceeds generated by the .75%
real estate transfer tax, (iv) the profits of the state-operated lottery, (v) a
portion of the commercial and industrial facilities taxes imposed pursuant to
the Commercial Redevelopment Act, Act No. 255, Public Acts of Michigan, 1978, as
amended, and Act No. 198, Public Acts of Michigan, 1974, as amended,
respectively, which would otherwise be disbursed to local school districts and
which compensates the State for increased State Aid to certain intermediate
school districts affected by the property tax abatements authorized under those
Acts, (vi) the State's 4% liquor excise tax, (vii) the State's education tax
levied at a rate of six mills on all property not exempt by law from ad valorem
property taxes or not subject to a tax levied upon certain rail transportation,
telephone and telegraph companies and (viii) 23.0% of the gross collections
before refunds from the State income tax levied at a rate of 4.4%.
In conjunction with the Constitutional Amendment, the State
Legislature also enacted legislation which substantially reduces the maximum
rate at which ad valorem property taxes can be levied by local school districts
for school operating purposes. Except for certain levies authorized as described
in the two paragraphs below, each local school district shall levy no more than
18 mills for school operating purposes or the number of mills it levied in 1993
for school operating purposes, whichever is less. All homestead property and
qualified agricultural property as defined by State law is exempt from such
levy, except for certain limited exceptions. The legislation also established a
system of financing local school operating costs based on a foundation allowance
amount which may vary by district based upon historical spending levels. State
funding will provide each school district an amount equal to the difference
between its foundation allowance and the revenue that would be generated by the
levy of certain local property taxes for school operating purposes at specified
maximum authorized rates. A local school district is entitled to levy
supplemental property taxes to generate additional revenues if its foundation
allowance is less than its historical per pupil expenditures. Levies of a
limited number of enhancement mills on regional and local school district bases
are also allowed.
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The effect of the Constitutional Amendment and the companion
legislation is that a significant portion of the cost of local school operations
have been shifted from local school districts to the State. The legislation
provided for additional State revenues to fund these State expenses. These
additional revenues will be included with the State's constitutional revenue
limitations and may impact the State's ability to raise additional revenues in
the future.
Effect of Limitations on Ability to Pay Bonds. The ability of the State
of Michigan to pay the principal and interest on its general obligation bonds
may be affected by the limitations described above under "Constitutional State
Revenue Limitations" and "Recent Michigan School Finance and Property Tax
Changes." Similarly, the ability of local units of government to levy taxes to
pay the principal and interest on their general obligation bonds is subject to
the constitutional, statutory, and charter limitations described above under
"Constitutional Local Tax Limitations" and "Recent Michigan School Finance and
Property Tax Changes."
In general, revenue bonds issued by the State, by local units of
government, or by authorities created by the State or local units of government
are payable solely from such specified revenues (other than tax revenues) as are
pledged for that purpose, and such authorities generally have no taxing power.
Effect of General Economic Conditions in Michigan. Michigan is an
industrialized state, whose economy is dominated by the automobile industry and
related industries. It tends to be more vulnerable to economic downturns than
the other economies of many other states and the nation as a whole. Tourism and
agriculture are two other important, but less significant industries in the
State, both of which have been affected adversely by prior recessions. Over the
past fifteen years the Michigan unemployment rate typically has been higher than
the national rate, however, this has not been the case since 1994.
There can be no assurance that the same factors that adversely affect
the economy of the State generally will not also affect adversely the market
value or marketability of obligations issued by local units of government or
local authorities in the State or the ability of the obligors to pay the
principal of or interest on such obligations.
State Litigation. A significant number of lawsuits, involving
substantial dollars, have been filed against the State and are pending. These
include tax refund claims, including claims for Single Business Taxes,
condemnation actions, claims relating to funding for schools and county courts,
and other types of actions.
SPECIAL RISK FACTORS APPLICABLE TO THE FLORIDA TAX-FREE MONEY FUND
"Florida tax-exempt securities" refer to tax-exempt securities issued
by the state of Florida and its political subdivisions, agencies, authorities
and instrumentalities and other qualifying issuers, the value of which is exempt
from the Florida intangible personal property tax, and which pay interest that
is, in the opinion of bond counsel to the issuer, excluded from gross income for
federal income tax purposes. Because the Florida Tax-Free Money Fund will invest
primarily in Florida tax-exempt securities, its investment performance is
especially dependent on Florida's prevailing economic conditions. The Florida
Tax-Free Money Fund may invest in Florida tax-exempt securities only if rated at
the time of purchase within the two highest grades assigned by any two NRSROs
(or by any one NRSRO if the obligation is rated by only that NRSRO).
In 1980, Florida ranked seventh in population among the fifty states,
having a population of 9.7 million people. The state has grown dramatically
since 1980 and, as of April 1, 1998, Florida ranked fourth in the nation, with
an estimated population of 15 million. The service and trade sectors constitute
Florida's largest employment sectors, with services currently accounting for 36%
and trade accounting for 25.5% of the state's of total non-farm employment.
Florida's manufacturing jobs exist in the high-tech and high value-added
sectors, such as electrical and electronic equipment, as well as printing and
publishing. Since 1992, Florida's non-farm jobs have increased 24.6% while U.S.
non-farm jobs
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<PAGE> 130
increased 15.9%. From 1995 to 1997, Florida's unemployment rate was below the
nation's average. In 1998, Florida's unemployment rate was 4.5%, while the
nation's was also 4.5%.
South Florida, because of its location and involvement with foreign
trade, tourism and investment capital, is particularly susceptible to
international trade and currency imbalances and economic dislocations in Central
and South America. The central and northern portions of the state are affected
by problems in the agricultural sector, particularly in the citrus and sugar
industries. Short-term adverse economic conditions may be experienced by the
central and northern section of Florida, and in the state as a whole, due to
crop failures, severe weather conditions or other agriculture-related problems.
In addition, the state economy has historically been somewhat dependent on the
tourism and construction industries and is therefore sensitive to trends in
those sectors.
The State operates under an annual budget. Under the State Constitution
and applicable statutes, the budget as a whole and each separate fund within the
State budget must be kept in balance from currently available revenues during
each State fiscal year (July 1 through June 30). Moneys are expended pursuant to
appropriations acts. In fiscal year 1998-99, an estimated 67% of total direct
revenues were derived from State taxes and fees. Federal funds and other special
revenues accounted for the remaining revenues. The largest single source of tax
receipts in Florida is the 6% sales and use tax and the second largest source of
tax receipts (including those distributed to local governments) is the tax on
motor fuels. Other tax receipt sources include an alcoholic beverage tax (an
excise tax), a corporate income tax, a documentary stamp tax, a gross receipts
tax, intangible personal property tax and an estate tax. The Florida lottery
produced sales of $2.11 billion, of which $802.9 million was used for education,
in fiscal 1998-99. Estimated revenues of $18,592.1 million for fiscal 1999-2000
represent an increase of 4% over revenues for fiscal 1998-99. Estimated revenues
for fiscal 1999-2000 of $18,555.2 million represent an increase of 4.6% over
fiscal 1999-2000.
Pursuant to a constitutional amendment which was ratified by the voters
on November 8, 1994, the rate of growth in state revenues in a given fiscal year
is limited to no more than the average annual growth rate in Florida personal
income over the previous five years. Revenues collected in excess of the
limitation are to be deposited into the Budget Stabilization Fund unless 2/3 of
the members of both houses of the Legislature vote to raise the limit. The
revenue limit is determined by multiplying the average annual growth rate in
Florida personal income over the previous five years by the maximum amount of
revenue permitted under the cap for the previous year. State revenues are
defined as taxes, licenses, fees and charges for services imposed by the
Legislature as well as revenue from the sale of lottery tickets. Included among
the categories of revenues which are exempt from the proposed revenue limitation
are revenues pledged to state bonds.
Many factors, including national, economic, social and environmental
policies and conditions, most of which are not within the control of the state
or local government, could affect or adversely impact on Florida's financial
condition.
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<PAGE> 131
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental and may not be
changed without a vote of a majority of the outstanding shares of a Fund.
Accordingly, the Trust will not, on behalf of a Fund:
(1) Except for the Tax-Exempt 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 Tax-Exempt
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
state-wide, national or international development) affecting
one such municipal 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) For all Funds except the Florida Tax-Free Money Fund, invest
more than 10% (15% in the case of the Government Income Fund)
of the value of its total assets in illiquid securities
including restricted securities, repurchase agreements of over
seven days' duration and OTC options. The Florida Tax-Free
Money Fund will not invest more than 10% of the value of its
net assets in such illiquid securities. The Money Market Fund
will not include in this limitation 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.
(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, except that each of the Michigan
Tax-Free Fund, Intermediate Government Income Fund and Florida
Tax-Free Money Fund may borrow from banks up to 10% of the
current value of its total net assets for temporary or
defensive purposes and those borrowings may be secured by the
pledge of not more than 15% (10% for the Florida Tax-Free
Money Fund) of the current value of its total net assets (but
investments may not be purchased by these Funds while any such
borrowings are outstanding).
(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
35
<PAGE> 132
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 margin 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, each of the Funds may lend its 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% (5% in the case of the Michigan Tax-Free
Fund) of the value of total assets 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.
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<PAGE> 133
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, 1999 and 1998, the portfolio
turnover rates for each of the following Funds were as follows:
<TABLE>
<CAPTION>
FUND 1999 1998
- ---- ---- ----
<S> <C> <C>
Growth Fund............................................... 10% 11%
Income Equity Fund........................................ 20% 13%
Mortgage Securities Fund.................................. 20% 17%
Ohio Tax-Free Fund........................................ 11% 9%
Michigan Tax-Free Fund*................................... 6% 11%
Fixed Income Securities Fund.............................. 44% 47%
Intermediate Government Income Fund*...................... 14% 9%
Short/Intermediate Fixed Income Securities Fund........... 92% 61%
</TABLE>
*The 1998 portfolio turnover rates for the Michigan Tax-Free Fund and the
Intermediate Government Income Fund include predecessor fund data.
Portfolio turnover for the Income Equity Fund increased in 1999 in
order to reduce unrealized gains and losses. Sale proceeds were generally used
to increase current yield and dividend growth. Portfolio turnover for the
Short/Intermediate Fixed Income Securities Fund was higher in 1999 than in 1998
due to an unusually high supply of new longer term issues designed to avoid
offerings too close to the year 2000. The resulting high spread in corporate
issues warranted the sale of existing positions for longer positions to increase
the average life of the portfolio. Portfolio turnover for the Michigan Tax-Free
Fund was reduced in 1999 versus 1998 as a result of a decrease in the rate of
cash flowing into the Fund, as well as in the number of maturing securities in
the portfolio. Decreased cash and generally rising interest rates dictated a
more passive strategy. 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.
37
<PAGE> 134
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for generally overseeing the
conduct of each Fund's business in accordance with the laws of the state of
Massachusetts. Trustees and officers of the Trust and their principal
occupations during the past five years are as set forth below.
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
David S. Schoedinger Trustee Chairman of the Board, Schoedinger
229 East State Street Funeral Service; President
Columbus, Ohio Schoedinger Financial Services,
Birth date: November 27, 1942 Inc.; Past President, Board of
Directors of National Selected (1992-
1993).
John M. Shary Trustee and Retired; Formerly: Member,
3097 Walden Ravine Chairman of the Business Advisory Board, DPEC-
Columbus, Ohio 43321 Board Data Processing Education Corp.
Birth date: November 28, 1930 (1993-1996); Member, Business
Advisory Board, Hublink, Inc. (1993-
1997); Member, Business Advisory
Board, Miratel Corporation (1993-
1995); Member, Board of Directors,
Applied Information Technology
Research Center (1987-1990);
Member, Board of Directors, AIT
(1987-1990); Chief Financial Officer
of OCLC Online Computer Library
Center, Inc. (1978-1993).
William R. Wise Trustee Retired; Formerly, Corporate
613 Valley Forge Court Director of Financial Services and
Westerville, Ohio Treasurer, Children's Hospital,
Birth date: October 20, 1931 Columbus, Ohio; Associate
Executive Director and Treasurer,
Children's Hospital, Columbus, Ohio
(1985-1989).
Mark Nagle President and Chief Vice President, Fund Accounting
One Freedom Valley Road Executive Officer and Administration of SEI
Oaks, Pennsylvania 19456 Investments Mutual Fund Services
Birth date: October 20, 1959 since 1996; BISYS Fund Services
from 1995 to 1996; Senior Vice
President, Fidelity Investments
from 1981-1995.
</TABLE>
38
<PAGE> 135
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH PRINCIPAL OCCUPATION(S)
NAME, AGE AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
John Leven Treasurer and Chief Director of Funds Accounting of SEI
One Freedom Valley Road Financial Officer Investments Mutual Funds Services
Oaks, Pennsylvania 19456 since March 1999; Division
Birth date: January 2, 1957 Controller, First Data Corp. from
1998 to 1999; Corporate Controller,
FPS Services, a mutual fund servicing
company, from 1993 to 1998.
James R. Foggo Vice President and Vice President and Assistant
One Freedom Valley Road Secretary Secretary of SEI since 1998.
Oaks, Pennsylvania 19456 Associate, Paul Weiss, Rifkind,
Birth date: June 30, 1964 Wharton & Garrison (1998).
Associate, Baker & McKenzie (1995-
1998). Associate, Battle Fowler
L.L.P. (1993-1995).
Todd Cipperman Vice President and General Counsel of SEI Investments
One Freedom Valley Road Assistant Secretary since 2000; Vice President and
Oaks, Pennsylvania 19456 Assistant Secretary of SEI
Birth date: February 14, 1966 Investments since 1995; Associate
attorney with Dewey Ballantine
(1994-1995); Associate attorney
with Winston & Strawn (1991-1994).
Lydia A. Gavalis Vice President and Vice President and Assistant
One Freedom Valley Road Assistant Secretary Secretary of SEI Investments
Oaks, Pennsylvania 19456 Distribution Co. since 1998;
Birth date: June 5, 1964 Assistant General Counsel and
Director of Arbitration, Philadelphia
Stock Exchange from 1989-1998.
Timothy D. Barto Vice President and Vice President and Assistant
One Freedom Valley Road Assistant Secretary Secretary of SEI Investments since
Oaks, Pennsylvania 19456 1999; Associate at Dechert, Price &
Birth date: March 28, 1968 Rhoads from 1997-1999; Associate
at Richter, Miller & Finn from 1994-
1997.
Christine M. McCullough Vice President and Vice President and Assistant
One Freedom Valley Road Assistant Secretary Secretary of SEI Investments since
Oaks, Pennsylvania 19456 1999; Associate at White and
Birth date: December 5, 1960 Williams from 1991-1999.
</TABLE>
TRUSTEE COMPENSATION
During the fiscal year ended December 31, 1999, the Trustees received
the following compensation from the Trust and total compensation from all
investment companies advised by Huntington:
39
<PAGE> 136
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION FROM THE
FROM THE HUNTINGTON FUNDS AND
NAME AND POSITION HUNTINGTON FUNDS HUNTINGTON VA FUNDS
- ----------------- ---------------- ---------------------
<S> <C> <C>
David S. Schoedinger, Trustee $12,000 $12,000
John M. Shary, Trustee and Chairman $16,500 $16,500
William R. Wise, Trustee $12,000 $12,000
</TABLE>
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.
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.
INVESTMENT ADVISER
Huntington National Bank is the investment adviser to each of the Funds
of the Trust. It is an indirect, wholly-owned subsidiary of Huntington
Bancshares Incorporated ("HBI") and is deemed to be controlled by HBI. With
$28.7 billion in assets as of December 31, 1999, 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.
Under the investment advisory agreements between the Trust and
Huntington (the "Investment Advisory Agreements"), Huntington, at its expense,
furnishes a continuous an investment program for the various Funds and makes
investment decisions on their behalf, all subject to such policies as the
Trustees may determine. Investment decisions are subject to the provisions of
the Trust's Declaration of Trust and By-laws, and of the 1940 Act. In addition,
Huntington makes decisions consistent with a Fund's investment objectives,
policies, and restrictions, and such policies and instructions as the Trustees
may, from time to time, establish.
Each of the Funds pays advisory fees to Huntington based on a
percentage of its average daily net assets as specified in the applicable
Investment Advisory Agreement. During the fiscal years ended December 31, 1999,
1998 and 1997, Huntington collected the following fees:
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<PAGE> 137
<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- ------------- ------------- -------------
<S> <C> <C> <C>
Money Market Fund ............................. $2,635,149 $2,150,113 $1,438,732
Ohio Municipal Money Market Fund .............. $ 514,825(1) $ 496,013(1) $ 315,663(1)
U.S. Treasury Money Market Fund ............... $ 947,595 $1,089,675 $1,103,305
Florida Tax-Free Money Fund ................... $ 62,539(2) N/A N/A
Growth Fund ................................... $1,968,426 $1,849,965 $1,249,265
Income Equity Fund ............................ $1,453,087 $1,396,117 $1,175,011
Mortgage Securities Fund ...................... $ 106,668(3) $ 114,558(3) $ 122,798(3)
Ohio Tax-Free Fund ............................ $ 304,895 $ 333,488 $ 327,550
Michigan Tax-Free Fund ........................ $ 136,459(4) $ 112,389(4) N/A
Fixed Income Securities Fund .................. $ 789,064 $ 817,205 $ 745,513
Intermediate Government Income Fund ........... $ 480,640(5) ($ 393,323(5) N/A
Short/Intermediate Fixed Income Securities Fund $ 592,825 $ 645,558 $ 622,863
</TABLE>
(1) During the fiscal year ended December 31, 1999, gross advisory fees for the
Ohio Municipal Money Market Fund were $617,790, of which $102,965 was
voluntarily waived. During the fiscal year ended December 31, 1998, gross
advisory fees were $595,216, of which $99,203 was voluntarily waived. During the
fiscal year ended December 31, 1997, gross advisory fees were $414,395, of which
$98,732 was voluntarily waived.
(2) During the fiscal year ended December 31, 1999, gross advisory fees for the
Florida Tax-Free Money Fund were $156,390, of which $93,851 was voluntarily
waived. During the fiscal year ended 1999, Huntington paid $62,555 to
Countrywide Investments, Inc. as sub-adviser to the Florida Tax-Free Money Fund.
(3) During the fiscal year ended December 31, 1999, gross advisory fees for the
Mortgage Securities Fund were $177,558, of which $70,890 was voluntarily waived.
During the fiscal year ended December 31, 1998, gross advisory fees for the
Mortgage Securities Fund were $190,930, of which $76,372 was voluntarily waived.
During the fiscal year ended December 31, 1997, gross advisory fees were
$204,663, of which $81,865 was voluntarily waived. During the fiscal years ended
1998 and 1997, Huntington paid $18,194 and $86,734, respectively, to Piper
Capital Management Incorporated ("Piper"), as sub-adviser to the Mortgage
Securities Fund. The Sub-Investment Advisory Agreement between Huntington and
Piper was automatically terminated under the Investment Company Act of 1940 upon
the acquisition of Piper's parent company, Piper Jaffray Companies Inc., by U.S.
Bancorp at the end of April, 1998.
(4) During the fiscal year ended December 31, 1999, gross advisory fees for the
Michigan Tax-Free Fund were $158,673, of which $22,214 was voluntarily waived.
During the fiscal year ended December 31, 1998, following the reorganization of
the FMB Michigan Tax-Free Bond Fund, gross advisory fees earned by Huntington
for the Michigan Tax-Free Fund were $130,685, of which $18,296 was voluntarily
waived. Prior to the reorganization, during the fiscal year ended December 31,
1998, First Michigan Bank earned gross advisory fees of $43,627, of which
$11,391 was voluntarily waived.
(5) During the fiscal year ended December 31, 1999, gross advisory fees for the
Intermediate Government Income Fund were $533,347, of which $52,707 was
voluntarily waived. During the fiscal year ended December 31, 1998, following
the reorganization of the FMB Intermediate Government
41
<PAGE> 138
Income Fund, gross advisory fees earned by Huntington for the Intermediate
Government Income Fund were $437,025, of which $43,702 was voluntarily waived.
Prior to the reorganization, during the fiscal year ended December 31, 1998,
First Michigan Bank earned gross advisory fees of $138,474, none of which was
waived.
The Investment Advisory Agreements provide 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 Agreements relate, 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 Agreements 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. An Investment Advisory Agreement may be amended only by a
vote of the shareholders of the affected Fund(s). The Agreements also terminate
without payment of any penalty in the event of its assignment. The Investment
Advisory Agreements provide that they 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.
From time to time, the Adviser may use a portion of its investment
advisory fee to pay for certain administrative services provided by financial
institutions on Investment A Shares or Investment B Shares of the Funds.
Because of the internal controls maintained by Huntington 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.
SUB-ADVISER
Effective May 1, 2000, the sub-adviser for the Florida Tax-Free Money
Fund, Countrywide Investments, Inc. ("Countrywide"), an indirect subsidiary of
The Western and Southern Life Insurance Company, reorganized part of its
investment advisory operations into its affiliate, Fort Washington Investment
Advisors, Inc. ("Fort Washington"). As of May 1, 2000, Fort Washington, whose
address is 420 E. Fourth Street, Cincinnati, Ohio 45202, will serve as
sub-adviser to the Florida Tax-Free Money Fund pursuant to an interim
sub-advisory agreement (the "Interim Sub-Advisory Agreement") with Huntington
approved by the Trust's Board of Trustees on April 26, 2000. The Interim
Sub-Advisory Agreement will remain in effect until September 28, 2000 or until
the shareholders of the Florida Tax-Free Money Fund approve a new sub-advisory
agreement with Fort Washington (the "New Sub-Advisory Agreement"), whichever is
earlier.
Following shareholder approval of the New Sub-Advisory Agreement on or
before September 28, 2000, Fort Washington will serve as sub-adviser under the
new agreement. In the event that shareholders do not approve the New
Sub-Advisory Agreement, shareholders will be notified of alternative
arrangements.
Under both the Interim Sub-Advisory Agreement and the New Sub-Advisory
Agreement between Huntington and Fort Washington, Fort Washington furnishes to
Huntington such investment advice, statistical and other factual information as
Huntington may reasonably request from time to time with respect to the Florida
Tax-Free Money Fund.
The Interim Sub-Advisory Agreement may be terminated without penalty at
any time by the vote of the Trustees or by the shareholders of the Florida
Tax-Free Money Fund upon 10 calendar days' written notice, or by Huntington on
10 calendar days' written notice. Any amendment to the Agreement must be
approved by both a vote of the Trustees and the shareholders of the Fund. The
Agreement
42
<PAGE> 139
also terminates without payment of any penalty in the event of its assignment or
in the event of termination of the Investment Advisory Agreement between the
Trust and Huntington with respect to the Florida Tax-Free Money Fund.
Compensation payable to Fort Washington under the Interim Sub-Advisory
Agreement will be paid into an escrow account until the shareholders vote to
approve or disapprove the New Sub-Advisory Agreement. In the event that the New
Sub-Advisory Agreement is approved by a vote of a majority of the outstanding
voting securities of the Florida Tax-Free Money Fund (as defined in Section
2(a)(42) of the 1940 Act), the total amount in the escrow account (including
interest earned) will be paid to Fort Washington. In the event that the New
Sub-Advisory Agreement is not approved, Fort Washington will be paid, out of the
escrow account, the lesser of: (1) any costs incurred in performing the Interim
Sub-Advisory Agreement (plus interest earned on that amount while in escrow); or
(2) the total amount in the escrow account (plus interest earned). Any balance
remaining in the escrow account following such disbursement shall be paid to
Huntington.
The New Sub-Advisory Agreement may be terminated without penalty at any
time by the vote of the Trustees or by the shareholders of the Florida Tax-Free
Money Fund upon 60 days' written notice, or by Huntington or Fort Washington on
90 days' written notice. Where required by the 1940 Act, an amendment to the
Agreement must be approved by both a vote of the Trustees and the shareholders
of the Fund. The New Sub-Advisory Agreement also terminates without payment of
any penalty in the event of its assignment or in the event of termination of the
Investment Advisory Agreement between the Trust and Huntington with respect to
the Florida Tax-Free Money Fund. The New Sub-Advisory Agreement provides that it
will continue in effect for two years from its effectiveness and from year to
year thereafter only so long as such continuance is approved at least annually
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.
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 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.
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.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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
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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 Agreements, Huntington may cause a
Fund to pay a broker-dealer that provides the brokerage and research services
described above an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another broker-dealer
may charge 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, 1999, 1998 and 1997, the Funds
named below paid the following brokerage commissions:
<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- -------- -------- -------
<S> <C> <C> <C>
Growth Fund................ $193,889 $154,528 $71,100
Income Equity Fund......... $ 78,969 $ 58,920 $36,858
</TABLE>
Brokerage commissions for the Growth Fund increased in 1999 versus 1998
as a result of increased sales to raise cash to meet redemptions. For the Income
Equity Fund, brokerage commissions increased in 1999 versus 1998 primarily as a
result of increased portfolio turnover in order to reduce unrealized gains and
losses.
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As of December 31, 1999, certain Funds held the securities of the
Trust's regular brokers or dealers or of their parents as follows:
<TABLE>
<CAPTION>
FUND HOLDINGS (000)
<S> <C>
Money Market Fund $46,485 Morgan Stanley Dean Witter
Ohio Municipal Money Market Fund $3,161 Merrill Lynch
U.S. Treasury Money Market Fund $43,790 Morgan Stanley Dean Witter
$50,000 Merrill Lynch
$20,000 Salomon, Smith Barney
Intermediate Government Income Fund $5,654 Morgan Stanley Dean Witter
Mortgage Securities $1,026 Morgan Stanley Dean Witter
Fixed Income Securities $1,000 Salomon, Smith Barney
Short/Intermediate Fixed Income Securities Fund $1,000 Donaldson Lufkin Jenrette
$1,000 Paine Webber Group
</TABLE>
CODE OF ETHICS
Each of the Trust, the Adviser and the Distributor maintain Codes of
Ethics which permit their personnel to invest in securities for their own
accounts. As of the date of this SAI, copies of these Codes of Ethics have been
filed with the Securities and Exchange Commission as exhibits to the Trust's
Registration Statement.
ADMINISTRATOR
Huntington is the administrator of the Trust. Pursuant to its
Administration Agreement, Huntington provides the Trust with administrative
services, regulatory reporting, all necessary office space, equipment,
personnel, compensation and facilities for handling the affairs of the Funds and
such other services as the Trustees may, from time to time, reasonably request
and Huntington shall, from time to time, reasonably determine to be necessary to
perform its obligations under the Administration Agreement. In addition,
Huntington provides fund accounting and related portfolio accounting services
under the Administration Agreement. For its administrative services, Huntington
receives an annual fee, computed daily and paid monthly, of 0.11% of each Fund's
average daily net assets. For its fund accounting services, Huntington receives
an annual fee, computed daily and paid monthly, of 0.03% of each Fund's average
daily net assets.
The Administration Agreement became effective on December 20, 1999, and
will continue in effect for a period of five years, 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 on 45 days' prior written notice or
immediately by the Trust without prior notice. The Administration Agreement
provides that Huntington 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 Huntington of its obligations and duties thereunder.
From January 12, 1998 to December 20, 1999, Huntington served as
administrator of the Trust pursuant to an Administration Agreement dated January
12, 1998. Prior to January 12, 1998, the Trust had retained SEI Fund Resources,
an affiliate of SEI Administrative as its administrator since January 11, 1996.
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<PAGE> 142
For the fiscal years ended December 31, 1999, 1998 and 1997, the Funds
paid the following fees pursuant to the applicable administration agreement with
Huntington or SEI Administrative, as the case may be:
<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- --------- -------- --------
<S> <C> <C> <C>
Money Market Fund.................................. 1,341,946 $835,791 $528,872
Ohio Municipal Money Market Fund................... 288,242 $218,246 $151,945
U.S. Treasury Money Market Fund.................... 663,337 $599,321 $606,818
Florida Tax-Free Money Fund........................ 43,795 N/A N/A
Growth Fund........................................ 461,809 $339,160 $229,032
Income Equity Fund................................. 340,847 $255,632 $215,419
Mortgage Securities Fund........................... 62,194 $ 42,026 $ 45,016
Ohio Tax-Free Fund................................. 85,391 $ 73,368 $ 72,061
Michigan Tax-Free Fund............................. 44,443 $ 28,751(1) N/A
Fixed Income Securities Fund....................... 220,957 $179,786 $164,031
Intermediate Government Income Fund................ 149,502 $ 96,143(2) N/A
Short/Intermediate Fixed Income Securities Fund.... 164,874 $142,023 $137,030
</TABLE>
(1) During the fiscal year ended December 31, 1998, for the period prior to the
reorganization of the FMB Michigan Tax-Free Bond Fund, SEI earned administrative
fees of $18,421.
(2) During the fiscal year ended December 31, 1998, for the period prior to the
reorganization of the FMB Intermediate Government Income Fund, SEI earned
administrative fees of $61,544.
SUB-ADMINISTRATOR
Huntington has entered into a Sub-Administration Agreement with SEI
Administrative pursuant to which SEI Administrative provides certain
administrative and fund accounting services to the Trust. Under this Agreement,
Huntington will pay to SEI Administrative a periodic fee at an annual rate of
0.08% of the average daily net assets of all Funds.
DISTRIBUTOR
SEI Investments Distribution Co., whose address is One Freedom Valley
Road, Oaks, Pennsylvania 19456, is the Distributor (principal underwriter) of
the Funds. SEI Distribution is an affiliated person of SEI Administrative, the
Trust's sub-administrator. Under a Distribution Agreement with SEI Distribution
the Distributor sells and distributes shares of each of the Funds on a
continuous basis, but is not obligated to sell any specific amount of shares of
any Fund. Any front-end sales charges paid by an investor on the sale of
Investment A Shares and any contingent deferred sales charges ("CDSCs") on the
redemption of Investment B Shares are collected by the Distributor. The
Distributor reallows up to 90% of front-end sales charges.
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.
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<PAGE> 143
DISTRIBUTION PLAN (12b-1 FEES)
Consistent with Rule 12b-1 under the 1940 Act, the Trust has adopted a
Distribution Plan pursuant to which the Distributor receives fees from the Funds
in connection with the sale and distribution of Investment A Shares and
Investment B Shares and the provision of shareholder services to holders of such
share classes. The Trust expects that the distribution efforts funded through
the use of 12b-1 fees will increase assets and therefore reduce Fund expenses
through economies of scale, and provide greater opportunities for diversified
investments.
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 A Shares and/or
Investment B 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 A Shares and/or Investment B 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 A Shares or
Investment B 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
A Shares or Investment B Shares. As of the date of this Statement of Additional
Information, The Huntington Investment 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 A Shares
or Investment B Shares of the Funds.
Payments to the Distributor under the Distribution Plan are made
regardless of expenses incurred by the Distributor in providing these services.
For each of the Investment A Shares class and Investment B Shares
class, 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 A Shares or Investment B Shares (as applicable) 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 for either Investment A
Shares or Investment B Shares with respect to a Fund requires the approval of
the holders of that Fund's Investment A Shares or Investment B Shares (as
applicable). 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 any agreements 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 independent persons.
For the fiscal years ended December 31, 1999, 1998 and 1997, the Funds
named below paid the following fees pursuant to the Distribution Plan for
Investment A Shares (formerly, Investment Shares):
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<PAGE> 144
<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- -------- -------- --------
<S> <C> <C> <C>
Money Market Fund....................... $305,102 $224,044* $115,933*
Ohio Municipal Money Market Fund........ 123,058 113,892* 72,632*
U.S. Treasury Money Market Fund......... 44,491 58,019* 50,978*
Florida Tax-Free Money Fund............. 5,117 N/A N/A
Growth Fund............................. 41,480 33,059 12,150
Income Equity Fund...................... 4,688 1,456 206
Mortgage Securities Fund................ 2,648 2,715* 3,414*
Ohio Tax-Free Fund...................... 3,647 3,816 4,358
Michigan Tax-Free Fund.................. 21,604 23,613** N/A
Fixed Income Securities Fund............ 3,616 3,976 4,289
Intermediate Government Income Fund..... 5,953 8,210** N/A
</TABLE>
* For the fiscal year ended December 31, 1999, gross distribution fees for the
Money Market Fund, Ohio Municipal Money Market Fund, U.S. Treasury Money Market
Fund, Florida Tax-Free Money Fund and Mortgage Securities Fund, respectively,
were $762,756, $307,646, $111,050, $12,861, and $5,297, of which $457,654,
$184,588, $66,559, $7,744 and $2,649 were voluntarily waived. For the fiscal
year ended December 31, 1998, gross distribution fees for the Money Market Fund,
Ohio Municipal Money Market Fund, U.S. Treasury Money Market Fund and Mortgage
Securities Fund, respectively, were $555,111, $284,729, $145,047 and $5,430, of
which $333,065, $170,837, $87,028 and $2,715 were voluntarily waived. For the
fiscal year ended December 31, 1997, gross distribution fees for the Money
Market Fund, Ohio Municipal Money Market Fund, U.S. Treasury Money Market Fund
and Mortgage Securities Fund were, respectively, $289,833, $181,580, $125,950
and $6,827, of which $173,900, $108,948, $74,972 and $3,413 were voluntarily
waived.
** Includes distribution fees paid to SEI as distributor of the FMB Funds prior
to the reorganization with the Huntington Funds. For the fiscal year ended
December 31, 1998, gross distribution fees for the Michigan Tax-Free Fund and
Intermediate Government Income Fund were, respectively, $26,013 and $9,046, of
which $2,400 and $836 were voluntarily waived.
No information on distribution fees is provided for Investment B
Shares, as that share class had not yet been offered as of December 31, 1999.
CUSTODIAN
For each of the Funds, Huntington acts as custodian. For an annual fee
of 0.026% of each Fund's average daily net assets, Huntington is generally
responsible as custodian for the safekeeping of Fund assets, including the
acceptance or delivery of cash or securities where appropriate, registration of
securities in the appropriate Fund name or the name of a nominee, maintenance of
bank accounts on behalf of the Funds. In addition, Huntington is responsible as
record keeper for the creation and maintenance of all Fund accounting records
relating to custodian activities required by the 1940 Act.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, whose address is Two Heritage
Drive, Quincy, Massachusetts 02171, serves as the transfer agent and dividend
disbursing agent for the Trust.
INDEPENDENT AUDITORS
KPMG LLP, whose address is Two Nationwide Plaza, Columbus, Ohio 43215,
serves as the independent auditors for the Trust.
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<PAGE> 145
PRINCIPAL HOLDERS OF SECURITIES
Information is provided below regarding each person who owns of record
or is known by the Trust to own beneficially 5% or more of any class of shares
of any Fund. By virtue of Huntington's ownership in the Funds it is deemed to
have control of each of the Funds. Huntington, a national banking association,
is an indirect wholly-owned subsidiary of Huntington Bancshares Incorporated, a
bank holding company organized under the laws of Ohio.
As of April 7, 2000, the Trustees and officers as a group owned less
than 1% of the shares of the Trust. There were no outstanding Investment B
Shares as of that date.
As of April 7, 2000, the following shareholders of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Money Market Fund:
National Financial Services Corp., P.O. Box 3752, New York, New York, 10008,
owned approximately 105,754,221 shares (31.84%), and Huntington, acting in
various capacities for numerous accounts, owned approximately 166,957,403 shares
(50.27%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Money Market Fund:
Huntington, acting in various capacities for numerous accounts, owned
approximately 616,172,880 shares (99.93%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Ohio Municipal
Money Market Fund: Huntington, acting in various capacities for numerous
accounts, owned approximately 106,644,478 shares (84.37%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Ohio Municipal Money
Market Fund: Huntington, acting in various capacities for numerous accounts,
owned approximately 82,974,054 shares (100%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington U.S. Treasury
Money Market Fund: Huntington, acting in various capacities for numerous
accounts, owned approximately 31,768,690 shares (79.85%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington U.S. Treasury Money
Market Fund: Huntington, acting in various capacities for numerous accounts,
owned approximately 417,353,358 shares (99.65%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Florida Tax-Free
Money Fund: Huntington, acting in various capacities for numerous accounts,
owned approximately 19,941,086 shares (98.38%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Florida Tax-Free Money
Fund: Huntington, acting in various capacities for numerous accounts, owned
approximately 21,923,784 shares (100%).
As of April 7, 2000, no shareholders of record owned 5% or more of the
outstanding Investment A Shares of the Huntington Growth Fund.
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Growth Fund: Huntington,
acting in various capacities for numerous accounts, owned approximately
5,903,331 shares (98.84%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Income Equity
Fund: John B. and Donaldeen A. Payne, 884 Pipestone Dr., Columbus, Ohio 43235,
owned approximately 2,709 shares (6.13%) and Lucille R. Weiss Trust, 1975
Christmas Run, Wooster, Ohio 44691, owned approximately 2,240 shares (5.07%).
49
<PAGE> 146
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Income Equity Fund:
Huntington, acting in various capacities for numerous accounts, owned
approximately 6,179,361 shares (97.87%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Mortgage
Securities Fund: The Minneapolis Clinic P/S Plan, P.O. Box 64010, St. Paul, MN
55164, owned approximately 13,149 shares (10.66%), and James E. Dill, as
Trustee, 6846 Zimmerman Road, Sabina, Ohio, owned approximately 7,357 shares
(5.96%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Mortgage Securities Fund:
Huntington, acting in various capacities for numerous accounts, owned
approximately 4,041,787 shares (98.46%).
As of April 7, 2000, the following shareholders of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Ohio Tax-Free
Fund: Ursula E.M. and William J. Umberg, 3267 Pickbury Drive, Cincinnati, Ohio
45211, owned approximately 8,736 shares (14.23%), John W. and Arlene J.
Warbritton, 1149 East College Avenue, Westerville, Ohio 43081, owned
approximately 6,874 shares (11.19%), Michael M., Jr. and Mary Ann Machowsky, 327
Colony Road, Rossford, Ohio 43460, owned approximately 4,612 shares (7.51%),
Evelyn V. Culberson Living Trust, 2510 Dover Road, Columbus, Ohio 43209, owned
approximately 4,523 shares (7.36%), Ellen M. Kohnhorst, 13914 Olde Post Road,
Pickering, Ohio 43147, owned approximately 3,472 shares (5.65%) and Kleinweber
Trust, 1229 Bonnieview Avenue, Lakewood, Ohio 44107, owned approximately 3,143
shares (5.12%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Ohio Tax-Free Fund:
Huntington, acting in various capacities for numerous accounts, owned
approximately 2,330,802 shares (93.30%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Michigan Tax-Free
Fund: Welland W. Sprague, 430 Lyons, Portland, Michigan 48875, owned
approximately 40,201 shares (6.42%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Michigan Tax-Free Fund:
Huntington, acting in various capacities for numerous accounts, owned
approximately 1,925,599 shares (99.30%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Intermediate
Government Income Fund: S.B. Davis Company Profit Sharing Trust, P.O. Box
141476, Grand Rapids, MI 49514, owned approximately 14,539 shares (7.54%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Intermediate Government
Income Fund: Huntington, acting in various capacities for numerous accounts,
owned approximately 9,325,842 shares (100%).
As of April 7, 2000, the following shareholders of record owned 5% or
more of the outstanding Investment A Shares of the Huntington Fixed Income
Securities Fund: Lillian Vinson Richardson, 232 Brookhaven Drive N, Gahanna,
Ohio 43230, owned approximately 7,499 shares (11.79%), William J. Umberg IRA,
3267 Pickbury Drive, Cincinnati, Ohio 45211, owned approximately 6,386 shares
(10.04%), Cincinnati Institute of Fine Arts, P.O. Box 630074, Cincinnati, Ohio
45263, owned approximately 4,674 shares (7.35%), and David M. Gampfer, 1415
Reymond Road, Columbus, Ohio 43220, owned approximately 3,237 shares (5.09%).
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Fixed Income Securities
Fund: Huntington, acting in various capacities for numerous accounts, owned
approximately 7,958,100 shares (99.57%).
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<PAGE> 147
As of April 7, 2000, the following shareholder of record owned 5% or
more of the outstanding Trust Shares of the Huntington Short/Intermediate Fixed
Income Securities Fund: Huntington, acting in various capacities for numerous
accounts, owned approximately 5,996,826 shares (99.30%).
SHAREHOLDER RIGHTS
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 SAI, the Trustees have established
three classes of shares, known as Investment A Shares, Investment B Shares and
Trust Shares, in the Money Market Fund, the Ohio Municipal Money Market Fund,
the U.S. Treasury Money Market Fund, Florida Tax-Free Money Fund, the Growth
Fund, the Income Equity Fund, the Mortgage Securities Fund, the Ohio Tax-Free
Fund, the Michigan Tax-Free Fund, the Fixed Income Securities Fund, the
Intermediate Government Income Fund and the Short/Intermediate Fixed Income
Securities Fund. Investment A Shares of the Short/Intermediate Fixed Income
Securities Fund are not presently being offered to the public. Only the Money
Market Fund, the Growth Fund, the Income Equity Fund and the Fixed Income
Securities Fund presently offer Investment B Shares.
Investment A Shares, Investment B 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 a
Fund) were liquidated, the shareholders of each class would receive the net
assets of the Fund attributable to each respective class.
All 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, or (ii) only holders of Investment A Shares and/or
Investment B Shares will be entitled to vote on matters submitted to shareholder
vote with respect to the Rule 12b-1 Plan applicable to such class or classes.
The rights of shareholders cannot be modified without a majority vote.
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, beheld 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
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<PAGE> 148
account of shareholder liability is limited to circumstances in which the Fund
would be unable to meet its obligations.
Shareholder inquiries regarding Investment A Shares should be directed
to The Huntington Investment Company, 41 South High Street, Columbus, Ohio
43287.
Shareholder inquiries regarding Investment B Shares should be directed
to The Huntington Investment Company, 41 South High Street, Columbus, Ohio
43287.
Shareholder inquiries regarding Trust Shares should be directed to
Huntington, 41 South High Street, Columbus, Ohio 43215, Attn: Investor Services.
ADDITIONAL INFORMATION ON PURCHASES, EXCHANGES AND REDEMPTIONS
Investment A Shares and Investment B Shares of each of the Funds may be
purchased, exchanged or redeemed by contacting the Trust, The Huntington
Investment Company or a Huntington Personal Banker.
Trust Shares may be purchased only through fiduciary, advisory, agency
and other similar accounts maintained by or on behalf of Huntington or its
affiliates or correspondent banks. Individuals who receive Trust Shares as a
result of a trust distribution or similar transaction or by operation of law,
will be permitted to retain such shares, but may not purchase additional Trust
Shares, except by means of the reinvestment of dividends or distributions.
Exchanges of Trust Shares, if permitted by the account agreement, as well as
redemptions of Trust Shares, are made by contacting the Trust.
Telephone purchase, exchange or redemption requests may be recorded and
will be binding upon an investor. Use of the telephone for exchanges or
redemptions involves the possible risk of loss, since anyone providing the
required information may be able to use the service without the shareholder's
permission. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In times of extreme economic or market conditions, shareholders may
have difficulty making redemptions or exchanges by telephone. If a shareholder
cannot make contact by telephone, redemption or exchange requests should be made
in writing and sent by overnight mail to the Trust.
In connection with certain redemption or exchange requests, a
shareholder may be required to obtain a signature guarantee for authentication
purposes. In such cases, the signature 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 Trust does not accept signatures guaranteed by a notary public. In
the future, the Trust may elect to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The Trust
reserves the right to amend these standards at any time without notice.
OTHER PURCHASE INFORMATION
Purchases of all classes of shares are made at net asset value, plus
(for Investment A Shares only) any applicable sales charge. All purchases are
subject to minimum purchase requirements, but
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these requirements may be waived by the Distributor. Payment for Investment A
Shares or Investment B Shares may not be by third party check, and any checks
drawn from a bank located outside the U.S. will result in a delay in processing
until the check has cleared.
If at any time the right to purchase shares is suspended, although no
new purchases may be made, in some circumstances existing shareholders may be
permitted to purchase additional shares and have dividends reinvested.
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
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.
Sales Charge Reductions (Investment A Shares). Sales charges applicable
in purchases of Investment A Shares may be reduced for certain investors or
groups of investors who make larger investments. Investors wishing to take
advantage of these reductions should call the Trust.
Accumulated Purchases. If an existing shareholder already owns
Investment A Shares on which he or she paid a sales charge, the sales charge or
any additional purchases will be reduced if the total amount of the purchases
would make the investor eligible for a sales charge reduction.
For example, a shareholder who purchased $150,000 worth of Investment A
Shares in a Fund, the sales charge on an additional $150,000 purchase in that
Fund would be the charge applicable to a $300,000 investment.
Letter of Intent. An investor who signs a letter of intent to purchase
within a 13-month period at least $100,000 worth of Investment A Shares in any
Equity or Income Fund will be eligible for the applicable sales charge reduction
on each purchase over the 13-month period. Until the investor reaches the
necessary threshold, the amount of the sales charge discount will be held in
escrow by the Trust.
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For example, an investor who signs a letter of intent to purchase
$100,000 in Investment A Shares of an Equity Fund will only pay a 4.75% sales
charge on all purchases made during the period which total at least $100,000 and
will deposit 1.00% (the amount of the discount) in escrow.
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 A 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. Every shareholder has a one-time right, within
30 days of redeeming Investment A Shares, to reinvest the redemption proceeds at
the next-determined net asset value without any sales charge. The investor must
notify the Trust in writing of the reinvestment by the shareholder in order to
eliminate a sales charge. If the shareholder redeems Investment A Shares and
utilizes the reinstatement privilege, there may be tax consequences.
Concurrent Purchases. For purposes of qualifying for a sales charge
reduction, an investor may combine concurrent purchases of Investment A Shares
in two or more Equity or Income Funds. For example, if an investor concurrently
purchases Investment A Shares in one Fund totaling $30,000 and Investment A
Shares in another Fund totaling $70,000, the sales charge will be reduced for
each investment as if $100,000 had been invested in each Fund.
To receive this sales charge reduction, the applicable Huntington Group
member must be notified in writing by the shareholder at the time the concurrent
purchases are made.
OTHER EXCHANGE INFORMATION
Exchanges may only be made between Funds having identical shareholder
registrations. For any other exchanges you must obtain a signature guarantee.
Unless otherwise specified in writing, the existing registration and
reinvestment options relating to a Fund being exchanged will be used for any new
Fund accounts required to be opened in the exchange.
Exchanges will not be available for shares purchased by check until the
check has cleared.
OTHER REDEMPTION INFORMATION
Redemptions of all classes of shares are made at net asset value, less
(for Investment B Shares only) any applicable CDSC. If you make exchanges of
your Investment B Shares among the Funds, the holding period for purposes of
determining the applicable CDSC will be determined based on the purchase date of
your original shares.
If a shareholder wishes to wire redemption proceeds to a bank other
than the one previously designated, redemption may be delayed by as much as
seven days. 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 a signature guarantee) to the Trust, c/o Huntington National Bank, 41 South
High Street (HC 1116), Columbus Ohio 43287, Attention: Investor Services.
Proceeds from the redemption of shares purchased by check will not be
available until the check has cleared.
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Shareholders of the Money Market Funds who write checks to redeem
Investment A Shares may be subject to certain checking account fees. Checks
written on these accounts may be negotiated through the shareholder's local bank
and should not be sent to the issuing bank in order to redeem Investment A
Shares. Canceled checks are sent to the shareholder each month.
DETERMINATION OF NET ASSET VALUE
Net asset value is calculated as of the close of the New York Stock
Exchange every 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.
For valuing securities in calculating net asset value, the Money Market
Funds have elected to use the amortized cost method of valuation pursuant to
Rule 2a-7 under the 1940 Act. The process of selecting securities is consistent
with the credit quality and diversification requirements of Rule 2a-7. 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
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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.
Rule 2a-7, as amended, defines the terms NRSRO, Requisite NRSROs,
Eligible Securities, Rated Securities, Unrated Securities, Demand Features,
Guarantees, Unconditional Demand Features, 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.
"REQUISITE NRSROS" means (i) any two NRSROs that have issued a rating
with respect to a security or class of debt obligations of an issuer, or (ii) if
only one NRSRO has issued a rating with respect to such security or class of
debt obligations of an issuer at the time the fund acquired the security, that
NRSRO.
"ELIGIBLE SECURITIES" are defined as (i) Rated Securities with a
remaining maturity of 397 or less days and which have received rating in one of
the two highest rating categories; (ii) Unrated Securities that are of
comparable equality, provided that an Unrated Security is not an Eligible
Security if the security has received a long-term rating from any NRSRO that is
not within the NRSRO's three highest long-term rating categories, unless the
security has received a long-term rating from an NRSRO in one of the three
highest rating categories, and provided that certain asset backed securities
shall not be Eligible Securities unless they have received a rating from an
NRSRO; and (iii)a security that is subject to a Demand Feature or Guarantee
whether the Guarantee has received a rating from an NRSRO or the Guarantee is
issued by a guarantor that has received a rating from an NRSRO with respect to a
class of debt obligations (or any debt obligation within that class) that is
comparable in priority and security to the Guarantee, or another institution,
has undertaken promptly to notify the holder of the security in the event the
Demand Feature or Guarantee is substituted with another Demand Feature or
Guarantee.
"RATED SECURITIES" include (i) securities that have received a
short-term rating from an NRSRO, or have been issued by an issuer that has
received a short-term rating from an NRSRO with respect to a class of debt
obligations (or any debt obligation within that class) that is comparable in
priority and security, or (ii) securities that are subject to a Guarantee that
has received a short-term rating from an NRSRO, or a Guarantee issued by a
guarantor that has received a short-term rating from an NRSRO with respect to a
class of debt obligations (or any debt obligation within that class) that is
comparable in priority and a security with the Guarantee. In either case, a
security is not a Rated Security if it is subject to an external credit support
agreement that was no in effect when the security was assigned its rating,
unless the security has received a short-term rating reflecting the existence of
the credit support or the credit support itself has received a short-term
rating.
"UNRATED SECURITIES" are any securities that are not Rated Securities.
"DEMAND FEATURE" is (i) a feature permitting the holder of a security
to sell the security at an exercise price equal to the approximate amortized
cost of the security plus accrued interest, if any, at the
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time of exercise, provided that such feature must be exercisable either at any
time on no more than 30 calendar days' notice or at specified intervals not
exceeding 397 calendar days and upon no more than 30 calendar days' notice; or
(ii) a feature permitting the holder of certain asset backed securities
unconditionally to receive principal and interest within 397 calendar days of
making demand.
"GUARANTEE" is an unconditional obligation of a person other than the
issuer of the security to undertake to pay, upon presentment by the holder of
the Guarantee (if required), the principal amount of the underlying security
plus accrued interest when due or upon default, or, in the case of an
Unconditional Demand Feature, an obligation that entitles the holder to receive
upon exercise the approximate amortized cost of the underlying security or
securities, plus accrued interest, if any. A Guarantee includes a letter of
credit, financial guaranty (bond) insurance, and an Unconditional Demand Feature
(other than an Unconditional Demand Feature provided by the issuer of the
security).
"UNCONDITIONAL DEMAND FEATURE" means a Demand Feature that by its terms
would be readily exercisable in the event of a default in payment of principal
or interest on the underlying security or securities.
"FIRST TIER SECURITY" means any (i) Rated Security which has received
the highest short-term rating by the Requisite NRSROs for debt obligations, (ii)
any Unrated Security that is of comparable quality, (iii) any security issued by
a registered investment company that is a money market fund, or (iv) certain
government securities.
"SECOND TIER SECURITY" means any Eligible Security that is not a First
Tier Security.
Each of the Funds relies on one or more pricing services authorized by
the Board of Trustees ("Authorized Pricing Services") to value its securities in
calculating net asset value. Each of the Equity Funds values its securities in
calculating net asset value as follows. 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
an Authorized Pricing Service. For the Income Funds, securities traded on a
national securities exchange or in the over-the-counter market are valued at
their last-reported sale price or, if there is no reported sale, at a bid price
estimated by an Authorized Pricing Service. For other debt securities, including
zero-coupon securities, and foreign securities, an Authorized Pricing Service
will be used.
U.S. government securities held by the Mortgage Securities Fund are
valued at the mean between the over-the-counter bid and asked prices as
furnished by an Authorized Pricing Service.
Short-term investments with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost. Investments in other open-end
investment companies are valued at net asset value.
For securities which cannot be priced by an Authorized Pricing Service,
the Board of Trustees has authorized the Trust's record keeper to seek a good
faith fair value determination from a broker-dealer or other financial
intermediary. In certain circumstances, in accordance with the Trust's Security
Valuation Policy, the record keeper may seek a good faith fair value
determination where an Authorized Pricing Service has provided a price. The
Trust's Security Valuation Policy has also established a Pricing Committee which
will price a security in the event that no price can be obtained from an
Authorized Pricing Service, a broker-dealer or other financial intermediary.
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
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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.
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) 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
(c) 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 (including
receivables), 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.
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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 net unrealized
gains and make distributions of any accumulated earnings and profits before
requalifying as a regulated investment company 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.
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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 stock or securities in 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 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 under
reported 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.
STATE TAXATION
Florida. Florida does not impose an income tax on individuals. Thus,
individual shareholders of the Florida Tax-Free Money Fund will not be subject
to any Florida state or local income taxes on distributions received from the
Florida Tax-Free Money Fund.
Florida does impose a state income tax on the income of corporations,
limited liability companies (that are subject to federal income taxation) and
certain trusts (excluding probate and testamentary trusts), and this tax is
allocated or apportioned to Florida. For those types of shareholders, in
determining income subject to Florida corporate income tax, Florida generally
"piggy-backs" federal taxable income concepts, subject to adjustments that are
applicable to all corporations and some adjustments that are applicable to
certain classes of corporations. In regard to the Florida Tax-Free Money Fund,
the most significant adjustment is for interest income from state and local
bonds that is exempt from tax under Section 103 of the Code. Provided that the
Florida Tax-Free Money Fund qualifies as a regulated investment company under
the Code and complies with the requirement that at least 50% of the value of its
assets at the close of each quarter of its taxable year be invested in state,
municipal or other obligations the interest on which is exempt from tax under
Section 103 of the Code, corporate shareholders of the Florida Tax-Free Money
Fund may receive Section 103 interest income from Florida Tax-Free Money Fund
distributions. While Section 103 interest income is generally excluded from
taxable income for federal income tax purposes, it is added back to taxable
income for Florida corporate income tax purposes (only 40% of such income is
added back for corporate taxpayers subject to Florida alternative minimum tax).
Consequently, the portion of the Section 103 interest income (or 40% of that
amount for corporate taxpayers subject to the Florida alternative minimum tax)
allocated or apportioned to Florida of a corporate Florida Tax-Free Money Fund
shareholder arising from Florida Tax-Free Money Fund distributions is subject to
Florida corporate income taxes. Other distributions from the Florida Tax-Free
Money Fund to corporate shareholders, to the extent allocated or apportioned to
Florida, may also be subject to Florida income tax.
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<PAGE> 157
Provided that on January 1 of a given year at least 90% of the net
asset value of the portfolio of assets of the Florida Tax-Free Money Fund is
comprised of notes, bonds, and other obligations issued by the State of Florida
or its municipalities, counties and other taxing districts, the U.S. Government
and its agencies, Puerto Rico, Guam and the Virgin Islands, and other
investments exempt from Florida intangible personal property tax, shares of the
Florida Tax-Free Money Fund will not be subject to Florida intangible personal
property taxes for that year. If the Florida Tax-Free Money Fund fails to meet
this 90% test, then the entire value of the Florida Tax-Free Money Fund shares
(except for that portion of the value attributable to U.S. government
obligations) will be subject to the Florida intangible personal property tax.
Shareholders of the Florida Tax-Free Money Fund should consult their
tax advisers about other state and local tax consequences of their investments
in the Florida Tax-Free Money Fund.
Michigan. Provided that the Michigan Tax-Free Fund qualifies as a
regulated investment company under the Code and complies with the requirement
that at least 50% of the value of its assets at the close of each quarter of its
taxable year be invested in state, municipal or other obligations the interest
on which is exempt from tax under Section 103 of the Code, individual
shareholders of the Michigan Tax-Free Fund residing in Michigan will not be
subject to Michigan personal income tax or personal income taxes imposed by
cities in Michigan, and corporate shareholders will not be subject to the
Michigan single business tax, on distributions received from the Michigan
Tax-Free Fund to the extent such distributions are attributable to interest on
tax-exempt obligations of the State of Michigan or any municipality, political
subdivision or governmental agency or instrumentality thereof or on obligations
issued by the Governments of Puerto Rico, the Virgin Islands and Guam. Other
distributions from the Michigan Tax-Free Fund, including those related to
long-term and short-term capital gains, will generally not be exempt from the
Michigan personal income tax or single business tax. Shareholders of the
Michigan Tax-Free Fund should consult their tax advisers about other state and
local tax consequences of their investments in the Michigan Tax-Free Fund.
Ohio. Under current Ohio law, individuals and estates that are subject
to Ohio personal income tax or municipal or school district income taxes in Ohio
will not be subject to such taxes on distributions with respect to shares of the
Ohio Municipal Money Market Fund or the Ohio Tax-Free Fund ("Distributions") to
the extent that such Distributions are properly attributable to interest on
obligations of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of Ohio or its political subdivisions ("Ohio Obligations").
Corporations that are subject to the Ohio corporation franchise tax will not
have to include Distributions in their tax base for purposes of calculating the
Ohio corporation franchise on the net income basis to the extent that such
Distributions either constitute exempt-interest dividends for federal income tax
purposes or are properly attributable to interest on Ohio Obligations. However,
shares of the Ohio Municipal Money Market Fund and the Ohio Tax Free Fund will
be included in a corporation's tax base for purposes of calculating the Ohio
corporation franchise tax on the net worth basis.
Distributions that consist of interest on obligations of the United
States or its territories or possessions or of any authority, commission, or
instrumentality of the United States ("Territorial Obligations") the interest on
which is exempt from state income taxes under the laws of the United States are
exempt from the Ohio personal income tax, and municipal and school district
income taxes in Ohio, and, provided, in the case of Territorial Obligations,
such interest is excluded from gross income for federal income tax purposes, are
excluded from the net income base of the Ohio corporation franchise tax.
Distributions properly attributable to profit on the sale, exchange or
other disposition of Ohio Obligations will not be subject to the Ohio personal
income tax, or municipal or school district income taxes in Ohio and will not be
included in the net income base of the Ohio corporation franchise tax.
Distributions attributable to other sources generally will not be exempt from
the Ohio personal income tax, municipal or school district income taxes in Ohio
or the net income base of the Ohio corporation franchise tax.
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<PAGE> 158
The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund are not
subject to the Ohio personal income tax or school district or municipal income
taxes in Ohio. The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund
are not subject to the Ohio corporation franchise tax or the Ohio dealers in
intangibles tax, provided that, if there is a sufficient nexus between the State
of Ohio and such entity that would enable the State to tax such entity, the Fund
timely files the annual report required by Section 5733.09 of the Ohio Revised
Code. The Ohio Tax Commissioner has waived this annual filing requirement for
each tax year since 1990, the first tax year to which such requirement applied.
This discussion of Ohio taxes assumes that the Ohio Municipal Money
Market Fund and the Ohio Tax-Free Fund will each continue to qualify as a
regulated investment company under the Internal Revenue Code and that at all
times at least 50% of the value of the total assets of each of the Funds
consists of Ohio Obligations or similar obligations of other states or their
subdivisions.
Shareholders of the Ohio Municipal Money Market Fund and the Ohio
Tax-Free Fund should consult their tax advisers about other state and local tax
consequences of their investments in the Ohio Municipal Money Market Fund and
the Ohio Tax-Free Fund.
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 not declared as a
dividend.
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
62
<PAGE> 159
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
From time to time the Trust may advertise the performance of one or
more of the Funds. All data is based on past performance and is not intended to
indicate future results. Performance of Trust Shares, as compared to Investment
A Shares or Investment B Shares, will normally be higher because Investment A
Shares and Investment B Shares are subject to distribution (12b-1) fees.
No performance information is provided for Investment B Shares as that
class of shares was not yet being offered by the Funds as of December 31, 1999.
MONEY MARKET FUNDS
Generally, the Money Market Funds will advertise seven-day yields and
seven-day effective yields. In addition, the Ohio Municipal Money Market Fund
and the Florida Tax-Free Money Fund may also advertise tax-equivalent yields.
The yield for each class of shares of a Money Market Fund is computed
by determining the percentage net change, excluding capital changes and any
income other than investment income, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a charge reflecting any deductions from shareholder accounts, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then multiplying the base period
return by 365/7 (or approximately 52 weeks).
The effective yield for each class of shares of a Fund represents a
compounding of the base period return by adding 1, raising the sum to a power
equal to 365/7, and subtracting 1 from the result, according to the following
formula:
Effective Yield = [ ( Base Period Return + 1 ) {365 divided by 7} ] - 1
Tax-equivalent yield is computed by dividing the portion of a Fund's
yield that is tax-exempt by 1 minus a stated income tax rate and adding the
quotient to that portion, if any, of the Fund's yield that is not tax-exempt.
Based on the seven-day period ended December 31, 1999 (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 ........................... 5.42% 5.57%
Ohio Municipal Money Market Fund ............ 3.94% 4.01%
U.S. Treasury Money Market Fund ............. 4.65% 4.76%
Florida Tax-Free Money Fund ................. 3.88% 3.85%
</TABLE>
63
<PAGE> 160
Based on the seven-day period ended December 31, 1999 (the "base
period"), the yield and effective yield of the Investment A Shares of the Money
Market Funds listed below were as follows:
<TABLE>
<CAPTION>
FUND-INVESTMENT A SHARES YIELD EFFECTIVE YIELD
------------------------ ----- ---------------
<S> <C> <C>
Money Market Fund ........................ 5.32% 5.46%
Ohio Municipal Money Market Fund ......... 3.84% 3.91%
U.S. Treasury Money Market Fund .......... 4.55% 4.65%
Florida Tax-Free Money Fund .............. 3.78% 3.85%
</TABLE>
The tax-equivalent yield for Trust Shares of the Ohio Municipal Money
Market Fund for the seven-day period ended December 31, 1999, was 7.58%
(assuming a 39.6% federal income tax bracket and a 7.5% Ohio income tax
bracket).
The tax-equivalent yield for Investment A Shares of the Ohio Municipal
Money Market Fund for the seven-day period ended December 31, 1999, was 7.39%
(assuming a 39.6% federal income tax bracket and a 7.5% Ohio income tax
bracket).
The tax-equivalent yield for Trust Shares of the Florida Tax-Free Money
Fund for the seven-day period ended December 31, 1999, was 6.54% (assuming a
39.6% federal income tax bracket).
The tax-equivalent yield for Investment A Shares of the Florida
Tax-Free Money Fund for the seven-day period ended December 31, 1999, was 6.37%
(assuming a 39.6% federal income tax bracket).
OTHER FUNDS
Generally, the Equity and Income Funds will advertise average annual
total returns. In addition, the Ohio Tax-Free Fund and the Michigan Tax-Free
Fund may advertise thirty-day tax-equivalent yields.
In accordance with SEC guidelines, the average annual total return for
each class of shares is calculated according to the following formula:
Average Annual Return = ( {ERV} divided by P ) (1 divided by n) - 1
where p = a hypothetical initial of $1,000; n = number of years; and ERV =
ending redeemable value of the hypothetical $1,000 investment after the
investment period.
In accordance with SEC guidelines, the yield for each class of shares
of an Equity or Income Fund is computed by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period, according to the following formula:
Yield = 2 [ ( a-b divided by cd+1 ) superior 6+1 ]
where a = dividends and interest earned during the period; b = expenses accrued
for the period (net of reimbursements); c = the average daily number of shares
outstanding during the period that were entitled to receive dividends; and d =
the maximum offering price per share on the last day of the period.
64
<PAGE> 161
In accordance with SEC guidelines, the tax-equivalent yield for each
class of the Equity and Income Funds is computed by dividing the portion of the
yield that is tax-exempt by 1 minus a stated income tax rate and adding the
quotient to that portion, if any, of the yield that is not tax-exempt.
65
<PAGE> 162
The average annual total returns for Investment A Shares of each of the
following Funds (including the effect of the sales load) for the one-year,
five-year and ten-year periods and for the life of the respective Fund through
December 31, 1999, were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR FIVE YEARS TEN YEARS INCEPTION
FUND ENDED ENDED ENDED THROUGH
INVESTMENT A SHARES 12/31/99 12/31/99 12/31/99 12/31/99
- ------------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Growth Fund................... 8.73% 21.39% N/A 14.66%
Income Equity Fund*........... -12.12% 15.75% 9.73% 9.59%
Ohio Tax-Free Fund............ -3.17% 4.28% N/A 4.35%
Michigan Tax-Free Fund**...... -2.72% 4.88% N/A 4.94%
Fixed Income Securities Fund.. -5.96% 6.00% N/A 6.10%
Mortgage Securities Fund...... -1.15% 9.66% N/A 5.19%
Intermediate Government
Income Fund**............... -3.28% 5.50% N/A 5.20%
</TABLE>
- ----------
*Performance shown represents combined performance of the Trust Shares class
from 7/3/89 to 5/14/97 (adjusted to reflect expenses associated with Investment
A Shares) and the Investment A Shares class since its 5/14/97 inception.
**Performance shown includes the applicable predecessor FMB Fund.
The average annual total returns for Trust Shares of each of the
following Funds for the one-year, five-year and ten-year periods and for the
life of the respective Fund through December 31, 1999, were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR FIVE YEARS TEN YEARS INCEPTION
FUND ENDED ENDED ENDED THROUGH
TRUST SHARES 12/31/99 12/31/99 12/31/99 12/31/99
- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Growth Fund................... 13.59% 22.71% 14.94% 14.68%
Income Equity Fund............ -6.75% 15.89% 10.63% 10.45%
Ohio Tax-Free Fund............ -0.92% 4.96% 5.13% 5.28%
Michigan Tax-Free Fund*....... -0.54% 5.51% N/A 5.34%
Fixed Income Securities Fund.. -3.84% 6.69% 6.82% 6.80%
Mortgage Securities Fund...... 1.01% 10.31% N/A 5.67%
Intermediate Government
Income Fund*.................. -1.09% 6.14% N/A 5.60%
Short/Intermediate
Fixed Income Securities Fund.. 1.05% 6.25% 6.54% 6.61%
</TABLE>
- ----------
* Performance shown includes the applicable predecessor FMB Fund.
The tax-equivalent yield for the Investment A Shares of the Ohio
Tax-Free Fund for the thirty-day period ended December 31, 1999, was 6.12%
(assuming a 39.6% federal income tax bracket and a 7.5% Ohio income tax
bracket).
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<PAGE> 163
The tax-equivalent yield for Investment A Shares of the Michigan
Tax-Free Fund for the thirty-day period ended December 31, 1999, was 5.94%
(assuming a 39.6% federal income tax bracket and a 4.4% Michigan 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, 1999, was 5.45% (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 Michigan Tax-Free
Fund for the thirty-day period ended December 31, 1999, was 5.28% (assuming a
39.6% federal income tax bracket and a 4.4% Michigan income tax bracket).
67
<PAGE> 164
TAX-EQUIVALENCY TABLES
The Ohio Municipal Money Market Fund and the Ohio Tax-Free Fund, with
respect to each class of shares offered, may use a tax equivalency table in
advertising and sales literature. The interest earned on tax-exempt securities
in either Fund's portfolio generally remains free from federal regular income
tax and is free from Ohio personal income taxes. The tables below provide
tax-equivalent yields for selected tax-exempt yields. Some portion of either
Fund's income may result in liability under the federal alternative minimum tax
and may be subject to state and local taxes.
TAXABLE YIELD EQUIVALENT FOR 2000
COMBINED FEDERAL AND STATE OF OHIO INCOME TAXES
<TABLE>
<CAPTION>
SINGLE RETURN
Federal Tax Rate:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.00% 28.00% 28.00% 31.00% 31.00% 31.00% 36.00% 36.0% 39.60%
Combined Federal and State Tax Rate:
18.79% 31.21% 31.74% 34.59% 35.10% 35.76% 40.42% 40.80% 44.13%
Taxable Income
Brackets*: $ 0- $26,251- $40,001- $63,551- $ 80,001- $100,001- $132,601- $200,001- Over
$26,250 $40,000 $63,550 $80,000 $100,000 $132,600 $200,000 $288,350 $288,350
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.50% 1.85% 2.18% 2.20% 2.29% 2.31% 2.33% 2.52% 2.53% 2.68%
2.00% 2.46% 2.91% 2.93% 3.06% 3.08% 3.11% 3.36% 3.38% 3.58%
2.50% 3.08% 3.63% 3.66% 3.82% 3.85% 3.89% 4.20% 4.22% 4.47%
3.00% 3.69% 4.36% 4.40% 4.59% 4.62% 4.67% 5.03% 5.07% 5.37%
3.50% 4.31% 5.09% 5.13% 5.35% 5.39% 5.45% 5.87% 5.91% 6.26%
4.00% 4.93% 5.81% 5.86% 6.12% 6.16% 6.23% 6.71% 6.76% 7.16%
4.50% 5.54% 6.54% 6.59% 6.88% 6.93% 7.01% 7.55% 7.60% 8.05%
5.00% 6.16% 7.27% 7.33% 7.64% 7.70% 7.78% 8.39% 8.45% 8.95%
5.50% 6.77% 8.00% 8.06% 8.41% 8.47% 8.56% 9.23% 9.29% 9.84%
6.00% 7.39% 8.72% 8.79% 9.17% 9.25% 9.34% 10.07% 10.14% 10.74%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The chart above is for illustrative purposes only. It is not an indicator
of past or future performance.
*The income brackets applicable to the state of Ohio do not correspond to the
Federal taxable income brackets. In addition, Ohio taxable income will likely be
different than Federal taxable income because it is computed by reference to
Federal adjusted gross income (AGI) with specifically-defined Ohio modifications
and exemptions, and does not consider many of the deductions allowed from
Federal AGI in computing Federal taxable income. No other state tax credits,
exemptions, or local taxes have been taken into account in arriving at the
combined marginal tax rate. In 1999, due to the state having surplus revenue, a
3.627% across the board reduction in the Ohio income tax rates for 1999 only was
effected pursuant to Ohio Revised Code sections 131.44 and 5747.02. It is not
yet known whether a reduction in the Ohio income tax rates will occur in 2000. A
reduction in Ohio income tax rates, such at the 1999 reduction, has the effect
of reducing the after-tax advantage of Ohio tax-exempt securities relative to
taxable securities. The income amount shown is income subject to federal income
tax reduced by adjustments to income, exemptions, and itemized deductions
(including the deduction for state and local income taxes). If the standard
deduction is taken for Federal income tax purposes, the taxable equivalent yield
required to equal a specified tax-exempt yield is at least as great as that
shown in the table. It is assumed that the investor is not subject to the
alternative minimum tax. Where applicable, investors should consider the benefit
of certain itemized deductions and the benefit of personal exemptions are
limited in the case of higher income individuals. For 2000, taxpayers with AGI
in excess of a threshold amount of approximately $128,950 are subject to an
overall limitation on certain itemized deductions, requiring a reduction in such
deductions equal to the lesser of (i) 3% of AGI in excess of the threshold
amount or (ii) 80% of the amount of such itemized deductions otherwise
allocable. The benefit of each personal exemption is phased out at the rate of
two percentage points for each $2,800 (or fraction thereof) of AGI in the
phase-out zone. For single taxpayers, the range of AGI comprising the phase-out
zone for 2000 is estimated to be from $128,950 to $251,450 and for married
taxpayers filling a joint return from $193,400 to $315,900. The Federal tax
brackets, the threshold amounts at which
68
<PAGE> 165
itemized deductions are subject to reduction, and the range over which personal
exemptions are phased out will be further adjusted for inflation each year after
2000.
69
<PAGE> 166
TAXABLE YIELD EQUIVALENT FOR 2000
COMBINED FEDERAL AND STATE OF OHIO INCOME TAXES (continued)
<TABLE>
<CAPTION>
JOINT RETURN
Federal Tax Rate:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15.00% 15.00% 28.00% 28.00% 28.00% 31.00% 36.00% 36.0% 39.60%
Combined Federal and State Tax Rate:
18.79% 19.42% 31.74% 32.28% 32.97% 35.76% 40.42% 40.80% 44.13%
Taxable Income
Brackets*: $ 0- $40,001- $43,851- $ 80,001- $100,001- $105,951- $161,451- $200,001- Over
$40,000 $43,850 $80,000 $100,000 $105,950 $161,450 $200,000 $288,350 $288,350
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.50% 1.85% 1.86% 2.20% 2.22% 2.24% 2.33% 2.52% 2.53% 2.68%
2.00% 2.46% 2.48% 2.93% 2.95% 2.98% 3.11% 3.36% 3.38% 3.58%
2.50% 3.08% 3.10% 3.66% 3.69% 3.73% 3.89% 4.20% 4.22% 4.47%
3.00% 3.69% 3.72% 4.40% 4.43% 4.48% 4.67% 5.03% 5.07% 5.37%
3.50% 4.31% 4.34% 5.13% 5.17% 5.22% 5.45% 5.87% 5.91% 6.26%
4.00% 4.93% 4.96% 5.86% 5.91% 5.97% 6.23% 6.71% 6.76% 7.16%
4.50% 5.54% 5.58% 6.59% 6.64% 6.71% 7.01% 7.55% 7.60% 8.05%
5.00% 6.16% 6.20% 7.33% 7.38% 7.46% 7.78% 8.39% 8.45% 8.95%
5.50% 6.77% 6.82% 8.06% 8.12% 8.21% 8.56% 9.23% 9.29% 9.84%
6.00% 7.39% 7.45% 8.79% 8.86% 8.95% 9.34% 10.07% 10.14% 10.74%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The chart above is for illustrative purposes only. It is not an indicator
of past or future performance.
*The income brackets applicable to the state of Ohio do not correspond to the
Federal taxable income brackets. In addition, Ohio taxable income will likely be
different than Federal taxable income because it is computed by reference to
Federal adjusted gross income (AGI) with specifically-defined Ohio modifications
and exemptions, and does not consider many of the deductions allowed from
Federal AGI in computing Federal taxable income. No other state tax credits,
exemptions, or local taxes have been taken into account in arriving at the
combined marginal tax rate. In 1999, due to the state having surplus revenue, a
3.627% across the board reduction in the Ohio income tax rates for 1999 only was
effected pursuant to Ohio Revised Code sections 131.44 and 5747.02. It is not
yet known whether a reduction in the Ohio income tax rates will occur in 2000. A
reduction in Ohio income tax rates, such at the 1999 reduction, has the effect
of reducing the after-tax advantage of Ohio tax-exempt securities relative to
taxable securities. The income amount shown is income subject to federal income
tax reduced by adjustments to income, exemptions, and itemized deductions
(including the deduction for state and local income taxes). If the standard
deduction is taken for Federal income tax purposes, the taxable equivalent yield
required to equal a specified tax-exempt yield is at least as great as that
shown in the table. It is assumed that the investor is not subject to the
alternative minimum tax. Where applicable, investors should consider the benefit
of certain itemized deductions and the benefit of personal exemptions are
limited in the case of higher income individuals. For 2000, taxpayers with AGI
in excess of a threshold amount of approximately $128,950 are subject to an
overall limitation on certain itemized deductions, requiring a reduction in such
deductions equal to the lesser of (i) 3% of AGI in excess of the threshold
amount or (ii) 80% of the amount of such itemized deductions otherwise
allocable. The benefit of each personal exemption is phased out at the rate of
two percentage points for each $2,800 (or fraction thereof) of AGI in the
phase-out zone. For single taxpayers, the range of AGI comprising the phase-out
zone for 2000 is estimated to be from $128,950 to $251,450 and for married
taxpayers filling a joint return from $193,400 to $315,900. The Federal tax
brackets, the threshold amounts at which itemized deductions are subject to
reduction, and the range over which personal exemptions are phased out will be
further adjusted for inflation each year after 2000.
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<PAGE> 167
MICHIGAN TAX-FREE FUND
The Michigan Tax-Free Fund, with respect to each class of shares
offered, may use a tax equivalency table in advertising and sales literature.
The interest earned on tax-exempt securities in this Fund's portfolio generally
remains free from federal regular income tax and is free from Michigan personal
income taxes. Some portion of this 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.
TAXABLE YIELD EQUIVALENT FOR 2000
COMBINED FEDERAL AND STATE OF MICHIGAN INCOME TAXES
<TABLE>
<CAPTION>
Federal Tax Rate:
<S> <C> <C> <C> <C> <C>
15.0% 28.0% 31.0% 36.0% 39.6%
Combined Federal and State Tax Rate:
19.3% 32.3% 35.3% 40.3% 43.9%
Taxable Income
Brackets--
SINGLE RETURN: $ 0- $ 25,751- $ 62,451- $130,251- Over
$25,750 $ 62,450 $130,250 $283,150 $283,150
JOINT RETURN: $ 0- $ 43,051- $104,051- $158,551- Over
$43,050 $104,050 $158,550 $283,150 $283,150
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.50%................. 1.86% 2.22% 2.32% 2.51% 2.67%
2.00%................. 2.48% 2.95% 3.09% 3.35% 3.57%
2.50%................. 3.10% 3.69% 3.86% 4.19% 4.46%
3.00%................. 3.72% 4.43% 4.64% 5.03% 5.35%
3.50%................. 4.34% 5.17% 5.41% 5.86% 6.24%
4.00%................. 4.96% 5.91% 6.18% 6.70% 7.13%
4.50%................. 5.58% 6.65% 6.96% 7.54% 8.02%
5.00%................. 6.20% 7.39% 7.73% 8.38% 8.91%
5.50%................. 6.82% 8.12% 8.50% 9.21% 9.80%
6.00%................. 7.44% 8.86% 9.27% 10.05% 10.70%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Additional state and local taxes paid on comparable
taxable investments were not used to increase federal deductions. Furthermore,
no adjustment was made to reflect available state tax deductions on federal
returns.
71
<PAGE> 168
FLORIDA TAX-FREE MONEY FUND
The Florida Tax-Free Money Fund, with respect to each class of shares
offered, may use a tax equivalency table in advertising and sales literature.
The interest earned on tax-exempt securities in this Fund's portfolio generally
remains free from federal regular income tax. Some portion of this Fund's income
may result in liability under the federal alternative minimum tax. The table
below provides tax-equivalent yields for selected tax-exempt yields.
TAXABLE YIELD EQUIVALENT FOR 2000
STATE OF FLORIDA--FEDERAL INCOME TAXES ONLY
<TABLE>
<CAPTION>
Federal Tax Rates:
<S> <C> <C> <C> <C> <C>
15.0% 28.0% 31.0% 36.0% 39.6%
Taxable Income Brackets--
SINGLE RETURN: $ 0- $ 25,751- $ 62,451- $130,251- Over
$25,750 $ 62,450 $130,250 $283,150 $283,150
JOINT RETURN: $ 0- $ 43,051- $104,051- $158,551- Over
$43,050 $104,050 $158,550 $283,150 $283,150
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.50%.................... 1.76% 2.08% 2.17% 2.34% 2.48%
2.00%.................... 2.35% 2.78% 3.90% 3.13% 3.31%
2.50%.................... 2.94% 3.47% 3.62% 3.91% 4.14%
3.00%.................... 3.53% 4.17% 4.35% 4.69% 4.97%
3.50%.................... 4.12% 4.86% 5.07% 5.47% 5.79%
4.00%.................... 4.71% 5.56% 5.80% 6.25% 6.62%
4.50%.................... 5.29% 6.25% 6.52% 7.03% 7.45%
5.00%.................... 5.88% 6.94% 7.25% 7.81% 8.28%
5.50%.................... 6.47% 7.64% 7.97% 8.59% 9.11%
6.00%.................... 7.06% 8.33% 8.70% 9.38% 9.93%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.
FINANCIAL STATEMENTS
The audited financial statements of the Funds for the year ended
December 31, 1999, and the report of KPMG LLP, independent auditors, are
incorporated herein by reference from the Trust's Annual Report to Shareholders
for the year ended December 31, 1999, 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.
72
<PAGE> 169
APPENDIX--DESCRIPTION OF BOND RATINGS
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 IBCA LONG-TERM RATING DEFINITIONS
AAA - Obligations for which there is the lowest expectation of credit risk.
Assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
73
<PAGE> 170
AA - Obligations for which there is a very low expectation of credit risk. They
indicated very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to unforeseeable events.
A - Obligations for which there is a low expectation of credit risk. The
capacity for timely repayment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to change in circumstances
or economic conditions.
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.
FITCH IBCA SHORT-TERM RATING DEFINITIONS
F1 - Obligations supported by the highest capacity for timely repayment.
F2 - Obligations supported by a strong capacity for timely repayment. However,
the relative degree of risk is slightly higher than for issues classified as
"A1" and capacity for timely repayment may be susceptible to adverse changes in
business, economic, or financial conditions.
F3 - Obligations supported by an adequate capacity for timely repayment,
although such capacity is more 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".
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
Prime 1 - Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term promissory obligations. P-1
repayment capacity will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
74
<PAGE> 171
- 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.
Prime 2 - Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term debt obligations. This normally will
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 IBCA COMMERCIAL PAPER RATING DEFINITIONS
F-1 - Issues assigned this rating are regarded as having the highest capacity
for timely payment.
F-2 - Issues assigned this rating reflect a strong capacity for timely payment.
However, the relative degree of risk is slightly higher than for issues
classified as "A1" and capacity for repayment may be susceptible to adverse
changes in business, economics, or financial conditions.
F-3 - Issues assigned this rating have an adequate capacity for timely payment.
Such capacity is more susceptible to adverse changes in business, economic or
financial conditions.
75
<PAGE> 172
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
All Exhibits incorporated by reference relate to File Nos. 33-11905 and 811-5010
except as otherwise noted):
(a) Amended and Restated Declaration of Trust of the Registrant, including
Amendments No. 1 and 2 thereto (previously filed as Exhibit 1 to
Post-Effective Amendment No. 19 and incorporated herein by reference)
(i) Amendment No. 3 to Amended and Restated Declaration of Trust
(previously filed as Exhibit (a)(i) to Post-Effective
Amendment No. 28 and incorporated herein by reference)
(b) By-Laws of the Registrant (previously filed as Exhibit 2 to
Post-Effective Amendment No. 19 and incorporated herein by reference)
(c) See Declaration of Trust and By-Laws
(d) (i) Investment Advisory Agreement, dated September 15, 1998, between
the Registrant and The Huntington National Bank, as successor to The
Huntington Trust Company, N.A., relating to the Money Market Fund, Ohio
Municipal Money Market Fund (formerly Tax-Free Money Market Fund) and
Ohio Tax-Free Fund (previously filed as Exhibit 5(i) to Post-Effective
Amendment No. 26 and incorporated by reference herein)
(ii) Investment Advisory Agreement, dated April 25, 1989, between the
Registrant and The Huntington National Bank, as successor to The
Huntington Trust Company, N.A., relating to the U.S. Treasury Money
Market Fund, Growth Fund, Income Equity Fund, Fixed Income Securities
Fund and Short/Intermediate Fixed Income Securities Fund (previously
filed as Exhibit 5(ii) to Post-Effective Amendment No. 26 and
incorporated by reference herein)
(iii) Investment Advisory Agreement, dated April 24, 1992, between the
Registrant and The Huntington National Bank, as successor to The
Huntington Trust Company, N.A., relating to the Mortgage Securities
Fund (previously filed as Exhibit 5(i) to Post-Effective Amendment No.
19 and incorporated herein by reference)
(iv) Investment Advisory Agreement, dated September 5, 1997, between
the Registrant and The Huntington National Bank relating to the
Michigan Tax-Free Fund (previously filed as Exhibit 5(iii) to
Post-Effective Amendment No. 23 and incorporated herein by reference)
(v) Investment Advisory Agreement, dated November 21, 1997, between the
Registrant and The Huntington National Bank relating to the
Intermediate Government Income Fund (previously filed as Exhibit 5(iv)
to Post-Effective Amendment No. 24 and incorporated herein by
reference)
(vi) Investment Advisory Agreement, dated December 1, 1998, as restated
April 26, 2000, between the Registrant and The Huntington National Bank
relating to the Florida Tax-Free Money Fund
(1) Interim Sub-Advisory Agreement, dated April 26, 2000,
between The Huntington National Bank and Fort Washington
Investment Advisors, Inc. relating to the Florida Tax- Free
Money Fund
(e) Distribution Agreement, dated January 11, 1996, between the Registrant
and SEI Investments Distribution Co. (formerly SEI Financial Services
Company) (previously filed as Exhibit 6 to Post- Effective Amendment
No. 20 and incorporated herein by reference)
(f) Not applicable
(g) Custodian Contract, dated January 27, 1993, between the Registrant and
The Huntington National Bank, as successor to The Huntington Trust
Company, N.A. (previously filed as Exhibit 8 to Post- Effective
Amendment No. 19 and incorporated herein by reference)
(1) Amendment to Schedule A to Custodian Contract dated
December 20, 1999 (previously filed as Exhibit (g)(1) to
Post-Effective Amendment No. 32 and incorporated herein by
reference)
C-1
<PAGE> 173
(h) (i) Transfer Agency and Service Agreement, dated January 1, 1998,
between the Registrant and State Street Bank and Trust Company
(previously filed as Exhibit 9(i) to the Registration Statement on Form
N-14, File No. 333-44511, and incorporated herein by reference)
(1) Amendment to Schedule A of Transfer Agency and Service
Agreement (previously filed as Exhibit (h)(i)(1) to
Post-Effective Amendment No. 28 and incorporated herein by
reference)
(ii) Administration Agreement, dated December 20, 1999, between the
Registrant and Huntington National Bank (previously filed as Exhibit
(h)(ii) to Post-Effective Amendment No. 32 and incorporated herein by
reference)
(i) Opinion and Consent of Counsel as to legality of shares being
registered
(j) Consent of KPMG LLP
(k) Not applicable
(l) Initial Capital Understanding (previously filed as Exhibit 13 to
Post-Effective Amendment No. 20 and incorporated herein by reference)
(m) Distribution and Shareholder Services Plan, as amended and restated
April 26, 2000
(n) Financial Data Schedules (incorporated herein by reference to
Registrant's Form N-SAR filed on February 29, 2000)
(o) Multiple Class Plan, as amended and restated April 26, 2000
(p) (i) Code of Ethics of Registrant
(ii) Code of Ethics of Trust Division of The Huntington National Bank
(iii) Code of Ethics of SEI Investments Distribution Co.
(z) (i) Power of Attorney for David S. Schoedinger (previously filed as
Exhibit (z)(i) to Post-Effective Amendment No. 28 and incorporated
herein by reference)
(ii) Power of Attorney for John M. Shary (previously filed as Exhibit
(z)(ii) to Post-Effective Amendment No. 28 and incorporated herein by
reference)
(iii) Power of Attorney for William R. Wise (previously filed as
Exhibit (z)(iii) to Post-Effective Amendment No. 28 and incorporated
herein by reference)
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
The response to this Item is incorporated by reference to Registrant's
Amendment No. 1 to Form N-14 filed February 3, 1998.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
THE ADVISER. Huntington National Bank ("Huntington") serves as
investment adviser to the Registrant. Huntington is a wholly-owned subsidiary of
Huntington Bancshares Incorporated ("HBI"). 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 HBI. Set forth below are the names and principal businesses of the
directors and executive officers of Huntington.
C-2
<PAGE> 174
<TABLE>
<CAPTION>
NAME OF PRINCIPAL BUSINESS(ES) DURING
OFFICERS AND DIRECTORS OF HUNTINGTON AT LEAST THE LAST TWO FISCAL YEARS
- ------------------------------------ ----------------------------------
<S> <C>
Friedrich K.M. Bohm, Director.......... Chairman, NBBJ East Limited Partnership
Douglas G. Borror, Director............ President and Chief Executive Officer, Dominion Homes, Inc.
Richard A. Cheap....................... Executive Vice President, General Counsel, Secretary and Cashier, Huntington
Anne Creek, Treasurer.................. Treasurer, Huntington
Peter H. Edwards, Director............. Chairman, Edwards Companies
Douglas E. Fairbanks, Director......... Retired; formerly Vice President, Ameritech
Ralph K. Frasier, Director............. Retired
Peter E. Geier, Director............... President and Chief Operating Officer, Huntington
Elaine H. Hairston, Director........... Retired; formerly Chancellor, Ohio Board of Regents
Edgar W. Ingram III, Director.......... President and Chief Executive Officer, White Castle Systems, Inc.
Pete A. Klisares, Director............. President and Chief Operating Officer, Karrington, Inc.
Robert W. Rahal, Director.............. President and Chief Executive Officer, Team Rahal, Inc.
John B. Schulze, Director.............. Chairman, President and Chief Executive Officer, The Lamson & Sessions Co.
Ronald J. Seiffert, Director........... Vice Chairman, Huntington
J. Richard Sisson, Director............ Senior Vice President and Provost, The Ohio State University
Rodney Wasserstrom, Director........... President and Chief Executive Officer, The Wasserstrom Company
William J. Williams, Director.......... Retired; formerly Chairman, Huntington
William S. Williams, Director.......... Retired; formerly, Vice Chairman and Chief Executive Officer, The W.W. Williams Co., Inc.
Frank Wobst, Director.................. Chairman, President and Chief Executive Officer, HBI
Helen K. Wright, Director.............. Retired
</TABLE>
C-3
<PAGE> 175
THE SUBADVISER. Fort Washington Investment Advisors, Inc. ("Fort
Washington"), a registered investment adviser, serves as subadviser to the
Florida Tax-Free Money Fund. Fort Washington is a wholly-owned subsidiary of The
Western-Southern Life Insurance Company which provides life and health
insurance, annuities, mutual funds, asset management and related financial
services. As a full-service registered investment advisory firm, Fort Washington
offers professional and comprehensive investment management services for
foundations and endowments, corporate pension funds, insurance companies, mutual
funds, colleges and universities, religious organizations and high net worth
individuals.
The table below gives the name, address and principal occupation of
each current director and principal executive officer of Fort Washington.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS FORT WASHINGTON
<S> <C> <C>
William J. Williams Chairman and Director Chairman of the Board of The Western
400 Broadway and Southern Life Insurance Company
Cincinnati, OH 45202
William Francis Ledwin President and Director President and Director of Touchstone
420 East Fourth Street Advisors; Director of Countrywide
Cincinnati, OH 45202 Investments; Vice President and Chief
Investment Officer of Columbus Life
Insurance Company; Senior Vice President
and Chief Investment Officer of The
Western and Southern Life Insurance
Company
James J. Vance Vice President and Vice President and Treasurer of The
400 Broadway Treasurer Western and Southern Life Insurance
Cincinnati, OH 45202 Company
</TABLE>
In addition to serving as sub-adviser to the Fund, Fort Washington
serves as sub-adviser to several other investment companies which are not
affiliated with the Trust, including Touchstone Series Trust.
ITEM 27. 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 underwriter, distributor or investment
adviser:
SEI Investments Distribution Co. ("SEI") is the Distributor of the
Registrant's shares. SEI also acts as distributor for the following other
investment companies:
The Achievement Funds Trust
The Advisors' Inner Circle Fund
Alpha Select Funds
Amerindo Funds, Inc.
The Arbor Fund
ARK Funds
C-4
<PAGE> 176
Armada Funds
The Armada Advantage Fund
Bishop Street Funds
Boston 1784 Funds(R) CNI Charter Funds CrestFunds, Inc.
CUFUND
The Expedition Funds
First American Funds, Inc.
First American Investment Funds, Inc.
First American Strategy Funds, Inc.
Friends Ivory Funds
HighMark Funds
Huntington VA Funds
The Nevis Fund, Inc.
Oak Associates Funds
The Parkstone Advantage Fund
The Parkstone Group of Funds
The PBHG Funds, Inc.
PBHG Insurance Series Fund, Inc.
The Pillar Funds
SEI Asset Allocation Trust
SEI Daily Income Trust
SEI Index Funds
SEI Institutional Investments Trust
SEI Institutional Managed Trust
SEI Institutional International Trust
SEI Insurance Products Trust
SEI Liquid Asset Trust
SEI Tax Exempt Trust
STI Classic Funds
STI Classic Variable Trust
TIP Funds
SEI 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) Unless otherwise 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 and Chairman of the None
Board of Directors
Carmen V. Romeo Director None
Mark J. Held President and COO None
Gilbert L. Beebower Executive Vice President None
</TABLE>
C-5
<PAGE> 177
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITION AND OFFICE
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
<S> <C> <C>
Richard B. Lieb Director and Executive Vice None
President
Dennis J. McGonigle Executive Vice President None
Robert M. Silvestri CFO and Treasurer None
Leo J. Dolan, Jr. Senior Vice President None
Carl A. Guarino Senior Vice President None
Jack May Senior Vice President None
Hartland J. McKeown Senior Vice President None
Kevin P. Robins Senior Vice President Vice President and Assistant
Secretary
Patrick K. Walsh Senior Vice President None
Robert Aller Vice President None
Timothy D. Barto Vice President and Assistant Vice President and Assistant
Secretary Secretary
Todd Cipperman Senior Vice President and Vice President and Assistant
General Counsel Secretary
James R. Foggo Vice President and Assistant Vice President and Secretary
Secretary
Robert Crudup Vice President and None
Managing Director
S. Courtney E. Collier Vice President and None
Assistant Secretary
Richard A. Deak Vice President and Assistant None
Secretary
Barbara Doyne Vice President None
Jeff Drennen Vice President None
Vic Galef Vice President and None
Managing Director
Lydia A. Gavalis Vice President and Vice President and Assistant
Assistant Secretary Secretary
Greg Gettinger Vice President and None
Assistant Secretary
Kathy Heilig Vice President None
Jeff Jacobs Vice President None
</TABLE>
C-6
<PAGE> 178
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITION AND OFFICE
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
<S> <C> <C>
Samuel King Vice President None
Kim Kirk Vice President and None
Managing Director
John Krzeminski Vice President and None
Managing Director
Position and Office Position and Office
Carolyn McLaurin Vice President and None
Managing Director
Christine M. McCullough Vice President and Assistant Vice President and Assistant
Secretary Secretary
Mark Nagle Vice President President and Chief
Executive Officer
Joanne Nelson Vice President None
Cynthia M. Parish Vice President and Secretary None
Rob Redican Vice President None
Maria Rinehart Vice President None
Steve Smith Vice President None
Daniel Spaventa Vice President None
Kathryn L. Stanton Vice President None
Lynda J. Striegel Vice President and None
Assistant Secretary
Lori L. White Vice President and None
Assistant Secretary
Wayne M. Withrow Senior Vice President None
</TABLE>
(c) Not applicable.
ITEM 28. 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 Investments Management Co. One Freedom Valley Road
(Distributor and Sub-Administrator) Oaks, PA 19456
Huntington National Bank Huntington Center
(Adviser, Administrator & Custodian) 41 South High Street
Columbus, OH 43287
C-7
<PAGE> 179
Fort Washington Investment Advisors, Inc. 420 East Fourth Street
(Sub-Adviser) Cincinnati, OH 45202
State Street Bank and Trust Two Heritage Drive
Company (Transfer Agent and Quincy, MA 02171
Dividend Disbursing Agent)
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
C-8
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this 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 1st day of May, 2000.
THE HUNTINGTON FUNDS
By: /s/ MARK NAGLE
-------------------------------
Mark Nagle, 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/ Mark Nagle President and Chief Executive May 1, 2000
- -------------------------
Mark Nagle Officer (Principal Executive
Officer)
/s/ John Leven Treasurer and Chief Financial May 1, 2000
- -------------------------
John Leven Officer (Principal Financial and
Accounting Officer)
* Trustee May 1, 2000
- -------------------------
David S. Schoedinger
* Trustee May 1, 2000
- -------------------------
William R. Wise
* Trustee May 1, 2000
- -------------------------
John M. Shary
*Executed on behalf of the indicated person by the undersigned, pursuant to
power of attorney previously filed and incorporated herein by reference.
By: /s/ Mark Nagle May 1, 2000
----------------------------------
Mark Nagle
Attorney-In-Fact
<PAGE> 181
EXHIBIT INDEX
(d)(vi) Investment Advisory Agreement, dated December 1, 1998,
as restated April 26, 2000, between the Registrant and
The Huntington National Bank relating to the Florida
Tax-Free Money Fund
(d)(vi)(1) Interim Sub-Advisory Agreement dated April 26, 2000
between The Huntington National Bank and Fort
Washington Investment Advisors, Inc. relating to the
Florida Tax- Free Money Fund
(i) Opinion and Consent of Counsel as to legality of
shares
(j) Consent of KPMG LLP
(m) Distribution and Shareholder Services Plan, as amended
and restated April 26, 2000
(o) Multiple Class Plan, as amended and restated April 26,
2000
(p)(i) Code of Ethics of the Registrant
(p)(ii) Code of Ethics of the Investment Division of The
Huntington National Bank
(p)(iii) Code of Ethics of SEI Investments Distribution Co.
<PAGE> 1
EXHIBIT (d)(vi)
THE HUNTINGTON FUNDS
INVESTMENT ADVISORY AGREEMENT
(RESTATED APRIL 26, 2000)
HUNTINGTON FLORIDA TAX-FREE MONEY FUND
This Agreement is made as of the 26th day of April, 2000, by and
between The Huntington Funds, a business trust organized under the laws of the
Commonwealth of Massachusetts (herein called the "Trust") and The Huntington
National Bank, a national bank (herein called the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended;
WHEREAS, the Trust has retained the Adviser to render investment
advisory and other management services for its Money Market Fund, Ohio Municipal
Money Market Fund, and Ohio Tax-Free Fund portfolios pursuant to a separate
Investment Advisory Agreement dated September 15, 1988; and for its U.S.
Treasury Money Market Fund, Growth Fund, Income Equity Fund, Fixed Income
Securities Fund and Short/Intermediate Fixed Income Securities Fund portfolios
pursuant to a separate Investment Advisory Agreement dated April 25, 1989; and
for its Mortgage Securities Fund pursuant to a separate Investment Advisory
Agreement dated April 24, 1992; and for its Michigan Tax-Free Fund pursuant to a
separate Investment Advisory Agreement dated September 5, 1997; and for its
Intermediate Government Income Fund pursuant to a separate Investment Advisory
Agreement dated November 21, 1997;
WHEREAS, the Trust has retained the Adviser to render investment
advisory and other management services for the Huntington Florida Tax-Free Money
Fund (the "Fund") on the terms and conditions set forth in the Investment
Advisory Agreement dated December 1, 1998 (the "Investment Advisory Agreement");
WHEREAS, the Trust desires and the Adviser has agreed to reduce the
compensation paid to the Adviser by the Fund under the Investment Advisory
Agreement.
NOW THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties agree as follows:
1. Employment of the Adviser. The Trust, being duly authorized, hereby appoints
the Adviser to act as investment adviser to the Trust for the Fund for the
period and on the terms set forth in this Agreement. The Adviser accepts such
employment and agrees to render the services herein set forth for the
compensation herein provided.
2. Management. Subject to the supervision and direction of the Board of Trustees
of the Trust (the "Trustees"), the Adviser will provide a continuous program for
the Fund, including, but not limited to, investment research and management with
respect to all securities, investments, cash and cash equivalents in the Fund.
The Adviser will determine, from time to time, what securities and
<PAGE> 2
other instruments will be purchased, retained or sold by the Trust for the Fund.
The Adviser will provide the services rendered by it in accordance with the
Fund's investment objectives and policies as stated in the Prospectus which is a
part of the Trust's effective Registration Statement as amended from time to
time. The Adviser agrees that it:
(a) will conform with all applicable Rules and Regulations of the Securities and
Exchange Commission (herein called the "Rules") and with the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940
and the Investment Advisers Act of 1940, all as amended, and will conduct its
activities under this Agreement in accordance with all applicable Rules and
Regulations of the Comptroller of the Currency pertaining to the investment
advisory activities of national banks;
(b) will place orders pursuant to its investment determinations for the Fund,
either directly with the issuer of the instrument to be purchased or with any
broker or dealer selected by it. In placing orders with brokers and dealers, the
Adviser will use its best reasonable efforts to obtain the best net price and
execution of its orders, after taking into account all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. However, this responsibility shall not be
deemed to obligate the Adviser to solicit competitive bids for each transaction.
Consistent with this obligation, the Adviser may, to the extent permitted by
law, purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (as those terms were defined in Section
28(e) of the Securities Exchange Act of 1934) statistical quotations,
specifically, the quotations necessary to determine the Fund's net asset value,
and other information provided to the Fund or to the Adviser or its affiliates
to or for the benefit of the Fund and/or other accounts over which the Adviser
or any of its affiliates exercises investment discretion. Subject to the review
of the Trustees from time to time with respect to the extent and continuation of
the policy, the Adviser is authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting the transaction if the Adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts as to which it or
its affiliates exercise investment discretion; and
(c) maintain books and records with respect to the securities transactions of
the Fund and will render to the Trustees such periodic and special reports as
the Trustees may reasonably request.
3. Services Not Exclusive. The investment management services rendered by the
Adviser under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others, as its services under this
Agreement are not impaired thereby. The Adviser shall provide fair and equitable
treatment to the Fund in the selection of portfolio instruments and the
2
<PAGE> 3
allocation of investment opportunities; the Adviser is not required to give the
Fund preferential treatment.
4. Books and Records. In compliance with the requirements of rule 31a-3
promulgated under the Investment Company Act of 1940, as amended, the Adviser
hereby agrees that all records which it maintains for the Fund are the property
of the Trust and further agrees to surrender promptly to the Trust any of such
records upon the Trust's request. The Adviser further agrees to preserve for the
periods proscribed by Rule 31a-2 the records required to be maintained by Rule
31a-1 and to comply in full with requirements of Rule 204(2) under the
Investment Advisers Act of 1940, pertaining to the maintenance of books and
records.
5. Expenses. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities (including brokerage commissions and taxes, if
any) or other investment instruments purchased for the Fund.
6. Compensation. For the services provided and the expenses assumed, pursuant to
this Agreement, the Trust will pay the Adviser, and the Adviser will accept as
full compensation, a fee, computed daily and payable monthly at an annual rate
of: 0.30 of one percent of the average daily net assets ("Net Assets") of the
Fund up to $500 million, 0.25 of one percent of Net Assets from $500 million to
$1 billion, 0.20 of one percent of Net Assets from in excess of $1 billion.
7. Limitation of Liability of the Adviser; Indemnification.
(a) The Adviser will not be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust in connection with the matters to which
this 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 malfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties or from reckless disregard
by it of its obligations and duties under this Agreement.
(b) Subject to the limitations contained in Section 7(c) below:
(i) the Trust shall indemnify and hold harmless the Adviser, its directors,
officers, employees and each person who controls the Adviser (hereinafter
referred to as "Covered Persons") to the fullest extent permitted by law,
against any and all claims, demands and liabilities (and all reasonable expenses
in connection therewith) to which the Adviser or any of its directors, officers,
employees or controlling persons may become subject by virtue of the Adviser
being or having been the Adviser of the Trust;
(ii) the words "claims", "actions", "suits", or "proceedings" shall apply to all
claims, actions, suit or proceedings (civil, criminal or other, including
appeals), actual or threatened while in office or thereafter, and the words
"liabilities" and "expenses" shall include, without limitation, attorneys' fees
and expenses, costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
3
<PAGE> 4
(c) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceedings was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of its office or (B) not to have acted in
good faith in the reasonable relief that its action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office
(1) by the court or other body approving the settlement; or
(2) by at least a majority of those Trustees who are neither
Interested persons of the Trust (as defined in the Investment
Company Act of 1940, as amended) nor are parties to the
matter, based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or
(3) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full
trial-type inquiry).
(d) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the personal representatives, successors and
assigns of each such person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel and any other persons, other than a
Covered Person, may be entitled by contract or otherwise by law.
(e) Expenses in connection with the investigation, preparation and presentation
of a defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 shall be paid by the Trust or by the Fund, from
time to time, prior to final disposition thereof, upon receipt of an undertaking
by or on behalf of such Covered Person that such amount will be paid over by him
to the Trust or the Fund if it is ultimately determined that he is not entitled
to indemnification under Section 7; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust shall be insured against losses arising out of any such advance
payments, or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry), that there is reason to
believe that such Covered Person will be entitled to indemnification under this
Section 7.
4
<PAGE> 5
8. Duration and Termination. This Agreement shall be effective as of the date on
which the Initial Registration Statement on Form N-1A filed with the Securities
and Exchange Commission with respect to the Fund becomes effective and, unless
sooner terminated as provided herein, shall continue until two years after such
date. Thereafter, if not terminated, this Agreement shall continue in effect as
to the Fund for successive periods of 12 months each, provided such continuance
is specifically approved at least annually (a) by the vote of a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Trustees or, with respect to the Fund, by the vote
of a majority of the outstanding voting securities of the Fund; provided,
however, that this Agreement may be terminated without the payment of any
penalty, by the Trustees, or, by vote of majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Adviser, or by the
Adviser at any time, on 90 days' written notice to the Trust. This Agreement
will immediately terminate in the event of its assignment by either party hereto
or by operation of law. (As used in this Agreement, the terms "majority of the
outstanding voting securities", "interested person" and "assignment" shall have
the same meanings as such terms have in the Investment Company Act of 1940, as
amended).
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and, where required by the Investment Company Act of
1940, any amendment to this Agreement shall be effective with respect to the
Fund only following approval by vote of a majority of the Fund's outstanding
voting securities.
10. Representations and Warranties. The Adviser hereby represents and warrants
as follows:
(a) The Adviser is exempt from registration under the Investment Advisers Act of
1940, as amended;
(b) The Adviser has all requisite authority to enter into, execute, deliver and
perform its obligations under this Agreement;
(c) This Agreement is the legal, valid and binding obligation of the Adviser,
and is enforceable in accordance with its terms; and
(d) The performance of the Adviser of its obligations under this Agreement does
not conflict with any law or regulation to which it is subject.
11. Covenants. The Adviser covenants and agrees that, so long as this Agreement
shall remain in effect, (1) The Adviser shall remain exempt from registration or
shall become registered under the Investment Advisers Act of 1940; and (2) the
performance by the Adviser of its obligations under this Agreement shall not
conflict with any law to which it is then subject.
5
<PAGE> 6
(a) The Trust hereby covenants and agrees that, so long as this Agreement shall
remain in effect, it shall furnish the Adviser from time to time with copies of
the following documents, if and when effective, pertaining to the Trust or the
Fund and all amendments and supplements thereto: Declaration of Trust, By-laws,
Registration Statement (including prospectus and Statement of Additional
Information), Custodial Agreement, Transfer Agency Agreement, Administration
Agreement, Distribution Agreement, Rule 12b-1 Service Plan, Proxy Statement and
any other documents filed with the Securities and Exchange Commission, State
securities law administrators or other governmental agencies, and any other
documents the Adviser may reasonably request.
12. Notices. Any notice required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by registered mail, postage prepaid,
(1) to the Adviser at 41 South High Street, Columbus, Ohio 43287, or (2) to the
Trust c/o SEI Investments Mutual Fund Services, One Freedom Valley Road, Oaks,
Pennsylvania 19456.
13. Waiver. With full knowledge of the circumstances and the effect of its
action, the Adviser hereby waives any and all rights which it may acquire in the
future against the property of any shareholder of the Trust, other than shares
of the Trust at their net asset value; which arise out of any action or inaction
of the Trust under this Agreement.
14. Captions. The captions in this Agreement are included for convenience or
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
15. Severability. If any provision of this Agreement shall be held or made
invalid or unenforceable by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
16. Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors.
17. Governing Law. This Agreement is executed in the state of Ohio, and shall be
governed by the laws of such state, without reference to conflict of laws
principles.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement
to be executed as of the day and year first above written.
Attest: THE HUNTINGTON FUNDS
_____________________________ By: ________________________________
Attest: THE HUNTINGTON NATIONAL BANK
_____________________________ By: ________________________________
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<PAGE> 1
EXHIBIT (d)(vi)(1)
THE HUNTINGTON FUNDS
INTERIM SUB-ADVISORY AGREEMENT
HUNTINGTON FLORIDA TAX-FREE MONEY FUND
THIS AGREEMENT is made between The Huntington National Bank, a national
banking association (hereinafter referred to as "Adviser") and Fort Washington
Advisors, Inc., a registered investment adviser located in Cincinnati, Ohio
(hereinafter referred to as the "Sub-Adviser").
B A C K G R O U N D
1. Countrywide Investments, Inc. ("Countrywide") served as the sub-adviser to
The Huntington National Bank ("Huntington") with respect to management of the
Huntington Florida Tax-Free Money Fund, pursuant to a Sub-Advisory Agreement
dated as of October 27, 1999 (the "Sub-Advisory Agreement").
2. Effective May 1, 2000, Countrywide will move its investment advisory
personnel and operations responsible for the Huntington Florida Tax-Free Money
Fund to its affiliate Fort Washington Investment Advisors, Inc.
3. The Sub-Advisory Agreement will automatically terminate on May 1, 2000 as a
result of the foregoing changes.
4. Huntington desires to retain the Sub-Adviser to provide the same sub-advisory
services previously provided by Countrywide.
A G R E E M E N T
In consideration of the foregoing and other good and valuable
consideration, the parties, intending to be legally bound, agree as follows:
(a) Sub-Adviser agrees to furnish to Adviser in its capacity as investment
adviser to the Huntington Florida Tax-Free Money Fund (the "Fund"), a portfolio
of The Huntington Funds ("Trust"), such investment advice, statistical and other
factual information, as may from time to time be reasonably requested by Adviser
for the Fund which may be offered in one or more classes of shares.
(b) For its services under this Agreement, Sub-Adviser shall receive from
Adviser a monthly fee, no greater than the compensation the Sub-Adviser would
have received under the Sub-Advisory Agreement, as set forth in Exhibit A
hereto.
(c) The compensation earned under this Agreement will be held in an
interest-bearing escrow account with the Fund's custodian. If a majority of the
Fund's outstanding voting securities do not
<PAGE> 2
approve a contract with the Sub-Adviser, the Sub-Adviser will be paid, out of
the escrow account, the lesser of: (i) any costs incurred in performing this
Agreement (plus interest earned on that amount while in escrow); or (ii) the
total amount in the escrow account (plus interest earned).
(d) This Agreement shall be effective as of May 1, 2000 and shall remain in
effect for the Fund for no more than 150 days or until the shareholders of the
Fund vote to approve or disapprove a new sub-advisory agreement with the
Sub-Adviser, at a meeting called for such purpose, whichever is earlier.
(e) Notwithstanding any provision to the contrary, this Agreement may be
terminated at any time without the payment of any penalty: (a) by the Trustees
of the Trust or by a vote of a majority of the outstanding voting securities (as
defined in Section 2(a) (42) of the Investment Company Act of 1940) of the Fund
upon ten (10) calendar days' written notice to the Sub-Adviser; or (b) by
Adviser upon ten (10) calendar days' written notice to the Sub-Adviser.
(f) This Agreement shall automatically terminate: (a) in the event of its
assignment (as defined in the Investment Company Act of 1940); or (b) in the
event of termination of the Investment Advisory Agreement between the Trust and
the Adviser as to the Fund (the "Investment Advisory Agreement") for any reason
whatsoever.
(g) So long as both Adviser and Sub-Adviser shall be legally qualified to act as
an investment adviser to the Fund, neither Adviser nor Sub-Adviser shall act as
an investment adviser (as such term is defined in the Investment Company Act of
1940) to the Fund except as provided herein and in the Investment Advisory
Agreement or in such other manner as may be expressly agreed between Adviser and
Sub-Adviser.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their duly authorized officers, as of this 26th day
of April, 2000.
ATTEST: THE HUNTINGTON NATIONAL BANK
By:
- ---------------------------------- ---------------------------------
Richard W. Stenberg
Senior Vice President
FORT WASHINGTON INVESTMENT
ADVISORS, INC.
By:
- ---------------------------------- ---------------------------------
3
<PAGE> 4
EXHIBIT A
THE HUNTINGTON FUNDS
HUNTINGTON FLORIDA TAX-FREE MONEY FUND
INTERIM SUB-ADVISORY AGREEMENT
For all services rendered by Sub-Adviser hereunder, Adviser shall pay
into an interest-bearing escrow account with the Fund's custodian at the end of
each month a Sub-Advisory Fee equal to the annual rate of 0.20% of the average
daily net assets ("Net Assets") of the Fund during such month.
In the event that a new sub-advisory agreement with the Sub-Adviser is
approved by a vote of a majority of the outstanding voting securities of the
Fund (as defined in Section 2(a)(42) of the Investment Company Act of 1940)
prior to the expiration of this Agreement, the total amount in the escrow
account (including interest earned) will be paid to the Sub-Adviser.
In the event that a new sub-advisory agreement with the Sub-Adviser is
not approved by a vote of a majority of the outstanding voting securities of the
Fund prior to the expiration of this Agreement, the Sub-Adviser will be paid,
out of the escrow account, the lesser of: (1) any costs incurred in performing
this Agreement (plus interest earned on that amount while in escrow); or (2) the
total amount in the escrow account (plus interest earned). Any balance remaining
in the escrow account following such disbursement shall be paid to Adviser.
This Exhibit duly incorporates by reference the Interim Sub-Advisory
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their duly authorized officers, as of this 26th day
of April, 2000.
ATTEST: THE HUNTINGTON NATIONAL BANK
By:
- ---------------------------------- ---------------------------------
Richard W. Stenberg
Senior Vice President
FORT WASHINGTON INVESTMENT
ADVISORS, INC.
By:
- ---------------------------------- ---------------------------------
<PAGE> 1
Ropes & Gray
One Franklin Square
1301 K Street, NW
Washington, DC 20005
May 1, 2000
The Huntington Funds
41 South High Street
Columbus, Ohio 43287
Ladies and 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 Huntington 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) with respect to certain
units of beneficial interest of the Trust ("Shares").
We have examined your 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 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 Shares have been duly authorized under Massachusetts law. Upon the
original issue and sale of the Shares and upon receipt of the authorized
consideration therefor in an amount not less than the net asset value of the
Shares established and in force at the time of their sale, the Shares issued
will be validly issued, fully paid and non-assessable.
The Huntington 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 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> 2
We understand that this opinion is to be used in connection with the
filing of the Registration Statement. We consent to the filing of this opinion
with and as part of your Registration Statement.
Sincerely,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
EXHIBIT (M)
THE HUNTINGTON FUNDS
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
AS AMENDED AND RESTATED APRIL 26, 2000
This Plan constitutes the Distribution and Shareholder Services Plan
("Plan") of THE HUNTINGTON FUNDS, f/k/a The Monitor Funds (the "Trust"), a
Massachusetts business trust, with respect to shares ("Shares") of those certain
classes ("Classes") of the series of the Trust (the "Funds") set forth in an
exhibit hereto. This Plan, amended and restated by the Board of Trustees of the
Trust on April 26, 2000 represents the amendment and restatement of the Plan
adopted by the Board of Trustees on November 8, 1995 which combined the Plan
adopted by the Board of Trustees on April 24, 1992, and the Plan adopted by the
Board of Trustees on May 1, 1991.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 ("Act"), to allow the Trust to make payments as contemplated
herein, in conjunction with the distribution of Shares and providing shareholder
services for holders of Shares.
2. This Plan is designed to finance activities of SEI Investments
Distribution Co., f/k/a SEI Financial Services Company ("SEI"), principally
intended to result in the sale of Shares, to include: (a) providing incentive to
broker/dealers ("Brokers") to sell Shares and to provide administrative support
services to the Funds and their shareholders; (b) compensating other
participating financial institutions and other persons ("Administrators") for
providing administrative support services to the Funds and their shareholders;
(c) paying for the costs incurred in conjunction with advertising and marketing
of Shares, to include expenses of preparing, printing and distributing
prospectuses and sales literature to prospective shareholders, Brokers or
Administrators; and (d) other costs incurred in the implementation and operation
of the Plan. In compensation for services provided pursuant to this plan, SEI
will be paid fees with respect to the Classes as set forth in the exhibit
hereto.
3. Any payment to SEI in accordance with this Plan will be made
pursuant to the Distribution Agreement entered into by the Trust and SEI. Any
payments made by SEI to Brokers and Administrators with funds received as
compensation under this Plan will be made pursuant to an agreement entered into
by SEI and the Broker or Administrator.
4. SEI has the right (i) to select, in its sole discretion, the Brokers
and Administrators to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any agreement entered into by SEI and the
Brokers or Administrators.
5. Quarterly in each year that this Plan remains in effect, SEI shall
prepare and furnish to the Board of Trustees of the Trust, and the Board of
Trustees shall review, a written report of the amounts expended under the Plan
and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class as of
the dates indicated in the exhibit hereto, provided that, as of that date, the
Plan shall have been approved with respect to that Class by majority votes of
(a) the Trust's Board of Trustees, including the Trustees who are not
"interested persons" of the Trust, as defined in the Act ("Disinterested
Trustees") of the Trust,
<PAGE> 2
cast in person at a meeting called for the purpose of voting on the Plan; and
(b) any outstanding voting securities as defined in Section 2(a)(42) of the Act.
7. This Plan shall remain in effect with respect to each Class for a
period of one year from the effective date for that Class as set forth on an
exhibit hereto, and may be continued thereafter if this Plan is approved with
respect to each Class at least annually by a majority of the Trust's Board of
Trustees and a majority of the Disinterested Trustees, cast in person at a
meeting called for the purpose of voting on such Plan.
8. All material amendments to this Plan must be approved by a vote of
the Board of Trustees of the Trust and of the Disinterested Trustees, cast in
person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the
costs which the Classes may bear for distribution pursuant to the Plan without
being approved by a majority vote of the outstanding voting securities of the
Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at
any time by: (a) a majority vote of the Disinterested Trustees; or (b) a vote of
a majority of the outstanding voting securities of the particular Class as
defined in Section 2(a)(42) of the Act; or (c) by SEI on 60 days notice to the
particular Class.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion of the
Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of Paragraph
10 herein.
13. The name "The Huntington Funds" and "Trustees of The Huntington
Funds" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated April 29, 1991, as amended, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Huntington Funds"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series and/or class of Shares of the Trust must look solely to the
assets of the Trust belonging to such series and/or class for the enforcement of
any claims against the Trust.
14. This Plan shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts.
2
<PAGE> 3
EXHIBIT A
TO
THE HUNTINGTON FUNDS
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
AS AMENDED AND RESTATED APRIL 26, 2000
1. The following classes of shares ("Classes") of The Huntington Funds
(formerly, The Monitor Funds) (the "Trust) (as defined under the Plan) shall
participate in the Plan effective as of the dates set forth below:
<TABLE>
<CAPTION>
COMPENSATION
(as a percentage of average
daily net asset value of shares
NAME DATE of the applicable Class)
<S> <C> <C>
Money Market Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
Ohio Municipal Money Market Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
U.S. Treasury Money Market Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
Growth Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
Ohio Tax-Free Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
Fixed Income Securities Fund
Investment A Shares May 1, 1991 0.25*
Investment B Shares April 26, 2000 1.00**
Mortgage Securities Fund
Investment A Shares April 26, 2000 0.25*
Investment B Shares April 26, 2000 1.00**
Income Equity Fund
Investment A Shares January 30, 1997 0.25*
Investment B Shares April 26, 2000 1.00**
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
COMPENSATION
(as a percentage of average
daily net asset value of shares
NAME DATE of the applicable Class)
<S> <C> <C>
Short/Intermediate Fixed Income
Securities Fund
Investment A Shares January 30, 1997 0.25*
Investment B Shares April 26, 2000 1.00**
Michigan Tax-Free Fund
Investment A Shares March 31, 1998 0.25*
Investment B Shares April 26, 2000 1.00**
Intermediate Government Income Fund
Investment A Shares April 6, 1998 0.25*
Investment B Shares April 26, 2000 1.00**
Florida Tax-Free Money Fund
Investment A Shares October 21, 1998 0.25*
Investment B Shares April 26, 2000 1.00**
</TABLE>
2. SEI shall pay Brokers and Administrators a quarterly fee with
respect to Investment A Shares, computed at the annual rate specified above, in
accounts for which such Brokers and Administrators provide services described in
paragraph 2 of the Plan. Such fee shall be accrued daily and paid quarterly. SEI
shall pay Brokers and Administrators a monthly fee with respect to Investment B
Shares, computed at the annual rate specified above, in accounts for which such
Brokers and Administrators provide services described in paragraph 2 of the
Plan. Such fee shall be accrued daily and paid monthly.
Pursuant to Section 6 of the Plan, the undersigned has executed this
Exhibit A as of April 26, 2000.
-----------------------------------
Mark Nagle, President
* Represents a distribution and servicing fee
** Represents 0.75% distribution fee and 0.25% servicing fee
4
<PAGE> 1
EXHIBIT (j)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
The Huntington Funds:
We consent to use of our report dated February 11, 2000 for the Huntington Funds
as incorporated by reference herein and to the reference to our firm under the
headings "Financial Highlights-Money Market Funds," "Financial Highlights-Equity
Funds," and "Financial Highlights-Income Funds" in the Prospectuses and
"Independent Auditors" and "Financial Statements" in the Statement of Additional
Information included herein.
/s/ KPMG LLP
Columbus, Ohio
April 27, 2000
<PAGE> 1
EXHIBIT (o)
THE HUNTINGTON FUNDS
MULTIPLE CLASS PLAN
AMENDED AND RESTATED APRIL 26, 2000
This Multiple Class Plan ("Plan") is adopted by THE HUNTINGTON FUNDS (the
"Trust"), a Massachusetts business trust, with respect to all of the classes of
shares ("Classes") of all of the series of the Trust (the "Funds").
Purpose
1. The Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" of the Trust, as such term is defined by the
Investment Company Act of 1940, as amended (the "1940 Act"), has determined to
adopt this Plan, as amended and restated, in accordance with Rule 18f-3(d) under
the 1940 Act to enable the Funds to provide appropriate services to certain
designated Classes.
2. Separate Arrangements/Class Differences
(a) Designation of Classes: Each of the Funds may offer up to three classes of
shares: Investment A Shares, Investment B Shares and Trust Shares.
(b) Sales Charges: Purchases of Investment A Shares are subject to a front-end
sales charge, certain redemptions of Investment A Shares are subject to
redemption fees, and redemptions of Investment B Shares are subject to a
contingent deferred sales charge, each as described in the applicable prospectus
or statement of additional information. Purchases and redemptions of Trust
Shares are not subject to sales charges. Quantity discounts, accumulated
purchases, concurrent purchases, purchases in conjunction with a letter of
intent, reinstatement privileges, systematic withdrawals, waivers and other
purchases at net asset value as they relate to Investment A Shares are as
described in the applicable prospectus or statement of additional information.
Waivers of contingent deferred sales charges as they relate to Investment B
Shares are as described in the applicable prospectus or statement of additional
information.
(c) Distribution of Shares: Investment A Shares and Investment B Shares may be
purchased through The Huntington Investment Company, Huntington Personal
Bankers, as well as from the Trust's Distributor. Trust Shares may be purchased
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 Bank or its affiliates or
correspondent banks.
(d) Minimum Investment Amounts: The minimum initial investment for Investment A
Shares, Investment B Shares or Trust Shares is $1,000 for investments made
outside the Systematic Investment Program and $50 for investments made within
the Systematic Investment Program. Subsequent investments in Investment A Shares
or Investment B Shares are subject to a $50 minimum. Subsequent investments in
Trust Shares are subject to a $500 minimum for
<PAGE> 2
investments made outside the Systematic Investment Program and $50 for
investments made within the Systematic Investment Program.
(e) Voting Rights: Shareholders of each class 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 shareholders of a
particular Fund or class, and (ii) only holders of Investment A Shares and/or
Investment B Shares will be entitled to vote on matters applicable to one or
both classes submitted to shareholder vote with respect to the Trust's
Distribution and Shareholder Services Plan adopted pursuant to Rule 12b-1 (the
"Rule 12b-1 Plan").
3. Expense Allocations
All or a portion of certain expenses may be attributable only to a
particular class of shares of each Fund. These class expenses are charged
directly to the net assets of the particular class and are borne on a pro rata
basis by the shareholders of that class. The expenses incurred pursuant to the
Rule 12b-1 Plan will be borne solely by the holders of Investment A Shares and
Investment B Shares classes, as specified in the Rule 12b-1 Plan. Certain other
expenses, not including advisory or custodial fees or other expenses related to
the management of the Trust's assets, may, in the discretion of the Board of
Trustees, also be charged to a particular class if such expenses are incurred in
a different amount by that class, or if the class receives services of a
different kind or to a different degree than other classes. All other expenses
will be allocated to each class on the basis of the relative net asset value of
that class in relation to the net asset value of the Fund.
4. Exchange Features
Shareholders may exchange Investment A Shares in any Fund for
Investment A Shares in any other Fund offering Investment A Shares at the
respective net asset value next determined after receipt of the request in good
order, plus any applicable sales charge. No sales charge applies when Investment
A Shares are exchanged from a Fund that imposes a sales charge to a Fund with no
sales charge. If a shareholder seeks to exchange Investment A Shares of a Fund
that does not impose a sales charge for Investment A Shares of a Fund that
imposes a sales charge, the shareholder will be required to pay the applicable
sales charge of the Fund into which the Investment A Shares are exchanged. In
all cases, shareholders will be required to pay a sales charge only once.
Shareholders may exchange Investment B Shares in any Fund for
Investment B Shares in any other Fund offering Investment B shares at the
respective net asset value next determined after receipt of the request in good
order.
Shareholders may exchange Trust Shares in any Fund for Trust Shares in
any other Fund at the respective net asset values next determined after receipt
of the request in good order.
2
<PAGE> 3
5. Conversion Feature
Investment B Shares (together with any Investment B Shares purchased
through the reinvestment of a dividend or distribution with respect to those
Investment B Shares) which are held for eight years from the date of purchase
will automatically convert to Investment A Shares of the same series of the
Trust based on the relative net asset values of Investment A Shares and
Investment B Shares, without the imposition of any sales charge or any other
fee. The holding periods for shares which have been exchanged will be added
together for purposes of determining the conversion date.
6. Dividends
As a result of fees charged by Investment A Shares and Investment B
Shares under the Rule 12b-1 Plan, dividends payable on Trust Shares may be more
than dividends payable on Investment A Shares or Investment B Shares, and
dividends payable on Investment A Shares may be more than dividends payable on
Investment B Shares.
7. Termination and Amendment
This Plan may be terminated or amended pursuant to the requirements of
Rule 18f-3(d) under the 1940 Act.
8. Effectiveness
This Plan shall become effective with respect to each class, (i) to the
extent required by Rule 18f-3, after approval by a majority vote of: (a) the
Trust's Board of Trustees; (b) the members of the Board of the Trust who are not
interested persons of the Trust and have no direct or indirect financial
interest in the operation of the Trust's Plan and/or (ii) upon execution of an
exhibit adopting this Plan with respect to such class.
3
<PAGE> 1
EXHIBIT (p)(i)
THE HUNTINGTON FUNDS
CODE OF ETHICS
1. STATEMENT OF GENERAL FIDUCIARY PRINCIPLES
This Code of Ethics is based on the principles that (i) Access Persons
(as such term is hereinafter defined) owe a fiduciary duty to, among others, the
shareholders of The Huntington Funds to conduct their personal transactions in
Covered Securities in a manner which neither interferes with Funds portfolio
transactions nor otherwise takes unfair or inappropriate advantage of an Access
Person's relationship to the Funds; (ii) in complying with this fiduciary duty,
Access Persons owe shareholders the highest duty of trust and fair dealing; and
(iii) Access Persons must, in all instances, place the interests of the
shareholders of the Funds ahead of the Access Person's own personal interests or
the interests of others. For example, in order to avoid the appearance of
conflict from a personal transaction in a Covered Security, the failure to
recommend that Covered Security to, or the failure to purchase that Covered
Security for the Funds may be considered a violation of this Code.
Access Persons must adhere to these general fiduciary principles and
comply with the specific provisions of this Code. Technical compliance with the
terms of this Code will not automatically insulate an Access Person from
scrutiny in instances where the personal transactions in a Covered Security
undertaken by such Access Person show a pattern of abuse of such Access Person's
fiduciary duty to the Funds and their shareholders or a failure to adhere to
these general fiduciary principles.
2. DEFINITIONS
(a) "Funds" means "The Huntington Funds" and any series or portfolios of The
Huntington Funds.
(b) "Access Person" means: (i) any director, trustee, officer, general partner,
Advisory Person of the Funds or Advisory Person of the investment adviser of the
Funds; (ii) any director, officer or Advisory Person of the investment adviser
of the Funds who, with respect to the Funds, makes any recommendation,
participates in the determination of which recommendation will be made, or whose
principal function or duties relate to the determination of which recommendation
will be made, or who, in connection with his or her duties, obtains any
information concerning recommendations on Covered Securities being made by the
investment adviser of the Funds; and (iii) any director, officer or general
partner of the principal underwriter of the Funds who, in the ordinary course of
business, makes, participates in or obtains information regarding, the purchase
or sale of Covered Securities by the Funds for which the principal underwriter
acts, or whose functions or duties in the ordinary course of business relate to
the making of any recommendation to the Funds regarding the purchase or sale of
Covered Securities.
(c) The "1940 Act" means the Investment Company Act of 1940, as amended.
<PAGE> 2
(d) "Advisory Person" means (i) any employee of either the Funds or the
investment adviser of the Funds or of any company in a control relationship to
the Funds or the investment adviser of the Funds, who, in connection with the
employee's regular functions or duties, makes, participates in, or normally
obtains information regarding the purchase or sale of a Covered Security by the
Funds, or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (ii) any natural person in a control
relationship to the Funds or the investment adviser of the Funds who normally
obtains information concerning recommendations made to the Funds with regard to
the purchase or sale of Covered Securities by the Funds.
(e) A Covered Security is "being considered for purchase or sale" when a
recommendation to purchase or sell a Covered Security has been made and
communicated by the investment adviser of the Funds and, with respect to the
person making the recommendation, when such person seriously considers making
such a recommendation.
(f) "Beneficial ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership shall
apply to all Covered Securities which an Access Person has or acquires. As a
general matter, "beneficial ownership" will be attributed to an Access Person in
all instances where the Access Person (i) possesses the ability to purchase or
sell the Covered Securities (or the ability to direct the disposition of the
Covered Securities); (ii) possesses voting power (including the power to vote or
to direct the voting) over such Covered Securities; or (iii) receives any
benefits substantially equivalent to those of ownership.
(g) "Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the 1940 Act.
(h) "Disinterested Trustee" means a trustee of the Funds who is not an
"interested person" of the Funds within the meaning of Section 2(a)(19) of the
1940 Act.
(i) "Purchase or sale of a Covered Security" includes, among other things, the
writing of an option to purchase or sell a Covered Security.
(j) "Investment Personnel" are: (i) employees of the Funds or the investment
adviser of the Funds (or any company in a control relationship to the Funds or
the investment adviser) who, in connection with their regular functions or
duties, make or participate in making recommendations regarding the purchase or
sale of Covered Securities by the Funds; and (ii) any natural person who
controls the Funds or the investment adviser of the Funds and who obtains
information concerning recommendations made to the Funds regarding the purchase
or sale of Covered Securities by the Funds. As the context requires, "Investment
Personnel" may refer to one or more person(s).
(k) "Covered Security" means a security as defined in Section 2(a)(36) of the
1940 Act, except that it does not include direct obligations of the Government
of the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt
2
<PAGE> 3
instruments, including repurchase agreements, and shares issued by registered
open-end investment companies.
(l) "Public Company" means an entity subject to the reporting requirements of
sections 13 and 15(d) of the Securities Exchange Act of 1934 the Securities
Exchange Act of 1934.
(m) "Secretary" means the Secretary of the Funds.
(n) "Initial Public Offering" means an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13 and
15(d) of the Securities Exchange Act of 1934.
(o) "Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant
to rule 504, rule 505, or rule 506 under the Securities Act of 1933.
3. PROHIBITED TRANSACTIONS AND ACTIVITIES
(a) No Access Person, other than a Disinterested Trustee, shall purchase or
sell, directly or indirectly, any Covered Security in which he or she has, or by
reason of such transaction acquires, a direct or indirect beneficial ownership
interest and which he or she knows, or should have known, at the time of such
purchase or sale:
(i) is being considered for purchase or sale by the Funds; or
(ii) is being purchased or sold by the Funds.
(b) Inducing or causing the Funds to take action or to fail to take action, for
the purpose of achieving a personal benefit, rather than for the benefit of the
Funds, is a violation of this Code. Examples of this would include causing the
Funds to purchase a Covered Security owned by the Access Person for the purpose
of supporting or driving up the price of the Covered Security, and causing the
Funds to refrain from selling a Covered Security in an attempt to protect the
value of the Access Person's investment, such as an outstanding option.
(c) Using knowledge of the portfolio transactions of the Funds to profit by the
market effect of such transactions is a violation of this Code. One test which
will be applied in determining whether this prohibition has been violated will
be to review the Covered Securities transactions of Access Persons for patterns.
However, it is important to note that a violation could result from a single
transaction if the circumstances warranted a finding that the provisions of
Section 1 of this Code have been violated.
(d) All Investment Personnel are prohibited from acquiring any Covered
Securities distributed in an Initial Public Offering, or for a period of five
business days following the commencement of the Initial Public Offering of such
Covered Securities.
3
<PAGE> 4
(e) All Investment Personnel are prohibited from acquiring Covered Securities
for their personal accounts distributed in a Limited Offering, without the
express prior approval of a designated officer of the investment adviser of the
Funds (or his or her designee). In instances where Investment Personnel, after
receiving prior approval, acquire a Covered Security in a Limited Offering, the
Investment Personnel have an affirmative obligation to disclose this investment
to the designated officer of the investment adviser of the Funds (or his or her
designee) if the Investment Personnel participate in any subsequent
consideration of any potential investment, by the Funds, in the issuer of those
Covered Securities. A decision by the Funds to purchase Covered Securities of
such an issuer (following a purchase by Investment Personnel in an approved
personal transaction) will be subject to an independent review by the designated
officer of the investment adviser of the Funds (or his or her designee) so long
as the person conducting such review has no personal interest in the issuer.
(f) All Access Persons, other than Disinterested Trustees, are prohibited from
executing a personal transaction in any Covered Security approved for purchase
by the Funds or held in the Funds (including transactions in pension or
profit-sharing plans where the Access Person retains investment discretion),
without express prior approval of a designated officer of the investment adviser
of the Funds (or his or her designee).
(g) All Access Persons, except Disinterested Trustees, are prohibited from
executing a personal transaction in any Covered Security on a day during which
any portfolio of the Funds has a pending "buy" or "sell" order for that Covered
Security, until such order is either executed or withdrawn. All portfolio
managers for the Funds are prohibited from purchasing or selling any Covered
Security within seven (7) calendar days before and after the Funds purchase or
sell the same Covered Security. If a transaction is undertaken in violation of
this prohibition, it will either be required to be unwound, or the profits
realized on such transaction within the proscribed periods (either while the
Funds have an open order, or within the 7-day blackout period) will be required
to be disgorged to an entity specified by the designated officer of the
investment adviser of the Funds or his or her designee, and the Access Person
may be subject to disciplinary action.
(h) All Investment Personnel are prohibited from profiting in the purchase and
sale, or sale and purchase, of the same (or equivalent) Covered Securities which
are also held in a portfolio of the Funds within 60 calendar days. If a
transaction is undertaken in violation of this prohibition, it will either be
required to be unwound, or the profits realized on such short-term trades will
be required to be disgorged to an entity specified by a designated officer of
the investment adviser of the Funds or his or her designee, and the Access
Person may be subject to disciplinary action. For purposes of this prohibition,
each personal transaction in the Covered Security will begin a new 60 calendar
day period. As an illustration, if Investment Personnel purchase 1000 shares of
Omega Corporation on June 1st, 500 shares on July 1st, and 250 shares on August
1st, the profiting from the sale of the 1000 shares purchased on June 1st is
prohibited for any transaction prior to October 1st (i.e., 60 calendar days
following August 1st).
In circumstances where a personal transaction in Covered Securities
within the proscribed period is involuntary (for example, due to
unforseen corporate activity, such as a merger), Investment Personnel
must notify the designated officer of the
4
<PAGE> 5
investment adviser of the Funds. In circumstances where Investment
Personnel can document personal exigencies, the designated officer of
the investment adviser of the Funds (or his or her designee) may grant
an exemption from the prohibition of profiting in the purchase and
sale, or sale and purchase, of the same (or equivalent) Covered
Securities within 60 calendar days.
(i) All Investment Personnel are prohibited from receiving any gift, favor,
preferential treatment, valuable consideration, or other thing of more than a de
minimis value in any year from any person or entity from, to or through whom the
Funds purchase or sell Covered Securities, or from any issuer of Covered
Securities. This prohibition does not apply to:
(i) salaries, wages, fees or other compensation paid, or expenses paid or
reimbursed, in the usual scope of an Access Person's employment;
(ii) the acceptance of meals, refreshments or entertainment of reasonable value
in the course of a meeting or other occasion, the purpose of which is to hold
bona fide business discussions;
(iii) the acceptance of advertising or promotional material of nominal value,
such as pens, pencils, note pads, key chains, calendars and similar items;
(iv) the acceptance of gifts, meals, refreshments, or entertainment of
reasonable value that are related to commonly recognized events or occasions,
such as a promotion, new job, Christmas, or other recognized holiday; or
(v) the acceptance of awards, from an employer to an employee, for recognition
of service and accomplishment.
For purposes of the above limitation, "de minimis value" is
equal to $100 or less.
(j) All Investment Personnel are prohibited from serving on the boards of
directors of any Public Company, absent express prior authorization from an
officer designated by the investment adviser of the Funds. Authorization to
serve on the board of a Public Company will be granted in instances where the
designated officer of the investment adviser of the Funds determines that such
board service would be consistent with the interests of the Funds and their
shareholders. In the relatively small number of instances where prior approval
to serve as a director of a Public Company is granted, Investment Personnel have
an affirmative duty to recuse themselves from participating in any deliberations
by the Funds regarding possible investments in the Covered Securities issued by
the Public Company on whose board the Investment Personnel sit.
4. EXEMPTED TRANSACTIONS
The prohibitions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence or control.
5
<PAGE> 6
(b) Purchases or sales which are non-volitional on the part of either the Access
Person or the Funds, subject to the provisions of Section 3.(h) of this Code.
(c) Purchases which are part of: an automatic dividend reinvestment plan; or an
automatic payroll deduction plan, whereby an employee purchases Covered
Securities issued by an employer.
(d) Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its Covered Securities, to the extent such rights
were acquired from such issuer, and any sales of such rights so acquired.
5. REPORTING
(a) Every Access Person shall submit to the Secretary for the Funds or, in the
case of the Disinterested Trustees, to legal counsel for the Funds, the reports
described in Sections 5.(b) through 5.(d) of this Code, except that:
(i) any Access Person of the Funds who is also an access person of the
investment adviser or principal underwriter of the Funds may submit reports
required by this Code to such investment adviser or principal underwriter in
lieu of submitting reports under this Code, provided that such reports contain
substantially the same information as called for by this Code and comply with
the requirements of Rule 17j-1(d)(1) under the 1940 Act;
(ii) a Disinterested Trustee of the Funds who would be required to make a report
solely by reason of being a Fund trustee need not submit the reports required by
Sections 5.(b) and 5.(d) and need not submit reports required by Section 5.(c)
unless such trustee knew or, in the ordinary course of fulfilling his or her
official duties as a trustee of the Funds, should have known that, during the
15-day period immediately preceding or following the date of the transaction in
a Covered Security, such Covered Security was purchased or sold by the Funds or
was being considered for purchase or sale by the Funds or its investment
adviser. Legal counsel shall report to the Board of Trustees any reports
received under this Code; and
(iii) a person who has no direct or indirect influence or control over
transactions effected for the Funds need not submit the reports required by
Section 5.
(b) INITIAL HOLDINGS REPORT. Each person becoming an Access Person on or after
March 1, 2000 shall, no later than 10 days after becoming an Access Person,
submit a report to the Secretary of the Funds containing the following
information:
(i) the title, number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership when the
person became an Access Person;
6
<PAGE> 7
(ii) the name of any broker, dealer or bank with whom the Access Person
maintains an account in which any Covered Securities are held for the direct or
indirect benefit of the Access Person as of the date the person became an Access
Person; and
(iii) the date the report is submitted by the Access Person.
Reports need not provide information with respect to Covered
Securities over which the Access Person had no direct or
indirect influence or control at the time he or she became an
Access Person.
(c) QUARTERLY TRANSACTION REPORTS. Each Access Person shall, no later than 10
calendar days after the end of each calendar quarter, submit a report to the
Secretary for the Funds, or in the case of the Disinterested Trustees to legal
counsel for the Funds, showing all transactions by the Access Person in Covered
Securities during the quarter in which the person had any direct or indirect
beneficial ownership. The report shall be dated and signed by the Access Person
submitting the report, and shall contain the following information:
(i) the date of the transaction, the title, the interest rate and maturity date
(if applicable), the number of shares, and the principal amount of each Covered
Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
(iii) the price of the Covered Security at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or through whom the transaction
was effected;
(v) if there were no personal transactions in Covered Securities during the
period, either a statement to that effect or the word "None" (or some similar
designation);
(vi) if an account was established during the quarter which holds Covered
Securities for the direct or indirect benefit of the Access Person:
(1) the name of the broker, dealer or bank with whom the Access
Person established the account; and
(2) the date the account was established.
A transaction need not be reported pursuant to this Section
5.(c) if it would duplicate information contained in broker
confirmations or account statements previously received by the
Secretary of the Funds or legal counsel, as applicable.
(d) ANNUAL HOLDINGS REPORTS. All Access Persons shall, no later than 30 days
after the end of the calendar year, submit a report to the Secretary of the
Funds containing the following information, current as of the end of the
calendar year:
7
<PAGE> 8
(i) the title, number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership;
(ii) the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any Covered Securities were held for the direct
or indirect benefit of the Access Person; and
(iii) the date the report is submitted by the Access Person.
(e) BROKER CONFIRMATIONS. Every Access Person, other than a Disinterested
Trustee, shall direct his or her broker(s) to forward to the Secretary of the
Funds, on a timely basis, duplicate copies of confirmations of all personal
transactions in Covered Securities (other than those personal transactions in
Covered Securities exempted under Section 4 of this Code) effected for any
account in which such Access Person has any direct or indirect beneficial
ownership interest or periodic statements relating to any such account.
(f) ANNUAL CERTIFICATIONS. All Access Persons are required, on an annual basis,
to certify that they have received and read the provisions of this Code. Such
certification shall also include a statement that the Access Person has complied
with the requirements of this Code and that the Access Person has disclosed or
reported all personal transactions in Covered Securities that are required to be
disclosed or reported pursuant to the requirements of this Code.
(g) The Funds, the investment adviser of the Funds and the principal underwriter
of the Funds shall, not less frequently than annually, furnish the Board of
Trustees of the Funds with a written report that:
(i) describes any issues arising under its Code of Ethics or related procedures
since the last report to the Board of Trustees, including, but not limited to,
information about material violations of such Code or related procedures and
sanctions imposed in response; and
(ii) certifies that the Funds, the investment adviser of the Funds or the
principal underwriter of the Funds, as applicable, has adopted procedures
reasonably necessary to prevent its Access Persons from violating its Code of
Ethics.
6. SANCTIONS
Upon discovering a violation of this Code, the Board of Trustees of the
Funds may impose such sanctions as it deems appropriate. The filing of any
false, incomplete or untimely reports, as required by Section 5 of this Code,
may (depending on the circumstances) be considered a violation of this Code.
7. RECORDS
8
<PAGE> 9
This Code of Ethics, records of any violations of this Code and any
actions taken as a result of such violations, a copy of each Initial Holdings
Report, Quarterly Transaction Report and Annual Holdings Report submitted under
this Code (including any information provided in lieu of such reports), a list
of all persons required to submit reports under this Code, and copies of reports
to the Board of Trustees required pursuant to Section 5.(g) shall be preserved
in accordance with the requirements of Rule 17j-1.
As Amended by the Board of Trustees of
The Huntington Funds
April 26, 2000
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EXHIBIT (p)(ii)
THE HUNTINGTON NATIONAL BANK
INVESTMENT DIVISION
CODE OF ETHICS OF ACCESS PERSONS
1. STATEMENT OF GENERAL FIDUCIARY PRINCIPLES
This Code of Ethics is based on the principles that (i) Access Persons
(as such term is hereinafter defined) owe a fiduciary duty to, among others, the
shareholders of The Huntington Funds and Huntington VA Funds to conduct their
personal transactions in Covered Securities in a manner which neither interferes
with Funds portfolio transactions nor otherwise takes unfair or inappropriate
advantage of an Access Person's relationship to the Funds; (ii) in complying
with this fiduciary duty, Access Persons owe shareholders the highest duty of
trust and fair dealing; and (iii) Access Persons must, in all instances, place
the interests of the shareholders of the Funds ahead of the Access Person's own
personal interests or the interests of others. For example, in order to avoid
the appearance of conflict from a personal transaction in a Covered Security,
the failure to recommend that Covered Security to, or the failure to purchase
that Covered Security for the Funds may be considered a violation of this Code.
Access Persons must adhere to these general fiduciary principles and
comply with the specific provisions and associated procedures of this Code.
Technical compliance with the terms of this Code and the associated procedures
will not automatically insulate an Access Person from scrutiny in instances
where the personal transactions in a Covered Security undertaken by such Access
Person show a pattern of abuse of such Access Person's fiduciary duty to the
Funds and their shareholders or a failure to adhere to these general fiduciary
principles.
2. DEFINITIONS
(a) "Funds" means The Huntington Funds, Huntington VA Funds and any series or
portfolios of The Huntington Funds or Huntington VA Funds.
(b) "Access Person" means any director, officer or Advisory Person of Huntington
who, with respect to the Funds, makes any recommendation, participates in the
determination of which recommendation will be made, or whose principal function
or duties relate to the determination of which recommendation will be made, or
who, in connection with his or her duties, obtains any information concerning
recommendations on Covered Securities being made by Huntington to the Funds.
(c) The "1940 Act" means the Investment Company Act of 1940, as amended.
(d) "Advisory Person" means (i) any employee of Huntington who, in connection
with the employee's regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a Covered Security by the
Funds, or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and (ii) any natural person in a control
relationship to Huntington who obtains information concerning recommendations
made to the Funds with regard to the purchase or sale of Covered Securities by
the Funds.
<PAGE> 2
(e) "Huntington" means Huntington Bancshares, Inc., The Huntington National Bank
and their affiliates.
(f) "Beneficial ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership shall
apply to all Covered Securities which an Access Person has or acquires. As a
general matter, "beneficial ownership" will be attributed to an Access Person in
all instances where the Access Person (i) possesses the ability to purchase or
sell the Covered Securities (or the ability to direct the disposition of the
Covered Securities); (ii) possesses voting power (including the power to vote or
to direct the voting) over such Covered Securities; or (iii) receives any
benefits substantially equivalent to those of ownership.
(g) "Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the 1940 Act.
(h) "Purchase or sale of a Covered Security" includes, among other things, the
writing of an option to purchase or sell a Covered Security.
(i) "Investment Personnel" are: (i) Huntington employees who, in connection with
their regular functions or duties, make or participate in making recommendations
regarding the purchase or sale of Covered Securities by the Funds, such as
portfolio managers and securities analysts; and (ii) any natural person who
controls Huntington and who obtains information concerning recommendations made
to the Funds regarding the purchase or sale of Covered Securities by the Funds.
As the context requires, "Investment Personnel" may refer to one or more
person(s).
(j) "Covered Security" means a security as defined in Section 2(a)(36) of the
1940 Act, except that it does not include direct obligations of the Government
of the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt instruments, including
repurchase agreements, and shares issued by registered open-end investment
companies, including The Huntington Funds and Huntington VA Funds.
(k) "Public Company" means an entity subject to the reporting requirements of
sections 13 and 15(d) of the Securities Exchange Act of 1934 the Securities
Exchange Act of 1934.
(l) "STO" means the Senior Trust Officer of The Huntington National Bank.
(m) "Portfolio Manager" means those Investment Personnel who manage investment
portfolios of the Funds.
(n) "Director of Compliance" means the director of the Compliance Department of
the Trust Division of The Huntington National Bank.
(o) "Initial Public Offering" means an offering of securities registered under
the Securities Act of 1933, the issuer of which, immediately before the
registration, was not subject to the reporting requirements of sections 13 and
15(d) of the Securities Exchange Act of 1934.
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(p) "Limited Offering" means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant
to rule 504, rule 505, or rule 506 under the Securities Act of 1933.
3. PROHIBITED TRANSACTIONS AND ACTIVITIES
(a) Inducing or causing the Funds to take action or to fail to take action, for
the purpose of achieving a personal benefit, rather than for the benefit the
Funds, is a violation of this Code. Examples of this would include causing the
Funds to purchase a Covered Security owned by the Access Person for the purpose
of supporting or driving up the price of the Covered Security, and causing the
Funds to refrain from selling a Covered Security in an attempt to protect the
value of the Access Person's investment, such as an outstanding option.
(b) Using knowledge of the portfolio transactions of the Funds to profit by the
market effect of such transactions is a violation of this Code. One test which
will be applied in determining whether this prohibition has been violated will
be to review the Covered Securities transactions of Access Persons for patterns.
However, it is important to note that a violation could result from a single
transaction if the circumstances warranted a finding that the provisions of
Section 1 of this Code have been violated.
(c) All Investment Personnel are prohibited from acquiring any Covered
Securities distributed in an Initial Public Offering, or for a period of five
business days following the commencement of the Initial Public Offering of such
Covered Securities.
(d) All Investment Personnel are prohibited from acquiring Covered Securities
for their personal accounts distributed in a Limited Offering, without the
express prior approval of the STO or his or her designee. In instances where
Investment Personnel, after receiving prior approval, acquire a Covered Security
in a Limited Offering, the Investment Personnel have an affirmative obligation
to disclose this investment to the STO or his or her designee if the Investment
Personnel participate in any subsequent consideration of any potential
investment, by the Funds, in the issuer of those Covered Securities. A decision
by the Funds to purchase Covered Securities of such an issuer (following a
purchase by Investment Personnel in an approved personal transaction) will be
subject to an independent review by the STO or his or her designee, so long as
the person conducting such review has no personal interest in the issuer.
(e) All Access Persons are prohibited from executing a personal transaction in
any Covered Security approved for purchase by the Funds or held in the Funds
(including transactions in pension or profit-sharing plans where the Access
Person retains investment discretion), without express prior approval of the STO
or his or her designee. A list of Covered Securities approved for purchase by
the Funds or held in the Funds shall be maintained by the Director of Compliance
and shall be updated at least weekly. Notwithstanding the receipt of express
prior approval, any purchases or sales by Access Persons undertaken in reliance
on this provision remain subject to prohibitions enumerated in Sections 3.(f)
and 3.(g) of this Code.
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(f) All Access Persons are prohibited from executing a personal transaction in
any Covered Security on a day during which any portfolio of the Funds has a
pending "buy" or "sell" order for that Covered Security, until such order is
either executed or withdrawn. Portfolio Managers are prohibited from purchasing
or selling any Covered Security within seven (7) calendar days before and after
the Funds purchase or sell the same Covered Security. If a transaction is
undertaken in violation of this prohibition, it will either be required to be
unwound, or the profits realized on such transaction within the proscribed
periods (either while the Funds have an open order, or within the 7-day blackout
period) will be required to be disgorged to an entity designated by the Director
of Compliance, and the Access Person may be subject to disciplinary action.
(g) All Investment Personnel are prohibited from profiting in the purchase and
sale, or sale and purchase, of the same (or equivalent) Covered Securities which
are also held in a portfolio of the Funds within 60 calendar days. If a
transaction is undertaken in violation of this prohibition, it will either be
required to be unwound, or the profits realized on such short-term trades will
be required to be disgorged to an entity specified by the STO, and the Access
Person may be subject to disciplinary action. For purposes of this prohibition,
each personal transaction in the Covered Security will begin a new 60 calendar
day period. As an illustration, if Investment Personnel purchase 1000 shares of
Omega Corporation on June 1st, 500 shares on July 1st, and 250 shares on August
1st, the profiting from the sale of the 1000 shares purchased on June 1st is
prohibited for any transaction prior to October 1st (i.e., 60 calendar days
following August 1st).
In circumstances where a personal transaction in Covered
Securities within the proscribed period is involuntary (for
example, due to unforseen corporate activity, such as a
merger), Investment Personnel must notify the Director of
Compliance. In circumstances where Investment Personnel can
document personal exigencies, the STO may grant an exemption
from the prohibition of profiting in the purchase and sale, or
sale and purchase, of the same (or equivalent) Covered
Securities within 60 calendar days. Such an exemption is
wholly within the discretion of the STO, and any request for
such an exemption will be evaluated on the basis of the facts
of the particular situation.
(h) All Investment Personnel are prohibited from receiving any gift, favor,
preferential treatment, valuable consideration, or other thing of more than a de
minimis value in any year from any person or entity from, to or through whom the
Funds purchase or sell Covered Securities, or from any issuer of Covered
Securities. This prohibition does not apply to:
(i) salaries, wages, fees or other compensation paid, or expenses paid or
reimbursed, in the usual scope of an Access Person's employment;
(ii) the acceptance of meals, refreshments or entertainment of reasonable value
in the course of a meeting or other occasion, the purpose of which is to hold
bona fide business discussions;
(iii) the acceptance of advertising or promotional material of nominal value,
such as pens, pencils, note pads, key chains, calendars and similar items;
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<PAGE> 5
(iv) the acceptance of gifts, meals, refreshments, or entertainment of
reasonable value that are related to commonly recognized events or occasions,
such as a promotion, new job, Christmas, or other recognized holiday; or
(v) the acceptance of awards, from an employer to an employee, for recognition
of service and accomplishment.
For purposes of the above limitation, "de minimis value" is
equal to $100 or less.
(i) All Investment Personnel are prohibited from serving on the boards of
directors of any Public Company, absent express prior authorization from the
STO. Authorization to serve on the board of a Public Company will be granted in
instances where the STO determines that such board service would be consistent
with the interests of the Funds and their shareholders. In the relatively small
number of instances where prior approval to serve as a director of a Public
Company is granted, Investment Personnel have an affirmative duty to recuse
themselves from participating in any deliberations by the Funds regarding
possible investments in the Covered Securities issued by the Public Company on
whose board the Investment Personnel sit.
4. EXEMPTED TRANSACTIONS
The prohibitions of Section 3 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence or control.
(b) Purchases or sales which are non-volitional on the part of either the Access
Person or the Funds, subject to the provisions of Section 3.(h) of this Code.
(c) Purchases which are part of: an automatic dividend reinvestment plan; or an
automatic payroll deduction plan, whereby an employee purchases Covered
Securities issued by an employer.
(d) Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its Covered Securities, to the extent such rights
were acquired from such issuer, and any sales of such rights so acquired.
5. REPORTING
(a) INITIAL HOLDINGS REPORT. Each person becoming an Access Person on or after
March 1, 2000 shall, no later than 10 days after becoming an Access Person,
submit a report to the Director of Compliance containing the following
information:
(i) the title, number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership when the
person became an Access Person;
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(ii) the name of any broker, dealer or bank with whom the Access Person
maintains an account in which any Covered Securities are held for the direct or
indirect benefit of the Access Person as of the date the person became an Access
Person; and
(iii) the date the report is submitted by the Access Person.
Reports need not provide information with respect to Covered
Securities over which the Access Person had no direct or
indirect influence or control at the time he or she became an
Access Person.
(b) QUARTERLY TRANSACTION REPORTS. Each Access Person shall, no later than 10
calendar days after the end of each calendar quarter, submit a report to the
Director of Compliance showing all transactions by the Access Person in Covered
Securities during the quarter with the exception of transactions exempted in
Section 4 of this Code. The report shall be dated and signed by the Access
Person submitting the report and shall contain the following information:
(i) the date of the transaction, the title, the interest rate and maturity date
(if applicable), the number of shares, and the principal amount of each Covered
Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
(iii) the price of the Covered Security at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or through whom the transaction
was effected;
(v) if there were no personal transactions in Covered Securities during the
period, either a statement to that effect or the word "None" (or some similar
designation);
(vi) if an account was established during the quarter which holds Covered
Securities for the direct or indirect benefit of the Access Person:
(1) the name of the broker, dealer or bank with whom the Access
Person established the account; and
(2) the date the account was established.
A transaction need not be reported pursuant to this Section
5.(b) if it would duplicate information contained in broker
confirmations or account statements previously received by the
Director of Compliance.
(c) ANNUAL HOLDINGS REPORT. All Access Persons shall, no later than 30 days
after the end of the calendar year, submit a report to the Director of
Compliance containing the following information current as of the end of the
calendar year:
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(i) the title, number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership;
(ii) the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any Covered Securities were held for the direct
or indirect benefit of the Access Person; and
(iii) the date the report is submitted by the Access Person.
(d) BROKER CONFIRMATIONS. Every Access Person shall direct his or her broker(s)
to forward to the Director of Compliance, on a timely basis, duplicate copies of
confirmations of all personal transactions in Covered Securities (other than
those personal transactions in Covered Securities exempted under Section 4 of
this Code) effected for any account in which such Access Person has any direct
or indirect beneficial ownership interest.
(e) ANNUAL CERTIFICATIONS. All Access Persons are required, on an annual basis,
to certify that they have received and read the provisions of this Code. Such
certification shall also include a statement that the Access Person has complied
with the requirements of this Code and that the Access Person has disclosed or
reported all personal transactions in Covered Securities that are required to be
disclosed or reported pursuant to the requirements of this Code.
(f) Huntington shall, not less frequently than annually, furnish the Board of
Trustees of the Funds with a written report that:
(i) describes any issues arising under this Code of Ethics or related procedures
since the last report to the Board of Trustees, including, but not limited to,
information about material violations of the Code or related procedures and
sanctions imposed in response; and
(ii) certifies that Huntington has adopted procedures reasonably necessary to
prevent its Access Persons from violating its Code of Ethics.
6. SANCTIONS
Upon discovering a violation of this Code, the STO may impose such
sanctions as he or she deems appropriate upon employees of Huntington, subject
to the personnel policies and procedures of Huntington Bancshares, Inc. The
filing of any false, incomplete or untimely reports, as required by Section 5 of
this Code, may (depending on the circumstances) be considered a violation of
this Code.
7. RECORDS
This Code of Ethics, records of any violations of this Code and any
actions taken as a result of such violations, a copy of each Initial Holdings
Report, Quarterly Transaction Report and Annual Holdings Report submitted under
this Code (including any information provided in lieu of such
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reports), a list of all persons required to submit reports under this Code, and
copies of reports to the Board of Trustees of the Funds required pursuant to
Section 5.(f) shall be preserved in accordance with the requirements of Rule
17j-1.
As Amended by _________________ of The
Huntington National Bank
, 2000
8
<PAGE> 1
EXHIBIT (p)(iii)
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND
INSIDER TRADING POLICY
April, 2000
<PAGE> 2
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND INSIDER TRADING POLICY
TABLE OF CONTENTS
I. General Policy
II. Code of Ethics
A. Purpose of Code
B. Employee/Associate Persons Categories
C. Generally Applicable Prohibitions and Restrictions
D. Pre-clearance of Personal Securities Transactions
E. Reporting Requirements
F. Detection and Reporting of Code Violations
G. Violations of the Code of Ethics
H. Confidential Treatment
I. Definitions Applicable to the Code of Ethics
J. Recordkeeping
III. Insider Trading Policy
A. What is "Material" Information?
B. What is "Nonpublic Information"?
C. Who is an Insider?
D. What is Misappropriation?
E. What is Tipping?
F. Identifying Inside Information
G. Trading in SEI Investments Company Securities
H. Violations of the Insider Trading Policy
10
<PAGE> 3
I. GENERAL POLICY
SEI Investments Company, through various subsidiaries (jointly "SEI"), is an
investment adviser, administrator, distributor, and/or trustee of investment
companies, collective investment trusts, investment partnerships, and asset
management accounts (jointly "Investment Vehicles"). As an investment adviser,
SEI is subject to various U.S. securities laws and regulations governing the use
of confidential information and personal securities transactions. This Code of
Ethics and Insider Trading Policy (jointly "Policy") was developed based on
those laws and regulations, and sets forth the procedures and restrictions
governing the personal securities transactions of all SEI employees.
SEI has a highly ethical business culture and expects that all employees will
conduct any personal securities transactions consistent with this Policy and in
such a manner as to avoid any actual or potential conflict of interest or abuse
of a position of trust and responsibility. When an employee invests for his or
her own account, conflicts of interest may arise between a client's and the
employee's interest. Such conflicts may include using an employee's advisory
position to take advantage of available investment opportunities, taking an
investment opportunity from a client for an employee's own portfolio, or
frontrunning, which occurs when an employee trades in his or her personal
account before making client transactions. As a fiduciary, SEI owes a duty of
loyalty to clients which requires that an employee must always place the
interests of clients first and foremost and shall not take inappropriate
advantage of his or her position. Thus, SEI employees must conduct themselves
and their personal securities transactions in a manner that does not create
conflicts of interest with the firm's clients.
Pursuant to this Policy, employees and other persons associated with SEI will be
subject to various pre-clearance and reporting standards for their personal
securities transactions based on their status as defined in Section B of this
Policy. Therefore, it is important that every person pay special attention to
the categories set forth in that section to determine what provisions of this
Policy applies to him or her, as well as to the sections on restrictions,
pre-clearance, and reporting of personal securities transactions.
Some employees and other persons associated with SEI outside the United States
are subject to this Policy and the applicable laws of the jurisdictions in which
they are located. These laws may differ substantially from U.S. law and may
subject employees to additional requirements. To the extent any particular
portion of the Policy is inconsistent with foreign law not included herein or
within the firm's Compliance Manual, employees should consult their designated
Compliance Officer or the Compliance Department at SEI's Oaks facility.
Each employee subject to this Policy must read and retain a copy and agree to
abide by its terms. Failure to comply with the provisions of this Policy may
result in the imposition of serious sanctions, including, but not limited to
disgorgement of profits, dismissal, substantial personal liability and/or
referral to regulatory or law enforcement agencies. Any questions regarding
SEI's policy or procedures should be referred to the Compliance Department,
which currently includes Courtney Collier (X1839) and Cyndi Parrish (x2807).
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II. CODE OF ETHICS
A. Purpose of Code
This Code of Ethics ("Code") was adopted pursuant to the provisions of Section
17(j) of the Investment Company Act of 1940 ("the 1940 Act"), as amended, and
Rule 17j-1 thereunder, as amended. Those provisions of the U.S. securities laws
were adopted to prevent persons who are actively engaged in the management,
portfolio selection or underwriting of registered investment companies from
participating in fraudulent, deceptive or manipulative acts, practices or
courses of conduct in connection with the purchase or sale of securities held or
to be acquired by such companies. Employees (including contract employees) and
other persons associated with SEI will be subject to various pre-clearance and
reporting requirements based on their responsibilities within SEI and
accessibility to certain information. Those functions are set forth in the
categories listed below.
B. Employees/Associate Persons Categories
1. Access Person:
a. any director, officer or general partner of SEI Investments
Distribution Co. ("SIDC") who, in the ordinary course of
business, makes, participates in or obtains information
regarding, the purchases or sales of securities by an
Investment Vehicle for which SIDC acts as principal
underwriter, or whose functions or duties in the ordinary
course of business relate to the making of any recommendations
to the Investment Vehicles regarding the purchase or sale of
securities;
b. any director, officer, general partner or employee of SEI
Investments Mutual Fund Services who, in connection with his
or her regular functions or duties, participates in the
selection of an Investment Vehicle's portfolio securities, or
who has access to information regarding an Investment
Vehicles' purchases or sales of portfolio securities;
c. any natural person in a "control" relationship to an
Investment Vehicle or SEI Investments Management Company
("SIMC") who obtains information concerning recommendations
made to an Investment Vehicle with regard to the purchase or
sale of securities by the Investment Vehicle.
2. Investment Person - any director, officer or employee of the Asset
Management Group who (1) directly oversees the performance of one or more
sub-advisers for any Investment Vehicle for which SEI acts as investment
adviser, (2) executes or helps execute portfolio transactions for any such
Investment Vehicle, or (3) obtains or is able to obtain information regarding
the purchase or sale of an Investment Vehicle's portfolio securities.
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3. Fund Officers - any director, officer or employee of SEI who acts as a
director or officer of any U.S. registered investment company to which SEI acts
as an administrator or sub-administrator, or principal underwriter.
4. Portfolio Persons - any director, officer or employee entrusted with
direct responsibility and authority to make investment decisions affecting one
or more client portfolios.
5. Registered Representative - any director, officer or employee who is
registered with the National Association of Securities Dealers as a registered
representative (Series 6, 7 or 63), a registered principal (Series 24 or 26) or
an investment representative (Series 65), regardless of job title or
responsibilities.
6. Associate - any director, officer or employee of SEI who does not fall
within the above listed categories.
C. Generally Applicable Prohibitions and Restrictions
1. Prohibition Against Fraud, Deceit and Manipulation
All SEI employees and associated persons may not, directly or indirectly, in
connection with the purchase or sale, of a Security held or to be acquired by an
Investment Vehicle for which SEI acts as an investment adviser, administrator or
distributor:
a. employ any device, scheme or artifice to defraud the
Investment Vehicle;
b. make to the Investment Vehicle any untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements made, in light of the
circumstances under which they were made, not misleading;
c. engage in any act, practice or course of business that
operates or would operate as a fraud or deceit upon the
Investment Vehicle; or
d. engage in any manipulative practice with respect to the
Investment Vehicle.
2. Personal Securities Restrictions
a. Access Persons:
- may not purchase or sell, directly or indirectly, any
Security within 24 hours before or after the time
that the same (or a related) Security is being
purchased or sold by any Investment Vehicle for which
SEI acts as advisor, distributor and/or
administrator.
- may not acquire Securities as part of an Initial
Public Offering ("IPO") without obtaining the written
approval of the designated Compliance Officer
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at Mutual Fund Services before directly or indirectly
acquiring a beneficial ownership in such securities.
- may not acquire a beneficial ownership interest in
Securities issued in a private placement transaction
without obtaining prior written approval from the
designated Compliance Officer at Mutual Fund
Services.
- may not receive any gift of more than de minimus
value (currently $100.00 per year) from any person or
entity that does business with or on behalf of any
Investment Vehicle.
b. Investment Persons:
- may not purchase or sell, directly or indirectly, any
Security within 24 hours before or after the time
that the same (or a related) Security is being
purchased or sold by any Investment Vehicle for which
SEI or one of its sub-advisers acts as investment
adviser or sub-adviser to the Investment Vehicle.
- may not profit from the purchase and sale or sale and
purchase of a Security within 60 days of acquiring or
disposing of Beneficial Ownership of that Security.
This prohibition does not apply to transactions
resulting in a loss, or to futures or options on
futures on broad-based securities indexes or U.S.
government securities.
- may not acquire Securities as part of an Initial
Public Offering without obtaining the written
approval of the Compliance Department before directly
or indirectly acquiring a beneficial ownership in
such securities.
- may not acquire a beneficial ownership interest in
Securities issued in a private placement transaction
without obtaining prior written approval from the
Compliance Department.
- may not receive any gift of more than de minimus
value (currently $100.00 per year) from any person or
entity that does business with or on behalf of any
Investment Vehicle.
- may not serve on the board of directors of any
publicly traded company.
c. Portfolio Persons:
- may not purchase or sell, directly or indirectly, any
Security within 7 days before or after a client
portfolio has executed a trade in that same (or an
equivalent) Security, unless the order is withdrawn.
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- may not acquire Securities as part of an Initial
Public Offering without obtaining the written
approval of the designated Compliance Officer before
directly or indirectly acquiring a beneficial
ownership in such securities.
- may not acquire a beneficial ownership interest in
Securities issued in a private placement transaction
without obtaining prior written approval from the
Compliance Department.
- may not profit from the purchase and sale or sale and
purchase of a Security within 60 days of acquiring or
disposing of Beneficial Ownership of that Security.
This prohibition does not apply to transactions
resulting in a loss, or to futures or options on
futures on broad-based securities indexes or U.S.
government securities.
- may not receive any gift of more than de minimus
value (currently $100.00 per year) from any person or
entity that does business with or on behalf of any
Investment Vehicle.
- may not serve on the board of directors of any
publicly traded company.
d. Registered Representatives:
- may not acquire Securities as part of an Initial
Public Offering.
D. Pre-clearance of Personal Securities Transactions
1. Access, Investment and Portfolio Persons:
- must pre-clear each proposed securities transaction with the
Compliance Department or the designated Compliance Officer for
Accounts held in their names or in the names of others in
which they hold a Beneficial Ownership interest. No
transaction in Securities may be effected without the prior
written approval of the Compliance Department or the
designated Compliance Officer, except as set forth below in
Section D.4 which sets forth the securities transactions that
do not require pre- clearance.
- the Compliance Department or the designated Compliance Officer
will keep a record of the approvals, and the rationale
supporting, investments in IPO and private placement
transactions.
2. Registered Representatives/Associates:
- must pre-clear transactions with the Compliance Department or
designated Compliance Officer only if the Registered
Representative or Associate knew or should have known at the
time of the transaction that, during the 24 HOUR period
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immediately preceding or following the transaction, the
Security was purchased or sold or was being considered for
purchase or sale by any Investment Vehicle.
3. Transactions that do not have to be pre-cleared:
- Purchases or sales over which the employee pre-clearing the
transaction ( the "Pre- clearing Person") has no direct or
indirect influence or control;
- Purchases, sales or other acquisitions of Securities which are
non-volitional on the part of the Pre-clearing Person or any
Investment Vehicle, such as purchases or sales upon exercise
of puts or calls written by the Pre-clearing Person, sales
from a margin account pursuant to a bona fide margin call,
stock dividends, stock splits, mergers, consolidations,
spin-offs, or other similar corporate reorganizations or
distributions;
- Purchases which are part of an automatic dividend reinvestment
plan or automatic employee stock purchase plans;
- Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities,
to the extent such rights were acquired from such issuer;
- Acquisitions of Securities through gifts or bequests; and
- Transactions in open-end mutual funds.
4. Pre-clearance procedures:
- All requests for pre-clearance of securities transactions must
be submitted to the Compliance Department or the designated
Compliance Officer by completing a Pre-clearance Request Form
(attached as Exhibit 1). SEI Employees located in the U.S.
with access to the I drive may also complete an electronic
version of the form located at I:\register\preform.doc.
- The following information must be provided on the Form:
a. Name, date, extension, title;
b. Transaction detail, i.e., whether the transaction is
a buy or sell; the security name and security type;
number of shares; price; date acquired if a sale; and
whether the security is held in a portfolio or
Investment Vehicle, part of an initial public
offering, or part of a private placement transaction;
and
c. Signature and date; if electronically submitted,
initial and date.
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<PAGE> 9
- The Compliance Department or the designated Compliance Officer
will notify the employee whether the request is approved or
denied by telephone or email, and by sending a copy of the
signed form to the employee. An employee is not officially
notified that the transaction has been pre-cleared until he or
she receives a copy of the signed form. Employees should
retain copies of the signed form.
- Employees may not submit a Pre-clearance Request Form for a
transaction that he or she does not intend to execute.
- Pre-clearance authorization is valid for 3 business days only.
Transactions, which are not completed within this period, must
be resubmitted with an explanation why the previous
pre-cleared transaction was not completed.
- Investment persons must submit to the Compliance Department or
the designated Compliance Officer transaction reports showing
the transactions in all the Investment Vehicles for which SEI
or a sub-adviser serves as an investment adviser for the 24
hour period before and after the date on which their
securities transactions were effected. Transaction reports
need only be submitted for the portfolios that hold or are
eligible to purchase and sell the types of securities proposed
to be bought or sold by the Investment Person. For example, if
the Investment Person seeks to obtain approval for a proposed
equity trade, only the transaction reports for the portfolios
effecting transactions in equity securities are required.
- The Compliance Department or the designated Compliance Officer
will maintain pre-clearance records for 5 years.
E. Reporting Requirements
1. Duplicate Brokerage Statements [All Employees]
- All SEI Employees are required to instruct their
brokers/dealers to file duplicate brokerage statements with
the Compliance Department at SEI Oaks. Employees in SEI's
global offices are required to have their duplicate statements
sent to the offices in which they are located. Statements must
be filed for all Accounts (including those in which employees
have a Beneficial Ownership interest), except those that trade
exclusively in open-end mutual funds, government securities,
or SEI stock through the employee stock/stock option plan.
Failure of a broker-dealer to send duplicate statements will
not excuse an Employee's violation of this Section, unless the
Employee demonstrates that he or she took every reasonable
step to monitor the broker's or dealer's compliance.
- Sample letters instructing the brokers/dealers to send the
statements to SEI are attached as Exhibit 2, and may be found
at I:\register\407pers.doc and I:\register\permltr.doc. If the
broker or dealer requires a letter authorizing a SEI employee
to open an account, the permission letter may used and may be
found at
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<PAGE> 10
I:\register\permltr.doc. Please complete the necessary
information in the letter and forward a signature ready copy
to the Compliance Department (Courtney Collier or Cyndi
Parrish).
- If no such duplicate statement can be supplied, the Employee
should contact the Compliance Department or the designated
Compliance Officer.
2. Initial Holdings Report [Access, Investment and Portfolio Persons and
Fund Officers]
- Access, Investment and Portfolio Persons and Fund Officers,
must submit an Initial Holdings Report to the Compliance
Department or designated Compliance Officer disclosing every
security beneficially owned directly or indirectly by such
person within 10 days of becoming an Access, Investment or
Portfolio Person or Fund Officer. Initial Holding Reports that
are not returned by the date they are due will be ----
considered late and will be reported as violations of the Code
of Ethics. Any person who repeatedly returns the reports late
(5 late filings) may be subject to a monetary fine for his or
her Code of Ethics violations.
- The Initial Holdings Report must include the following
information: (1) the title of the security; (2) the number of
shares held; (3) the principal amount of the security; and (4)
the name of the broker, dealer or bank where the security is
held. The information disclosed in the report must be current
as of a date no more than 30 days before the report is
submitted.
- The Initial Holdings Report is attached as Exhibit 3
to this Code and can be found on the I drive at
I:\register\inhold.doc.
3. Quarterly Report of Securities Transactions [Access, Investment and
Portfolio Persons and Fund Officers]
- Access, Investment and Portfolio Persons, and Fund Officers,
must submit quarterly transaction reports of the purchases
and/or sales of securities in which such persons have a direct
or indirect Beneficial Ownership interest (See Exhibit 4-
Quarterly Transaction Report). The report will be provided to
all of the above defined persons before the end of each
quarter by the Compliance Department or the designated
Compliance Officer and must be completed and returned no later
than 10 days after the end of each calendar quarter. Quarterly
Transaction Reports that are not returned by the date they are
due will be considered late and will be reported as violations
of ---- the Code of Ethics. Any person who repeatedly return
the reports late (5 late filings) may be subject to a monetary
fine for his or her Code of Ethics violations.
- The following information must be provided on the report:
a. The date of the transaction, the description and
number of shares, and the principal amount of each
security involved;
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<PAGE> 11
b. Whether the transaction is a purchase, sale or other
acquisition or disposition;
c. The transaction price; and
d. The name of the broker, dealer or bank through whom
the transaction was effected.
4. Annual Report of Securities Holdings [Access, Investment and Portfolio
Persons and Fund Officers]
- On an annual basis, Access, Investment and Portfolio Persons,
and Fund Officers, must submit to the Compliance Department or
the designated Compliance Officer an Annual Report of
Securities Holdings that contains a list of all securities
subject to this Code in which they have any direct or indirect
Beneficial Ownership interest (See Exhibit 5 - Annual
Securities Holdings Report). The information disclosed in the
report must be current as of a date no more than 30 days
before the report is submitted. The report will be provided to
the above defined persons by the Compliance Department or
designated Compliance Officer. The form may also be found on
the I drive at I:\register\annualholdings.doc.
- Annual reports must be returned to the Compliance Department
or the designated Compliance Officer within 30 days after the
end of the calendar year-end. Annual Reports that are not
returned by the date they are due will be considered late and
will be reported as violations of the Code of Ethics. Any
person who repeatedly returns the reports late (5 late
filings) may be subject to a monetary fine for his or her Code
of Ethics violations.
5. Annual Certification of Compliance [All Employees]
- All employees will be required to certify annually that they:
- have read the Code of Ethics;
- understand the Code of Ethics; and
- have complied with the provisions of the Code of Ethics.
- The Compliance Department or the designated Compliance Officer
will send out annual forms (attached as Exhibit 6) to all
employees that must be completed and returned no later than 30
days after the end of the calendar year.
F. Detection and Reporting of Code Violations
The Compliance Department or the designated Compliance Officer will:
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<PAGE> 12
- review the personal securities transaction reports or
duplicate statements filed by Employees and compare the
reports or statements to the Investment Vehicles' completed
portfolio transactions. The review will be performed on a
quarterly basis. If the Compliance Department or designated
Compliance Officer determines that a compliance violation may
have occurred, the Compliance Department will give the person
an opportunity to supply explanatory material.
- prepare an Annual Issues and Certification Report to the Board
of Trustees or Directors of the Investment Vehicles that, (1)
describes the issues that arose during the year under this
Code, including, but not limited to, material violations of
and sanctions under the Code, and (2) certifies that SEI has
adopted procedures reasonably necessary to prevent its access,
investment and portfolio personnel from violating this Code;
and
- prepare a written report to SEI management personnel outlining
any violations of the Code together with recommendations for
the appropriate penalties.
- prepare a written report detailing any approval(s) granted for
the purchase of securities offered in connection with an IPO
or a private placement. The report must include the rationale
supporting any decision to approve such a purchase.
G. Violations of the Code of Ethics
1. Penalties:
- Employees who violate the Code of Ethics may be subject to
serious penalties which may include:
- written warning;
- reversal of securities transaction;
- restriction on trading privileges;
- disgorgement of trading profits;
- fine;
- suspension or termination of employment; and/or
- referral to regulatory or law enforcement agencies.
2. Penalty Factors:
- Factors which may be considered in determining an appropriate
penalty include, but are not limited to:
- the harm to clients;
- the frequency of occurrence;
- the degree of personal benefit to the employee;
- the degree of conflict of interest;
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<PAGE> 13
- the extent of unjust enrichment;
- evidence of fraud, violation of law, or reckless disregard
of a regulatory requirement; and/or
- the level of accurate, honest and timely cooperation from
the employee.
H. Confidential Treatment
- The Compliance Department or the designated Compliance Officer
will use their best efforts to assure that all requests for
pre-clearance, all personal securities transaction reports and
all reports for securities holding are treated as "Personal
and Confidential." However, such documents will be available
for inspection by appropriate regulatory agencies and other
parties within and outside SEI as are necessary to evaluate
compliance with or sanctions under this Code.
I. Definitions Applicable to the Code of Ethics
1. Account - a securities trading account held by an Employee and by any such
person's spouse, minor children and adults residing in his or her household
(each such person, an "immediate family member"); any trust for which the person
is a trustee or from which the Employee benefits directly or indirectly; any
partnership (general, limited or otherwise) of which the Employee is a general
partner or a principal of the general partner; and any other account over which
the Employee exercises investment discretion.
2. Beneficial Ownership - Security ownership in which a person has a direct or
indirect financial interest. Generally, an employee will be regarded as a
beneficial owner of Securities that are held in the name of:
a. a spouse or domestic partner;
b. a minor child;
c. a relative who resides in the employee's household; or
d. any other person if: (a) the employee obtains from the
securities benefits substantially similar to those of
ownership (for example, income from securities that are held
by a spouse); or the employee can obtain title to the
securities now or in the future.
3. Control - means the same as it does under Section 2(a)(9) of the 1940 Act.
Section 2(a)(9) provides that "control" means the power to exercise a
controlling influence over the management or policies of a company, unless such
power is solely the result of an official position with such company. Ownership
of 25% or more of a company's outstanding voting securities is presumed to give
the holder of such securities control over the company. The facts and
circumstances of a given situation may counter this presumption.
4. Initial Public Offering - an offering of securities for which a registration
statement has not been previously filed with the U.S. SEC and for which there is
no active public market in the shares.
5. Purchase or sale of a Security - includes the writing of an option to
purchase or sell a security.
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<PAGE> 14
6. Security - includes notes, bonds, stocks (including closed-end funds),
convertibles, preferred stock, options on securities, futures on broad-based
market indices, warrants and rights. A "Security" does not include direct
obligations of the U.S. Government ; bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements; and, shares issued by open-end mutual funds.
J. Recordkeeping
SEI will maintain records as set forth below. These records will be maintained
in accordance with Rule 31a-2 under the 1940 Act and the following requirements.
They will be available for examination by representatives of the Securities and
Exchange Commission and other regulatory agencies.
1. A copy of this Code that is, or at any time within the past five years has
been, in effect will be preserved in an easily accessible place.
2. A record of any Code violation and of any sanctions taken will be preserved
in an easily accessible place for a period of at least five years following the
end of the fiscal year in which the violation occurred.
3. A copy of each Quarterly Transaction Report, Initial Holdings Report, and
Annual Holdings Report submitted under this Code, including any information
provided in lieu of any such reports made under the Code, will be preserved for
a period of at least five years from the end of the fiscal year in which it is
made, for the first two years in an easily accessible place.
4. A record of all persons, currently or within the past five years, who are or
were required to submit reports under this Code, or who are or were responsible
for reviewing these reports, will be maintained in an easily accessible place.
5. A record of any decision, and the reasons supporting the decision, to approve
the acquisition of securities acquired in an IPO or limited offering, for at
least five years after the end of the fiscal year in which the approval is
granted.
III. INSIDER TRADING POLICY
All Employees are required to refrain from investing in Securities based on
material nonpublic inside information. This policy is based on the U.S. federal
securities laws that prohibit any person from:
1. trading on the basis of material, nonpublic information;
2. tipping such information to others;
3. recommending the purchase or sale of securities on the basis
of such information;
4. assisting someone who is engaged in any of the above
activities; and
5. trading a security, which is the subject of an actual or
impending tender offer when in possession of material
nonpublic information relating to the offer.
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<PAGE> 15
This includes any confidential information that may be obtained by Access,
Investment and Portfolio Persons, and Fund Officers, regarding the advisability
of purchasing or selling specific securities for any Investment Vehicles or on
behalf of clients. Additionally, this policy includes any confidential
information that may be obtained about SEI Investments Company or any of its
affiliated entities. This Section outlines basic definitions and provides
guidance to Employees with respect to this Policy.
A. What is "Material" Information?
Information is material when there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions.
Generally, if disclosing certain information will have a substantial effect on
the price of a company's securities, or on the perceived value of the company or
of a controlling interest in the company, the information is material, but
information may be material even if it does not have any immediate direct effect
on price or value. There is no simple "bright line" test to determine when
information is material; assessments of materiality involve a highly
fact-specific inquiry. For this reason, any question as to whether information
is material should be directed to the Compliance Department.
B. What is "Nonpublic" Information?
Information about a publicly traded security or issuer is "public" when it has
been disseminated broadly to investors in the marketplace. Tangible evidence of
such dissemination is the best indication that the information is public. For
example, information is public after it has become available to the general
public through a public filing with the SEC or some other governmental agency,
the Dow Jones "tape" or the Wall Street Journal or some other publication of
general circulation, and after sufficient time has passed so that the
information has been disseminated widely.
Information about securities that are not publicly traded, or about the issuers
of such securities, is not ordinarily disseminated broadly to the public.
However, for purposes of this Policy, such private information may be considered
"public" private information to the extent that the information has been
disclosed generally to the issuer's security holders and creditors. For example,
information contained in a private placement memorandum to potential investors
may be considered "public" private information with respect to the class of
persons who received the memorandum, but may still be considered "nonpublic"
information with respect to creditors who were not entitled to receive the
memorandum. As another example, a controlling shareholder may have access to
internal projections that are not disclosed to minority shareholders; such
information would be considered "nonpublic" information.
C. Who Is an Insider?
Unlawful insider trading occurs when a person, who is considered an insider,
with a duty not to take advantage of material nonpublic information violates
that duty. Whether a duty exists is a complex legal question. This portion of
the Policy is intended to provide an overview only, and should not be read as an
exhaustive discussion of ways in which persons may become subject to insider
trading prohibitions.
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<PAGE> 16
Insiders of a company include its officers, directors (or partners), and
employees, and may also include a controlling shareholder or other controlling
person. A person who has access to information about the company because of some
special position of trust or has some other confidential relationship with a
company is considered a temporary insider of that company. Investment advisers,
lawyers, auditors, financial institutions, and certain consultants and all of
their officers, directors or partners, and employees are all likely to be
temporary insiders of their clients.
Officers, directors or partners, and employees of a controlling shareholder may
be temporary insiders of the controlled company, or may otherwise be subject to
a duty not to take advantage of inside information.
D. What is Misappropriation?
Misappropriation usually occurs when a person acquires inside information about
Company A in violation of a duty owed to Company B. For example, an employee of
Company B may know that Company B is negotiating a merger with Company A; the
employee has material nonpublic information about Company A and must not trade
in Company A's shares.
For another example, Employees who, because of their association with SEI,
receive inside information as to the identity of the companies being considered
for investment by SEI Investment Vehicles or by other clients, have a duty not
to take advantage of that information and must refrain from trading in the
securities of those companies.
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<PAGE> 17
E. What is Tipping?
Tipping is passing along inside information; the recipient of a tip (the
"tippee") becomes subject to a duty not to trade while in possession of that
information. A tip occurs when an insider or misappropriator (the "tipper")
discloses inside information to another person, who knows or should know that
the tipper was breaching a duty by disclosing the information and that the
tipper was providing the information for an improper purpose. Both tippees and
tippers are subject to liability for insider trading.
F. Identifying Inside Information
Before executing any securities transaction for your personal account or for
others, you must consider and determine whether you have access to material,
nonpublic information. If you think that you might have access to material,
nonpublic information, you must take the following steps:
1. Report the information and proposed trade immediately to the Compliance
Department or designated Compliance Officer;
2. Do not purchase or sell the securities on behalf of yourself or others;
and
3. Do not communicate the information inside or outside SEI, other than to the
Compliance Department or designated Compliance Officer.
These prohibitions remain in effect until the information becomes public.
Employees managing the work of consultants and temporary employees who have
access to material nonpublic information are responsible for ensuring that
consultants and temporary employees are aware of this Policy and the
consequences of non-compliance.
G. Trading in SEI Investments Company Securities
This Policy applies to all employees with respect to trading in the securities
of SEI Investments Company, including shares held directly or indirectly in the
Company's 401(k) plan. Employees, particularly "officers" (as defined in Rule
16(a)-1(f) in the Securities Exchange Act of 1934, as amended), of the company
should be aware of their fiduciary duties to SEI and should be sensitive to the
appearance of impropriety with respect to any of their personal transactions in
SEI's publicly traded securities. Thus, the following restrictions apply to all
transactions in SEI's publicly traded securities occurring in an employee's
Account and in all other accounts in which the employee benefits directly or
indirectly, or over which the employee exercises investment discretion.
- - Blackout Period - Directors and Officers are prohibited from buying or
selling SEI's publicly traded securities during the blackout period.
The blackout periods are as follows:
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<PAGE> 18
- for the first, second and third quarterly financial reports -
begins at the close of the prior quarter and ends after SEI
publicly announces the financial results for that quarter.
- for the annual and fourth quarter financial reports - begins
on the 6th business day of the first month following the end
of the calendar year-end and ends after SEI publicly announces
its financial results.
All securities trading during this period may only be conducted with
the approval of SEI's General Counsel or the Compliance Director. In no
event may securities trading in SEI's stock be conducted while an
Director or Officer of the company is in possession of material
nonpublic information regarding SEI.
- - Major Events - Employees who have knowledge of any SEI events or
developments that may have a "material" impact on SEI's stock that have
not been publicly announced are prohibited from buying or selling SEI's
publicly traded securities before such announcements. (See definition
of "material information" contained in III. A. above.)
- - Short Selling and Derivatives Trading Prohibition - All employees are
prohibited from engaging in short sales and options trading of SEI's
common stock.
Section 16(a) directors and officers are subject to the following additional
trading restriction.
- - Short Swing Profits - Directors and Officers may not profit from the
purchase and sale or sale and purchase of SEI's securities within 6
months of acquiring or disposing of Beneficial Ownership of that
Security.
H. Violations of the Insider Trading Policy
Unlawful trading of securities while in possession of material nonpublic
information, or improperly communicating that information to others, is a
violation of the federal securities laws and may expose violators to stringent
penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten
years imprisonment. The SEC can recover the profits gained or losses avoided
through the violative trading, a penalty of up to three times the illicit
windfall or loss avoided, and an order permanently enjoining violators from such
activities. Violators may be sued by investors seeking to recover damages for
insider trading violations. In addition, violations by an employee of SEI may
expose SEI to liability. SEI views seriously any violation of this Policy, even
if the conduct does not, by itself, constitute a violation of the federal
securities laws. Violations of this Policy constitute grounds for disciplinary
sanctions, including dismissal.
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<PAGE> 19
SEI INVESTMENTS COMPANY
CODE OF ETHICS AND INSIDER TRADING POLICY
EXHIBITS
Exhibit 1 Pre-clearance Request Form
Exhibit 2 Account Opening Letters to Brokers/Dealers
Exhibit 3 Initial Holdings Report
Exhibit 4 Quarterly Transaction Report
Exhibit 5 Annual Securities Holdings Report
Exhibit 6 Annual Compliance Certification
27
<PAGE> 20
EXHIBIT 1
28
<PAGE> 21
PRECLEARANCE REQUEST FORM
Name: Date:
Ext #: Title/Position:
TRANSACTION DETAIL: I REQUEST PRIOR WRITTEN APPROVAL TO EXECUTE THE FOLLOWING
TRADE:
Buy: / / Sell: / / Security Name: Security type:
No. of Shares: Price: If sale, date acquired:
Held in an SEI Portfolio: Yes / / No / /
If yes, provide: (a) the Portfolio's name:
(b) the date Portfolio bought or sold the security:
Initial Public Offering: Private Placement:
/ / Yes / / No / / Yes / / No
DISCLOSURE STATEMENTS
I hereby represent that, to the best of my knowledge, neither I nor the
registered account holder: (1) have knowledge of a possible or pending purchase
or sale of the above security in any of the portfolios for which SEI acts as an
investment adviser, distributor, administrator, or for which SEI oversees the
performance of one or more it sub-advisers; (2) is in possession of any material
nonpublic information concerning the security to which this request relates; and
(3) is engaging in any manipulative or deceptive trading activity.
I acknowledge that if the Compliance Officer to whom I submit this written
request determines that the above trade would contravene SEI Investments
Company's Code of Ethics and Insider Trading Policy ("the Policy"), the
Compliance Officer in his or her sole discretion has the right not to approve
the trade, and I undertake to abide by his or her decision.
I acknowledge that this authorization is valid for a period of three (3)
business days.
Signature: Date:
Compliance Officer's Use Only
Approved: / / Disapproved: / / Date:
By: Comments:
Transaction Report Received: Yes / / No / /
Note: This preclearance will lapse at the end of the day on ______________,
20___. If you decide not to effect the trade, please notify the Compliance
Department or designated Compliance Officer immediately.
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<PAGE> 22
EXHIBIT 2
30
<PAGE> 23
Date:
Your Broker
street address
city, state zip code
Re: Your Name
Your SSN or account number
Dear Sir or Madam:
Please be advised that I am an employee of SEI Investments Distribution, Co., a
registered broker/dealer an/or SEI Investments Management Corporation, a
registered investment adviser. Please send duplicate statements only of this
brokerage account to the attention of:
SEI Investments Company
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is made pursuant to SEI's Code of Ethics and Insider Trading Policy
and Rule 3050 of the NASD's Code of Conduct.
Thank you for your cooperation.
Sincerely,
Your name
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<PAGE> 24
Date:
[Address]
Re: Employee Name
Account #
SSN
Dear Sir or Madam:
Please be advised that the above referenced person is an employee of SEI
Investments Distribution, Co., a registered broker/dealer and/or SEI Investments
Management Corporation, a registered investment adviser. We grant permission for
him/her to open a brokerage account with your firm and request that you send
duplicate statements only of this employee's brokerage account to:
SEI Investments Company
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is made pursuant to SEI's Code of Ethics and Insider Trading Policy
and Rule 3050 of the NASD's Code of Conduct.
Thank you for your cooperation.
Sincerely,
Cynthia M. Parrish
Compliance Director
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<PAGE> 25
EXHIBIT 3
33
<PAGE> 26
SEI INVESTMENTS COMPANY
INITIAL HOLDINGS REPORT
Name of Reporting:
Date Person Became Subject to the Code's Reporting Requirements:
Information in Report Dated as of:
Date Report Due:
Date Report Submitted:
Securities Holdings
<TABLE>
<CAPTION>
Name of Issuer and No. of Shares Principal Amount, Maturity Date
Title of Security (if applicable) and Interest Rate (if applicable)
<S> <C> <C>
</TABLE>
If you have no securities holdings to report, please check here. / /
Securities Accounts
<TABLE>
<CAPTION>
Name of Broker, Dealer or Bank Name(s) on and Type of Account
<S> <C>
</TABLE>
If you have no securities accounts to report, please check here. / /
I certify that I have included on this report all securities transactions and
accounts required to be reported pursuant to the Code of Ethics.
Signature: Date:
Received by:
34
<PAGE> 27
EXHIBIT 4
35
<PAGE> 28
SEI INVESTMENTS COMPANY
QUARTERLY TRANSACTION REPORT
Transaction Record of Securities Directly or Indirectly Beneficially Owned
For the Quarter Ended _____________
Name:
Submission Date:
Securities Transactions
<TABLE>
<CAPTION>
Date of Name of Issuer No. of Shares Principal Amount, Type of Price Name of Broker,
Transaction and Title of (if applicable) Maturity Date and Transaction Dealer or Bank
Security Interest Rate Effecting
(if applicable) Transaction
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
If you had no reportable transactions during the quarter, please check here. / /
Securities Accounts
If you established an account within the quarter, please provide the following
information:
<TABLE>
<CAPTION>
Name of Broker, Dealer or Bank Date Account was Established Name(s) on and Type of Account
<S> <C> <C>
</TABLE>
If you did not establish a securities account during the quarter, please check
here. / /
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<PAGE> 29
This report is required of all officers, directors and certain other persons
under Section 204 of the Investment Advisers Act of 1940 and Rule 17j-1 of the
Investment Company Act of 1940 and is subject to examination. Transactions in
direct obligations of the U.S. Government need not be reported. In addition,
persons need not report transactions in bankers' acceptances, certificates of
deposit, commercial paper or open-end investment companies. The report must be
returned within 10 days of the applicable calendar quarter end. The reporting of
transactions on this record shall not be construed as an admission that the
reporting person has any direct or indirect beneficial ownership in the security
listed.
By signing this document, I represent that all reported transactions were
pre-cleared through the Compliance Department or the designated Compliance
Officer in compliance with the SEI Investments Company Code of Ethics and
Insider Trading Policy. In addition, I certify that I have included on this
report all securities transactions and accounts required to be reported pursuant
to the Policy.
Signature:
Received by:
37
<PAGE> 30
EXHIBIT 5
38
<PAGE> 31
SEI INVESTMENTS COMPANY
ANNUAL SECURITIES HOLDINGS REPORT
As of December 31, ______
Name of Reporting Person:
Securities Holdings
<TABLE>
<CAPTION>
Name of Issuer and Title of Security No. of Shares (if applicable) Principal Amount, Maturity Date and Interest
Rate (if applicable)
<S> <C> <C>
</TABLE>
If you had no securities holding to report this year, please check here. / /
Securities Accounts
<TABLE>
<CAPTION>
Name of Broker, Dealer or Bank Date Account was Established Name(s) on and Type of Account
<S> <C> <C>
</TABLE>
If you have no securities accounts to report this year, please check here. / /
I certify that the above list is an accurate and complete listing of all
securities in which I have a direct or indirect beneficial interest.
Signature Received by
Date
Note: Do not report holdings of U.S. Government securities, bankers'
acceptances, certificates of deposit, commercial paper and mutual funds.
39
<PAGE> 32
EXHIBIT 6
40
<PAGE> 33
SEI INVESTMENTS COMPANY
CODE OF ETHICS
ANNUAL COMPLIANCE CERTIFICATION
TO: Compliance Department
FROM: (Please Print)
DATE:
1. I hereby acknowledge receipt of a copy of the Code of Ethics and
Insider Trading Policy.
2. I have read and understand the Code of Ethics and Insider Trading
Policy and recognize that I am subject thereto.
3. I hereby declare that I have complied with the terms of the Code of
Ethics and Insider Trading Policy.
Signature:
Date:
Received by:
41
