<PAGE> 1
THE HANOVER FUNDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
The 100% U.S. Treasury Securities Money Market Fund Portfolio of Investments.......... 1
The U.S. Treasury Money Market Fund Portfolio of Investments.......................... 2
The Government Money Market Fund Portfolio of Investments............................. 4
The Cash Management Fund Portfolio of Investments..................................... 6
The Tax Free Money Market Fund Portfolio of Investments............................... 13
The New York Tax Free Money Market Fund Portfolio of Investments...................... 21
Footnotes to Portfolios............................................................... 27
Statement of Assets and Liabilities................................................... 29
Statement of Operations............................................................... 31
Statement of Changes in Net Assets.................................................... 32
Notes to Financial Statements......................................................... 34
Financial Highlights.................................................................. 41
</TABLE>
------------------------
DISTRIBUTOR: HANOVER FUNDS DISTRIBUTOR, INC.
INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE UNITED STATES
GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. HANOVER FUNDS DISTRIBUTOR, INC. IS
NOT A BANK, AND SHARES OF THE HANOVER FUNDS, INC. ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, CHEMICAL BANK OR ITS AFFILIATES,
NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUNDS
INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE> 2
THE HANOVER FUNDS, INC.
THE 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
------------ ------------ --------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 100.0%
U.S. TREASURY BILLS -- 92.5%
12/07/95...................................... 5.31% $ 976,000 $ 975,151
12/14/95...................................... 5.48 174,080,000 173,740,944
12/21/95...................................... 5.67 748,745,000 746,415,722
01/04/96...................................... 5.48 100,000,000 99,496,611
01/11/96...................................... 5.47 38,480,000 38,246,854
01/25/96...................................... 5.56 105,000,000 104,130,542
02/15/96...................................... 5.51 50,000,000 49,434,222
04/25/96...................................... 5.48 25,000,000 24,466,695
--------------
1,236,906,741
--------------
U.S. TREASURY NOTE -- 7.5%
7.50%, 02/29/96............................... 5.55 100,000,000 100,462,291
--------------
TOTAL INVESTMENTS -- 100.0% (COST
$1,337,369,032)+............................ 1,337,369,032
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.0%......................... 179,789
--------------
NET ASSETS -- 100.0%.......................... $1,337,548,821
=============
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
1
<PAGE> 3
THE HANOVER FUNDS, INC.
THE U.S. TREASURY MONEY MARKET FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
------------ ------------ --------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 69.4%
U.S. TREASURY BILLS -- 65.7%
12/07/95........................................ 5.39% $ 80,000,000 $ 79,929,400
12/14/95........................................ 5.29 1,000,000 998,130
12/21/95........................................ 5.65 736,000,000 733,732,125
01/11/96........................................ 5.43 105,000,000 104,368,543
01/18/96........................................ 5.42 100,000,000 99,297,333
02/15/96........................................ 5.51 50,000,000 49,434,222
04/25/96........................................ 5.48 25,000,000 24,466,694
--------------
1,092,226,447
--------------
U.S. TREASURY NOTE -- 3.7%
7.875%, 07/15/96................................ 5.67 61,500,000 62,271,837
--------------
TOTAL INVESTMENTS(COST $1,154,498,284).......... 1,154,498,284
--------------
REPURCHASE AGREEMENTS -- 30.0%
Dean Witter Reynolds Inc.
dated 11/30/95, 5.87%, 12/01/95............... 5.95 125,000,000 125,000,000
(Proceeds at maturity $125,020,382)
collateralized by:
$122,721,000 U.S. Treasury Notes,
6.50%-8.00%, 10/15/96-10/31/99
Morgan (J.P.) Securities Inc.
dated 11/30/95, 5.85%, 12/01/95............... 5.93 125,000,000 125,000,000
(Proceeds at maturity $125,020,313)
collateralized by:
$123,887,000 U.S. Treasury Notes,
6.50%-7.625%, 05/31/95-04/30/99
Morgan Stanley & Co. Inc.
dated 11/30/95, 5.87%, 12/01/95............... 5.95 125,000,000 125,000,000
(Proceeds at maturity $125,020,382)
collateralized by:
$121,260,000 U.S. Treasury Note,
6.75%, 04/30/00
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
2
<PAGE> 4
THE HANOVER FUNDS, INC.
THE U.S. TREASURY MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
------------ ------------ --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- (CONTINUED)
Nomura Securities Int'l, Inc.
dated 11/30/95, 5.875%, 12/01/95.............. 5.96% $125,000,000 $ 125,000,000
(Proceeds at maturity $125,020,399)
collateralized by:
$124,860,000 U.S. Treasury Notes,
6.50%-6.875%, 02/28/97-05/15/97
--------------
TOTAL REPURCHASE AGREEMENTS (COST
$500,000,000)................................. 500,000,000
--------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
-- 99.4% (COST $1,654,498,284)+............... 1,654,498,284
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.6%... 9,330,668
--------------
NET ASSETS -- 100.0%............................ $1,663,828,952
=============
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
3
<PAGE> 5
THE HANOVER FUNDS, INC.
THE GOVERNMENT MONEY MARKET FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
------------ ------------ --------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 94.3%
FEDERAL FARM CREDIT BANK DEBENTURES -- 4.1%
5.75%, 08/01/96............................... 5.92% $ 50,000,000 $ 49,966,268
5.75%, 09/09/96............................... 6.02 13,685,000 13,666,089
--------------
63,632,357
--------------
FEDERAL HOME LOAN BANK -- 48.0%
DEBENTURES:
5.98%, 07/08/96............................ 6.10 50,000,000 49,991,008
5.97%, 07/18/96............................ 6.05 50,000,000 50,000,000
6.10%, 09/05/96............................ 6.19 30,000,000 30,000,000
DISCOUNT NOTES:
12/01/95................................... 5.88 400,000,000 400,000,000
12/26/95................................... 5.81 100,000,000 99,604,167
01/02/96++................................. 6.19 115,000,000 114,922,056
--------------
744,517,231
--------------
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT
NOTES -- 25.2%
12/01/95................................... 5.88 232,040,000 232,040,000
12/20/95................................... 5.80 160,000,000 159,518,667
--------------
391,558,667
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
DEBENTURE -- 4.3%
5.66%, 03/15/96............................ 5.78 67,260,000 67,244,458
--------------
STUDENT LOAN MARKETING ASSOCIATION*** -- 12.7%
5.68%, 12/05/95............................... 5.63 50,000,000 50,000,000
5.69%, 12/05/95............................... 5.69 77,000,000 76,993,082
5.73%, 12/05/95............................... 5.75 25,000,000 25,000,000
5.82%, 12/05/95............................... 5.69 45,000,000 45,116,373
--------------
197,109,455
--------------
TOTAL INVESTMENTS (COST $1,464,062,168)......... 1,464,062,168
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
4
<PAGE> 6
THE HANOVER FUNDS, INC.
THE GOVERNMENT MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
------------ ------------ --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 12.9%
Smith Barney Inc.
dated 11/30/95, 5.91%, 12/01/95............... 5.99% $200,000,000 $ 200,000,000
(Proceeds at maturity $200,032,833)
collateralized by:
$5,415,000 Federal National Mortgage
Association Debenture, 7.50%, 02/11/02
$10,000,000 Student Loan Marketing Association
Debenture, 9.01%, 12/02/04
$34,565,000 Tennessee Valley Authority
Debenture, 8.375%, 10/01/99
$50,000,000 U.S. Treasury Bill, 11/14/96
$97,485,000 U.S. Treasury Notes,
5.75%-8.50%, 07/15/97-09/30/97
--------------
TOTAL REPURCHASE AGREEMENT (COST
$200,000,000)................................. 200,000,000
--------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENT
-- 107.2% (COST $1,664,062,168)+.............. 1,664,062,168
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (7.2%).............................. (112,063,729)
--------------
NET ASSETS -- 100.0%............................ $1,551,998,439
=============
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
5
<PAGE> 7
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 72.5%
AUTO REPAIR, SERVICES
AND PARKING -- 1.4%
A1/P1 PHH Corp. 02/09/96................... 5.79% $23,000,000 $ 22,748,214
--------------
BUSINESS SERVICES -- 3.8%
International Lease Finance Corp.:
A1/P1 01/16/96........................... 5.84 25,000,000 24,818,555
A1/P1 02/01/96........................... 5.79 4,250,000 4,209,744
A1/P1 02/05/96........................... 5.82 11,500,000 11,380,668
A1/P1 02/09/96........................... 5.82 16,500,000 16,318,408
A1/P1 02/20/96........................... 5.81 6,000,000 5,923,725
--------------
62,651,100
--------------
CHEMICALS AND ALLIED PRODUCTS -- 1.1%
A1+/P1 duPont (EI) de Nemours & Co.
01/03/96........................... 6.45 18,000,000 17,899,680
--------------
COMMUNICATION -- 2.9%
American Telephone & Telegraph Co.:
A1+/P1 12/01/95........................... 5.76 18,000,000 18,000,000
A1+/P1 01/18/96........................... 5.85 9,000,000 8,931,960
A1+/P1 01/24/96........................... 5.88 5,000,000 4,957,250
A1+/P1 02/23/96........................... 5.80 15,000,000 14,805,050
--------------
46,694,260
--------------
DEPOSITORY INSTITUTIONS -- 13.5%
A1+/P1 Bank of Nova Scotia 01/26/96......... 5.84 50,000,000 49,555,889
A1+/P1 Commerzbank U.S. Finance, Inc.
01/16/96........................... 5.83 28,000,000 27,797,140
A1/P1 Corestates Capital Corp. 01/31/96.... 5.86 5,000,000 4,951,624
A1+/P1 Norwest Corp. 12/28/95............... 5.86 11,000,000 10,952,562
A1+/P1 Republic National Bank New York
01/25/96........................... 5.78 5,000,000 4,957,757
A1+/P1 Societe Generale 02/26/96............ 5.80 50,000,000 49,318,500
Toronto Dominion Bank:
A1+/P1 12/21/95........................... 5.81 20,000,000 19,937,333
A1+/P1 01/02/96........................... 5.86 14,000,000 13,928,444
A1+/P1 01/31/96........................... 5.83 24,000,000 23,769,827
A1+/P1 02/20/96........................... 5.78 16,000,000 15,797,680
--------------
220,966,756
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
6
<PAGE> 8
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- (CONTINUED)
ELECTRIC AND ELECTRIC
EQUIPMENT -- 1.8%
General Electric Co.:
A1+/P1 12/29/95........................... 5.80% $ 5,000,000 $ 4,977,989
A1+/P1 01/31/96........................... 5.94 25,000,000 24,762,354
--------------
29,740,343
--------------
ELECTRIC, GAS AND SANITARY
SERVICES -- 0.8%
A1/P1 WMX Technologies Family Waste
Management Co. 06/07/96 (b)........ 5.87 12,500,000 12,135,781
--------------
FINANCIAL INSTITUTIONS -- 11.3%
A1/P1 American Express Credit Corp.
12/11/95........................... 5.81 30,000,000 29,952,917
National Rural Utilities Cooperative
Finance Corp.:
A1+/P1 01/24/96........................ 5.85 7,000,000 6,940,255
A1+/P1 01/26/96........................ 5.84 10,000,000 9,911,644
A1+/P1 02/27/96........................ 5.83 15,000,000 14,792,833
Transamerica Finance Corp.:
A1/P1 01/12/96........................... 6.48 12,000,000 11,914,600
A1/P1 01/24/96........................... 5.86 12,000,000 11,896,860
A1/P1 01/29/96........................... 5.84 35,125,000 34,796,874
A1/P1 02/16/96........................... 5.80 15,500,000 15,312,687
A1/P1 U.S. Leasing International Corp.
02/08/96........................... 5.83 20,000,000 19,782,267
A1/P1 USL Capital Corp. 01/19/96........... 5.87 30,000,000 29,766,433
--------------
185,067,370
--------------
FOOD AND KINDRED PRODUCTS -- 4.7%
Cargill, Inc.:
A1+/P1 12/05/95........................... 5.80 11,000,000 10,993,070
A1+/P1 12/07/95........................... 5.77 20,000,000 19,981,300
A1+/P1 02/06/96........................... 5.79 13,180,000 13,041,899
A1+/P1 02/14/96........................... 5.77 23,300,000 23,027,196
A1/P1 PepsiCo, Inc. 01/22/96............... 5.74 10,000,000 9,920,556
--------------
76,964,021
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
7
<PAGE> 9
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- (CONTINUED)
INDUSTRIAL MACHINERY
AND EQUIPMENT -- 7.6%
A1/P1 Caterpillar, Inc. 12/20/95........... 5.82% $22,000,000 $ 21,934,397
Hewlett-Packard Co.:
A1+/P1 12/21/95........................... 5.74 8,500,000 8,473,650
A1+/P1 01/24/96........................... 5.81 50,000,000 49,577,000
A1/P1 International Business Machines Corp.
03/01/96........................... 5.82 20,000,000 19,715,372
International Business Machines
Credit Corp.:
A1/P1 12/11/95........................ 5.80 10,000,000 9,984,333
A1/P1 12/12/95........................ 5.78 15,000,000 14,974,242
--------------
124,658,994
--------------
INSURANCE CARRIERS -- 8.2%
A1+/P1 Met Life Funding Corp. 01/12/96...... 5.82 66,116,000 65,676,912
USAA Capital Corp.:
A1+/P1 12/11/95........................... 5.81 9,500,000 9,485,038
A1+/P1 12/20/95........................... 5.80 25,000,000 24,925,320
A1+/P1 01/11/96........................... 5.84 20,000,000 19,870,850
A1+/P1 01/23/96........................... 5.82 14,000,000 13,882,723
--------------
133,840,843
--------------
PRIMARY METAL INDUSTRIES -- 1.1%
A1+/P1 U.S. Borax & Chemical Corp.
01/17/96........................... 5.87 18,500,000 18,362,329
--------------
SECURITY AND COMMODITY
BROKERS -- 3.7%
Merrill Lynch & Co.:
A1+/P1 01/08/96........................... 5.86 30,000,000 29,819,500
A1+/P1 01/12/96........................... 5.88 15,000,000 14,899,900
A1+/P1 02/16/96........................... 5.81 15,000,000 14,818,729
--------------
59,538,129
--------------
TRADE RECEIVABLES -- 2.6%
Ciesco Limited Partnership:
A1+/P1 12/07/95........................... 5.77 10,000,000 9,990,633
A1+/P1 12/14/95........................... 5.81 9,000,000 8,981,638
A1+/P1 01/12/96........................... 5.76 18,985,000 18,861,407
A1+/P1 02/26/96........................... 5.85 5,000,000 4,932,213
--------------
42,765,891
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
8
<PAGE> 10
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- (CONTINUED)
TRANSPORTATION EQUIPMENT -- 8.0%
Daimler-Benz North America Corp.:
A1/P1 12/15/95........................... 5.83% $10,000,000 $ 9,977,833
A1/P1 02/14/96........................... 5.82 22,000,000 21,741,042
A1/P1 03/15/96........................... 5.88 5,000,000 4,918,333
Ford Motor Credit Co.:
A1/P1 12/01/95........................... 5.83 10,000,000 10,000,000
A1/P1 12/19/95........................... 5.81 25,000,000 24,929,500
A1/P1 01/12/96........................... 5.74 10,000,000 9,936,183
A1/P1 02/09/96........................... 5.81 19,000,000 18,790,894
A1/P1 02/22/96........................... 5.73 5,000,000 4,935,819
A1+/P1 Toyota Motor Credit Corp. 01/11/96... 5.81 26,000,000 25,831,513
--------------
131,061,117
--------------
TOTAL COMMERCIAL PAPER............... 1,185,094,828
--------------
CERTIFICATES OF DEPOSIT -- 6.1%
FOREIGN BANK -- 6.1%
Banque National de Paris:
A1+/P1 5.78%, 12/29/95.................... 5.71 10,000,000 10,001,054
A1+/P1 5.75%, 02/29/96.................... 5.82 20,000,000 20,000,488
A1+/P1 Commerzbank A.G. 5.67%, 01/19/96..... 5.73 20,000,000 20,000,534
A1+/P1 Dresdner Bank A.G. 6.94%, 01/08/96... 6.39 5,000,000 5,002,709
A1+/P1 Lloyds Bank PLC 5.64%, 01/16/96...... 5.70 10,000,000 10,000,247
A1+/P1 National Westminster Bank PLC 6.50%,
01/04/96........................... 6.39 25,000,000 25,003,715
A1+/P1 Westdeutsche Landesbank GZ 5.79%,
01/12/96........................... 5.86 10,000,000 10,000,050
--------------
TOTAL CERTIFICATES OF DEPOSIT........ 100,008,797
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
9
<PAGE> 11
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 7.6%
FINANCIAL INSTITUTIONS -- 3.5%
A1/P1 First Chicago Corp. 9.00%,
06/06/96........................... 5.63% $ 5,000,000 $ 5,076,389
A1+/P1 General Electric Capital Corp. 7.85%,
07/18/96........................... 5.97 13,000,000 13,138,920
A1+/P1 J.P. Morgan & Co., Inc. Delaware
5.75%, 08/07/96.................... 5.88 2,000,000 1,999,351
A1+/P1 Morgan Guaranty Trust Co. 6.05%,
08/21/96........................... 6.13 10,000,000 10,000,000
A1+/P1 Norwest Corp. 7.75%, 12/31/96........ 5.31 9,400,000 9,615,598
A1/P1 PNC Bank N.A. 5.65%, 09/18/96........ 5.63 17,000,000 17,004,303
--------------
56,834,561
--------------
ELECTRIC, GAS AND SANITARY
SERVICES -- 0.6%
A1/P1 WMX Technologies Family Waste
Management Co. 4.875%, 06/15/96.... 5.87 10,000,000 9,941,263
--------------
INDUSTRIAL MACHINERY
AND EQUIPMENT -- 0.2%
International Business Machines
Credit Corp.:
A1/P1 5.12%, 11/12/96................. 5.83 1,000,000 993,131
A1/P1 5.14%, 11/15/96................. 5.83 2,000,000 1,986,532
--------------
2,979,663
--------------
INSURANCE CARRIERS -- 0.1%
A1+/P1 American General Corp. 4.90%,
08/16/96........................... 5.76 1,000,000 993,190
--------------
NONDEPOSITORY INSTITUTIONS -- 0.9%
FCC National Bank Notes:
A1/P1 6.51%, 05/02/96.................... 6.39 10,000,000 10,003,226
A1/P1 5.70%, 10/02/96.................... 5.79 5,000,000 4,995,250
--------------
14,998,476
--------------
TRADE RECEIVABLES -- 0.6%
A1+/P1 Ciesco Limited Partnership 6.62%,
02/26/96........................... 6.69 10,000,000 9,999,066
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
10
<PAGE> 12
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
CREDIT ON DATE PRINCIPAL VALUE
RATINGS* OF PURCHASE AMOUNT (NOTE 2A)
- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES --
(CONTINUED)
TRANSPORTATION EQUIPMENT -- 1.7%
A1/P1 Ford Motor Credit Co. 9.05%,
07/09/96........................... 5.85% $ 2,000,000 $ 2,036,536
A1+/P1 Toyota Motor Credit Corp. 6.74%,
03/18/96........................... 6.54 25,000,000 25,010,007
--------------
27,046,543
--------------
TOTAL CORPORATE BONDS AND NOTES...... 122,792,762
--------------
VARIABLE RATE OBLIGATIONS*** -- 5.4%
AUTO REPAIR, SERVICES
AND PARKING -- 2.1%
A1/P1 PHH Corp. 5.66%, 12/05/95............ 5.68 35,000,000 34,999,063
--------------
FINANCIAL INSTITUTIONS -- 3.3%
A1/P1 American Express Centurian Bank
5.7825%, 12/13/95.................. 5.92 5,000,000 5,000,000
A1/P1 American Telephone & Telegraph
Capital Corp. 5.80%, 12/01/95...... 5.80 13,000,000 13,000,000
FCC National Bank Notes:
A1/P1 5.52%, 12/05/95.................... 5.49 5,000,000 5,000,187
A1/P1 5.68%, 12/05/95.................... 5.68 18,000,000 18,000,000
A1/P1 First Chicago Corp. Medium Term Note
5.868%, 02/29/96................... 5.80 8,000,000 8,000,000
A1/P1 Household Finance Corp. Medium Term
Note 5.70%, 12/05/95............... 5.75 5,000,000 4,998,872
--------------
53,999,059
--------------
TOTAL VARIABLE RATE OBLIGATIONS...... 88,998,122
--------------
TAXABLE MUNICIPAL OBLIGATION -- 0.3%
A1+/VMIG1 Richmond County Georgia Development
Authority IDR, Monsanto Co. Project
(Union Bank of Switzerland) 6.27%,
06/01/96 (a)....................... 6.27 5,000,000 5,000,000
--------------
U.S. GOVERNMENT AGENCY
OBLIGATION -- 0.7%
Federal Home Loan Mortgage Corp.
Debenture 6.84%, 02/28/96.......... 5.74 12,000,000 12,026,940
--------------
TOTAL INVESTMENTS (COST
$1,513,921,449).................... 1,513,921,449
--------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
11
<PAGE> 13
THE HANOVER FUNDS, INC.
THE CASH MANAGEMENT FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
YIELD TO
MATURITY
ON DATE PRINCIPAL VALUE
OF PURCHASE AMOUNT (NOTE 2A)
----------- ----------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 7.0%
Goldman Sachs & Co.
dated 11/30/95, 5.78%, 12/01/95................ 5.86% $74,000,000 $ 74,000,000
(Proceeds at maturity $74,011,881)
collateralized by:
$74,710,000 U.S. Treasury Note,
5.25%, 07/31/98
Merrill Lynch Government Securities, Inc.
dated 11/30/95, 5.80%, 12/01/95................ 5.88 40,000,000 40,000,000
(Proceeds at maturity $40,006,444)
collateralized by:
$42,785,000 U.S. Treasury Bill, 10/17/96
--------------
TOTAL REPURCHASE AGREEMENTS...................... 114,000,000
--------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
-- 99.6% (COST $1,627,921,449)+................ 1,627,921,449
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%.... 6,571,643
--------------
NET ASSETS -- 100.0%............................. $1,634,493,092
=============
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
12
<PAGE> 14
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- 98.8%
ALABAMA -- 1.7%
A1+/VMIG1 The Board of Trustees of the University of Alabama at
Birmingham General RB Series 1993B 3.70%,
12/6/95***......................................... $5,500,000 $ 5,500,000
------------
ARIZONA -- 8.7%
Apache County IDA, IDR RB Tucson Electric Power Co.
Springville Project:
A1+/P1 Series 1983A (Barclays Bank PLC) 3.65%,
12/6/95***...................................... 6,000,000 6,000,000
A1+/VMIG1 Series 1985A (Barclays Bank PLC) 3.65%,
12/6/95***...................................... 1,300,000 1,300,000
SP1/MIG1 Maricopa County School District TANS Series 1995
4.50%, 7/31/96..................................... 9,000,000 9,029,556
NR/VMIG1 Mesa Municipal Development Corp. Special Tax UPDATES
(Union Bank of Switzerland) 3.75%, 12/7/95**....... 3,000,000 3,000,000
Pima County IDA, Industrial Development
RB Tucson Electric Power Co.:
A1+/VMIG1 General Project Series 1982A (BankAmerica
National Trust and Savings Association) 3.65%,
12/6/95***.................................... 3,000,000 3,000,000
A1+/VMIG1 Irvington Series 1982A (Societe Generale) 3.65%,
12/6/95***.................................... 1,000,000 1,000,000
A1+/P1 Revenue RFB Tucson Retirement Center Project Series
1988 (Swiss Bank Corp.) 3.75%, 12/6/95***....... 4,100,000 4,100,000
------------
27,429,556
------------
ARKANSAS -- 2.9%
NR/VMIG1 The Board of Trustees of the University of Arkansas
Various Facility UAMS Campus RB Series 1994 (Credit
Suisse) 3.65%, 12/6/95***.......................... 9,000,000 9,000,000
------------
CALIFORNIA -- 4.4%
A1+/VMIG1 California Higher Education Loan Authority Series
1987 (National Westminster Bank PLC) 3.65%,
12/6/95***......................................... 2,000,000 2,000,000
NR/VMIG1 California Student Education Loan Marketing Corp.
Student Loan Revenue RFB Series 1993A (Dresdner
Bank A.G.) 3.70%, 12/7/95***....................... 7,000,000 7,000,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
13
<PAGE> 15
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
A1/P1 Oakland HFA, Multifamily Rental Revenue RB Skyline
Hills Association Project Series 1985 (Citibank,
N.A.) 3.50%, 12/7/95***............................ $ 3,300,000 $ 3,300,000
NR/VMIG1 San Diego City HFA, Multifamily Revenue Demand Bonds
Market Street Square Apartments Project Series 1985
Issue G (Barclays Bank PLC) 3.70%, 12/6/95***...... 1,500,000 1,500,000
------------
13,800,000
------------
COLORADO -- 4.2%
A1+/VMIG1 Colorado HFA, Sisters of Charity Health Care Systems
Series 1992A ARTS (SPA-Toronto Dominion Bank)
3.70%, 12/7/95***.................................. 2,000,000 2,000,000
SP1+/NR Colorado State General Fund Revenue TRANS Series 1995
4.50%, 6/27/96..................................... 11,200,000 11,252,233
------------
13,252,233
------------
CONNECTICUT -- 1.0%
A1+/VMIG1 Connecticut State Development Authority PCR,
Connecticut Light & Power Co. Project A (Deutsche
Bank A.G.) 3.65%, 12/6/95***....................... 3,000,000 3,000,000
------------
DISTRICT OF COLUMBIA -- 5.0%
District of Columbia:
GO RFB Series 1992:
A1+/VMIG1 A-1 (National Westminster Bank PLC) 3.85%,
12/1/95***.................................... 3,000,000 3,000,000
A1+/VMIG1 A-2 (Bank of Nova Scotia) 3.85%, 12/1/95***..... 1,800,000 1,800,000
A1+/VMIG1 A-3 (Toronto Dominion Bank) 3.85%, 12/1/95***... 3,400,000 3,400,000
A1+/VMIG1 A-4 (Toronto Dominion Bank) 3.85%, 12/1/95***... 600,000 600,000
A1+/VMIG1 A-5 (Bank of Nova Scotia) 3.85%, 12/1/95***..... 5,400,000 5,400,000
A1/VMIG1 Revenue RB American Assignment Advancement Science
Project Series 1995 (Nations Bank) 3.75%,
12/1/95***...................................... 1,500,000 1,500,000
------------
15,700,000
------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
14
<PAGE> 16
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
FLORIDA -- 2.0%
A1+/P1 Okaloosa County Revenue Gulf Coast Treatment Center
Project Series 1984 (Societe Generale) 3.70%,
12/6/95***......................................... $1,800,000 $ 1,800,000
A1+/NR Orange County HFA Housing Revenue Multifamily RFB
Smokewood/Sun Series 1992A (Citibank, N.A.) 3.80%,
12/6/95***......................................... 2,000,000 2,000,000
A1+/VMIG1 St. Lucie County PCR, Florida Power & Light Co.
Project Series 1993 (Florida Power & Light Co.)
3.80%, 12/6/95***.................................. 2,500,000 2,500,000
------------
6,300,000
------------
GEORGIA -- 6.7%
A1/NR Bibb County Development Authority Environmental
Improvement Revenue RFB Series 1991 IR-1 (Temple
Inland, Inc.) 3.90%, 12/7/95*** (b)................ 8,000,000 8,000,000
A1+/P1 Burke County Development Authority PCR, Oglethorpe
Power Corp. Project 1992A (Credit Suisse) 3.75%,
2/12/96**.......................................... 1,800,000 1,800,000
A1+/NR Columbus Downtown Development Authority IDR, One
Arsenal Plane Project Series 1985 (National
Westminster Bank PLC) 3.65%, 12/6/95***............ 1,800,000 1,800,000
A1+/NR Fulton County HFA, Multifamily Housing Revenue RFB
Spring Creek Crossing Project Series 1994 (Wachovia
Bank of Georgia, N.A.) 3.70%, 12/6/95***........... 5,000,000 5,000,000
A1+/NR Marietta City Housing Authority Multifamily Housing
Revenue RFB Concepts 21 Delk Apartments Series 1994
(FNMA) 3.60%, 12/6/95***........................... 4,525,000 4,525,000
------------
21,125,000
------------
ILLINOIS -- 4.3%
A1+/VMIG1 Chicago O'Hare International Airport General Airport
Second Lien RB Series 1994C (Societe Generale)
3.70%, 12/6/95***.................................. 5,500,000 5,500,000
NR/VMIG1 Illinois EFAR, RB Museum of Science and Industry
Series 1985 (Northern Trust Co.) 3.75%, 12/6/95***
(b)................................................ 2,100,000 2,100,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
15
<PAGE> 17
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
ILLINOIS -- (CONTINUED)
A1+/VMIG1 Illinois HFAR, RB Revolving Fund Pooled Financing
Program Series 1985F (NBD Bank Corp., Inc.) 3.60%,
12/6/95***......................................... $4,300,000 $ 4,300,000
A1+/NR Savanna IDR, Metform Corp. Project Series 1994C
(First National Bank of Chicago) 3.75%,
12/6/95***......................................... 1,600,000 1,600,000
------------
13,500,000
------------
INDIANA -- 4.2%
A1+/P1 Indiana Health Facility Financing Authority Refunding
RB MMM-Invest, Inc. Project Series 1990A (Banc One
Indianapolis, N.A.) 3.75%, 12/7/95*** (b).......... 3,460,000 3,460,000
NR/VMIG1 Indiana Health Facilities Financing Authority, RB
Rehabilitation Hospital Inc. Project Series 1990
(NBD Bank Corp., Inc.) 3.70%, 12/6/95***........... 4,000,000 4,000,000
A1+/NR Lafayette City EDR, RFB Health Quest Realty XI
Project Series 1993 (Banc One Indianapolis, N.A.)
3.75%, 12/7/95*** (b).............................. 2,500,000 2,500,000
A1+/NR Muncie City EDR, RFB Health Quest Realty Project
Series 1993 (Banc One Indianapolis, N.A.) 3.75%,
12/7/95*** (b)..................................... 1,035,000 1,035,000
A1+/P1 Sullivan City PCR, RB Hoosier Energy Rural Electric
Cooperative, Inc. Project Series 1985L-4 (NRUCFC)
3.80%, 2/13/96**................................... 2,200,000 2,200,000
------------
13,195,000
------------
LOUISIANA -- 2.5%
A1+/NR Louisiana State Offshore Terminal Authority Deepwater
Port Revenue RB Loop Inc. First Stage Series 1991A
(Union Bank of Switzerland) 3.70%, 12/1/95***...... 5,300,000 5,300,000
A1+/VMIG1 South La Port Commercial Marine Terminal Facilities
Revenue RB Occidental Petroleum Project Series 1991
(Credit Suisse) 3.70%, 12/6/95***.................. 2,700,000 2,700,000
------------
8,000,000
------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
16
<PAGE> 18
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
MARYLAND -- 1.5%
A1+/NR Baltimore PCR Multi-Modal SCM Plants, Inc. Project
Series 1993 (Barclays Bank PLC) 3.70%,
12/7/95***......................................... $3,500,000 $ 3,500,000
NR/NR Baltimore Series 1986 6.50%, 8/1/96 (c).............. 1,150,000 1,193,490
------------
4,693,490
------------
MASSACHUSETTS -- 2.8%
SP1/MIG1 Massachusetts State UTGO Series 1995A 4.25%,
6/12/96............................................ 8,625,000 8,639,911
------------
MICHIGAN -- 1.5%
SP1+/NR Michigan Municipal Bond Authority Revenue Notes
Series 1995B 4.50%, 7/3/96......................... 4,750,000 4,768,454
------------
MINNESOTA -- 2.0%
A1+/VMIG1 Duluth City Miller Dwan Medical Center Revenue RB
Series 1989A (Citibank, N.A.) 3.75%, 12/7/95***.... 6,300,000 6,300,000
------------
MISSOURI -- 2.9%
A1+/VMIG1 Missouri State Health & Educational Facilities
Authority Health Facilities Revenue RB Barnes
Hospital Project Series 1985 (Morgan Guaranty Trust
Co.) 3.55%, 12/6/95***............................. 7,000,000 7,000,000
NR/VMIG1 St. Charles County IDA, IDR RFB Venture Stores, Inc.
Project Series 1991 (Bank of Nova Scotia) 3.75%,
12/6/95***......................................... 2,000,000 2,000,000
------------
9,000,000
------------
NEVADA -- 1.6%
A1+/NR Clark County IDR, Nevada Power Corp. Project Series
1995C (Barclays Bank PLC) 3.75%, 12/6/95***........ 5,000,000 5,000,000
------------
NEW MEXICO -- 2.1%
A1+/VMIG1 Albuquerque City Municipal Gross Receipts Tax
Adjustable Tender RB Series 1995 (Canadian Imperial
Bank of Commerce) 3.70%, 12/6/95***................ 1,500,000 1,500,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
17
<PAGE> 19
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
NEW MEXICO -- (CONTINUED)
A1+/VMIG1 Albuquerque Hospital Revenue Sisters of Charity St.
Josephs Hospital Series 1992 (SPA-Toronto Dominion
Bank) 3.70%, 12/6/95***............................ $5,000,000 $ 5,000,000
------------
6,500,000
------------
NEW YORK -- 5.2%
NR/MIG1 East Meadow UFSD TANS Series 1995 4.25%, 6/27/96..... 6,800,000 6,822,451
NR/NR New York State Urban Development Corp. Revenue RB
Correctional Facilities 8.00%, 1/1/96 (c).......... 7,500,000 7,674,558
NR/MIG1 West Islip UFSD TANS Series 1995 4.75%, 6/27/96...... 2,000,000 2,008,121
------------
16,505,130
------------
NORTH CAROLINA -- 1.3%
A1/P1 Lenoir County Industrial Facilities and Pollution
Control Financing Authority IDR, RB Texasgulf Inc.
Project Series 1983 (Bankers Trust Co.) 4.00%,
12/7/95*** (b)..................................... 1,400,000 1,400,000
A1+/VMIG1 North Carolina Medical Care Community Hospital
Revenue Duke University Hospital Project Series
1993A 3.75%, 12/7/95***............................ 2,650,000 2,650,000
------------
4,050,000
------------
OHIO -- 1.0%
NR/MIG1 Toledo City Services Special Obligations Project
Series 1995 (Canadian Imperial Bank of Commerce)
3.90%, 6/1/96...................................... 3,000,000 3,002,051
------------
OREGON -- 3.2%
Klamath Falls City Electric RB Salt Caves
Hydroelectric Project Escrowed to Maturity:
SP1+/NR Series 1986A 4.40%, 5/1/96 (a)(c)............... 5,000,000 5,000,000
SP1+/NR Series 1986B 4.40%, 5/1/96 (a)(c)............... 5,000,000 5,014,318
------------
10,014,318
------------
PENNSYLVANIA -- 1.5%
SP1/MIG1 Philadelphia TRANS Series 1995A 4.50%, 6/27/96....... 4,800,000 4,814,288
------------
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
18
<PAGE> 20
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
TENNESSEE -- 3.8%
A1/NR Carter County IDB, Industrial Development RB Inland
Container Corp. Project Series 1983 (Temple Inland,
Inc.) 3.95%, 12/1/95*** (b)........................ $ 3,000,000 $ 3,000,000
A1+/VMIG1 Memphis UTGO Series 1995A (SPA-Westdeutsche
Landesbank GZ) 3.50%, 12/6/95***................... 1,400,000 1,400,000
A1+/P1 Shelby County Health Educational and Housing Facility
Board Multifamily Housing Revenue RFB Wyndridge II
Apartments Project Series 1994 (Credit Suisse)
3.70%, 12/6/95***.................................. 7,635,000 7,635,000
------------
12,035,000
------------
TEXAS -- 13.8%
NR/P1 Brazos River PCR, RB Monsanto Co. Project Series 1990
(Monsanto Co.) 3.60%, 12/6/95***................... 1,100,000 1,100,000
NR/NR Dallas Water Works & Sewer Systems Revenue Series
1986A 8.50%, 10/1/96............................... 1,955,000 2,029,561
A1+/VMIG1 Greater East Texas Higher Education Project Series
1992A (SLMA) 3.70%, 12/7/95***..................... 2,000,000 2,000,000
A1+/P1 Guadalupe-Blanco River Authority IDC, IDR RFB The BOC
Group, Inc. Project Series 1993 (Wachovia Bank of
Georgia, N.A.) 3.75%, 12/7/95*** (b)............... 3,000,000 3,000,000
NR/NR Houston Sewer System Revenue Series 1984 Escrowed to
Maturity U.S. Government Securities Collateral
9.00%, 10/1/96..................................... 2,200,000 2,294,137
A1+/NR Katy ISD Series 1995A (SPA-Credit Suisse) 4.00%,
12/6/95***......................................... 10,000,000 10,000,000
A1+/P1 Port of Corpus Christi IDC, IDR RFB Lantana Corp.
Project Series 1992 (Banc One Texas, N.A.) 3.75%,
12/7/95***......................................... 3,085,000 3,085,000
A1+/VMIG1 Red River Authority PCR, RFB Southwestern Public
Service Co. Project Series 1991 ARTS (SPA-Union
Bank of Switzerland) 3.60%, 12/7/95***............. 5,300,000 5,300,000
A1+/VMIG1 San Antonio City Higher Education Authority, Inc.
Educational Facilities UTSA Phase I Dormitory
Project Series 1985 (Lloyds Bank PLC) 3.80%,
12/1/95***......................................... 3,085,000 3,085,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
19
<PAGE> 21
THE HANOVER FUNDS, INC.
THE TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- --------------- ----------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES -- (CONTINUED)
TEXAS -- (CONTINUED)
A1/P1 Shenandoah City HFDC, Hospital RB Southwood Ltd.
Project I Series 1984 (Bank America National Trust
and Savings Association) 4.07%, 12/7/95*** (b)..... $4,300,000 $ 4,300,000
Texas State TRANS:
SP1+/MIG1 Series 1995A 4.75%, 8/30/96........................ 5,000,000 5,023,952
A1+/P1 Series 1995B 3.65%, 8/20/96**...................... 2,200,000 2,200,000
------------
43,417,650
------------
UTAH -- 2.5%
NR/MIG1 Davis County School District TANS Series 1995 4.25%,
6/28/96............................................ 3,000,000 3,006,437
A1+/P1 Salt Lake County HFA, Elderly Housing Revenue RFB
Sandy Retirement Center Series 1988 (Swiss Bank
Corp.) 3.65%, 12/7/95***........................... 4,900,000 4,900,000
------------
7,906,437
------------
WYOMING -- 4.5%
A1+/P1 Green River City PCR, RB Texasgulf Project Series
1984 (Societe Generale) 4.00%, 12/7/95*** (b)...... 1,800,000 1,800,000
Lincoln County PCR RB PacificCorp. Project Series
1991 (PacificCorp.):
A1+/VMIG1 3.75%, 2/7/96**................................. 2,500,000 2,500,000
A1+/VMIG1 3.70%, 2/12/96**................................ 3,500,000 3,500,000
A1+/VMIG1 Sweetwater County PCR, RB PacificCorp. Project Series
1992B (Union Bank of Switzerland) 3.70%,
3/13/96**.......................................... 6,305,000 6,305,000
------------
14,105,000
------------
TOTAL INVESTMENTS -- 98.8% (COST $310,553,518)+...... 310,553,518
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%........ 3,912,866
------------
NET ASSETS -- 100.0%................................. $314,466,384
===========
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
20
<PAGE> 22
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES*** -- 52.9%
A1+/VMIG1 Babylon GO Series 1994B (AMBAC/SPA-Bank of
Nova Scotia) 3.45%, 12/6/95....................... $ 2,500,000 $ 2,500,000
A1+/VMIG1 Indian Trace Community Development District Florida
Basin 1 Water Management Series A UPDATES
(MBIA/SPA-Swiss Bank Corp.) 3.60%, 12/6/95........ 3,800,000 3,800,000
A1+/NR Nassau County IDA, CFR Cold Spring Harbor Laboratory
Project Series 1989 (Morgan Guaranty Trust Co.)
3.80%, 12/1/95.................................... 5,000,000 5,000,000
A1/NR New York City Housing Development Corp. Mortgage
Revenue Multifamily Columbus Gardens Project
Series A 3.50%, 12/6/95........................... 200,000 200,000
New York City IDA:
A1+/NR CFR Calhoun School Inc. Project (Barclays Bank
PLC) 3.50%, 12/7/95............................ 1,800,000 1,800,000
A1+/NR CFR Childrens Oncology Society (Barclays Bank PLC)
3.45%, 12/6/95................................. 1,900,000 1,900,000
A1+/NR CFR National Audubon Society RB Series 1989 (Swiss
Bank Corp.) 3.70%, 12/1/95..................... 2,000,000 2,000,000
A2/VMIG1 IDR Field Hotel Association JFK Project (Banque
Indosuez) 3.60%, 12/6/95....................... 9,700,000 9,700,000
NR/P1 IDR La Guardia Association Project (Banque
Indosuez) 3.60%, 12/6/95....................... 11,000,000 11,000,000
New York City Municipal Water Finance Authority
Water & Sewer System Revenue RB (FGIC):
A1+/VMIG1 Fiscal 1994 Series 1993C 3.80%, 12/1/95........ 280,000 280,000
A1+/VMIG1 Series 1995A 4.00%, 12/1/95.................... 500,000 500,000
New York City Trust Cultural Resources Revenue:
NR/VMIG1 American Museum of Natural History Series 1993A
(MBIA/SPA-Credit Suisse) 3.45%, 12/6/95........ 3,550,000 3,550,000
A1+/VMIG1 Solomon R. Guggenheim Series 1990B (Swiss Bank
Corp.) 3.70%, 12/1/95.......................... 2,000,000 2,000,000
New York City UTGO:
A1+/VMIG1 Fiscal 1993 Subseries B (FGIC) 4.00%, 12/1/95..... 11,000,000 11,000,000
A1+/VMIG1 Fiscal 1994 Subseries B-4 (Union Bank of
Switzerland) 4.00%, 12/1/95.................... 2,400,000 2,400,000
Fiscal 1995:
A1+/VMIG1 Subseries B-3 (MBIA) 3.80%, 12/1/95............ 1,150,000 1,150,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
21
<PAGE> 23
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES*** -- (CONTINUED)
New York City UTGO Fiscal 1995: -- (continued)
A1+/VMIG1 Subseries B-4 (MBIA) 3.80%, 12/1/95............... $ 3,600,000 $ 3,600,000
A1+/VMIG1 Subseries B-7 (AMBAC) 3.80%, 12/1/95.............. 300,000 300,000
A1+/VMIG1 New York State Dormitory Authority Revenues RB
Cornell University Series 1990B (Liq. Morgan
Guaranty Trust) 3.70%, 12/1/95.................... 700,000 700,000
New York State ERDA, PCR:
Central Hudson Gas and Electric:
NR/P1 Series 1985B (Deutsche Bank A.G.) 3.45%,
12/7/95...................................... 3,500,000 3,500,000
NR/P1 Series 1987B (Union Bank of Switzerland) 3.60%,
12/7/95...................................... 1,800,000 1,800,000
A1+/VMIG1 Electric and Gas Series 1994D (Union Bank of
Switzerland) 3.70%, 12/1/95.................... 900,000 900,000
A1+/VMIG1 New York State HFA Normandie Court 1 Project Series
1991A (Societe Generale) 3.45%, 12/6/95........... 12,800,000 12,800,000
A1+/VMIG1 New York State Local Assistance Corp. Series A
(Credit Suisse, Swiss Bank Corp. and Union Bank of
Switzerland) 3.50%, 12/6/95....................... 9,700,000 9,700,000
New York State Local Government Assistance Corp.:
A1+/VMIG1 Series D (Societe Generale) 3.55%, 12/6/95........ 1,700,000 1,700,000
A1+/VMIG1 Series E (Canadian Imperial Bank Canada) 3.55%,
12/6/95........................................ 2,000,000 2,000,000
A1+/VMIG1 Series G (National Westminster Bank PLC) 3.50%,
12/6/95........................................ 8,600,000 8,600,000
NR/VMIG1 New York State Thruway Authority General Revenue
(FGIC GO of Authority) 3.65%, 12/1/95............. 200,000 200,000
NR/VMIG1 North Hempstead Solid Waste Management Authority
Series A (National Westminster Bank PLC) 3.50%,
12/6/95........................................... 3,500,000 3,500,000
A1+/NR Seneca County IDA, CFR New York Chiropractic College
(Barclays Bank PLC) 3.50%, 12/6/95................ 9,500,000 9,500,000
NR/P1 St. Lawrence County IDA, PCR Reynolds Metals Co.
Project Series 1985 (Bank of Nova Scotia) 3.80%,
12/1/95........................................... 5,250,000 5,250,000
NR/VMIG1 Suffolk County Water Authority BANS (SPA-Bank of
Nova Scotia) 3.65%, 12/6/95....................... 3,800,000 3,800,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
22
<PAGE> 24
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES*** -- (CONTINUED)
A1+/VMIG1 Syracuse IDA, CFR RB Multi-Modal Syracuse University
Project (Morgan Guaranty Trust Co.) 3.70%,
12/1/95........................................... $ 3,000,000 $ 3,000,000
A1+/VMIG1 Triborough Bridge and Tunnel Authority Special
Obligation RB Series 1994 (FGIC) 3.50%, 12/6/95... 4,000,000 4,000,000
------------
TOTAL VARIABLE RATE DEMAND NOTES.................... 133,630,000
------------
MUNICIPAL OBLIGATIONS -- 25.6%
NR/NR Brockport CSD BANS 4.25%, 6/27/96................... 4,000,000 4,010,664
NR/NR Clarence CSD TANS 4.00%, 6/28/96.................... 2,000,000 2,003,243
NR/MIG1 East Meadow UFSD TANS 4.25%, 6/27/96................ 2,000,000 2,006,491
NR/NR Greece CSD Monroe County TANS 4.00%, 6/28/96........ 3,000,000 3,003,218
Town of Hempstead:
BANS Series A:
NR/NR 5.25%, 3/1/96.................................. 3,500,000 3,505,297
NR/NR 5.50%, 3/1/96.................................. 500,000 501,053
NR/NR UFSD TANS 4.50%, 6/28/96.......................... 2,000,000 2,007,659
NR/NR Merrick UFSD TANS 4.25%, 6/27/96.................... 1,000,000 1,003,050
NR/NR Metropolitan Transportation Authority Series F
8.375%, 7/1/96 (c)................................ 4,000,000 4,184,268
Nassau County:
BANS:
SP1/MIG1 Series E 4.25%, 3/15/96........................ 1,570,000 1,572,831
SP1+/MIG1 Series F 4.50%, 3/15/96........................ 500,000 501,089
SP1/MIG1 RANS 4.25%, 6/27/96............................... 2,000,000 2,005,321
New York City Municipal Assistance Corp. Series 56
(c):
NR/NR 7.90%, 7/1/96..................................... 1,500,000 1,565,156
NR/NR 8.10%, 7/1/96..................................... 500,000 522,500
NR/NR New York City Municipal Water Finance Authority
Water & Sewer System Revenue Series A 7.00%,
6/15/96 (c)....................................... 1,500,000 1,555,079
NR/NR New York State Dormitory Authority Revenues
Refunding Insured New York University Series B
(MBIA) 3.65%, 7/1/96.............................. 530,000 529,829
New York State ERDA, PCR:
New York State Electric and Gas Corp. RB:
A1+/NR (Morgan Guaranty Trust Co.) 4.65%, 3/15/96
(a).......................................... 1,500,000 1,500,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
23
<PAGE> 25
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS -- (CONTINUED)
New York State ERDA, PCR; New York State Electric
and Gas Corp. RB: -- (continued)
A1+/NR Series D (Union Bank of Switzerland) 4.60%,
12/1/95 (a).................................. $ 1,000,000 $ 1,000,000
A1+/NR Series D (Union Bank of Switzerland) 3.65%,
12/1/96 (a)++................................ 1,000,000 1,000,000
NR/VMIG1 LILCO Project Series B (Deutsche Bank A.G.) 4.70%,
3/1/96 (a)..................................... 2,500,000 2,500,000
New York State HFA U.S. Government Securities
Collateral:
NR/NR Special Obligation Health Facilities New York
City Series A Escrowed to Maturity 6.55%,
5/1/96....................................... 500,000 505,671
State University Construction Series A:
NR/NR Escrowed to Maturity 7.00%, 5/1/96........... 200,000 202,328
NR/NR 8.00%, 5/1/96 (c)............................ 200,000 207,312
New York State PAR and General Purposes RB:
A1/VMIG1 (GO of New York State Power Authority) 3.85%,
3/1/96 (a)..................................... 4,000,000 4,000,000
Series T (c):
NR/NR 7.375%, 1/1/96................................. 400,000 409,007
NR/NR 7.400%, 1/1/96................................. 325,000 332,390
New York State Urban Development Corporation Revenue
Correctional Facility Series A (c):
NR/NR 7.00%, 1/1/96.................................. 1,400,000 1,431,488
NR/NR 9.20%, 1/1/96.................................. 250,000 255,980
NR/NR Oyster Bay BANS 4.00%, 7/12/96...................... 4,000,000 4,008,224
NR/NR Port Washington UFSD TANS 4.25%, 6/27/96............ 2,000,000 2,006,039
NR/NR Scarsdale UFSD TANS 4.00%, 6/27/96.................. 3,000,000 3,006,484
NR/NR Southampton County of Suffolk UFSD TANS 4.50%,
6/28/96........................................... 4,350,000 4,365,357
NR/MIG1 South Huntington UFSD TANS 4.25%, 6/28/96........... 2,000,000 2,006,515
NR/MIG1 Three Village CSD TANS 4.50%, 6/28/96............... 1,600,000 1,607,049
NR/NR Triborough Bridge and Tunnel Authority Revenue
General Purpose Series 1 7.625%, 1/1/96 (c)....... 2,500,000 2,557,724
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
24
<PAGE> 26
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS -- (CONTINUED)
NR/NR United Nations Development Corp. Revenue Phase 2 & 3
Senior Lien 7.875%, 7/1/96 (c).................... $ 1,300,000 $ 1,356,155
------------
TOTAL MUNICIPAL OBLIGATIONS......................... 64,734,471
------------
TAX EXEMPT COMMERCIAL PAPER -- 21.1%
New York City Municipal Water Finance Authority
(Credit Suisse):
A1+/P1 3.80%, 12/4/95................................. 2,800,000 2,800,000
A1+/P1 3.35%, 12/7/95................................. 2,100,000 2,100,000
A1+/P1 3.95%, 12/7/95................................. 1,000,000 1,000,000
A1+/P1 3.50%, 12/20/95................................ 1,000,000 1,000,000
A1+/P1 3.70%, 1/23/96................................. 1,000,000 1,000,000
A1+/P1 3.75%, 1/24/96................................. 3,000,000 3,000,000
A1+/P1 3.75%, 1/26/96................................. 1,600,000 1,600,000
A1+/P1 3.70%, 1/29/96................................. 2,000,000 2,000,000
A1+/P1 3.70%, 1/30/96................................. 2,000,000 2,000,000
New York City UTGO Fiscal 1994 Series 1994H:
Subseries H-3 (FSA/SPA-Banque Paribas):
A1/VMIG1 3.90%, 12/4/95................................. 2,000,000 2,000,000
A1/VMIG1 3.75%, 12/7/95................................. 2,000,000 2,000,000
A1/VMIG1 3.70%, 1/17/96................................. 2,200,000 2,200,000
A1/VMIG1 3.75%, 1/25/96................................. 2,000,000 2,000,000
A1/VMIG1 3.70%, 2/28/96................................. 3,100,000 3,100,000
Subseries H-4 (AMBAC/SPA-Kredietbank, N.V.):
A1/VMIG1 3.70%, 1/26/96................................. 2,800,000 2,800,000
A1/VMIG1 3.75%, 3/7/96.................................. 2,500,000 2,500,000
A1+/P1 New York State EFC, Solid Waste Disposal RFB General
Electric Capital Corp. Project Series 1987A
(General Electric Capital Corp.) 3.75%, 1/10/96... 2,500,000 2,500,000
New York State GO BANS:
Series Q:
A1/P1 3.80%, 1/16/96................................. 2,000,000 2,000,000
A1/P1 3.70%, 1/18/96................................. 2,200,000 2,200,000
A1/P1 3.70%, 1/22/96................................. 2,000,000 2,000,000
A1/P1 3.75%, 2/7/96.................................. 2,350,000 2,350,000
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
25
<PAGE> 27
THE HANOVER FUNDS, INC.
THE NEW YORK TAX FREE MONEY MARKET FUND
Portfolio of Investments (continued)
November 30, 1995
<TABLE>
<CAPTION>
CREDIT PRINCIPAL VALUE
RATINGS* AMOUNT (NOTE 2A)
- ----------- ----------- ------------
<S> <C> <C> <C>
TAX EXEMPT COMMERCIAL PAPER -- (CONTINUED)
New York State GO BANS:-- (continued)
Series R:
A1/P1 3.625%, 1/11/96................................ $ 2,000,000 $ 2,000,000
A1/P1 3.75%, 1/16/96................................. 2,000,000 2,000,000
A1/P1 3.70%, 2/7/96.................................. 2,000,000 2,000,000
A1/P1 3.70%, 2/8/96.................................. 3,100,000 3,100,000
------------
TOTAL TAX EXEMPT COMMERCIAL PAPER................... 53,250,000
------------
TOTAL INVESTMENTS -- 99.6% (COST $251,614,471)+..... 251,614,471
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4%....... 1,006,630
------------
NET ASSETS -- 100.0%................................ $252,621,101
===========
</TABLE>
See Footnotes to Portfolios and accompanying notes to financial statements.
26
<PAGE> 28
THE HANOVER FUNDS, INC.
Footnotes to Portfolios (unaudited)
* Credit Ratings given by Standard and Poor's Ratings Group and Moody's
Investors Service, Inc.
<TABLE>
<CAPTION>
Standard & Poor's Moody's
- -------------------- -----------
<S> <C> <C>
Long-Term Ratings:
AAA Aaa Instrument judged to be of the best quality and
carrying the smallest amount of credit risk.
Short-Term Ratings:
A1 P1 Instrument judged to be of the highest quality.
SP1 MIG1/VMIG1 Instrument judged to be of the best quality
with strong protection.
NR NR Not Rated. In the opinion of the Investment
Advisers, instrument judged to be of comparable
investment quality to rated securities which
may be purchased by the Funds.
</TABLE>
Items which possess the strongest investment attributes of their category
are given that letter rating followed by a number. The Standard & Poor's
ratings may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories. Moody's applies
numerical modifiers to designate relative standing within the generic
rating categories.
U.S. Government Issues have assumed ratings of AAA/Aaa.
** Tax Exempt Commercial Paper.
*** Variable Rate Demand Notes or Obligations. Maturity date shown is the later
of next exercise date of the demand feature (redemption at par by the
issuers) or the next interest reset date; rate shown is rate in effect at
November 30, 1995. Yield to maturity on date of purchase shown is yield in
effect at November 30, 1995.
+ The cost of securities for Federal income tax purposes is substantially the
same.
++ Security purchased on a when issued basis. Portfolio securities in The
Government Money Market Fund and The New York Tax Free Money Market Fund
with a market value of $117,244,458 and $1,023,090, respectively, have been
segregated against the portfolio purchase.
(a) Maturity date shown is the mandatory or optional put date.
(b) Security may be sold to institutional investors only.
(c) Pre-refunded and U.S. Government Securities Collateral.
INVESTMENT PERCENTAGES SHOWN ARE CALCULATED AS A PERCENTAGE OF NET ASSETS.
INSTITUTIONS SHOWN IN PARENTHESIS HAVE ENTERED INTO CREDIT SUPPORT AGREEMENTS
WITH THE ISSUERS.
27
<PAGE> 29
THE HANOVER FUNDS, INC.
Footnotes to Portfolios (unaudited) (continued)
<TABLE>
<CAPTION>
ABBREVIATIONS USED IN THE PORTFOLIOS:
<S> <C>
AMBAC American Municipal Bond Assurance Corporation
ARTS Adjustable Rate Tender Security
BANS Bond Anticipation Notes
CFR Civil Facilities Revenue
CSD Central School District
EDR Economic Development Revenue
EFAR Education Facilities Authority Revenue
EFC Environmental Facilities Corporation
ERDA Energy Research and Development Authority
FGIC Financial Guaranty Insurance Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
HFA Housing Finance Agency
HFAR Health Facilities Authority Revenue
HFDC Health Facilities Development Corporation
GO General Obligation
IDA Industrial Development Authority
IDB Industrial Development Board
IDC Industrial Development Corporation
IDR Industrial Development Revenue
ISD Independent School District
MBIA Municipal Bond Insurance Association
NRUCFC National Rural Utilities Cooperative Finance Corp.
PAR Power Authority Revenue
PCR Pollution Control Revenue
RANS Revenue Anticipation Notes
RB Revenue Bonds
RFB Refunding Bonds
SLMA Student Loan Marketing Association
SPA Standby Purchase Agreement
TANS Tax Anticipation Notes
TRANS Tax and Revenue Anticipation Notes
UFSD Union Free School District
UPDATES Unit Priced Demand Adjustable Tax-Exempt Security
UTGO Unlimited Tax General Obligation
</TABLE>
28
<PAGE> 30
THE HANOVER FUNDS, INC.
Statement of Assets and Liabilities
November 30, 1995
<TABLE>
<CAPTION>
THE 100%
U.S. TREASURY THE U.S. THE
SECURITIES TREASURY GOVERNMENT
MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$1,337,369,032, $1,154,498,284, and
$1,464,062,168, respectively) (Note 2A).... $1,337,369,032 $1,154,498,284 $1,464,062,168
Repurchase agreements, at value (cost $0,
$500,000,000, and $200,000,000,
respectively) (Note 8)..................... -- 500,000,000 200,000,000
Cash.......................................... 91,949 11,072,335 --
Receivable for securities sold................ -- -- 25,000,000
Interest receivable........................... 1,895,605 1,910,808 5,894,185
Deferred organizational costs (Note 2E)....... 1,762 10,853 --
Other assets.................................. 20,536 22,635 27,610
-------------- -------------- --------------
Total assets............................... 1,339,378,884 1,667,514,915 1,694,983,963
-------------- -------------- --------------
LIABILITIES:
Payable for securities purchased.............. -- -- 139,922,056
Dividend payable (Note 2C).................... 1,218,124 2,675,555 2,271,183
Shareholder servicing fee payable (Note 6).... 374,997 487,887 429,836
Investment advisory fee payable (Note 4)...... 128,570 167,276 147,372
Administrative services fee payable (Note
5)......................................... 45,349 59,001 51,980
Co-Administrative services fee payable (Note
5)......................................... 32,143 41,819 36,843
Custodian fee payable (Note 7)................ -- 48,046 --
Cash overdraft due to custodian............... -- -- 7,259
Transfer agent fee payable (Note 7)........... -- 7,125 --
Fund accounting fee payable (Note 5).......... 2,083 2,083 2,083
Other accrued liabilities..................... 28,797 197,171 116,912
-------------- -------------- --------------
Total liabilities.......................... 1,830,063 3,685,963 142,985,524
-------------- -------------- --------------
NET ASSETS:
Shares of capital stock outstanding (par value
of $.001 per share); ten billion shares
authorized................................. 1,337,563 1,663,829 1,551,998
Additional paid-in capital.................... 1,336,225,405 1,662,165,123 1,550,446,441
Accumulated undistributed net realized loss on
investment transactions.................... (14,147) -- --
-------------- -------------- --------------
Net assets applicable to outstanding shares..... $1,337,548,821 $1,663,828,952 $1,551,998,439
============= ============= =============
Shares of capital stock outstanding............. 1,337,562,968 1,663,828,952 1,551,998,439
============= ============= =============
Net asset value per share outstanding........... $1.00 $1.00 $1.00
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 31
THE HANOVER FUNDS, INC.
Statement of Assets and Liabilities (continued)
November 30, 1995
<TABLE>
<CAPTION>
THE
NEW YORK
THE CASH THE TAX FREE TAX FREE
MANAGEMENT MONEY MARKET MONEY MARKET
FUND FUND FUND
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$1,513,921,449, $310,553,518, and
$251,614,471, respectively) (Note 2A)...... $1,513,921,449 $310,553,518 $251,614,471
Repurchase agreements, at value (cost
$114,000,000, $0, and $0, respectively)
(Note 8)................................... 114,000,000 -- --
Cash.......................................... 10,537,302 2,423,238 815,426
Receivable for securities sold................ 20,257,330 -- --
Interest receivable........................... 5,779,898 2,204,741 1,869,552
Other assets.................................. 21,788 3,725 3,309
-------------- ------------ ------------
Total assets............................... 1,664,517,767 315,185,222 254,302,758
-------------- ------------ ------------
LIABILITIES:
Payable for securities purchased.............. 27,130,907 -- 1,208,823
Dividend payable (Note 2C).................... 2,089,945 486,275 305,769
Shareholder servicing fee payable (Note 6).... 396,417 91,737 74,300
Investment advisory fee payable (Note 4)...... 135,914 31,453 25,474
Administrative services fee payable (Note
5)......................................... 47,939 11,094 8,985
Co-Administrative services fee payable (Note
5)......................................... 33,978 7,863 6,369
Custodian fee payable (Note 7)................ 25,613 30,588 12,322
Transfer agent fee payable (Note 7)........... 8,846 8,151 3,627
Fund accounting fee payable (Note 5).......... 2,083 2,300 2,139
Other accrued liabilities..................... 153,033 49,377 33,849
-------------- ------------ ------------
Total liabilities.......................... 30,024,675 718,838 1,681,657
-------------- ------------ ------------
NET ASSETS:
Shares of capital stock outstanding (par value
of $.001 per share); ten billion shares
authorized................................. 1,634,493 314,512 252,669
Additional paid-in capital.................... 1,632,858,599 314,197,593 252,416,056
Accumulated undistributed net realized loss on
investment transactions.................... -- (45,721) (47,624)
-------------- ------------ ------------
Net assets applicable to outstanding shares... $1,634,493,092 $314,466,384 $252,621,101
============= =========== ===========
Shares of capital stock outstanding........... 1,634,493,092 314,512,105 252,668,725
============= =========== ===========
Net asset value per share outstanding......... $1.00 $1.00 $1.00
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 32
THE HANOVER FUNDS, INC.
Statement of Operations
For the Year Ended November 30, 1995
<TABLE>
<CAPTION>
THE 100%
U.S. THE THE
TREASURY THE U.S. GOVERNMENT NEW YORK
SECURITIES TREASURY MONEY THE CASH THE TAX FREE TAX FREE
MONEY MARKET MONEY MARKET MARKET MANAGEMENT MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND FUND
------------ ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INTEREST INCOME...................... $59,142,062 $84,441,346 $85,684,159 $68,443,684 $13,229,723 $ 8,106,519
------------ ------------ ----------- ------------ ------------ -------------
EXPENSES:
Shareholder servicing (Note 6)..... 3,711,688 5,160,464 5,044,785 4,040,014 1,183,863 755,492
Investment advisory (Note 4)....... 1,590,723 2,211,627 2,162,051 1,731,434 507,370 323,782
Administrative services (Note 5)... 452,063 628,663 614,702 492,115 144,310 92,011
Co-Administrative services (Note
5)............................... 318,145 442,325 432,410 346,287 101,474 64,756
Registration....................... 176,597 185,710 231,636 176,953 62,538 31,580
Custodian (Note 7)................. 81,398 277,195 246,782 102,656 60,645 41,689
Transfer agent (Note 7)............ 51,432 70,623 70,607 70,975 26,475 28,220
Legal.............................. 30,900 62,103 46,099 36,048 59,253 6,850
Fund accounting (Note 5)........... 25,507 25,128 25,451 26,942 29,027 27,086
Insurance.......................... 17,812 24,849 19,622 14,710 9,808 4,059
Directors.......................... 14,404 20,533 19,685 15,680 5,270 2,993
Reports to shareholders............ 13,609 19,250 18,799 15,160 6,070 3,110
Audit.............................. 11,216 15,840 17,852 12,907 3,174 2,774
Amortization of organization
expenses (Note 2E)............... 7,618 19,768 -- 4,345 10,090 --
Miscellaneous...................... 15,991 71,297 28,614 23,160 8,938 4,849
------------ ------------ ----------- ------------ ------------ -------------
Total expenses before waivers.... 6,519,103 9,235,375 8,979,095 7,109,386 2,218,305 1,389,251
Expenses waived by Investment
advisers, Co-Administrator &
Custodian (Notes 4, 5 & 7)..... (342,061) (634,684) (480,816) (375,631) (132,259) (85,251)
------------ ------------ ----------- ------------ ------------ -------------
Net expenses....................... 6,177,042 8,600,691 8,498,279 6,733,755 2,086,046 1,304,000
------------ ------------ ----------- ------------ ------------ -------------
NET INVESTMENT INCOME................ 52,965,020 75,840,655 77,185,880 61,709,929 11,143,677 6,802,519
------------ ------------ ----------- ------------ ------------ -------------
NET REALIZED GAIN (LOSS) ON
INVESTMENTS........................ 286,897 106,094 8,875 51,803 (65,920) (915)
------------ ------------ ----------- ------------ ------------ -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $53,251,917 $75,946,749 $77,194,755 $61,761,732 $11,077,757 $ 6,801,604
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
31
<PAGE> 33
THE HANOVER FUNDS, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
THE 100% U.S. TREASURY SECURITIES THE U.S. TREASURY THE GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
--------------------------------- ----------------------------------- ----------------------------------
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
--------------------------------- ----------------------------------- ----------------------------------
1995 1994 1995 1994 1995 1994
--------------- --------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET
ASSETS:
Operations:
Net investment
income.......... $ 52,965,020 $ 24,200,846 $ 75,840,655 $ 36,769,435 $ 77,185,880 $ 29,545,724
Net realized gain
on invest-
ments........... 286,897 40,715 106,094 24,119 8,875 34,426
--------------- --------------- ---------------- ---------------- ---------------- ---------------
Net increase in net
assets resulting
from operations... 53,251,917 24,241,561 75,946,749 36,793,554 77,194,755 29,580,150
--------------- --------------- ---------------- ---------------- ---------------- ---------------
Distributions to
shareholders:
Net investment
income.......... (52,965,020) (24,200,846) (75,840,655) (36,769,435) (77,185,880) (29,545,724)
Net realized gain
(loss) on
investments..... (287,803) (53,956) (90,389) (39,824) 64 (63,266)
--------------- --------------- ---------------- ---------------- ---------------- ---------------
(53,252,823) (24,254,802) (75,931,044) (36,809,259) (77,185,816) (29,608,990)
--------------- --------------- ---------------- ---------------- ---------------- ---------------
Capital share
transactions (at
$1.00 per share):
Proceeds from
sales of
shares........ 8,315,731,409 6,313,225,632 13,719,687,712 11,697,651,225 16,830,561,076 8,540,855,568
Net asset value
of shares
issued in
reinvestment
of distri-
butions....... 38,827,021 17,702,352 44,475,592 22,994,479 44,844,948 12,795,260
--------------- --------------- ---------------- ---------------- ---------------- ---------------
8,354,558,430 6,330,927,984 13,764,163,304 11,720,645,704 16,875,406,024 8,553,650,828
Cost of shares
redeemed...... (8,041,133,881) (6,180,420,868) (13,321,482,895) (11,428,612,498) (16,465,315,771) (7,957,986,557)
--------------- --------------- ---------------- ---------------- ---------------- ---------------
Net increase in net
assets derived
from capital share
transactions...... 313,424,549 150,507,116 442,680,409 292,033,206 410,090,253 595,664,271
--------------- --------------- ---------------- ---------------- ---------------- ---------------
NET INCREASE IN NET
ASSETS............ 313,423,643 150,493,875 442,696,114 292,017,501 410,099,192 595,635,431
NET ASSETS:
Beginning of
period.......... 1,024,125,178 873,631,303 1,221,132,838 929,115,337 1,141,899,247 546,263,816
--------------- --------------- ---------------- ---------------- ---------------- ---------------
End of period..... $ 1,337,548,821 $ 1,024,125,178 $ 1,663,828,952 $ 1,221,132,838 $ 1,551,998,439 $ 1,141,899,247
============== ============== =============== =============== =============== ==============
</TABLE>
See accompanying notes to financial statements.
32
<PAGE> 34
THE HANOVER FUNDS, INC.
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
THE CASH THE TAX FREE THE NEW YORK TAX FREE
MANAGEMENT FUND MONEY MARKET FUND MONEY MARKET FUND
---------------------------------- ---------------------------------- ------------------------------
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
---------------------------------- ---------------------------------- ------------------------------
1995 1994 1995 1994 1995 1994
--------------- --------------- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
Operations:
Net investment
income............ $ 61,709,929 $ 27,662,057 $ 11,143,677 $ 8,285,351 $ 6,802,519 $ 3,436,386
Net realized gain
(loss) on
investments....... 51,803 26,136 (65,920) (272,226) (915) (3,816)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase in net
assets resulting
from operations..... 61,761,732 27,688,193 11,077,757 8,013,125 6,801,604 3,432,570
--------------- --------------- --------------- --------------- ------------- -------------
Distributions to
shareholders:
Net investment
income............ (61,709,929) (27,662,057) (10,945,829) (8,190,774) (6,802,519) (3,436,315)
Net realized gain on
investments....... (51,803) (26,136) -- -- -- --
--------------- --------------- --------------- --------------- ------------- -------------
(61,761,732) (27,688,193) (10,945,829) (8,190,774) (6,802,519) (3,436,315)
--------------- --------------- --------------- --------------- ------------- -------------
Capital share
transactions (at
$1.00 per share):
Proceeds from
sales of
shares.......... 10,290,191,626 7,914,911,934 1,492,967,257 1,950,480,104 650,155,917 561,794,942
Net asset value of
shares issued in
reinvestment of
distributions... 36,322,846 14,408,576 4,501,517 3,447,870 3,539,264 1,645,715
--------------- --------------- --------------- --------------- ------------- -------------
10,326,514,472 7,929,320,510 1,497,468,774 1,953,927,974 653,695,181 563,440,657
Cost of shares
redeemed........ (9,682,066,076) (7,800,301,282) (1,542,176,447) (1,829,904,382) (583,079,840) (545,068,230)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase
(decrease) in net
assets derived from
capital share
transactions........ 644,448,396 129,019,228 (44,707,673) 124,023,592 70,615,341 18,372,427
--------------- --------------- --------------- --------------- ------------- -------------
NET INCREASE
(DECREASE) IN NET
ASSETS.............. 644,448,396 129,019,228 (44,575,745) 123,845,943 70,614,426 18,368,682
NET ASSETS:
Beginning of
period............ 990,044,696 861,025,468 359,042,129 235,196,186 182,006,675 163,637,993
--------------- --------------- --------------- --------------- ------------- -------------
End of period....... $ 1,634,493,092 $ 990,044,696 $ 314,466,384 $ 359,042,129 $ 252,621,101 $ 182,006,675
============== ============== ============== ============== ============ ============
</TABLE>
See accompanying notes to financial statements.
33
<PAGE> 35
THE HANOVER FUNDS, INC.
Notes to Financial Statements
November 30, 1995
1. DESCRIPTION
The Hanover Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, and was established as a Maryland corporation on October 5,
1988. The Articles of Incorporation of the Company authorize ten billion shares,
having a par value of $.001 per share. The Company has six separate investment
portfolios: The 100% U.S. Treasury Securities Money Market Fund ("The 100% U.S.
Treasury Securities Fund"), The U.S. Treasury Money Market Fund ("The U.S.
Treasury Fund"), The Government Money Market Fund ("The Government Fund"), The
Cash Management Fund, The Tax Free Money Market Fund ("The Tax Free Fund") and
The New York Tax Free Money Market Fund ("The New York Tax Free Fund"), (each, a
"Fund," collectively, the "Funds").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements:
A) SECURITY VALUATION: Pursuant to Rule 2a-7 of The Investment Company Act
of 1940, investment securities are valued under the amortized cost
method, which approximates current market value. Under this method,
securities are valued at cost when purchased and, thereafter, a constant
proportionate amortization of any discount or premium is recorded until
maturity of the security. Regular review and monitoring of the valuation
is performed to avoid dilution of net asset value per share. The Funds
seek to maintain a stable net asset value of $1.00 per share.
B) INVESTMENT TRANSACTIONS AND INCOME: Investment transactions are recorded
on the trade date. The cost of investments sold is determined by use of
the specific identification method to calculate gain and loss on sales
for both financial statement and Federal income tax purposes. Interest
income, including the amortization of discount or premium, is recorded
as earned.
C) DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are
declared daily and paid monthly, generally on the first business day of
each month. Net investment income for dividend purposes consists of (i)
interest accrued and discount earned on the Fund's assets (including
both original issue and market discount), less (ii) amortization of
market premium on such assets, and the accrued expenses of the Fund. Any
net realized capital gains less available capital loss carryover are
distributed at least annually.
D) FEDERAL INCOME TAXES: Each Fund is a separate taxable entity for Federal
income tax purposes, and intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as
amended. By so qualifying, each Fund will not be subject to Federal
income taxes to the extent that it distributes all of its "investment
company taxable income", as defined in the Code, and net capital gains,
if any, to its shareholders. Each Fund also intends to meet the
distribution requirements to avoid the payment of an excise tax.
Accordingly, no provision for Federal income taxes is required.
E) ORGANIZATIONAL COSTS: Costs incurred by the Company in connection with
its organization and initial registration and public offering of shares
are being amortized on a straight-line basis for a five-year period
beginning with the operations of each Fund. In the event that any of the
34
<PAGE> 36
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
initial shares of the Funds owned by Furman Selz Incorporated ("Furman
Selz"), the Company's Administrator, are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro
rata portion of any unamortized deferred organization expenses in the
same proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
F) EXPENSES: Expenses directly attributable to a Fund are charged to that
Fund, other expenses are allocated proportionately among each Fund
within the Company in relation to the net assets of each Fund, or on
another reasonable basis.
3. CONCENTRATION OF CREDIT RISK
Because The New York Tax Free Fund will invest primarily in obligations
issued by the State of New York and its cities, municipalities and other public
authorities, it is more susceptible to factors adversely affecting issuers of
such obligations than a comparable municipal bond fund that is not so
concentrated. New York State and New York City have recently encountered
financial difficulties. If either New York State or any of its local
governmental entities is unable to meet its financial obligations, the income
derived by The New York Tax Free Fund and its ability to preserve capital and
liquidity could be adversely affected. (See the Statement of Additional
Information for more information.)
4. INVESTMENT ADVISERS
The Portfolio Group, Inc. ("TPG") provides investment advisory services to
The 100% U.S. Treasury Securities Fund, The U.S. Treasury Fund, The Government
Fund and The New York Tax Free Fund; Texas Commerce Bank, National Association
("TCB") provides investment advisory services to The Cash Management Fund and
The Tax Free Fund, in each case pursuant to an Advisory Agreement with the
Company (together, the "Advisory Agreements").
TPG was organized in March 1983 and is a wholly-owned subsidiary of
Chemical Banking Corporation, a bank holding company ("Chemical"). TPG provides
a wide range of asset management services to individuals, institutions and
retirement benefit plans. TCB has been in the investment counselling business
since 1987 and is a wholly-owned subsidiary of Texas Commerce Bancshares, Inc.,
which is a wholly-owned subsidiary of Chemical. TCB renders investment advice to
a wide variety of corporations, pension plans, foundations, trusts and
individuals.
Under the Advisory Agreements, TPG and TCB act as Investment Advisers and,
subject to the supervision and direction of the Company's Board of Directors,
direct the investments of the Funds in accordance with their investment
objectives and policies, make investment decisions and place orders to purchase
and sell securities for the Funds. As compensation for their investment advisory
services, TPG and TCB are each entitled to receive from the respective Funds
they advise a monthly fee at an annual rate of 0.15% of average daily net assets
of such Funds.
35
<PAGE> 37
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
For the year ended November 30, 1995, TPG and TCB (including Texas Commerce
Investment Management Company, an affiliate of TCB which acted as investment
adviser to The Cash Management Fund and The Tax Free Fund prior to September 1,
1995) were entitled to and voluntarily waived the investment advisory fees as
indicated below:
<TABLE>
<CAPTION>
TPG TCB
-------------------- --------------------
ENTITLED WAIVED ENTITLED WAIVED
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
The 100% U.S. Treasury Securities
Fund................................. $1,590,723 $318,145 -- --
The U.S. Treasury Fund................. 2,211,627 442,325 -- --
The Government Fund.................... 2,162,051 432,410 -- --
The Cash Management Fund............... -- -- $1,731,434 $346,287
The Tax Free Fund...................... -- -- 507,370 101,474
The New York Tax Free Fund............. 323,782 64,756 -- --
</TABLE>
5. ADMINISTRATORS
Furman Selz serves as the Company's Administrator. Furman Selz provides
management and administrative services for the operation of the Funds, furnishes
office space and facilities required for conducting the business of the Funds
and pays the compensation of the Company's officers affiliated with Furman Selz.
As compensation for its administrative services, Furman Selz receives a
monthly fee, based upon the aggregate average daily net assets of the Funds, at
an annual rate of 0.06% of the first $500 million of the average daily net
assets, 0.05% of the next $500 million of the average daily net assets, 0.04% of
the average daily net assets in excess of $1 billion. Furman Selz also provides
fund accounting services for the Funds and receives a monthly fee of $2,083 from
each Fund for those services. Furman Selz commenced providing fund accounting
services for the Funds on May 1, 1995.
Chemical Bank, a wholly-owned subsidiary of Chemical, serves as the
Company's Co-Administrator and generally assists the Company in all aspects of
its administration and operation. As compensation for its administrative
services, Chemical Bank receives from each Fund a monthly fee at an annual rate
of 0.03% of the average daily net assets of that Fund. In addition, Chemical
Bank provided fund accounting services for the Funds from December 1, 1994 to
April 30, 1995 and received a monthly fee of $2,083 from each Fund during that
period.
For the year ended November 30, 1995, Furman Selz and Chemical Bank were
entitled to and voluntarily waived the administrative services and fund
accounting fees as indicated below:
<TABLE>
<CAPTION>
FURMAN SELZ CHEMICAL BANK
------------------ ----------------
ENTITLED WAIVED ENTITLED WAIVED
-------- -------- -------- ------
<S> <C> <C> <C> <C>
The 100% U.S. Treasury Securities Fund..... $466,646 -- $328,561 $4,243
The U.S. Treasury Fund..................... 643,246 -- 452,742 8,333
The Government Fund........................ 629,285 -- 442,827 4,167
The Cash Management Fund................... 506,699 -- 356,704 2,083
The Tax Free Fund.......................... 158,893 -- 111,891 7,248
The New York Tax Free Fund................. 106,595 -- 75,173 2,083
</TABLE>
36
<PAGE> 38
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
Certain of the states in which the shares of the Funds are qualified for
sale impose limitations on the expenses of the Funds. If, in any fiscal year,
the total expenses of a Fund (excluding taxes, interest, distribution expenses,
brokerage commissions, certain portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles and extraordinary expenses, but including the advisory and
administrative services fees) exceed the expense limitations applicable to that
Fund imposed by the securities regulations of any state, TPG, TCB, Furman Selz
and Chemical Bank will reimburse the Funds for expenses to meet these
limitations. In the most restrictive state, aggregate annual expenses shall not
normally exceed two and one-half percent (2 1/2%) of the first $30 million of
the average net assets, two percent (2%) of the next $70 million of the average
net assets and one and one-half percent (1 1/2%) of the remaining average net
assets. For the year ended November 30, 1995, there were no reimbursements
required as a result of these expense limitations for the Funds.
6. SHAREHOLDER SERVICING AGENTS
Pursuant to a Shareholder Servicing Plan adopted by the Board of Directors
of the Company, the Company may enter into Shareholder Servicing Agreements with
financial institutions ("Shareholder Servicing Agents"). Shareholder
administrative support services will be performed by Shareholder Servicing
Agents for their customers who beneficially own shares. Such services, which are
described more fully in the Statement of Additional Information, may include,
among other things: (i) aggregating and processing purchase and redemption
orders; (ii) placing net purchase and redemption orders with the Company's
distributor; (iii) providing necessary personnel and facilities to establish and
maintain customer accounts and records; (iv) processing dividend payments; and
(v) providing information periodically to beneficial owners showing their
positions in the Fund's shares. Shareholder Servicing Agents may enter into
arrangements with, and pay a portion of their fees to, other entities that
perform or assist in performing shareholder administrative support services.
For the services provided, the Company's Shareholder Servicing Plan permits
the Company to pay fees to Shareholder Servicing Agents from each Fund at an
annual rate of up to 0.35% of the average daily net asset value of shares in the
Funds for which such Shareholder Servicing Agents provide services for the
benefit of customers. The Company has entered into Shareholder Servicing
Agreements with Chemical Bank, certain of its affiliates, Furman Selz and
certain other broker-dealers, pursuant to which it pays them a monthly fee from
each Fund at an annual rate of 0.35% of the average daily net asset value of the
shares in the Funds for which they provide services. The Company may appoint
additional Shareholder Servicing Agents in the future.
Shareholder Servicing Agents will provide their customers with a schedule
of any credits, fees or other conditions that may be applicable to the
investment of customer assets in the Funds' shares. The Company's Board of
Directors has determined that the amount payable by each Fund in respect of
"service fees" (as defined under Article III, Section 26 of the Rules of Fair
Practice by the National Association of Securities Dealers, Inc.) does not
exceed 0.25% of the average annual net assets of that Fund.
37
<PAGE> 39
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
For the year ended November 30, 1995, Chemical Bank and its affiliates and
Furman Selz earned the shareholder servicing fees as indicated below:
<TABLE>
<CAPTION>
CHEMICAL BANK
AND
ITS FURMAN
AFFILIATES SELZ
------------- -------
<S> <C> <C>
The 100% U.S. Treasury Securities Fund.............. $ 3,684,527 $12,594
The U.S. Treasury Fund.............................. 5,157,842 --
The Government Fund................................. 5,044,309 241
The Cash Management Fund............................ 4,012,435 403
The Tax Free Fund................................... 1,159,289 58
The New York Tax Free Fund.......................... 754,984 441
</TABLE>
7. OTHER TRANSACTIONS WITH AFFILIATES
Shares in each Fund are sold on a continuous basis without a sales load by
the Company's Distributor, Hanover Funds Distributor, Inc. (the "Distributor"),
an affiliate of Furman Selz.
Solely for the purpose of reimbursing the Distributor for activities
primarily intended to result in the sale of its shares, each Fund is authorized
to spend up to 0.10% of its net assets annually in accordance with a Plan of
Distribution (the "Plan") pursuant to Rule 12b-1 promulgated under the 1940 Act.
Activities for which the Distributor may be reimbursed include (but are not
limited to) the development and implementation of direct mail promotions and
advertising for the Funds and the preparation, printing and distribution of
prospectuses for the Funds to recipients other than existing shareholders. For
the year ended November 30, 1995, none of the Funds paid any amounts in
accordance with the Plan.
Chemical Bank serves as the Company's transfer agent and dividend
disbursing agent, and is entitled to a fee of $10 per year for each shareholder
account. Furman Selz serves as the Company's sub-transfer agent and provides the
services to be performed by Chemical Bank as transfer agent, subject to the
general supervision of Chemical Bank, and receives the fee to which Chemical
Bank is entitled as transfer agent, and reimbursement for certain expenses.
For the year ended November 30, 1995, Furman Selz earned the sub-transfer
agent fees as indicated below:
<TABLE>
<S> <C>
The 100% U.S. Treasury Securities Fund............................. $29,463
The U.S. Treasury Fund............................................. 19,393
The Government Fund................................................ 28,489
The Cash Management Fund........................................... 23,174
The Tax Free Fund.................................................. 6,108
The New York Tax Free Fund......................................... 12,957
</TABLE>
Chemical Bank serves as the Company's custodian, and receives a monthly fee
at an annual rate of 0.015% of the first $300 million of the aggregate average
daily net assets of the Company's Funds, 0.010% of the next $300 million of such
assets and 0.005% of such assets in excess of $600 million, plus a
38
<PAGE> 40
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
fee of $25 for each transaction involving a security which is not book-entry and
$15 for each transaction involving a book-entry security, and reimbursement for
out-of-pocket expenses.
For the year ended November 30, 1995, Chemical Bank was entitled to and
voluntarily waived the custodian fees as indicated below:
<TABLE>
<CAPTION>
ENTITLED WAIVED
-------- --------
<S> <C> <C>
The 100% U.S. Treasury Securities Fund................. $ 81,398 $ 19,673
The U.S. Treasury Fund................................. 277,195 184,025
The Government Fund.................................... 246,782 44,239
The Cash Management Fund............................... 102,656 27,261
The Tax Free Fund...................................... 60,645 23,537
The New York Tax Free Fund............................. 41,689 18,412
</TABLE>
8. REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board, with member banks of the
Federal Reserve System or with other brokers or dealers that meet the credit
guidelines established by the Board of Directors of the Company. The Funds will
always receive and maintain securities as collateral whose market value,
including accrued interest, will equal or exceed the value of the dollar amount
invested by that Fund in each agreement, and that Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the custodian. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults, and the value of the collateral declines, or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Funds may be delayed or limited.
9. FEDERAL INCOME TAX STATUS
For the year ended November 30, 1995, The Tax Free Fund and The New York
Tax Free Fund had net capital loss carryforwards of $338,145 and $82,846,
respectively. These losses, which may be used to offset future realized gains,
will expire in varying degrees and at varying times up through the year ending
November 30, 2003.
10. BANK MERGER
In August 1995 Chemical Banking Corporation ("Chemical") and The Chase
Manhattan Corporation ("Chase") announced that they had entered into a merger
agreement. Following the merger of these two Bank holding companies, The Chase
Manhattan Bank, N.A. will be merged with and into Chemical Bank, at which time
Chemical Bank will assume the Chase Manhattan name.
In anticipation of the consummation of the foregoing mergers, the Board of
Directors of The Hanover Funds, Inc. (the "Company"), which is affiliated with
Chemical, and the Board of Trustees of Mutual Fund Trust ("Vista"), a mutual
fund company affiliated with Chase, each have approved an Agreement and Plan of
Reorganization and Liquidation (the "Agreement") between the Company and
39
<PAGE> 41
THE HANOVER FUNDS, INC.
Notes to Financial Statements (continued)
November 30, 1995
Vista. The Agreement provides that, subject to certain conditions, including
approval of the Agreement by the shareholders of the Company and consummation of
the merger of Chemical and Chase, each investment portfolio of the Company will
sell all of its assets and liabilities to a corresponding existing or
newly-created investment portfolio of Vista having a substantially identical
investment objective and similar investment policies, in exchange for the
issuance by Vista of shares of the respective acquiring investment portfolio.
The value of the shares of a portfolio of Vista issued in connection with the
contemplated transaction will equal the value of the net assets of the
corresponding portfolio of the Company being sold. Each portfolio of the Company
will distribute to its shareholders the shares received from Vista in
cancellation of the outstanding shares of the Company, and shareholders of the
Company will become shareholders of Vista. The total net asset value of the
holdings of the shareholders of the Company immediately before and after the
contemplated transaction will be the same. The Agreement provides that, subject
to the satisfaction of the conditions contained therein, the transaction will be
consummated before July 31, 1996.
40
<PAGE> 42
THE HANOVER FUNDS, INC.
Financial Highlights
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
----------------------------------------------------------------
YEAR ENDED NOVEMBER 30, PERIOD ENDED
------------------------------------------------ NOVEMBER 30,
1995 1994 1993 1992 1991*
---------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- -------- ----------
Income from Investment Operations:
Net investment income.............. 0.050 0.033 0.026 0.033 0.021
---------- ---------- -------- -------- ----------
Less Distributions:
Dividends from net investment
income.......................... (0.050) (0.033) (0.026) (0.033) (0.021)
---------- ---------- -------- -------- ----------
Net Asset Value, End of Period....... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ======== ======== =========
Total Return......................... 5.15% 3.32% 2.62% 3.33% 2.58%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands)...................... $1,337,549 $1,024,125 $873,631 $383,688 $141,875
Ratio of Expenses to Average Net
Assets++........................ 0.58% 0.59% 0.58% 0.55% 0.45%+
Ratio of Net Investment Income to
Average Net Assets.............. 4.99% 3.26% 2.58% 3.28% 5.02%+
</TABLE>
- ---------------
* Fund commenced operations on July 1, 1991.
+ Annualized.
++ Ratios of expenses before effect of waivers were 0.61%, 0.62%, 0.61%, 0.67%
and 0.74% (annualized), respectively.
See accompanying notes to financial statements.
41
<PAGE> 43
THE HANOVER FUNDS, INC.
Financial Highlights (continued)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE U.S. TREASURY MONEY MARKET FUND
----------------------------------------------------
YEAR ENDED NOVEMBER 30, PERIOD ENDED
------------------------------------ NOVEMBER 30,
1995 1994 1993 1992*
---------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- ------------
Income from Investment Operations:
Net investment income....................... 0.052 0.034 0.025 0.004
---------- ---------- -------- ------------
Less Distributions:
Dividends from net investment income........ (0.052) (0.034) (0.025) (0.004)
---------- ---------- -------- ------------
Net Asset Value, End of Period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ======== ===========
Total Return.................................. 5.28% 3.45% 2.57% 0.43%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands).... $1,663,829 $1,221,133 $929,115 $1,073,194
Ratio of Expenses to Average Net Assets++... 0.58% 0.59% 0.59% 0.65%+
Ratio of Net Investment Income to Average
Net Assets............................... 5.14% 3.46% 2.54% 2.58%+
</TABLE>
- ---------------
* Fund commenced operations on October 1, 1992.
+ Annualized.
++ Ratios of expenses before effect of waivers were 0.63%, 0.63%, 0.62% and
0.68% (annualized), respectively.
See accompanying notes to financial statements.
42
<PAGE> 44
THE HANOVER FUNDS, INC.
Financial Highlights (continued)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE GOVERNMENT MONEY MARKET FUND
------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- -------- --------
Income from Investment Operations:
Net investment income..................... 0.054 0.036 0.027 0.035 0.057
---------- ---------- -------- -------- --------
Less Distributions:
Dividends from net investment income...... (0.054) (0.036) (0.027) (0.035) (0.057)
---------- ---------- -------- -------- --------
Net Asset Value, End of Period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== =========== ========= ========= =========
Total Return................................ 5.49% 3.62% 2.71% 3.52% 5.81%
Ratios/Supplemental Data:
Net Assets, End of Period (in
thousands).............................. $1,551,998 $1,141,899 $546,264 $471,279 $335,093
Ratio of Expenses to Average Net
Assets++................................ 0.59% 0.61% 0.61% 0.66% 0.66%
Ratio of Net Investment Income to Average
Net Assets.............................. 5.35% 3.75% 2.68% 3.46% 5.65%
</TABLE>
- ---------------
++ Ratios of expenses before effect of waivers were 0.62%, 0.64%, 0.64%, 0.70%,
and 0.72%, respectively.
See accompanying notes to financial statements.
43
<PAGE> 45
THE HANOVER FUNDS, INC.
Financial Highlights (continued)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE CASH MANAGEMENT FUND
----------------------------------------------------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................... 0.054 0.036 0.027 0.035 0.059
---------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income....... (0.054) (0.036) (0.027) (0.035) (0.059)
---------- -------- -------- -------- --------
Net Asset Value, End of Period............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== ========= ========= ========= =========
Total Return................................. 5.49% 3.62% 2.74% 3.51% 6.01%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)... $1,634,493 $990,045 $861,025 $560,173 $343,166
Ratio of Expenses to Average Net
Assets++................................. 0.58% 0.58% 0.61% 0.67% 0.67%
Ratio of Net Investment Income to Average
Net Assets............................... 5.35% 3.62% 2.70% 3.41% 5.84%
</TABLE>
- ---------------
++ Ratios of expenses before effect of waivers were 0.62%, 0.62%, 0.64%, 0.72%,
and 0.73%, respectively.
See accompanying notes to financial statements.
44
<PAGE> 46
THE HANOVER FUNDS, INC.
Financial Highlights (continued)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE TAX FREE MONEY MARKET FUND
--------------------------------------------------------
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income........................ 0.032 0.022 0.019 0.026 0.041
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income......... (0.032) (0.022) (0.019) (0.026) (0.041)
-------- -------- -------- -------- --------
Net Asset Value, End of Period................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ========= =========
Total Return................................... 3.29% 2.23% 1.91% 2.61% 4.21%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)..... $314,466 $359,042 $235,196 $195,952 $135,514
Ratio of Expenses to Average Net Assets++.... 0.62% 0.61% 0.63% 0.67% 0.67%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.29% 2.22% 1.89% 2.55% 4.13%
</TABLE>
- ---------------
++ Ratios of expenses before effect of waivers were 0.66%, 0.64%, 0.66%, 0.74%,
and 0.74%, respectively.
See accompanying notes to financial statements.
45
<PAGE> 47
THE HANOVER FUNDS, INC.
Financial Highlights (continued)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
THE NEW YORK TAX FREE MONEY MARKET FUND
-------------------------------------------------------
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income......................... 0.032 0.020 0.016 0.024 0.037
-------- -------- -------- -------- -------
Less Distributions:
Dividends from net investment income.......... (0.032) (0.020) (0.016) (0.024) (0.037)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========= ========= ========= ========= ========
Total Return.................................... 3.20% 1.99% 1.63% 2.29% 3.77%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)...... $252,621 $182,007 $163,638 $146,640 $39,776
Ratio of Expenses to Average Net Assets++..... 0.60% 0.60% 0.63% 0.66% 0.67%
Ratio of Net Investment Income to Average Net
Assets...................................... 3.15% 1.97% 1.64% 2.26% 3.70%
</TABLE>
- ---------------
++ Ratios of expenses before effect of waivers were 0.64%, 0.65%, 0.66%, 0.81%,
and 0.80%, respectively.
See accompanying notes to financial statements.
46
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
The Hanover Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of The
Hanover Funds, Inc. (The 100% U.S. Treasury Securities Money Market Fund, The
U.S. Treasury Money Market Fund, The Government Money Market Fund, The Cash
Management Fund, The Tax Free Money Market Fund, and The New York Tax Free Money
Market Fund), including the portfolios of investments, as of November 30, 1995
and the related statements of operations for the year then ended, and statements
of changes in net assets for each of the years in the two-years then ended and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and the financial highlights. Our procedures included verification of
securities owned at November 30, 1995, by count and by correspondence with
custodians and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Hanover Funds, Inc. (The 100% U.S. Treasury Securities Money Market Fund, The
U.S. Treasury Money Market Fund, The Government Money Market Fund, The Cash
Management Fund, The Tax Free Money Market Fund, and The New York Tax Free Money
Market Fund), as of November 30, 1995, and the results of their operations for
the year then ended, the changes in their net assets for each of the years in
the two-years then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
January 19, 1996
47
<PAGE> 49
TAX STATUS OF DIVIDENDS PAID (UNAUDITED)
The following table represents the tax status of dividends and
distributions paid by the Company during the fiscal year ended November 30,
1995. Certain portions of this information were previously reported to you on
Form 1099 at the close of calendar year 1994. This information is presented in
order to comply with regulatory requirements and requires no current action on
your part.
<TABLE>
<CAPTION>
% OF INCOME
DERIVED FROM
GOVERNMENT % OF INCOME
% OF INCOME SECURITIES DERIVED FROM
INCOME DERIVED FROM HELD SUBJECT NEW YORK
DIVIDENDS PAID GOVERNMENT TO REPURCHASE MUNICIPAL
PER SHARE SECURITIES AGREEMENTS OBLIGATIONS
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
The 100% U.S. Treasury Securities Money
Market Fund............................ $0.050 100% -- --
The U.S. Treasury Money Market Fund...... 0.052 43.0 57.0% --
The Government Money Market Fund......... 0.054 3.1 26.5 --
The Cash Management Fund................. 0.054 1.2 6.8 --
The Tax Free Money Market Fund........... 0.032 -- -- 2.5%
The New York Tax Free Money Market
Fund................................... 0.032 -- 0.1 99.3
</TABLE>
Additionally, none of the dividends and distributions paid by the Company
qualify for the dividends received deduction available to corporations.
48
<PAGE> 50
THE HANOVER FUNDS, INC.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
W. PERRY NEFF*++ CHAIRMAN OF THE BOARD; Independent Financial Consultant
ROLAND R. EPPLEY, JR.*+ VICE CHAIRMAN OF THE BOARD; (Retired) Former President
and Chief Executive Officer of Eastern States Bankcard
Association Inc.
ROBERT H. DUNKER (Retired) Former Executive Vice President,
First Fidelity Bank, N.A., N.J.
W. D. MACCALLAN* (Retired) Former Chairman of the Board and
Chief Executive Officer of The Adams Express Co. and
Petroleum & Resources Corp.
JOSEPH L. MCELROY*++ Independent Trust Consultant and Expert Witness,
Former Executive Vice President,
Manufacturers Hanover Trust Company
RALPH J. ROHNER*+ Dean, Columbus School of Law, The Catholic
University of America and Special Counsel of
Consumer Bankers Association
DAVID P. SLOTERBECK, JR. Principal, KV Partners
ANNE K. ZOPFI+ Senior Vice President and Group Director of
Young & Rubicam, Inc.
* Member of Audit Committee
+ Member of Nominating Committee
++ Director who is an "interested person" of the Company
as that term is defined in the Investment Company Act
of 1940.
- ---------------------------------------------------------------------------------------------
OFFICERS
JOSEPH L. MCELROY President
JOHN J. PILEGGI Treasurer
DONALD E. BROSTROM Assistant Treasurer
JOAN V. FIORE Secretary
SHERYL HIRSCHFELD Assistant Secretary
</TABLE>
<PAGE> 51
For product or performance information,
please call your investment representative
or The Hanover Funds at
1-800-821-2371
INVESTMENT ADVISERS
The Portfolio Group, Inc.
Texas Commerce Bank, National Association
HO-11/95
- -------------------------------------------------------------
The Hanover
- -------------------------------------------------------------
Money Market
- -------------------------------------------------------------
Funds
- -------------------------------------------------------------
- -------------------------------------------------------------
-THE 100% U.S. TREASURY SECURITIES FUND
- -------------------------------------------------------------
-THE U.S. TREASURY FUND
- -------------------------------------------------------------
-THE GOVERNMENT FUND
- -------------------------------------------------------------
-THE CASH MANAGEMENT FUND
- -------------------------------------------------------------
-THE TAX FREE FUND
- -------------------------------------------------------------
-THE NEW YORK TAX FREE FUND
- -------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 1995
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