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PROSPECTUS
DATED OCTOBER 27, 1995
As Amended November 20, 1995
HOMESTATE PENNSYLVANIA GROWTH FUND
LOGO
Fund Information
New Accounts -- (800) 232-0224
Existing Accounts/Orders -- (800) 892-1351
Brokers Only -- (800) 232-OK-PA
SYMBOL: HSPGX
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PROSPECTUS DATED OCTOBER 27, 1995
AS AMENDED NOVEMBER 20, 1995
THE HOMESTATE GROUP Mailing 1857 William Penn Way
Emerald Advisers, Inc. Address P.O. Box 10666
Investment Adviser Lancaster, PA 17605-0666
Phone (800) 232-0224 -- Toll-Free
(717) 396-7864 -- Local &
International
INVESTMENT OBJECTIVES AND POLICIES
The HomeState Group is a diversified, open-end management company,
organized on August 26, 1992, as a common law trust under Pennsylvania law.
The Group is registered as a "series fund." There is only one series
currently in operation: The HomeState Pennsylvania Growth Fund.
The HomeState Pennsylvania Growth Fund -- The objective of the Fund is
long-term growth of capital through investments primarily in the common
stock of companies with headquarters or significant operations in the
Commonwealth of Pennsylvania. To pursue its objective, the Fund will invest
at least 65% of its total assets in such companies. There is no assurance the
Fund will achieve this investment objective (See "Investment Objectives and
Policies").
PURCHASE INFORMATION
Shares of the Fund can be purchased through any independent securities
dealer having a sales agreement with the Fund's Distributor, at the
then-current net asset value plus a sales charge of 5.00%. There are several
ways to purchase shares at a reduced sales charge. See "How to Purchase
Shares of the Fund" for more information. The required minimum initial
investment in the Fund is $500 and the minimum subsequent investment is $50.
The minimum initial and subsequent investment amounts are $50 under the
Fund's monthly automatic investment plan.
ADDITIONAL INFORMATION
This Prospectus sets forth the information a prospective investor should
know before investing. Please read it carefully and retain it for future
reference. A Statement of Additional Information, dated October 27, 1995, as
amended November 20, 1995, has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. The
Statement of Additional Information includes a description of the Fund's
trustees and officers, a list of investment policies and restrictions, and
further details about the management and operations of the Fund, and is
available at no charge by writing or calling the Fund at the address or phone
numbers listed above.
For further information concerning a new account, call the Fund at (800)
232-0224. For questions about an established account, call Rodney Square
Management Corporation, the Fund's shareholder services agent, at (800)
892-1351.
Shares of the Fund are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Where to Find Information Concerning Page Number
------------------------------------ -----------
Investment Objectives and Policies ................ 1
Purchase Information .............................. 1
Additional Information ............................ 1
Expenses Summary .................................. 3
Financial Highlights .............................. 4
Investment Objectives and Policies ................ 5
How to Purchase Shares of the Fund ................ 9
How to Redeem Shares of the Fund .................. 13
Valuing the Fund's Shares ......................... 15
Management of the Fund ............................ 16
Brokerage Allocation .............................. 19
Dividends, Distributions and Taxes ................ 19
General Information ............................... 21
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2
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HOMESTATE PENNSYLVANIA GROWTH FUND
EXPENSES SUMMARY
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(As a percentage of Maximum offering price) ... 5.00% (1)
Sales Load Imposed on Reinvested Dividends .... None
Deferred Sales Load ........................... None
Redemption Fees ............................... None
Exchange Fees ................................. None
Wire Transfer of Redemption Proceeds Fee ...... $7.00
ANNUAL FUND OPERATING EXPENSES (2)
(As a percentage of Average Net Assets)
Management Fees .................... 0.75%
12b-1 Fees ......................... 0.25%
Other Expenses (After Reimbursement) 0.91% (3)
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TOTAL OPERATING EXPENSES ........... 1.91% (4)
EXAMPLE OF EXPENSES
An investor would have directly or indirectly paid the following expenses
at the end of the periods shown on a hypothetical $1,000 investment in the
Fund, assuming a 5% annual return and redemption at the end of each period:
One Three Five Ten
Year Years Years Years
------------- ------------- ------------- -------------
$68 $107 $148 $262
This table is provided to help you understand the expense of investing in
the Fund and your share of the operating expenses which the Fund incurs. The
table does not represent past or future expense levels. Actual expenses may
be greater or less than those shown. Federal regulations require the Example
to assume a 5% annual return, but the Fund's actual annual return has varied.
- ----------
(1) The rules of the SEC require that the maximum sales charge (in the
Fund's case, 5.00% of the offering price) be reflected in the above table.
However, there are several methods by which the sales charge can be reduced.
See "How to Purchase Shares of the Fund" for more information.
(2) The table shows expenses based on the management fee and distribution
service (12b-1) fee and other expenses on an annualized basis for the period
ended June 30, 1995.
(3) (4) The Fund's total other expenses and total operating expenses have
been reduced to reflect the reimbursement of certain expenses of the Fund by
the Adviser. Absent the reimbursement, the Fund's total other expenses would
have been 1.00% and the Fund's total operating expenses would have been
2.00%.
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FINANCIAL HIGHLIGHTS
The following table presents per share financial information for the Fund
since its commencement of operations on October 1, 1992. This information has
been audited and reported on by the Fund's independent accountants. The
Report of Independent Accountants and financial statements included in the
Fund's Annual Report to shareholders for the period ended June 30, 1995 are
incorporated by reference into this Prospectus. The Fund's Annual Report
contains additional performance information that will be made available
without charge upon request.
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
October 1, 1992+
Year Ended Year Ended through
June 30, 1995 June 30,1994 June 30, 1993
--------------- -------------- ----------------
<S> <C> <C> <C>
Net asset value at beginning of period ...... $ 12.37 $ 10.98 $ 10.00
--------------- -------------- ----------------
Income from Investment Operations
Net investment income (loss) ................ (0.01) (0.03) 0.03
Net realized and unrealized gains on
investments ................................ 3.54 1.53 0.95
--------------- -------------- ----------------
Total from investment operations ........ 3.53 1.50 0.98
--------------- -------------- ----------------
Less Distributions
Dividends from net investment income ........ -- (0.03) --
Distributions from net realized gains ....... (0.22) (0.08) --
--------------- -------------- ----------------
Total distributions ..................... (0.22) (0.11) --
--------------- -------------- ----------------
Net asset value at end of period ............ $ 15.68 $ 12.37 $ 10.98
--------------- -------------- ----------------
Total Return** .............................. 28.96% 13.75% 13.07%*
--------------- -------------- ----------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ................... $20,387,899 $9,892,397 $3,026,091
Ratio of expenses to average net assets
before reimbursement by Adviser ............ 2.00% 2.67% 7.85%*
Ratio of expenses to average net assets after
reimbursement by Adviser ................... 1.91% 2.23% 1.87%*
Ratio of net investment loss to average net
assets before reimbursement by Adviser ..... (0.20%) (0.76%) (5.24%)*
Ratio of net investment income (loss) to
average net assets after reimbursement by
Adviser .................................... (0.10%) (0.32%) 0.74%*
Portfolio turnover rate ..................... 51% 51% 63%
</TABLE>
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* Annualized.
** Total return does not reflect 5.0% maximum sales charge.
+ Commencement of Operations
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INVESTMENT OBJECTIVES AND POLICIES
The HomeState Group is registered as a "series" fund whereby each
individual series of the Fund, in effect, represents a separate mutual fund
with its own investment objectives and policies, with varying possibilities
for capital appreciation or income, and subject to varying degrees of market
risks. Currently, the only series in operation is the HomeState Pennsylvania
Growth Fund. The discussion of investment objectives and policies that
follows relates only to this series. Future series of the Fund would have
their own distinct objectives and policies. Any reference to "the Fund" in
this Prospectus relates specifically to the HomeState Pennsylvania Growth
Fund.
The Fund's objective is long-term growth through capital appreciation. The
Fund seeks to achieve this goal mainly by investing in a diversified
portfolio of companies that have their headquarters in the Commonwealth of
Pennsylvania, or companies based elsewhere but have significant operations in
the Commonwealth of Pennsylvania (i.e. at least 50% of their revenues are
derived from operating units headquartered in Pennsylvania). The Fund's
objective may not be changed without a vote of the holders of a majority of
the outstanding shares of the Fund. There can be no guarantee the investment
objective of the Fund will be achieved.
The Fund's Adviser, Emerald Advisers, Inc., believes that Pennsylvania is
positioned to provide publicly-traded companies and their shareholders
significant opportunities for growth. The state is situated between two of
the nation's most densely populated regions, and its industries are poised to
take advantage of global markets. The state has ports accessing the Great
Lakes system, the Mississippi and Ohio rivers to the Gulf of Mexico, and the
Atlantic Ocean. Pennsylvania is at the heart of an expansive railroad system
and has a major network of inter-connecting interstate highways. Its
corporate profile is diverse: from high-tech biopharmacuetical firms
headquartered in the state's southeast corner, to rich farmlands in central
Pennsylvania, to the growing financial and commercial center of the west.
From Erie to Philadelphia and from Pittsburgh to the Poconos, the four
corners of Pennsylvania frame a $244 billion economy. If Pennsylvania were a
free-standing country, its Gross Domestic Product would rank it similar in
size to such countries as Mexico or the Republic of Korea.
The Adviser believes that the Fund will provide a positive influence on
the Pennsylvania economy by stimulating investor interest and awareness in
Pennsylvania companies.
The Fund will invest in a diverse group of companies having varying
degrees of name recognition. The portfolio will include companies in a wide
range of industries, from basic consumer goods and utilities to high-tech
electronics.
Investments are based primarily on fundamental analysis and, although
technical factors will not be ignored, the main investment criteria will
focus on an evaluation of revenues, earnings, debt, capitalization, quality
of management, level of insider ownership, changing market conditions, past
performance and future expectations. The Fund will strive to invest in
companies with strong balance sheets and dominant or leading positions in
niche markets. The Fund will look favorably upon those companies that have
well-defined business plans and long-term operating strategies designed to
increase shareholder value.
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When evaluating a Pennsylvania-based company, a member of the Adviser's
portfolio management or research staff will request to conduct an in-person
visit to the company whenever such a visit is judged appropriate, and will
seek to meet with the company's management and survey its operations. The
Adviser will also attempt to interview a cross section of the company's
employees, customers, suppliers and competitors. The Adviser believes that
this "hands-on" approach to investing may give it an opportunity to spot
developing trends in these Pennsylvania companies.
The Fund will be actively managed but will limit short-term trading and
high portfolio turnover rates. The Fund's annual portfolio turnover rate is
not anticipated to exceed eighty percent. Higher portfolio turnover rates
increase transaction costs and the possibility of realizing taxable capital
gains.
RISK FACTORS
The principal risk factor associated with an investment in the Fund is
that the market value of the portfolio's securities may decrease and result
in a decrease in the value of a shareholder's investment.
The Fund's portfolio will include smaller companies that are not
nationally recognized and companies that pay no dividends or interest. The
prices of the stocks of such companies are generally more volatile than those
of larger or more mature companies. Additionally, the securities of such
companies are generally more likely to be negatively affected by adverse
economic and/or market conditions, and are generally less liquid.
Due to its geographic limitation, the Fund's assets may be subject to
greater risk of loss from economic, political or other developments (e.g.,
natural disasters) having an unfavorable impact upon business located in the
Commonwealth of Pennsylvania than similar funds whose investments are
geographically more diverse (i.e. the Fund may be less diversified than other
funds with similar investment objectives but no such geographic limitation).
There can be no assurance that the economy of Pennsylvania or the companies
headquartered or operating in Pennsylvania will grow in the future.
Since the Fund will be mainly investing in a diversified portfolio of
companies that have their headquarters in the Commonwealth of Pennsylvania,
or companies based elsewhere but have significant operations in Pennsylvania,
Fund investments can be significantly affected by business trends and the
economic health of Pennsylvania. The following is a brief summary of certain
factors affecting the Pennsylvania Growth Fund. The summary does not purport
to be complete and is based upon information derived from publicly available
documents.
Special Factors Affecting Investments in Pennsylvania Companies --
Pennsylvania is the nation's fifth-ranked state in terms of population,
behind California, New York, Texas and Florida. Pennsylvania's population
notched up to 11.9 million in 1990 from 11.8 million in 1980. Pennsylvania's
population is evenly split between the metropolitan areas of Philadelphia and
Pittsburgh and the rest of the State.
Pennsylvania boasts the nation's highest personal savings rate and
percentage of residents owning their homes, and the least transitory
population of any state in the nation (81% of the current population was born
in the State).
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Pennsylvania's workforce totals more than 5.9 million, ranking it as the
sixth largest labor pool in the nation. The State's unemployment rate stood
at 5.5% in August, 1995, versus 5.6% for the U.S. economy as a whole. By
comparison, neighboring New Jersey's rate was 6.6%. Pennsylvania ranks first
in the nation in its economic development budget, and has a lower per capita
state tax burden than the surrounding states of New York, New Jersey,
Maryland or Ohio.
Pennsylvania's $244 billion economy is home to 33 Fortune 500 corporations
and more than 237,000 public and private businesses. Since the Fund commenced
operations in 1992, the number of Pennsylvania-based publicly-traded
companies it has identified has grown from 440 to over 500 companies. See
"Appendix B: Pennsylvania-based Companies" in the Statement of Additional
Information for a complete listing of these companies. Pennsylvania has
historically been identified as among the leading states in manufacturing and
mining. The coal and steel industries have declined in national importance in
recent years, but remain a major component of the Pennsylvania economy. Due
to the cyclical nature of these businesses, Pennsylvania may be more
vulnerable to the industries' economic fluctuations and downturns.
In part because of the decline in the heavy manufacturing sector,
Pennsylvania's economy has diversified beyond the traditional "smoke stack"
industries. Major new sources for growth are in the service sector, including
medical and health services, trade, education and financial institutitons.
The State's workforce has diversified so that it is almost evenly divided
between the services (24.4%), wholesale and retail trade (23.9%) and
manufacturing (23.3%) employment sectors. The State is home to the nation's
third largest number of technology companies, and the greater Philadelphia
area is ranked as the nation's number-two region for biotechnology companies.
Pennsylvania's agriculture industries have also historically played a
prominent role in the State's economy. Crop and livestock products add an
annual $3.5 billion to the State's economy, while agribusiness and food
related industries as a whole support $38 billion in annual economic
activity. Agribusiness activities can be detrimentally affected by
consistently poor weather conditions.
Pennsylvania's natural resources include major deposits of coal, oil, gas
and limestone.
STRATEGY AND POLICIES
To pursue its objective, the Fund will invest at least 65 percent of the
value of its total assets in common stocks, preferred stocks and securities
convertible into common and preferred stocks issued by firms whose
headquarters are located in the Commonwealth of Pennsylvania or companies
based elsewhere but have significant operations in the Commonwealth of
Pennsylvania.
The Fund may also invest up to 35 percent of the value of its total assets
in other common stocks, preferred stocks, investment-grade corporate bonds
and notes, and high- quality short-term debt securities such as commercial
paper, bankers' acceptances, certificates of deposit, repurchase agreements,
obligations insured or guaranteed by the United States Government or its
agencies, and demand and time deposits of domestic banks and United States
branches and subsidiaries of foreign banks. (The price of debt securities in
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which the Fund invests are likely to decrease in times of rising interest rates.
Conversely, when rates fall, the value of the Fund's debt securities may rise.
Price changes of these debt securities held by the Fund have a direct impact on
the net asset value per share of the Fund. Investment grade corporate bonds are
generally defined by the four highest rating categories by Standard & Poor's
Corporation ("S & P") and Moody's Investors Services ("Moody's"): AAA, AA, A or
BBB by S & P and Aaa, Aa, A and Baa by Moody's. Corporate bonds rated BBB by S &
P or Baa by Moody's are regarded as having an adequate capacity to pay principal
and interest but with greater vulnerability to adverse economic conditions and
speculative characteristics (See the "Appendix A" of the Fund's Statement of
Additional Information for further information).) The Fund will make use of
these short-term instruments primarily under those circumstances where it has
cash to manage for a brief time period (i.e. after receiving dividend
distributions, proceeds from the sale of portfolio securities or money from the
sale of Fund shares to investors).
The Fund will not engage in direct investment in real estate or real
estate mortgage loans, except those instruments issued or guaranteed by the
United States Government. The mortgage-related instruments in which the Fund
may invest include those issued by Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA") and Federal Home
Loan Mortgage Corporation ("FHLMC") (collectively, the "Mortgage-Related
Instruments"). The underlying mortgages which collateralize Mortgage-Related
Instruments issued by GNMA are fully guaranteed by the Federal Housing
Administration or Veteran's Administration, while those collateralizing
Mortgage-Related Instruments issued by FHLMC or FNMA are typically
conventional residential mortgages conforming to strict underwriting size and
maturity constraints. Mortgage-Related Instruments provide for a periodic
payment consisting of both interest and principal. The interest portion of
these payments will be distributed by the Fund as income and the capital
portion will be reinvested. Unlike conventional bonds, Mortgage-Related
Instruments pay back principal over the life of the Mortgage-Related
Instrument rather than at maturity. At the time that a holder of a
Mortgage-Related Instrument reinvests the payments and any unscheduled
prepayment of principal that it receives, the holder may receive a rate of
interest which is actually lower than the rate of interest paid on the
existing Mortgage-Related Instruments. As a consequence, Mortgage-Related
Instruments may be a less effective means of "locking-in" long-term interest
rates than other types of U.S. government securities. While Mortgage-Related
Instruments generally entail less risk of a decline during periods of rapidly
rising interest rates, they may also have less potential for capital
appreciation than other investments with comparable maturities because as
interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if Mortgage-Related Instruments are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may result
in some loss of a holder's principal investment to the extent of premium
paid. Conversely, if Mortgage-Related Instruments are purchased at a
discount, both a scheduled payment of principal and an unscheduled payment of
principal would increase current and total returns and would be taxed as
ordinary income when distributed to shareholders.
OTHER PRACTICES
On those occasions when, in the opinion of the Fund's investment adviser,
market conditions warrant a temporary defensive approach, the Fund may invest
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more than 35 percent of its total assets in short-term obligations, including
the following: securities issued or guaranteed by the U.S. government,
commercial paper and bankers acceptances. During intervals when the Fund has
adopted a temporary defensive position it will not be achieving its stated
investment objective.
The Fund may from time to time engage in repurchase agreements. That is, a
seller may sell securities to the Fund and agree to repurchase the securities
at the Fund's cost plus interest within a specified period (normally one
day). The arrangement results in a fixed rate of return that is not subject
to market fluctuations during the period that the underlying security is held
by the Fund. Repurchase agreements involve certain risks, including seller's
default on its obligation to repurchase or seller's bankruptcy.
INVESTMENT RESTRICTIONS
The Fund is subject to specific fundamental investment restrictions, which
may not be changed without a vote of a majority of its outstanding shares.
Following is a discussion of some of these fundamental restrictions:
The Fund may not:
1. Invest more than 5% of the value of its assets in the equity or debt
of one issuer (other than obligations issued or guaranteed by the United
States Government).
2. Invest more than 15% of total assets in one industry.
3. Acquire more than 10% of the voting securities of any one issuer.
4. Invest in, write or sell puts, straddles, spreads or combinations
thereof.
5. Invest in commodities or commodity contracts.
6. Issue or sell senior securities.
7. Borrow money except for temporary or emergency purposes and then
only from commercial banks and not in excess of 15% of the Fund's total
assets. The Fund will not purchase securities when borrowing exceeds 5% of
total assets.
The aforementioned investment limitations are considered at the time the
investment securities are purchased.
See the Fund's Statement of Additional Information for the full text of
these policies and the Fund's other Fundamental Policies, as well as a
listing of non-fundamental policies, which the Board of Trustees may change
without shareholder approval.
HOW TO PURCHASE SHARES OF THE FUND
Shares of the Fund are available for purchase through selected financial
service firms (such as broker-dealer firms) that have signed a selling
agreement with Rodney Square Distributors, Inc. (the "Distributor"), the
Fund's principal distributor. If an investor would like assistance in
locating a dealer, he or she should contact the Fund. Shares can be purchased
by mail or by wire, as described below. The minimum initial investment is
$500, and the minimum subsequent investment is $50.
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Shares of the Fund are purchased at net asset value per share next
determined after an order is received (See "Valuing the Fund's Shares"), plus
any applicable sales charge as described below, which is known as the
"offering price." Fund shareholders pay an ongoing distribution services fee
at an annual rate of up to 0.35% of the Portfolio's aggregate average daily
net assets attributable to Fund shares (See "Management of the Fund -- The
Distribution Plan").
The Offering Price is calculated as follows:
<TABLE>
<CAPTION>
Sales Charge as a
Dollar Percentage of: Dealer's Concession
Amount Invested Offering Price N.A.V. (as % of Offering Price)
---------------------- ----------------- -------- ------------------------
<S> <C> <C> <C>
Less Than $50,000 5.00% 5.26% 4.25%
$50,000 to $250,000 4.00 4.16 3.25
$250,000 to $500,000 3.00 3.09 2.50
$500,000 to $1,000,000 2.25 2.30 2.00
$1,000,000 & Above 0.00 0.00 0.50
</TABLE>
REDUCED SALES CHARGE
There are several ways for shareholders to qualify to pay a lower sales
charge:
(1.) Reach Fund "Break Points" -- Increase the initial investment
amount to reach a higher discount level, as listed above.
(2.) Right of Accumulation -- Add to an existing shareholder account so
that the current offering price value of the total combined holdings reach
a higher discount level, as listed above.
(3.) Sign a Letter of Intent -- Inform the Fund or its Agent that you
wish to sign a non-binding "Letter of Intent" (the "Letter") to purchase
an additional number of shares so that the total equals at least $50,000
over the following 13-month period. Upon the Fund's receipt of the signed
Letter, the shareholder will receive a discount equal to the dollar level
specified in the Letter. If, however, the purchase level specified by the
shareholder's Letter has not been reached at the conclusion of the
13-month period, each purchase will be deemed made at the sales charge
appropriate for the actual purchase amount.
(4.) Combined Purchase Privilege -- Combine the following investor
accounts into one "purchase" or "holding" to qualify for a reduced sales
charge:
(i) An individual or "company," as defined in Section 2(a)(8) of
the Act; (ii) an individual, his spouse and children under age 21;
(iii) a trustee or other fiduciary for certain trusts, estates, and
certain fiduciary accounts; or (iv) the employee benefit plans of a
single employer.
The Fund's Transfer Agent, Rodney Square Management Corporation (the
"Transfer Agent") must be advised of the related accounts at the time the
purchase is made.
(5.) Purchases at Net Asset Value -- Additionally, the Board of
Trustees has determined that the following shareholders shall be permitted
to purchase shares of the Fund without paying a sales charge:
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(i) Existing shareholders, upon reinvestment of their dividend
income or capital gains distributions as dividends and capital gains
distributions are reinvested in shares of the Fund at the net asset
value without sales charge;
(ii) Shareholders who have redeemed any or all of their shares of
the Fund within the past 120 days may purchase shares at the net asset
value without sales charge. The amount which may be reinvested is
limited to the amount up to but not exceeding the redemption proceeds
(or to the nearest full share if fractional shares are not purchased)
and is limited to shareholders who have not previously exercised this
right. The Transfer Agent must be notified of the exercise of this
privilege when shares are being purchased;
(iii) Certain "Institutional Investors" -- Pennsylvania State and
local government-affiliated agencies, non-profit and charitable
organizations, and corporations with headquarters or significant
operations in the Commonwealth of Pennsylvania having a minimum of $5
million in annual sales and fifteen full-time employees, and the
retirement plans of each of the above may purchase at net asset value
without sales charge. For these purposes, "significant operations" is
defined as having a material impact on the corporation's financial
condition or profitability in the discretion of the Adviser;
(iv) Investor's shares purchased by advisory accounts managed by
S.E.C.-registered investment advisers or bank trust departments;
(v) Trustees, Officers, Employees (and those retired) of the Fund,
its services providers and their affiliates, for their own accounts and
for their spouse and children, and employees of such broker-dealer
firms that have executed a Selling Agreement with the Fund may purchase
shares at net asset value without a sales charge.
(6.) On purchases of $1,000,000 or more, shares are acquired at net
asset value with no sales charge or dealer concession charged to the
investor. The Distributor, however, may pay the broker-dealer up to 0.50%
of the Offering Price, from its own assets.
The Distributor may from time to time allow broker-dealers selling shares
of the Fund to retain 100% of the sales charge. In such cases, the
broker-dealer may be deemed an "underwriter" under the Securities Act of
1933, as amended.
In addition to the commission paid to broker-dealers selling Fund shares
by way of a selling agreement, the Distributor may also from time to time pay
additional cash bonuses or other incentives to selected broker-dealers in
connection with their registered representatives selling Fund shares. Such
compensation will be paid solely by the Distributor, and may be conditioned
upon the sale by the broker-dealer's representatives of a specified minimum
dollar amount of shares. Compensation may include payment for travel
expenses, including lodging, incurred in connection with trips taken by
registered representatives and members of their families to locations within
or outside the United States for meetings of a business nature.
PURCHASING SHARES
Shares of the Fund may be purchased for your account directly by your
financial services firm representative, and may be purchased by mail or wire.
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Investing By Mail:
To invest by mail, an investor must complete and sign the Subscription
Application Form which accompanies this Prospectus and send it, with a check
payable, to The HomeState Group, c/o Rodney Square Management Corporation,
P.O. Box 8987, Wilmington, DE 19899-9752. A purchase order sent by overnight
mail should be sent to The HomeState Group, c/o Rodney Square Management
Corporation, 1105 N. Market Street, Wilmington, DE 19801.
Investing By Wire:
Investors having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Fund by requesting their
bank to transmit funds by wire to:
c/o Wilmington Trust Company, Wilmington, DE
ABA #0311-0009-2
DDA# 2688-958-8
Attention: HomeState Pennsylvania Growth Fund
(followed by the name in which the account is registered,
and the account number).
Initial Purchases -- Before making an investment by wire, an investor must
first telephone the Transfer Agent at (800) 892-1351 before the close of the
New York Stock Exchange (generally, 4:00 p.m.) to be assigned an account
number. The Subscription Application Form which accompanies this Prospectus
should be promptly forwarded to Rodney Square Management Corporation at the
address above under "Investing by Mail."
Subsequent Purchases -- Additional investments may also be made through
the wire procedures described above. An investor must telephone the Transfer
Agent at (800) 892-1351 before the close of the New York Stock Exchange
(generally, 4:00 p.m.).
The bank transmitting the wire may charge a fee for this service. Federal
funds wires received before the close of the New York Stock Exchange ("NYSE")
(generally, 4:00 p.m. Eastern time) will be executed based on the Fund's
valuation that same day. Purchase orders received after the close of the NYSE
will be executed on the next day the exchange is open.
TAX-DEFERRED RETIREMENT PLANS
Shares may be purchased by certain types of retirement plans. The Fund
provides plan forms and custody agreements for the following:
Individual Retirement Accounts (IRA) -- An IRA is a tax-deferred
retirement savings account that may be used by an individual who has
compensation or self- employment income and his or her unemployed spouse, or
an individual who has received a qualified total or partial distribution from
his or her employer's retirement plan. The current annual maintenance fee for
IRA accounts is $10.00 per year.
12
<PAGE>
In each of these plans, dividends and distributions will be automatically
reinvested. For further details, contact the Adviser to obtain specific plan
documents. Investors should consult with their tax adviser before
establishing any tax-deferred retirement plans.
AUTOMATIC INVESTMENT PLAN
The Fund also provides for an automatic investment plan whereby
shareholders may arrange to make regular monthly, quarterly, semi-annually,
or annually investments in the Fund. Investment amounts are automatically
debited from the shareholder's checking account. The minimum initial and
subsequent investment pursuant to this plan is $50 per month.
Purchase orders for shares of the Fund placed with a registered
broker-dealer must be received by the broker-dealer before the close of the
NYSE to receive the Fund's valuation calculated that day. The broker-dealer
is responsible for the timely transmission of orders to the Distributor.
Orders placed with the registered broker-dealer after the close of the NYSE
will be executed based on the Fund's valuation calculated on the next
business day.
The Fund may refuse any order for the purchase of shares which the Board
of Trustees deems as not in the best interests of the Fund.
Stock certificates representing shares of the Fund are not issued except
upon written request to the Fund. In order to facilitate redemptions and
transfers, most shareholders elect not to receive certificates. If you lose
your certificate, you may incur an expense to replace it.
HOW TO REDEEM SHARES OF THE FUND
There is no charge for share redemptions. Shares will be redeemed at the
net asset value next determined after the redemption request has been
received in proper order by the Fund's Transfer Agent. Shares may be redeemed
by telephone call or mail delivery to the Transfer Agent.
BY MAIL
A written request for redemption (along with any endorsed stock
certificates) must be received by the Fund's Transfer Agent, Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, DE 19899-9752, to
constitute a valid tender for redemption. A signature guarantee is required
for any written redemption request which: (1) is in excess of $10,000.00; (2)
requests proceeds be sent to somewhere other than the account's listed
address; or (3) requests proceeds be sent to someone other than the account's
listed owner(s). These requirements may be waived or modified upon notice to
shareholders. Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. A broker-dealer guaranteeing
signatures must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be authorized to issue signature
13
<PAGE>
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program. Payment of a
written request for redemption will be made within seven business days of
receipt of the request.
BY TELEPHONE
A shareholder redeeming at least $1,000 of shares (for which certificates
have not been issued) and who has authorized expedited redemption on the
Subscription Application form filed with the Transfer Agent may, at the time
of such redemption, request that the funds be mailed or wired to the
commercial bank or registered broker-dealer designated on the application
form by telephoning the Transfer Agent at (800) 892-1351 before close of the
New York Stock Exchange. Redemption proceeds will be sent on the next
business day following receipt of the telephone redemption request. A wire
fee of $7.00 will be deducted from the shareholder account or proceeds before
a wire is sent. Please note that the Fund's Transfer Agent receives all
telephone calls for telephone instructions on a recorded phone line. The Fund
and/or its Transfer Agent will employ such reasonable procedures to confirm
that instructions communicated by telephone are genuine. If it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. The Fund reserves the right, at any
time, to suspend or terminate the expedited redemption procedure. During a
period of unusual economic or market changes, shareholders may experience
difficulties or delays in effecting telephone redemptions.
BY SYSTEMATIC WITHDRAWAL
Shareholders may elect to participate in a "Systematic Withdrawal Plan"
which provides for automatic fixed withdrawals of at least $50 monthly,
quarterly, semi-annually, or annually. The minimum investment to establish a
Systematic Withdrawal Plan is $10,000.
If a shareholder seeks to redeem shares that were purchased within fifteen
days of the redemption request, the Fund may delay payment until such time as
the funds in question have been properly cleared and collected by the Fund.
Due to the relatively high administration cost of smaller shareholder
accounts, the Fund reserves the right to redeem, at net asset value, the
shares of any shareholder whose account has a value of less than $500, other
than as a result of a decline in the net asset value per share of the Fund.
The Fund will provide a 30-day written notice to such shareholder prior to
initiating such a redemption.
HOW TO EXCHANGE SHARES OF THE FUND
Shares of the HomeState Pennsylvania Growth Fund may be exchanged for
shares of any other funds which may be introduced by the Adviser. Shares may
also be exchanged for the Rodney Square Fund ("RSF") which is managed by
Rodney Square Management Corporation and distributed by Rodney Square
Distributors, Inc. Shares of RSF acquired through direct purchase or in the
form of dividends earned on such shares may be exchanged for shares of any
HomeState fund at net asset value plus the normal sales charge of such funds.
The minimum initial investment of $1,000 is required to establish an account
in RSF by telephone exchange or written request.
14
<PAGE>
RSF reserves the right to amend or change the exchange privilege upon 60
days notice to the shareholders.
VALUING THE FUND'S SHARES
The Funds daily closing price is listed in many newspapers in the mutual
fund prices section as "HomeStPA." The net asset value and offering price of
the shares of the Fund are determined once on each Business Day as of the
close of the NYSE, which on a normal Business Day is usually 4:00 p.m.
Eastern Time. A "Business Day" is defined as a day in which the NYSE is open
for trading. Holidays currently observed by the NYSE are New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Fund's value is determined by adding
the value of the portfolio securities and other assets, subtracting its
liabilities, and dividing the result by the number of its shares outstanding.
Net asset value includes interest on fixed income securities, which is
accrued daily. The net asset value of the Fund will fluctuate with market
conditions as the value of the investment portfolio changes.
With approval of the Board of Trustees, the Fund may use a pricing
service, bank or broker-dealer experienced in such matters to value the
Fund's securities. The prices of bonds and other fixed income securities
provided by such service providers may be determined without regard to bid or
last sale prices but take into account institutional size trading in similar
groups of securities and any developments related to specific securities.
Fund securities listed or traded on a national securities exchange or market
system for which representative market quotations are available will be
valued at the last quoted sales price on the security's listed exchange on
that day. Listed securities not traded on an exchange that day, and other
securities traded in the over-the-counter market will be valued at the mean
between the closing asked price and the closing bid price. Debt securities
with maturities of 60 days or less are valued at amortized cost, which
approximates market value. Where market quotations are not readily available,
securities will be valued using a method which the Board of Trustees believes
in good faith accurately reflects the fair value.
For more information concerning valuation of the Fund's shares, see
"Additional Information Concerning Valuing the Fund's Shares" in the
Statement of Additional Information.
15
<PAGE>
MANAGEMENT OF THE FUND
THE BOARD OF TRUSTEES
The operations and management of the Fund are the responsibility of the
Fund's Board of Trustees. Pursuant to that responsibility, the Board of
Trustees has approved contracts with the following organizations to provide,
among other things, day-to-day investment advisory and administrative
management services.
THE INVESTMENT ADVISER
Emerald Advisers, Inc. serves as investment adviser to the Fund. The
Adviser was organized as a Pennsylvania corporation on November 14, 1991, and
is registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 and with the Pennsylvania Securities
Commission under the Pennsylvania Securities Act of 1972. In August 1994,
Emerald Advisers, Inc. became a wholly-owned subsidiary of Emerald Asset
Management, Inc. Substantially all of the executives and investment related
personnel of Emerald Advisers continue in their positions. Total assets
managed by the Adviser exceeded $88 million at September 30, 1995. The three
principal officers of the Adviser combine over 40 years of experience in the
mutual fund, investment advisory, pension funds management and securities
brokerage industries.
Pursuant to an investment advisory agreement, dated January 1, 1995 (the
"Advisory Agreement"), the Adviser furnishes the Fund with investment
advisory and administrative services which are necessary to conduct the
Fund's business. Specifically, the Adviser manages the Fund's investment
operations and furnishes advice with respect to the purchase and sale of
securities on a daily basis.
Kenneth G. Mertz II, CFA, President of Emerald Advisers, Inc., and Vice
President and Chief Investment Officer of the Fund, is primarily responsible
for the day-to-day management of the Fund's portfolio. Mr. Mertz has had this
responsibility since the Fund commenced operations on October 1, 1992. Prior
to this date, Mr. Mertz was the Chief Investment Officer to the $12 billion
Pennsylvania State Employes' Retirement System.
Under the terms of the Advisory Agreement, the Fund pays the Adviser an
annual fee based on a percentage of the net assets under management. The fees
are computed daily and paid monthly as follows: for assets up to and
including $250,000,000: 0.75%; for assets in excess of $250,000,000 and up to
and including $500,000,000: 0.65%; for assets in excess of $500,000,000 and
up to and including $750,000,000: 0.55%; for assets in excess of
$750,000,000: 0.45%. These fees are higher than most but comparable to fees
paid by equity funds of a similar investment objective and size.
The Fund pays all of its expenses other than those expressly assumed by
the Adviser. Specifically, the Fund pays the fees and expenses of its
transfer agent, custodian, independent auditors and legal counsel. These fees
are generally for the costs of necessary professional services, regulatory
compliance, and those pertaining to maintaining the Fund's organizational
16
<PAGE>
standing. The resulting fees may include, but are not limited to: brokerage
commissions, taxes and organizational fees, bonding and insurance, custody,
auditing and accounting services, shareholder communications and shareholder
servicing, and the cost of financial reports and prospectuses sent to
Shareholders.
The Adviser will reimburse its fee to the Fund to the extent such fee
exceeds the most restrictive expense limitation in effect by a state
regulatory agency where the Fund's shares are registered for purchase. The
Adviser reserves the right to voluntarily waive any portion of its advisory
fee at any time.
The Adviser has agreed that a percentage of its net advisory fee income
(less any fee waivers and expense reimbursements made by the Adviser to the
Fund) will be contributed annually by the Fund on behalf of the Adviser to
provide scholarship funding that will specifically benefit Pennsylvania
residents who have graduated from a Pennsylvania high school and are
attending an accredited Pennsylvania college, university or trade school. The
current year's contribution is 1% of its net advisory fee income.
ADMINISTRATOR, ACCOUNTING AND TRANSFER AGENT
Pursuant to separate administration, accounting services and transfer
agency agreements each dated November 20, 1995, Rodney Square Management
Corporation ("Rodney Square"), Rodney Square North, 1100 N. Market Street,
Wilmington, DE 19890-0001, has been retained to serve as administrator,
accounting and transfer agent. As administrator, Rodney Square provides
administrative and operational services and facilities. As accounting agent,
Rodney Square determines net asset value and provides accounting services to
the Fund. Also, Rodney Square, as transfer agent, performs certain
shareholder servicing duties as listed in the Transfer Agency Agreement.
CUSTODIAN
Pursuant to a custodian agreement dated August 31, 1994 (the "Custodial
Agreement"), CoreStates Financial Corp., P.O Box 7558, Philadelphia, PA
19101-7558 (the "Custodian"), has been retained to serve as custodian to the
Fund's assets, and performs certain corresponding administrative tasks.
THE DISTRIBUTOR
Rodney Square Distributors, Inc., Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, is the sole distributor of shares of the
Fund. The Distributor is a Delaware corporation, a broker-dealer registered
with the Securities and Exchange Commission and a member of the National
Association of Securities Dealers (the "NASD"), and an affiliate of Rodney
Square, which also performs administrative, shareholder and accounting
servicing duties for the Fund.
Certain officers and/or employees of the Adviser may also serve as
registered representatives of the Distributor, but only in the capacity of
distributing shares of the Fund.
THE DISTRIBUTION PLAN
The Distributor will incur certain expenses while providing selling and
sales distribution services for the Fund, including such costs as
compensation to broker-dealers for (i) selling shares of the Fund, and (ii)
providing information and advice to their shareholder clients regarding
ongoing investment in the Fund, as well as advertising, promotional and
printing expenses.
17
<PAGE>
To promote shares of the Fund to the general public, the Fund has adopted
a distribution services plan (the "Plan") under Rule 12b-1 of the Investment
Company Act of 1940 (the "Act"). The Plan allows the Fund to reimburse the
Distributor for costs specifically described in this Section. The Distributor
receives no other compensation from the Fund, except that (i) any sales
charge collected will be paid to the Distributor (See "How to Purchase Shares
of the Fund"), and (ii) the minimum total dollar amount paid to the
Distributor on an annual basis (net of the amount paid to broker-dealers
and/or service organizations) will be $3,000. The Distributor may pay such
sales charge to broker-dealers who have entered into a Selling Agreement with
the Distributor as a commission paid for selling Fund shares.
The Fund pays the Distributor on a monthly basis at an annual rate not to
exceed 0.35% of the series' average net assets. Expenses acceptable for
reimbursement under the Plan include compensation of broker-dealers or other
persons for providing assistance in distribution and for promotion of the
sale of the shares of the Fund. The Fund's Adviser is responsible to pay the
Distributor for any unreimbursed distribution expenses.
Pursuant to the Plan, a broker-dealer may receive a maintenance commission
in the amount of 0.25% (annualized) of the average net assets maintained in
the Fund by their clients.
The Fund may also compensate a bank under the Plan only to the extent that
a bank may serve as a "service organization," providing administrative and
accounting services for Fund shareholders. The Glass-Steagall Act and other
applicable laws and regulations prohibit a bank from acting as underwriter or
distributor of securities. If a bank were prohibited from providing certain
administrative services, shareholders would be permitted to remain as Fund
shareholders and alternate means for continuing the servicing of such
shareholders would be sought. It is not expected that shareholders would
suffer any financial consequences as a result of any of those occurrences.
The Board of Trustees of the Fund adopted the Plan after determining the
Plan would likely benefit the Fund and its shareholders to the extent that
the Plan can aid the Distributor in attracting additional shareholders,
promoting the sale of shares, reducing redemptions, and maintaining and
improving services provided to shareholders by the Distributor or dealers.
The resulting increase in assets should benefit the Fund by providing a
continuous cash flow, thereby affording the Adviser the ability to purchase
and redeem portfolio securities without making unwanted redemptions of
existing portfolio securities.
The Trustees of the Fund will annually review the success of the Plan in
meeting these objectives based on information provided by the Adviser.
Future regulatory review and revision of Rule 12b-1 by the Securities and
Exchange Commission, of Article III Section 26 of the Rules of Fair Practice
by the National Association of Securities Dealers, or any similar review and
revision of other applicable regulations by other regulatory agencies could
affect the Fund's Plan. The Trustees of the Fund will promptly modify the
Plan if such action is warranted.
18
<PAGE>
BROKERAGE ALLOCATION
The Adviser is responsible for selecting brokers and dealers to effect
portfolio securities transactions and for negotiating brokerage commissions
and dealers' charges. When selecting brokers and dealers to handle the
purchase and sale of portfolio securities, the Adviser looks for prompt
execution of the order at the best overall terms available. Securities may be
bought from or sold to brokers who have furnished statistical, research and
other financial information or services to the Adviser. The Adviser may give
consideration to those firms which have sold or are willing to sell shares of
the Fund. See "Additional Brokerage Allocation Information" in the Statement
of Additional Information for more information.
To the extent consistent with applicable provisions of the Investment
Company Act of 1940, Rule 17e-1, and other rules and exemptions adopted by
the Securities and Exchange Commission ("SEC") under that Act, the Board of
Trustees has determined that transactions for the Fund may be executed by
affiliated brokers if, in the judgement of the Adviser, the use of an
affiliated broker is likely to result in price and execution at least as
favorable as those qualified brokers. The Adviser will not execute principal
transactions by use of an affiliated broker.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends, if any, realized by the Fund will be declared and paid
semi-annually, in the months of January and July. Capital gains, if any,
realized by the Fund will be declared and paid annually in the months of July
and December. The Declaration and Record dates for payments to shareholders
will normally be the 15th of the month, the Ex-Dividend dates will normally
be the 16th of the month, and the Payment dates will normally be the 20th of
the month (or the next business day if any of these dates fall on a weekend).
Shareholders of record as of the Record Date will be paid, or have their
payments reinvested in additional shares, as of the Re-Invest and Payable
Dates. The net asset value price of the Fund will be reduced by the
corresponding amount of the per-share payment declared on the Ex-Dividend
Date. Since dividend income is not a primary objective of the Fund, the Fund
does not anticipate paying substantial income dividends to shareholders.
A shareholder will automatically receive all dividends and capital gains
distributions in additional full and fractional shares of the Fund at net
asset value as of the date of payment, unless the shareholder elects to
receive such distributions in cash. To change the distribution option chosen,
the shareholder should write to the Fund's Transfer Agent, Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. The request
will become effective with respect to distributions having record dates after
its receipt by the Transfer Agent.
If a shareholder elects to receive distributions in cash, and the check is
returned by the United States Postal Service, the Fund reserves the right to
invest the amount of the returned check in additional shares of the Fund at
the then existing net asset value and to convert the shareholder's election
to automatic reinvestment of all distributions.
19
<PAGE>
TAXES
Reinvested dividends and capital gains distributions will receive the same
tax treatment as dividends and distributions paid in cash. Because the Fund
is a Pennsylvania common law trust, it will not be liable for corporate
income or franchise tax in the Commonwealth of Pennsylvania. Further, shares
of the Fund are exempt from Pennsylvania personal property taxes.
The Fund intends to qualify for treatment as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Qualification under the Code requires that the Fund satisfy:
(1) two gross income tests that ensure the Fund earns passive income; (2) two
diversification tests that limit the investment of the Fund's assets in any
one issuer; and (3) a series of distribution rules which require that the
Fund distribute to shareholders substantially all of its investment company
taxable income and net tax-exempt interest income. Each series of the Fund is
expected to be treated as a separate corporation for most federal income tax
purposes. So long as the Fund qualifies for this tax treatment, the Fund will
be relieved of Federal income tax on amounts distributed to shareholders but
amounts so distributed will be taxable to shareholders.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of the Fund will be
taxed to shareholders as long-term capital gain in the year in which it was
received, regardless of the length of time a shareholder has owned the shares
and whether or not such gain was reflected in the price paid for the shares.
All other distributions, to the extent they are taxable, are taxed to
shareholders as ordinary income. Redemptions and exchanges from the Fund are
each taxable events.
A statement detailing the Federal income tax status of all distributions
made during a taxable year will be sent to shareholders of record no later
than January 31 of the following year.
Shareholders must furnish to the Fund a certified taxpayer identification
number ("TIN"). The Fund is required to withhold 31% from reportable payments
including ordinary income dividends, capital gains distributions, and
redemptions occurring in accounts where the shareholder has failed to furnish
a certified TIN and has not certified that such withholding does not apply.
Any shareholders who are non-resident alien individuals, or foreign
corporations, partnerships, trusts or estates, may be subject to different
Federal income tax treatment.
The tax information presented here is based on Federal and state tax laws
and regulations effective as of the date of this Prospectus, and may
subsequently change. Because the information presented here is only a very
brief summary of some of the important tax considerations for shareholders,
shareholders are urged to consult their tax advisers for more specific
professional advice, especially as it relates to local and state tax
regulations. See "Additional Dividend, Distribution and Taxes Information" in
the Statement of Additional Information for more information.
20
<PAGE>
GENERAL INFORMATION
The HomeState Group was organized as a Pennsylvania common law trust on
August 26, 1992. Shares of the Fund do not have preemptive or conversion
rights, and are fully-paid and non-assessable when issued.
Since the Fund is organized as a Pennsylvania common law trust, it is not
required to hold annual meetings, and does not intend to do so, except as
required by the Act or other applicable Federal or state law. The Fund will
assist in shareholder communications as required by Section 16(c) of the Act.
The Act does require initial shareholder approval of each investment advisory
agreement and election of Trustees. Under certain circumstances, the law
provides shareholders with the right to call for a special shareholders
meeting for the purpose of removing Trustees or for other proper purposes.
Shares of the Fund are entitled to one vote per share, and do not have
cumulative voting rights.
The Fund currently issues shares of beneficial interest with no par value,
in one series. Additional series may be added in the future by the Board of
Trustees. Each share of the Fund has pro rata distribution rights, and shares
equally in dividends and distributions.
Shareholders will receive an annual report containing financial statements
which have been audited by the Fund's independent accountants, and a
semi-annual report containing unaudited financial statements. Each report
will include a list of investment securities held by the Fund. Shareholders
may contact the Fund for additional information.
Duane, Morris & Heckscher, 305 North Front Street, Harrisburg, PA
17108, is legal counsel to the Fund.
Price Waterhouse LLP, 30 South Seventeenth Street, Philadelphia, PA
19103, are the independent accountants for the Fund.
MANAGEMENT OF THE FUND
Trustees
- --------
Bruce E. Bowen
Kenneth G. Mertz II, C.F.A.
Scott C. Penwell, Esq.
Scott L. Rehr
Dr. H. J. Zoffer, Ph.D.
Officers
- --------
Scott L. Rehr --President
Kenneth G. Mertz II, C.F.A. --Vice President and Chief Investment Officer
Daniel W. Moyer IV --Vice President and Secretary
21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SUBSCRIPTION APPLICATION FORM
THE HOMESTATE GROUP
PENNSYLVANIA GROWTH FUND
Mail to: Rodney Square Management Corporation
-------
P.O. Box 8987
Wilmington, DE 19899-9752
For Assistance, Call (800) 892-1351
- -------------------------------------------------------------------------------
1. AMOUNT INVESTED
FORM OF PAYMENT -- INITIAL INVESTMENT
[ ] Check for $------.------ enclosed -- Payable to The HomeState Group
[ ] NAV Purchase: Attach NAV Purchase Form
[ ] My Dealer purchased ---------------------- on -----------.
(No. of shares) (date)
- -------------------------------------------------------------------------------
2. REGISTRATION (Please Print or Type)
INDIVIDUAL *(Joint ownership with rights of survivorship unless otherwise
noted)
------------------------------------------------- ----------------------
(First Name) (Initial) (Last Name) (Social Sec No.)
------------------------------------------------- ----------------------
(Jt. Owner) (Initial) (Last Name) (Social Sec No.)
GIFT TO MINORS
AS CUSTODIAN FOR
--------------------------------- ------------------------
(Name of Custodian--ONE ONLY) (Minor's Name)
Under the Uniform Gift to Minors Act. -- --
------------ --------------------------
(State) (Minor's Soc Sec No.)
CORPORATIONS, PARTNERSHIPS, TRUSTS and OTHERS
(complete Corporate Resolution)
----------------------------------------------------------------------------
(Name of Corporation, Partnership, Trust or Other)
/ / --
------ ------------ -------------------------------- -------------------
(Date of Trust) (Name of Trustee(s))
(Tax I.D. No.)
Citizen of: [ ] U.S. [ ] Other:
----------------------
- -------------------------------------------------------------------------------
3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
----------------------------------------------------------------------------
(Street Address)
-------------------------------------------------- ---------------- --------
(City) (State) (ZIP)
( ) -- ( ) --
------- -------- -------- --------
(Daytime Phone No.) (Evening Phone No.)
<PAGE>
- -------------------------------------------------------------------------------
4. DISTRIBUTION OPTIONS (Please indicate one -- Distributions will be
reinvested if no option is checked)
[ ] Automatic Compounding (reinvest all dividends and capital gains)
[ ] Cash Dividends (dividends in cash; reinvest capital gains)
[ ] All Cash (all dividends and capital gains in cash)
- -------------------------------------------------------------------------------
5. SHAREHOLDER OPTIONS (Fill-in those sections that apply)
LETTER OF INTENT
[ ] $50,000. [ ] $250,000. [ ] $500,000. [ ] $1,000,000.
[ ] I agree to the letter of intent provisions of the Prospectus and
Statement of Additional Information, Although I am not obligated to
purchase, and the Fund is not obligated to sell, I intend to invest,
over a 13-month period beginning on , 19 , an
aggregate amount in the Fund at least equal to (check appropriate box
above).
RIGHT OF ACCUMULATION/COMBINED PURCHASE PRIVILEGE
I apply for Right of Accumulation or Combined Purchase Privilege reduced
sales charges subject to the Agent's confirmation of the following
holdings of eligible load accounts of the Fund.
-------------------------------- ----------------------- $------------------
(Shareholder) (Account No.) (Approx. $ Value)
-------------------------------- ----------------------- $------------------
(Shareholder) (Account No.) (Approx. $ Value)
TELEPHONE TRANSFER OPTION
[ ] I (we) authorize Rodney Square Management Corporation to honor
telephone instructions for my (our) account. Neither the Fund nor Rodney
Square Management Corporation will be liable for properly acting upon
telephone instructions believed to be genuine. PLEASE ATTACH A VOIDED
CHECK on the Transfer account and complete below:
---------------------------------------------- ----------------- -----------
(Name of Bank) (City) (State)
----------------- --------------------------------------------------------
(Account Number) (ABA Bank Routing Number--9-digit number needed to
process)
[ ] Checking [ ] Savings
- -------------------------------------------------------------------------------
6. SIGNATURE AND CERTIFICATION
Required by Federal tax law to avoid 31% backup withholding: "By signing,
I certify under penalties of perjury that the social security or taxpayer
identification number entered above is correct and that I have not been
notified by the IRS that I am subject to backup withholding unless I have
checked the box below:"
[ ] I am subject to backup withholding.
Receipt of the current Prospectus is hereby acknowledged.
------------------------------------- Date: , 19
(Signature) ------------------- ---
[ ] Owner [ ] Custodian [ ] Trustee
-------------------------------------- Date: , 19
(Joint Owner Signature, If Applicable) ------------------- ---
- -------------------------------------------------------------------------------
7. INVESTMENT DEALER INFORMATION
----------------------------------------------------------------------------
(Firm Name)
----------------------------------------- -------------------------------
(Rep. Name) (Rep No.)
-----------------------------------------
(Authorized Signature)
----------------------------------------------------------------------------
(Branch Address) (Branch No.)
------------------------------------ ---------------------- -------------
(City) (State) (Zip)
- -------------------------------------------------------------------------------
<PAGE>
THE HOMESTATE GROUP
HomeState Pennsylvania Growth Fund
1857 William Penn Way
P.O. Box 10666
Lancaster, PA 17605-0666
INVESTMENT ADVISER
GENERAL FUND INFORMATION
Emerald Advisers, Inc.
P.O. Box 10666
Lancaster, PA 17605-0666
DISTRIBUTOR
MARKETING INFORMATION
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
ADMINISTRATOR
ACCOUNTING AGENT
TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
CUSTODIAN
CoreStates Financial Corp.
P.O. Box 7558
Philadelphia, PA 19101-7558
LEGAL COUNSEL
Duane, Morris & Heckscher
305 North Front Street
Harrisburg, PA 17108
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
30 South Seventeenth Street
Philadelphia, PA 19103
<PAGE>
GRAPHIC DESCRIPTION
-------------------
Back Cover is a Marble Pattern
only. No type on Back Cover of
Prospectus.
<PAGE>
THE HOMESTATE GROUP
HomeState Pennsylvania Growth Fund
- ----------------------------------
1857 William Penn Way
P.O. Box 10666
Lancaster, PA 17605-0666
Investment Adviser
General Fund Information
- ------------------------ ----------------------------------
Emerald Advisers, Inc. STATEMENT OF
P.O. Box 10666 ADDITIONAL INFORMATION
Lancaster, PA 17605-0666
The HomeState Group
Distributor
- ----------- The HomeState
Rodney Square Distributors, Inc. Pennsylvania Growth Fund
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Administrator
Transfer Agent and DATED OCTOBER 27, 1995
Accounting Agent As Amended November 20, 1995
- ---------------- ----------------------------
Rodney Square Management Corporation
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Custodian
- ---------
CoreStates Financial Corp.
P.O. Box 7558
Philadelphia, PA 19101-7558
Legal Counsel
- -------------
Duane, Morris & Heckscher
305 North Front Street
Harrisburg, PA 17108
Independent Accountants
- -----------------------
Price Waterhouse LLP
30 South Seventeenth Street
Philadelphia, PA 19103
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PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 27, 1995
AS AMENDED NOVEMBER 20, 1995
THE HOMESTATE GROUP
This Statement of Additional Information contains information which may be
useful to investors but which is not included in the Prospectus of The HomeState
Group (the "Fund"). This Statement is not a Prospectus and should be read in
conjunction with the Fund's Prospectus. This Statement is only authorized for
distribution when accompanied or preceded by a copy of the Fund's Prospectus
dated October 27, 1995, as amended November 20, 1995. You may obtain a free copy
of the Prospectus by writing the Fund, P.O. Box 10666, Lancaster, PA 17605, or
by calling (717) 396-7864.
TABLE OF CONTENTS
Definitions ................................................... 2
Additional Information Concerning Investment Objectives
and Policies ................................................... 2
Fundamental Investment Restrictions .................... 2
Other Investment Policies .............................. 4
Additional Fund Valuation Information .......................... 6
Additional General Fund Information .................... 6
Additional Purchase and Redemption Information ................. 8
Reduced Sales Charge Plans ............................. 8
Additional Dividend, Distributions & Taxes Information ......... 10
Dividend & Distributions ............................... 10
Taxes .................................................. 12
Management of the Fund ......................................... 12
Board of Trustees and Officers of the Fund ............ 12
Person Controlling the Fund ............................ 14
Investment Adviser and Other Services Providers ........ 14
The Distribution Plan .................................. 16
Additional Brokerage Allocation Information .................... 17
Measuring Performance .......................................... 17
Financial Statements ........................................... 19
Appendix A - Description of Ratings ............................ 35
Appendix B - Pennsylvania Based Companies ...................... 37
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DEFINITIONS
The "Fund" The HomeState Group Pennsylvania Growth Fund
"EAI" or Emerald Advisers, Inc., the Fund's Investment Adviser
"Adviser"
"Distributor" Rodney Square Distributors, Inc., the Fund's Distributor
"CSFN" CoreStates Financial Corp., the Fund's Custodian
"Rodney Rodney Square Management Corporation, the Fund's
Square" Administrator, Accounting Agent and Transfer Agent
ADDITIONAL INFORMATION CONCERNING INVESTMENT OBJECTIVES
AND POLICIES
General
The HomeState Group is registered as a "series" fund, whereby each individual
series of the Fund, in effect, represents a separate mutual fund with its own
objectives and policies. Currently, there is one series operating: The HomeState
Pennsylvania Growth Fund. The discussion of investment objectives and policies
that follows relates only to this series of the Fund. In the likely event that
further series' of the Fund are introduced, these new series would have their
own separate objectives and policies and would be disclosed here as such. In the
meantime, any discussion of the "Fund" in this Statement relates specifically to
the HomeState Pennsylvania Growth Fund.
The Fund's objective is long-term growth through capital appreciation. The Fund
seeks to achieve this goal mainly by investing in a diversified portfolio of
companies that have their headquarters or principal operations in the
Commonwealth of Pennsylvania, or companies based elsewhere but whose business in
the Commonwealth of Pennsylvania contributes significantly to their overall
performance. To pursue its objective, the Fund will invest at least 65% of the
value of its total assets in common stocks, preferred stocks and securities
convertible into common and preferred stocks issued by firms whose headquarters
are located in Pennsylvania or companies based elsewhere but have significant
operations in Pennsylvania (i.e. at least 50% of their revenues are derived from
operating units headquartered in Pennsylvania).
Fundamental Investment Restrictions
The following investment policies and restrictions may not be changed without
the approval of a majority of the Fund's outstanding shares. For these purposes,
a majority of shares of the Fund is defined as the vote, at a special meeting of
the shareholders of the Fund duly called, of more than fifty percent (50%) of
the Fund's outstanding voting securities.
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The Fund may not under any circumstances:
(1) Purchase the securities of any issuer (other than obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities)
if as a result more than five percent (5%) of the value of the Fund's total
assets at the time of such purchase would be invested in the securities of the
issuer;
(2) Invest more than fifteen percent (15%) of its total assets in any one
industry;
(3) Invest in, write, or sell put or call options, straddles, spreads or
combinations thereof;
(4) Borrow money, except from a bank. Such borrowing shall be permitted for
temporary or emergency purposes only (to facilitate the meeting of redemption
requests), and not for investment purposes. Such borrowing cannot exceed fifteen
percent (15%) of the Fund's current total assets, and will be repaid before any
additional investments are purchased. The Fund will not purchase securities when
borrowing exceeds 5% of total assets;
(5) Pledge, mortgage or hypothecate assets, except to secure borrowings
permitted by Item (4) above, and then only pledge securities not exceeding ten
percent (10%) of the Fund's total assets (at current value);
(6) Issue or sell senior securities;
(7) Make short sales;
(8) Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
(9) Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws;
(10) Purchase or sell real estate, although it may purchase securities which
are secured by or represent interests in real estate that are issued or backed
by the United States Government, its agencies or instrumentalities;
(11) Make loans, except by purchase of debt obligations in which the Fund
may invest in accordance with its investment policies, or except by entering
into qualified repurchase agreements with respect to not more than twenty-five
percent (25%) of its total assets (taken at current value).
(12) Purchase or sell commodities, commodity contracts or futures contracts;
(13) Purchase or hold the securities of any issuer if the officers or
directors of the Fund or its investment adviser (i) individually own more than
one-half of one percent (0.5%) of the outstanding securities of the issuer, or
(ii) collectively own more than five percent (5%) of the outstanding securities;
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(14) Acquire more than ten percent (10%) of the voting securities of any
issuer; or make investments for the purpose of gaining control of a company's
management;
(15) Invest in the securities of other investment companies (excepting
no-load, open-end money market mutual funds, and excepting the case of acquiring
such companies through merger, consolidation or acquisition of assets). The Fund
will not invest more than ten percent (10%) of its total current assets in
shares of other investment companies nor invest more than five percent (5%) of
its total current assets in a single investment company. When investing in a
money market mutual fund, the Fund will incur duplicate fees and expenses.
The aforementioned investment limitations are considered at the time the
investment securities are purchased.
Other Investment Policies
In addition to the fundamental investment restrictions listed above, the Fund
has also adopted the following non-fundamental investment policies. These
policies may be changed by the Fund's Board of Trustees without shareholder
approval.
The Fund:
(1) Will not invest in foreign currencies or foreign options;
(2) Will not buy or sell oil, gas or other mineral leases, rights or royalty
contracts;
(3) Will not invest in illiquid securities (including illiquid equity
securities, repurchase agreements and time deposits with maturities or notice
periods of more than 7 days, and other securities which are not readily
marketable, including securities subject to legal or contractual restrictions on
resale);
(4) Will not issue long-term debt securities;
(5) Will not invest more than five percent (5%) of its total assets (at
current value) in securities of companies, including predecessor companies or
controlling persons, having a record of less than three years of continuous
operation;
(6) Will not invest in warrants (A warrant is an option issued by a
corporation that gives the holder the right to buy a stated number of shares of
common stock of the corporation at a specified price within a designated time
period);
(7) Will not invest more than ten percent (10%) of its total assets (at
current value) in repurchase agreements, and will not invest in repurchase
agreements maturing in more than seven days;
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(A repurchase agreement is a contract under which the Fund acquires a security
for a relatively short time period (usually not more than one week) subject to
the obligation of the seller to repurchase and the Fund to resell such security
at a fixed time and price (which represents the Fund's cost plus interest). The
Fund will enter into such agreements only with commercial banks and registered
broker-dealers. In these transactions, the securities issued by the Fund will
have a total value in excess of the value of the repurchase agreement during the
term of the agreement. If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the proceeds of the sale,
including accrued interest, are less than the resale price provided in the
agreement including interest, and it may incur expenses in selling the security.
In addition, if the other party to the agreement becomes insolvent and subject
to liquidation or reorganization under the United States Bankruptcy Code of 1983
or other laws, a court may determine that the underlying security is collateral
for a loan by the Fund not within the control of the Fund and therefore the Fund
may not be able to substantiate its interest in the underlying security and may
be deemed an unsecured creditor of the other party to the agreement. While the
Fund's management acknowledges these risks, it is expected that they can be
controlled through careful monitoring procedures.)
(8) May invest its cash for temporary purposes in commercial paper,
certificates of deposit, money market mutual funds, repurchase agreements (as
set forth in Item 7 above) or other appropriate short-term investments;
(Commercial paper must be rated A-1 or A-2 by Standard & Poor's Corporation
("S & P") or Prime-1 or Prime-2 by Moody's Investor Services ("Moody's"), or
issued by a company with an unsecured debt issue currently outstanding rated AA
by S & P or Aa by Moody's, or higher. For more information on ratings, see
"Appendix: Description of Ratings" in this Statement. Certificates of Deposit
("CD's") must be issued by banks or thrifts which have total assets of at least
$1 billion. In the case of a bank or thrift with assets of less than $1 billion,
the Fund will only purchase CD's from such institutions covered by FDIC
insurance, and only to the dollar amount insured by the FDIC.)
(9) May invest in securities convertible into common stock, but only when
the Fund's investment adviser believes the expected total return of such a
security exceeds the expected total return of common stocks eligible for
investment; (In carrying out this policy, the Fund may purchase convertible
bonds and convertible preferred stock which may be exchanged for a stated number
of shares of the issuer's common stock at a price known as the conversion price.
The conversion price is usually greater than the price of the common stock at
the time of purchase of the convertible security. The interest rate of
convertible bonds and the yield of convertible preferred stock will generally be
lower than that of the non-convertible securities. While the value of the
convertible securities will usually vary with the value of the underlying common
stock and will normally fluctuate inversely with interest rates, it may show
less volatility in value than the non-convertible securities. A risk associated
with the purchase of convertible bonds and convertible preferred stock is that
the conversion price of the common stock will not be attained. The Fund will
purchase only those convertible securities which have underlying common stock
with potential for long-term growth in EAI's opinion. The Fund will only invest
in investment-grade convertible securities (Those rated in the top four
categories by either Standard & Poor's Corporation ("S & P") or Moody's Investor
Services, Inc. ("Moody's") - See "Appendix: Description of Ratings" in this
statement).
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(10) Will maintain its portfolio turnover rate at a percentage consistent
with its investment objective of long-term growth. The Fund will not engage
primarily in trading for short-term profits, but it may from time to time make
investments for short-term purposes when such trading is believed by EAI to be
desirable and consistent with a sound investment policy. The Fund may dispose of
securities whenever it deems advisable without regard to the length of time
held. The Fund is not expected to exceed a portfolio turnover rate of 80% on an
annual basis.
ADDITIONAL FUND VALUATION INFORMATION
The Fund determines its net asset value per share daily by subtracting its
liabilities (including accrued expenses and dividends payable) from its total
assets (the market value of the securities the Fund holds plus cash or other
assets, including interest accrued but not yet received) and dividing the result
by the total number of shares outstanding. The Fund's net asset value per share
is calculated as of the close of trading on the New York Stock Exchange (the
"Exchange") every day the Exchange is open for trading. The Exchange closes at
4:00 p.m. Eastern Time on a normal business day. Presently, the Exchange is
closed on the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Temporary investments held by the Fund's portfolio having a remaining
maturity of less than sixty days when purchased and securities originally
purchased with maturities in excess of sixty days but which currently have
maturities of sixty days or less may be valued at cost, adjusted for
amortization of premiums or accrual of discounts, if in the judgment of the
Board of Trustees such methods of valuation are appropriate, or under such other
methods as the Board of Trustees may from time to time deem to be appropriate.
The cost of those temporary securities that had original maturities in excess of
sixty days shall be determined by their fair market value as of the sixty-first
day prior to maturity. All other securities and assets in the portfolios will be
appraised in accordance with those procedures established in good faith in
computing the fair market value of these assets by the Board of Trustees.
ADDITIONAL GENERAL FUND INFORMATION
Description of Share and Voting Rights
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of shares of beneficial interest without par value from separate classes
("Series") of shares. Currently the Trust is offering shares of one Series.
The shares of the Trust are fully paid and nonassessable except as set forth
under "Shareholder and Trustee Liability" and have no preference as to
conversion, exchange, dividends, retirement or other features. The shares of the
Trust have no pre-emptive rights. The shares of the Trust have non-cumulative
voting rights which means that the holders of more than 50% of the shares voting
for the election of Trustees can elect 100% of the Trustees if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his name on
the books of the Trust. On any matter submitted to a vote of shareholders, all
shares of the Trust then issued and outstanding and entitled to vote,
irrespective of the class, shall be voted in the aggregate and not by class
except that shares shall be voted as a separate class with respect matters
affecting that class or as otherwise required by applicable law.
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The Trust will continue without limitation of time, provided however that:
1) Subject to the majority vote of the holders of shares of any Series of
the Trust outstanding, the Trustees may sell or convert the assets of such
Series to another investment company in exchange for shares of such investment
company and distribute such shares ratably among the shareholders of such
Series;
2) Subject to the majority vote of shares of any Series of the Trust
outstanding, the Trustees may sell and convert into money the assets of such
Series and distribute such assets ratably among the shareholders of such Series;
and
3) Without the approval of the shareholders of any Series, unless otherwise
required by law, the Trustees may combine the assets of any two or more Series
into a single Series so long as such combination will not have a material
adverse effect upon the shareholders of such Series.
Upon completion of the distribution of the remaining proceeds or the
remaining assets of any Series as provided in paragraphs 1), 2), and 3) above,
the Trust shall terminate as to that Series and the Trustees shall be discharged
of any and all further liabilities and duties hereunder and the right, title and
interest of all parties shall be canceled and discharged.
Shareholder and Trustee Liability. - Under Pennsylvania law, shareholders of
such a Trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. Therefore, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust provides for indemnification out of the
Trust property of any shareholder held personally liable for the obligations of
the Trust. The Declaration of Trust also provides that the Trust shall, upon
request, assume the defense of any claim against any shareholder for any act or
obligation of the Trust and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
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ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Fund shares are sold at net asset value with a sales charge payable at the
time of purchase. The Prospectus contains a general description of how investors
may buy shares of the Fund, as well as a table of applicable sales charges for
the Fund. This Statement contains additional information which may be of
interest to investors.
The Fund is currently making a continuous offering of its shares. The Fund
receives the entire net asset value of shares sold. The Fund will accept
unconditional orders for shares to be executed at the public offering price
based on the net asset value per share next determined after the order is
placed. The public offering price is the net asset value plus the applicable
sales charge, if any.
For orders placed through the Fund's established broker-dealer network, the
public offering price will be based on the net asset value determined on the day
the order is placed, but only if (i) the dealer has received the order before
the close of the Exchange, and (ii) the dealer transmits it to the Fund's
Distributor prior to the close of the Exchange that same day (normally 4:00 p.m.
Eastern time). The dealer is responsible for transmitting this order by 4:00
p.m. Eastern time, and if the dealer fails to do so, the customer's entitlement
to that day's closing price must be settled between the customer and the dealer.
If the dealer receives the order after the close of the Exchange, the price will
be based on the net asset value determined as of the close of the Exchange on
the next day it is open.
If funds are sent directly to Rodney Square, they will be invested at the
public offering price based on the net asset value next determined after
receipt. Payment for purchase of shares of the Fund must be in United States
dollars. If payment is made by check, the check must be drawn on a United States
bank.
Reduced Sales Charge Plans
Shares of series of the Fund may be purchased at a reduced sales charge to
certain investors listed in the Fund's Prospectus and below.
The underwriter's commission (paid to the Distributor) is the sales charge
shown in the Prospectus, less any applicable dealer concession. The dealer
concession is paid to those firms selling shares as a member of the Fund's
broker-dealer network. The dealer concession is the same for all dealers, except
that the Distributor retains the entire sales charge on any retail sales made by
it. For the period ended June 30, 1995, Fund/Plan Broker Services, Inc., the
Fund's previous distributor, received $263,145 in sales charges on sales of
shares of the Fund, of which it retained $35,601 after reallowance of dealer
concessions. Following are detailed discussions of some of the reduced sales
charge plans listed in the Fund's Prospectus:
Combined Purchase Privilege - Certain investors may qualify for a reduced sales
charge by combining purchases into a single "purchase" if the resulting
"purchase" totals at least $50,000. The applicable sales charge for such a
"purchase" is based on the combined purchases of the following: (i) an
individual, or a "company," as defined in section 2(a)(8) of the Investment
Company Act of 1940 (which includes corporations which are corporate affiliates
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of each other, but does not include those companies in existence less than six
months or which have no purpose other than the purchase of shares of the Fund or
other registered investment companies at a discount); (ii) an individual, their
spouse and their children under age twenty-one, purchasing for his, her or their
own account; (iii) a single purchase by a trustee or other fiduciary purchasing
shares for a single trust, estate or single fiduciary account although more than
one beneficiary is involved; or (iv) a single purchase for the employee benefit
plans of a single employer. Rodney Square, the Fund's Transfer Agent, must be
advised of the related accounts at the time the purchase is made.
Right of Accumulation - An investor's purchase of additional shares may qualify
for a cumulative quantity discount by combining a current purchase with certain
other shares already owned ("Right of Accumulation"). The applicable shares
charge is based on the total of: (i) the investor's current purchase; (ii) the
net asset value (valued at the close of business on the previous day of (a.) all
shares of the series held by the investor, and (b.) all shares of any other
series fund of the HomeState Group which may be introduced and held by the
investor; and (iii) the net asset value of all shares described in section (ii)
above owned by another shareholder eligible to combine their purchase with that
of the investor into a single "purchase" (See "Combined Purchase Privilege"
above).
To qualify for the Combined Purchase Privilege or obtain the Right of
Accumulation on a purchase through a broker-dealer, when each such purchase is
made the investor or dealer must provide the Distributor with sufficient
information to verify that the purchase qualifies for the privilege or discount.
Letter of Intent - Investors may purchase shares at a reduced sales charge by
means of a written Letter of Intent (a "Letter"), which expresses the investor's
intention to invest a minimum of $50,000 within a period of 13 months in shares
of the Fund.
Each purchase of shares under a Letter will be made at the public offering
price applicable at the time of such purchase to a single transaction of the
dollar amount indicated in such Letter. At the investor's option, a Letter may
include purchases of shares made not more than ninety days prior to the date the
investor signed the Letter; however, the 13-month period during which the Letter
is in effect will then begin on the date of the earliest purchase to be
included. Investors do not receive credit for shares purchased by the
reinvestment of distributions. Investors qualifying for the Combined Purchase
Privilege (see above) may purchase shares under a single Letter. The Letter is
not a binding obligation upon the investor to purchase the full amount
indicated. The minimum initial investment under a Letter is 20% of such stated
amount. Shares purchased with the first 5% of such amount will be held in escrow
(while remaining registered in the name of the investor) to secure payment of
the higher sales charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed accounts will be
involuntarily redeemed to pay the additional sales charge, if necessary.
To the extent that an investor purchases more than the dollar amount
indicated in the Letter and qualifies for a further reduction in the sales
charge, the sales charge will be adjusted for the entire amount purchased at the
end of the 13-month period, upon recovery from the investor's dealer of its
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portion of the sales charge adjustment. Once received from the dealer, the sales
charge adjustment will be used to purchase additional shares of the Fund's
series at the then-current offering price applicable to the actual amount of the
aggregate purchases. No sales charge adjustment will be made until the
investor's dealer returns any excess commissions previously received. Dividends
and distributions on shares held in escrow, whether paid in cash or reinvested
in additional Fund shares, are not subject to escrow. The escrow will be
released when the full amount indicated has been purchased. Investors making
initial purchases who wish to enter into a Letter may complete the appropriate
section of the Subscription Application Form. Current shareholders may call the
Fund at (800) 232-0224 to receive the appropriate form.
Reinstatement Privilege - An investor who has sold shares of the Fund may
reinvest the proceeds of such sale in shares of the series within 120 days of
the sale, and any such reinvestment will be made at the Fund's then-current net
asset value, so that no sales charge will be levied. Investors should call the
Fund for additional information.
By exercising this reinstatement privilege, the investor does not alter the
federal income tax treatment of any capital gains realized on the previous sale
of shares of the series, but to the extent that any shares are sold at a loss
and proceeds are reinvested in shares of the series, some or all of the loss may
be disallowed as a deduction. Please contact your tax adviser for more
information concerning tax treatment of such transactions.
ADDITIONAL DIVIDEND, DISTRIBUTIONS & TAXES INFORMATION
Dividends and Distributions
Dividends, if any, will be declared and paid in January and July. Capital gains,
if any, will be declared and paid in July and December. All such payments will
be declared on the 15th of the month and paid on the 20th of the month. If any
of these dates falls on a weekend, both the declaration and payment dates will
be moved accordingly to the next business day.
If you elect to receive cash dividends and/or capital gains distributions
and a check is returned as undelivered by the United States Postal Service, the
Fund reserves the right to invest the check in additional shares of the Fund at
the then-current net asset value and to convert your account's election to
automatic reinvestment of all distributions, until the Fund's Transfer Agent
receives a corrected address in writing from the number of account owners
authorized on your application to change the registration. If the Transfer Agent
receives no written communication from the account owner(s) and there are no
purchases, sales or exchanges in your account for a period of time mandated by
state law, then that state may require the Transfer Agent to turn over to state
government the value of the account as well as any dividends or distributions
paid.
After a dividend or capital gains distribution is paid, the Fund's share
price will drop by the amount of the dividend or distribution. If you have
chosen to have your dividends or distributions paid to your account in
additional shares, the total value of your account will not change after the
dividend or distribution is paid. In such cases, while the value of each share
will be lower, each reinvesting shareholder will own more shares. Reinvested
shares will be purchased at the price in effect at the close of business on the
day after the record date.
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Taxes
The Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
order to qualify, and, therefore to qualify for the special tax treatment
accorded regulated investment companies and their shareholders, the Fund must,
among other things:
(1) Derive at least 90% of its gross income from dividends, interest,
payments with respect to certain securities, loans, and gains from the sale of
stock and securities, or other income derived with respect to its business of
investing in such stock or securities;
(2) Derive less than 30% of its gross income from gains from the sale or
other disposition of certain assets (including stock or securities) held for
less than three months;
(3) Distribute with respect to each taxable year at least 90% of its taxable
and tax-exempt income for such year; and
(4) Diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the Fund's assets is represented by cash and
cash items, United States Government securities, securities of other investment
companies, and other securities limited in respect of any one issuer to a value
not greater than 5% of the value of the Fund's total assets and 10% of the
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities (other than those of the United States
Government or other regulated investment companies) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar, or related types of businesses.
If the Fund qualifies to be taxed as a regulated investment company it is
accorded special tax treatment and will not be subject to federal income tax on
income distributed to its shareholders in the form of dividends (including both
capital gain and ordinary income dividends). If, however, the Fund does not
qualify for such special tax treatment, the Fund will be subject to tax on its
taxable income at corporate rates, and could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial distributions
before requalifying as a regulated investment company that is accorded special
tax treatment. In addition, if the Fund fails to distribute in a calendar year
substantially all of its ordinary income for such year and substantially all of
its net capital gain for the year ending October 31 (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the undistributed amounts.
The Fund intends generally to make distributions sufficient to avoid imposition
of the 4% excise tax. In calculating its income, the Fund must include dividends
in income not when received, but on the date when the stock in question is
acquired or becomes ex-dividend, whichever is later.
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Other Tax Information
Return of Capital Distributions - If the Fund makes a distribution to you in
excess of its accumulated earnings and profits in any taxable year, the excess
distribution will be treated as a return of capital to the extent of your tax
basis in your shares, and thereafter as capital gain. A return of capital is not
taxable, but it reduces your tax basis in your shares.
Capital Gains - When you purchase shares of the Fund, the Fund's then-current
net asset value may reflect undistributed capital gains or net unrealized
appreciation of securities held by the Fund. If the Fund subsequently
distributed such amounts to you, the distribution would be taxable, although it
constituted a return of your investment. For federal income tax purposes, the
Fund is permitted to carry forward net realized capital losses, if any, and
realize net capital gains up to the amount of such losses without being required
to pay taxes on or distribute such gains which, if distributed, might be taxable
to you.
Dividends - The Code provides a 70% deduction for dividends received by
corporate shareholders, with certain exceptions. It is expected that only part
of the Fund's investment income will be derived from dividends qualifying as
such and, therefore, not all dividends received will be subject to the
deduction.
Shares Purchased through Retirement Plans - Special tax rules and fiduciary
responsibility requirements apply to investments made through retirement plans
which satisfy the requirements of Section 401(a) of the Code. Shareholders of
the Fund should consult with their tax adviser to determine the suitability of
shares of the Fund as an investment through such plans, and the precise effect
of such an investment on their particular tax situation.
MANAGEMENT OF THE FUND
Board of Trustees and Officers of the Fund
The following individuals hold positions as Trustees and/or Officers of the
Fund. Their position with the Fund is listed along with their business
occupations for the previous five years:
Name and Position Occupation for Previous Five Years
- ----------------- ----------------------------------
Scott L. Rehr* Vice President and Treasurer, Emerald Advisers,
Trustee, President of Inc. (1991 - Present); Vice President, Weik
the Fund Investment Services, Inc. (1990 - 1991); Vice
President, Penn Square Mutual Fund and The William
Penn Interest Income Fund (1989 - 1990); Director
of Investor Services, Penn Square Management Corp.
(1986 - 1989).
Bruce E. Bowen Private Investor, Retired. Vice Chairman and
Trustee Secretary, Penn Square Mutual Fund (1968 - 1988)
and the William Penn Interest Income Fund (1987 -
1988); Vice President and Secretary, Penn Square
Management Corp. (1964 - 1988); Director,
Berk-Tek, Inc. (1987 - 1991; Director, Morgan
Corporation, (1989 - 1991).
12
<PAGE>
Kenneth G. Mertz II, C.F.A.* President, Emerald Advisers, Inc. (1992 -
Trustee, Vice President Present); Chief Investment Officer, Pennsylvania
and Chief Investment State Employes Retirement System (1985 - 1992);
Officer Member, National Advisory Board, Northwest
Center for Professional Education/Real Estate
Investment for Pension Funds (1991 - 1992);
Member, Advisory Board, APA/Fostin Pennsylvania
Venture Capital Fund (1987 - 1992).
Daniel W. Moyer IV Vice President, Emerald Advisers, Inc. (1992 -
Vice President and Present); Registered Representative, First Montauk
Secretary Securities Corp. (1992 - Present); Branch Office
Manager, Keogler Morgan & Co., Registered
Representative, Director, Financial Management
Group (1988 - 1992).
Scott C. Penwell, Esq. ** Partner, Duane, Morris & Heckscher (1981 -
Trustee Present); Chairman, Securities Regulation
Committee of the Corporation, Banking and Business
Law Section of the Pennsylvania Bar Association
(1994 - Present).
Dr. H. J. Zoffer Dean, Joseph M. Katz School of Business,
University of Pittsburgh (1968 - Present); Trustee
Professor of Business Administration, Joseph M.
Katz School of Business, University of Pittsburgh
(1966 - Present); Director, Penwood Savings
Association (1991 - Present).
* Employee of Emerald Advisers, Inc. and "Interested Person" within the meaning
of the Investment Company Act of 1940.
** Employee of the Fund's Legal Counsel and therefore an "Interested Person"
within the meaning of the Investment Company Act of 1940.
The Trustees of the Fund who are not employed by the Adviser, the
Distributor, or their affiliates (the "Disinterested Trustees") receive a $1,000
annual retainer, $250 for each Trustees meeting attended, and $100 for each
Audit Committee meeting attended. For the year ended June 30, 1995, the Trustees
received fees totalling $6,000 for their services. The Fund will also reimburse
the Independent Trustees' travel expenses incurred attending Board meetings.
The Officers of the Fund receive no compensation for their services as such.
As of June 30, 1995, the Trustees and Officers of the Fund owned, as a
group, less than one percent of the outstanding shares of the Fund.
The Declaration of Trust of the Fund provides that the Fund will indemnify
its Trustees and may indemnify its officers and employees against liabilities
and expenses incurred in connection with litigation in which they may be
involved because of their offices with the Fund, except if it is determined in
the manner specified in the Trust that they have acted in bad faith, with
reckless disregard of his/her duties, willful misconduct or gross negligence.
The Fund, at its expense, may provide liability insurance for the benefit of its
Trustees, officers and employees.
13
<PAGE>
Person Controlling the Fund
To the knowledge of the Fund, no person owned of record or beneficially 25%
or more of the Fund's outstanding shares as of June 30, 1995.
The Following persons owned of record or beneficially 5% or more of the
Fund's outstanding shares as of June 30, 1995:
NAME ADDRESS % OF OWNERSHIP
---- ------- --------------
AMP, Inc. P.O. Box 3608, Harrisburg, PA 17105 6.9%
Investment Adviser and Other Service Providers
Investment Adviser and Principal Underwriter
Emerald Advisers, Inc., 1857 William Penn Way, Lancaster, PA 17601, and Rodney
Square Distributors, Inc., Rodney Square North, 100 N. Market Street,
Wilmington, DE 19890-0001, are the Fund's investment adviser and distributor,
respectively. The Distributor is not obligated to sell any specific amount of
shares of the Fund and will purchase shares for resale only against orders for
shares. The Distributor is a Delaware corporation, a broker-dealer registered
with the Securities and Exchange Commission, and a member of the National
Association of Securities Dealers, Inc., (the "NASD"). The Distributor is an
affiliate of Rodney Square, which also provides administrative, shareholder and
accounting services to the Fund. Some officers of the Fund are employed by the
Adviser and may also distribute shares of the Fund as registered representatives
of the Distributor.
Effective August 19, 1994, Emerald Advisers, Inc. the investment adviser of
the Fund, became a wholly-owned subsidiary of Emerald Asset Management, Inc.
("EAM"), 1857 William Penn Way, Lancaster, PA 17601. The shareholders of EAM
are: Joseph E. Besecker, James Brubaker, J. Jeffrey Fox, Kenneth G. Mertz II,
Daniel W. Moyer IV, Scott L. Rehr, Douglas S. Thomas, Paul W. Ware and Judy S.
Ware.
The following individuals have the following positions and offices with the
Fund and EAI:
POSITION WITH: FUND
- ------------- -----
NAME: ADVISER (TRUSTEE) (OFFICER)
- ----- ------- --------- ---------
Scott L. Vice President, Trustee President
Rehr Treasurer, Director
Kenneth M. President, Director Trustee Vice President,
Mertz II, C.F.A. Chief Investment Officer
Daniel W. Vice President, None Vice President and
Moyer IV Director Secretary
14
<PAGE>
In carrying out its responsibilities under the investment advisory contract
with the Fund, EAI furnishes or pays for all facilities and services furnished
or performed for, or on behalf of, the Fund. Such items may include, but are not
limited to: office facilities, office support materials and equipment, records
and personnel necessary to manage the Fund's daily affairs. In return for these
services, the Fund has agreed to pay EAI an annualized fee, based on the average
market value of the net assets of the Fund, computed each business day and paid
to EAI monthly. The fee is paid as follows:
Assets $0 to $250 Million....................... 0.75%
Over $250 MM to $500 MM......................... 0.65%
Over $500 MM to $750 MM......................... 0.55%
Over $750 Million............................... 0.45%
These fees are higher than most but comparable to fees paid by equity funds
of a similar investment objective and size. For the one year ended June 30,
1995, the one year ended June 30, 1994 and the period ended June 30, 1993, EAI
received management fees from the Fund, before voluntary reimbursement of
expenses, totalling $106,017, $53,255 and $9,766, respectively.
The Fund pays all of its expenses other than those expressly assumed by the
Adviser. Specifically, the Fund pays the fees and expenses of its transfer
agent, custodian, independent auditors and legal counsel. These fees are
generally for the costs of necessary professional services, regulatory
compliance, and those pertaining to maintaining the Fund's organizational
standing. The resulting fees may include, but are not limited to: brokerage
commissions, taxes and organizational fees, bonding and insurance, custody,
auditing and accounting services, shareholder communications and shareholder
servicing, and the cost of financial reports and prospectuses sent to
Shareholders. The Adviser will reimburse its fee to the Fund to the extent such
fee exceeds the most restrictive expense limitation in effect by a state
regulatory agency where the Fund's shares are registered for purchase. The
Adviser reserves the right to voluntarily waive any portion of its advisory fee
at any time.
Administrator, Accounting Agent and Transfer Agent
- --------------------------------------------------
Rodney Square Management Corporation, Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, is the administrator, accounting agent and
transfer agent for the Fund. As administrator, Rodney Square provides
administrative and operational services and facilities. As transfer, dividend
disbursing, and shareholder servicing agent for the Fund Rodney Square is
responsible for all such corresponding duties, including: maintenance of Fund
shareholders records, transactions involving Fund shares, and the compilation,
distribution, or reinvestment of income dividends or capital gains
distributions, and shareholder communication regarding these items. Rodney
Square also performs certain bookkeeping and accounting duties for the Fund. For
the one year ended June 30, 1995, the one year ended June 30, 1994, and the
period ended June 30, 1993, Fund/Plan Services, Inc., the Fund's previous
transfer and accounting agent, received fees from the Fund totalling $80,253,
$70,372 and $54,037, respectively.
Custodian and Independent Accountants
- -------------------------------------
CoreStates Financial Corporation, P.O. Box 7558, Philadelphia, PA 19101-7558, is
the custodian of the securities and cash of the Fund. For the year ended June
30, 1995, CFSN received custodial fees from the Fund totalling $26,648. Price
Waterhouse LLP, 30 South Seventeenth Street, Philadelphia, PA 19103, are the
independent accountants which audit the annual financial statements of the Fund.
15
<PAGE>
The Distribution Plan
General Information. In order to compensate investment dealers (including for
this purpose certain financial institutions) for services provided in connection
with sales of shares of certain series of the Fund and maintenance of
shareholder accounts within these series, the Distributor makes quarterly
payments to qualifying dealers based on the average net asset value of shares of
the Fund's specified series which are attributable to shareholders for whom the
dealers are designated as the dealer of record. The Distributor makes such
payments at the annual rate of 0.25% of the average net asset value, with
"average net asset value" attributable to a shareholder account meaning the
product of (i) the average daily share balance of the account multiplied by (ii)
the series' average daily net asset value per share.
For administrative reasons, the Distributor may enter into agreements with
certain dealers providing for the calculation of "average net asset value" on
the basis of assets of the accounts of the dealer's customers on an established
day in each quarter. The Distributor may suspend or modify these payments at any
time. Payments are subject to the continuation of the Series' Plan described
below and the terms of service agreements between dealers and the Distributor.
The HomeState Pennsylvania Growth Fund. The HomeState Group's Pennsylvania
Growth Fund is currently the only series operating with a Distribution Plan (a
"Plan"). The Fund has adopted a Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The purpose of the Plan is to permit the Fund to compensate
the Distributor for services provided and expenses incurred by it in promoting
the sale of shares of the Series, reducing redemptions, or maintaining or
improving services provided to shareholders by the Distributor or dealers. By
promoting the sale of shares and/or reducing redemptions, the Plan should help
provide a continuous cash flow, affording the Adviser the ability to purchase
and redeem securities without forcing the Adviser to make unwanted redemptions
of existing portfolio securities.
The Plan provides for quarterly payments by the Fund to the Distributor at
the annual rate of up to 0.35% of the Series' average net assets, subject to the
authority of the Fund's Board of Trustees to reduce the amount of payments or to
suspend the Plan for such periods as they may determine. Subject to these
limitations, the amount of such payments and the specific purposes for which
they are made shall be determined by the Board of Trustees of the Fund. At
present, the Trustees have approved payments under the Plan for the purpose of
reimbursing the Distributor for payments made by it to dealers under the service
agreements referred to above as well as for certain additional expenses related
to shareholder services and the distribution of shares, subject to the maximum
annual rate of 0.35% of the Fund's average net assets. Continuance of the Plan
is subject to annual approval by a vote of the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Fund and who have
no direct or indirect interest in the Plan or related arrangements (these
Trustees are known as "Disinterested Trustees"), cast in person at a meeting
16
<PAGE>
called for that purpose. All material amendments to the Plan must be likewise
approved by separate votes of the Trustees and the Disinterested Trustees of the
Fund. The Plan may not be amended in order to increase materially the costs
which the Fund bear for distribution pursuant to the Plan without also being
approved by a majority of the outstanding voting securities of the Fund. The
Plan terminates automatically in the event of its assignment and may be
terminated without penalty, at any time, by a vote of the majority of (i) the
outstanding voting securities of the Fund, or (ii) the Disinterested Trustees.
For the one year ended June 30, 1995, the one year ended June 30, 1994 and
the period ended June 30, 1993, the Fund incurred $35,339, $17,751 and $ 3,256,
respectively, in 12b-1 fees to Fund/Plan Broker Services, Inc., the Fund's
previous distributor, pursuant to the Fund's Distribution Plan, of which
$26,584, $15,215 and $2,608, respectively, was paid to qualifying dealers.
ADDITIONAL BROKERAGE ALLOCATION INFORMATION
EAI places orders for the purchase or sale of portfolio securities of the
Fund. In choosing a particular broker to execute a given transaction, EAI uses
the following criteria: (1) the past capabilities of that broker in executing
such types of trades; (2) the quality and speed of executing trades; (3)
competitive commission rates; and (4) all other factors being equal, useful
research services provided by the brokerage firm. The research services provided
to EAI are used to advise all of its clients, including the Fund, but not all
such services furnished are used to advise the Fund. Research services can
include written reports and interviews by analysts on a particular industry or
company or on economic factors, and other such services which can enhance EAI's
ability to gauge the potential investment worthiness of companies and/or
industries, such as evaluation of investments, recommendations as to the
purchase or sale of investments, newspapers, magazines, quotation services and
news services. If these services are not used exclusively by EAI for Fund
research purposes, then EAI, based upon allocations of expected use, bears that
portion of the service's cost that directly relates to non-Fund research use.
The management fee paid by the Fund to EAI is not reduced because EAI receives
these services even though EAI might otherwise be required to purchase some of
these services for cash. EAI does not pay excess commissions to any broker for
research services provided or for any other reason. Consistent with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. (the
"NASD") and subject to seeking the most favorable price and execution available
and such other policies as the Board of Trustees may determine, EAI may consider
sales of shares of front-end load series of the Fund as a factor in the
selection of broker-dealers to execute portfolio transactions for the Fund.
For the year ended June 30, 1995, the Fund incurred brokerage commissions
aggregating $91,506.
MEASURING PERFORMANCE
Average annual total return data ("Standardized Return") for the Fund may
from time to time be presented in the Prospectus, this Statement and in
advertisements. The Fund's "average annual total return" is an average annual
compounded rate of return. It is the rate of return based on factors that
include a hypothetical investment of $1,000 ("P" in the formula below) held for
a number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:
17
<PAGE>
ERV 1/n
---
P - 1 = Average Annual Total Return
Using this formula, the Fund's average annual return for the period October 1,
1992 (Commencement of Operations) through October 1, 1995 is as follows:
10/1/92 maximum offering price = $10.53 per share; 10/1/95 net asset value =
$17.22 per share.
$1,000 / $10.53 = 94.966 shares purchased.
94.966 shares x $0.06 dividend paid 7/30/93 = $5.69; $5.69 / $11.15 (dividend
reinvestment price) = 0.510 additional shares purchased. 94.966 + 0.510 = 95.476
shares owned.
95.476 shares x $0.0538 dividend paid 12/15/93 = $5.14; $5.14/$12.47 (reinvest
price) = 0.412 additional shares purchased. 95.476 + 0.412 = 95.888 shares
owned.
95.888 shares x $0.215 dividend paid 7/15/94 = $20.62; $20.62/$12.36 (reinvest
price) = 1.668 shares purchased. 95.888 + 1.668 = 97.556 shares owned.
97.556 shares x $0.338 dividend paid 7/18/95 = $32.97. $32.97/$15.92 (reinvest
price) = 2.071 shares purchased.
97.556 + 2.071 = 99.627 shares owned.
99.627 shares x 10/1/95 n.a.v. $17.22 = $1,715.58 (ERV)
$1,715.58 1/3
---------
$1,000.00 -1 = 19.71% Average Annual Return
Total return data ("Non-Standardized Return") may also be presented from
time to time. The calculation of the Fund's "total return" uses some of the same
factors as the calculation of the average annual total return, but does not
average the rate of return on an annual basis. Total return measures the
cumulative (rather than average) change in value of a hypothetical investment in
the Fund over a stated period. Total return is stated as follows:
n
P( 1 + T ) = ERV
Both methods of total return calculation assume: (i) deduction of the Fund's
maximum sales charge, if applicable, and (ii) reinvestment of all Fund
distributions at net asset value on the respective date. Average annual total
return and total return calculation is a measurement of past performance, and is
not indicative of future results. Share prices will fluctuate so that an
investor's shares in the Fund may be worth more or less than their original
purchase cost when redeemed.
The Fund may periodically compare its performance to that of other mutual
funds tracked by mutual fund ratings services (such as Lipper Analytical
Services, Inc.), financial and business publications and periodicals, of broad
groups of comparable mutual funds or of unmanaged indices (such as the Standard
& Poor's 500, Dow Jones Industrial Average, NASDAQ Composite, Wilshire 5000 or
Wilshire 4500 indices), which may assume investment of dividends but generally
do not reflect deductions for administrative and management costs. The Fund may
quote Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Fund may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.
18
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
THE FUND AT A GLANCE o JUNE 30, 1995
- -------------------------------------------------------------------------------
HomeState Pennsylvania Growth Fund
Performance Comparison vs. S & P 500+
Growth of $10,000 Initial Investment
October 1, 1992 (Commencement of Operations) - June 30, 1995*
Line Graph showing the growth of a $10,000 investment in The HomeState
Pennsylvania Growth Fund and the S&P 500 on a monthly basis over the period
of October 1, 1992 to June 30, 1995.
PA Growth
Fund
$15,297*
-------
S & P 500
$14,044
-------
Average
Annual
Return
--------
16.62%*
Past performance is not indicative of future performance.
* The Fund's investment performance and average total return for the period
October 1, 1992 (Commencement of Operations) to June 30, 1995, reflects the
Fund's maximum sales charge of 5.0%. Had the sales charge not been included, the
Fund's average annual return would have been 18.81%, and the $10,000 initial
investment would have been worth $ 16,108.
+ The Standard & Poor's 500 Index is an unmanaged index of 500 stocks weighted
by market capitalization.
==============================================================================
PORTFOLIO STATISTICS
==============================================================================
TEN LARGEST PORTFOLIO HOLDINGS
- -------------------------------------------------------------------------------
ISSUE/CITY % OF FUND
1. Safeguard Scientifics Inc. (Wayne) 4.1%
2. Iomega Corp. 2.6%
3. Harsco Corp. (Camp Hill) 2.5%
4. AMP Incorporated (Harrisburg) 2.5%
5. JLG Industries Inc. (McConnellsburg) 2.3%
6. Vishay Intertechnology Inc. (Malvern) 2.3%
7. C-COR Electronics Inc. (State College) 2.2%
8. Kennametal Inc. (Latrobe) 1.9%
9. York International (York) 1.9%
10. Magainin Pharmaceuticals (Plymouth Mtg) 1.8%
- -------------------------------------------------------------------------------
DIVERSIFICATION BY INDUSTRY
Pie Chart showing the breakdown of the Fund investments by industry
as follows:
Biotechnology 3.6%
Capital Goods 13.9%
Utilities 1.7%
Consumer Goods 8.1%
Other 2.2%
Tech-Other 15.0%
Energy 1.4%
Tech Computers & Info 15.9%
Transport 0.8%
Materials & Services 15.3%
Healthcare 8.1%
Finance Misc. 6.5%
Finance Bank/S&L 7.5%
*Money market fund (4.2%); Net of Liabilities (2.0%)
19
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
Market
Shares EQUITIES* - 97.8% Market Value+
- ------ ------
Capital Goods - 13.9%
6,000 Ametek Inc. $108,000
6,100 Greenbrier Companies Inc. (a) 80,062
9,800 Harsco Corp. 516,950
18,000 JLG Industries Inc. 477,000
8,500 Johnstown America Industries Inc. (b) 88,188
11,200 Kennametal Inc. 394,800
16,800 Met Pro Corp. 231,000
1,200 Mine Safety Appliances Co. 63,600
11,700 Owosso Corp. 136,744
3,200 Penn Engineering & Manufacturing Corp. 241,600
8,700 Technitrol Inc. 123,975
8,500 York International Corp. 382,500
----------
2,844,419
----------
Consumer Goods - General - 8.1%
8,000 Adelphia Communications Corp. (b) 70,000
3,000 Allen Organ Company Class B 133,500
7,750 American Eagle Outfitters Inc. (b) 122,062
12,500 Chock Full O Nuts Corp. (a) (b) 85,938
14,950 Comcast Corp. Special Class A 277,509
12,500 DiMark Inc. (b) 187,500
3,500 Hershey Foods Corp. 193,375
6,000 Lesco Inc. 93,750
45,000 NoCopi Technologies Inc. (b) 30,150
9,500 Piercing Pagoda Inc. (b) 100,938
6,000 Right Management Consultants (b) 136,500
5,000 Rite Aid Corp. 128,125
4,324 Strawbridge & Clothier Class A 86,480
----------
1,645,827
----------
See accompanying Notes to Financial Statements
20
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
Market
Shares EQUITIES* (Continued) Value+
- ------ ------
Consumer Goods - Health Care - 8.1%
7,900 Amerisource Health Corp. Class A (b) $180,219
10,500 Amsco International Inc. (b) 145,688
4,000 Apria Healthcare Group (a) (b) 113,000
5,000 Arrow International Inc. 211,250
27,500 Concord Health Group Inc. (b) 130,625
8,500 Genesis Health Ventures Inc. (b) 251,812
10,000 Mylan Laboratories Inc. 307,500
8,000 Renal Treatment Centers Inc. (b) 197,000
8,000 Respironics Inc. (b) 114,000
----------
1,651,094
----------
Consumer Goods - Biotechnology - 3.6%
13,000 Centocor Inc. (b) 186,062
5,500 Genetic Therapy Inc. (a) (b) 81,812
51,500 IBAH, Inc. (b) 103,000
53,500 Magainin Pharmaceuticals Inc. (b) 367,812
----------
738,686
----------
Energy - 1.4%
6,000 Buckeye Partners 208,500
2,500 Sun Company Inc. 68,437
----------
276,937
----------
Finance - Banks - 5.6%
1,483 BT Financial Corp. 46,714
6,500 Commerce Bank (a) 125,938
2,600 First Capitol Bank/York PA (b) 50,050
4,625 First Colonial Group, Inc. 75,156
3,800 Integra Financial Corp. 184,775
600 Kish Bancorp Inc. 25,800
5,950 Mellon Bank Corp. 247,669
See accompanying Notes to Financial Statements
21
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1995
Market
Shares EQUITIES* (Continued) Value+
- ------ ------
Finance - Banks (Continued)
6,000 Omega Financial Corp. $159,000
7,219 SUN Bancorp Inc. 166,939
2,500 Susquehanna Bancshares Inc. 58,750
----------
1,140,791
----------
Finance - Savings & Loans - 1.9%
5,687 Parkvale Financial Corp. 150,706
4,400 Prime Bancorp Inc. 79,200
15,750 Sovereign Bancorp, Inc. 151,594
----------
381,500
----------
Finance - Miscellaneous - 6.5%
9,500 American Travellers Corp. (b) 167,438
3,500 BHC Financial Inc. 57,312
22,800 Crown American Realty 287,850
7,000 Donegal Group Inc. 119,000
5,000 Kranzco Realty Trust 89,375
6,500 Laurentian Capital Corp. (b) 86,938
14,500 Liberty Property Trust 284,562
5,000 Penn-American Group Inc. 47,500
8,250 Penn Treaty American Corp. (b) 105,188
5,000 Walshire Assurance Company 82,500
----------
1,327,663
----------
Materials & Services - 15.3%
5,400 Air Products and Chemicals Inc. 301,050
2,000 Alco Standard Corp. 159,750
4,000 Arco Chemical Co. 181,500
26,666 Astrotech International Corp. (b) 89,998
3,000 Carpenter Technology Corp. 204,375
See accompanying Notes to Financial Statements
22
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
Market
Shares EQUITIES* (Continued) Value+
- ------ ------
Materials & Services (Continued)
14,500 Charter Power Systems Inc. $348,000
2,500 Dentsply International Corp. 90,000
3,500 Exide Corp. 150,500
8,000 Giant Cement Holding Inc. (b) 98,000
9,500 Glatfelter (P.H.) Company 191,188
10,000 J & L Specialty Steel Inc. 192,500
2,500 Macdermid Inc. (a) 115,000
6,000 OM Group Inc. (a) 171,000
4,000 PPG Industries, Inc. 172,000
10,037 Robroy Industries Class A 173,138
8,000 Total Containment Inc. (b) 85,000
10,000 Tuscarora, Inc. 237,500
3,000 Williamette Industries Inc. (a) 166,500
----------
3,126,999
----------
Technology - Communications - 4.3%
8,700 Black Box Corp. (b) 123,975
16,500 C-COR Electronics Inc. (b) 453,750
13,800 Electronics, Missiles &
Communications Industries (b) 82,800
3,750 Numerex Corp. Class A (b) 42,188
7,500 Scientific-Atlanta Inc. (a) 165,000
----------
867,713
----------
Technology - Computers &
Information Technology - 15.9%
2,500 Cambridge Technology Partners Inc. (a)(b) 82,500
12,000 Cohu Inc. (a) 280,500
6,500 EMC Corp. (a)(b) 157,625
13,000 HDS Network Systems Inc. (b) 67,032
3,200 Integrated Circuit Systems Inc. (b) 47,200
24,000 Iomega Corp. (a) (b) 531,000
4,200 Nexgen Inc. (a) (b) 99,225
See accompanying Notes to Financial Statements
23
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
SCHEDULE OF INVESTMENTS (Continued)
June 30, 1995
Market
Shares EQUITIES* (Continued) Value+
- ------ ------
Technology - Computers &
Information Technology (Continued)
4,400 Paradigm Technology Inc. (a) (b) $ 98,725
20,200 Safeguard Scientifics Inc. (b) 838,300
5,500 Silicon Graphics Inc. (a) (b) 219,312
17,500 SubMicron Systems Corp.(b) 192,500
6,600 SunGard Data Systems Inc. (b) 344,850
14,000 Systems & Computer Technology Corp. (b) 280,000
----------
3,238,769
----------
Technology - Electronics - 10.7%
12,200 AMP Inc. 515,450
10,000 Amphenol Corp. Class A (a)(b) 291,250
9,800 Cable Design Technologies (b) 210,700
20,300 ECC International Corp. (b) 225,838
17,500 Genrad Inc. (a) (b) 133,437
3,000 LAM Research Corp. (a) (b) 192,000
5,000 II VI Corp. (b) 138,750
13,200 Vishay Intertechnology Inc. (b) 476,850
----------
2,184,275
----------
Transportation - 0.8%
9,000 Arnold Industries Inc. 157,500
----------
See accompanying Notes to Financial Statements
24
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
Market
Shares EQUITIES* (Continued) Value+
- ------ ------
Utilities - 1.7%
1,900 Bell Atlantic Corp. $106,400
3,400 Pennsylvania Enterprises Inc. 105,400
7,500 Philadelphia Suburban Corp. 138,750
----------
350,550
----------
CASH EQUIVALENTS - 4.2%
Money Market Mutual Funds - 4.2%
867,071 SEI Liquid Asset Trust - Government Portfolio 867,071
----------
TOTAL INVESTMENTS (cost $16,939,661) 102.0% 20,799,794
Liabilities in excess of other assets (2.0%) (411,895)
-----------
NET ASSETS 100.0% $20,387,899
===========
* Securities listed are common stock unless otherwise indicated
+ See Note 1 to Financial Statements
(a) Non-Pennsylvania Company as defined in the Fund's current Prospectus
(The aggregate value of such securities amounted to $3,189,824 as of June
30, 1995)
(b) Non-income producing security
See accompanying Notes to Financial Statements
25
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
ASSETS
Investments in securities at market value (cost $16,939,661) $20,799,794
Cash 187,509
Receivables for:
Dividends and interest 14,929
Investment securities sold 156,471
Reimbursement from Adviser 14,000
Capital shares sold 215,314
-----------
Total Assets 21,388,017
-----------
LIABILITIES
Payables for:
Investment securities purchased 738,362
Accrued expenses 48,985
Capital shares repurchased 212,771
-----------
Total Liabilities 1,000,118
-----------
NET ASSETS $20,387,899
===========
NET ASSETS CONSISTED OF:
Shares of beneficial interest, no par value, 50,000,000
authorized; 1,300,002 issued and outstanding $16,084,911
Accumulated net realized gain on investments 442,855
Unrealized appreciation on investments 3,860,133
-----------
Total net assets $20,387,899
===========
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE
($20,387,899/1,300,002 shares) $15.68
======
Maximum offering price per share
(100/95 of net asset value per share) $16.51
======
See accompanying Notes to Financial Statements
26
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1995
INVESTMENT INCOME
Dividends $ 237,288
Interest 27,774
---------
Total Investment Income 265,062
---------
EXPENSES
Advisory fees 106,017
12b-1 fees 35,339
Transfer agent fees 51,901
Custodial fees 26,648
Accounting services fees 28,352
Professional fees 26,750
Printing expenses 12,033
Trustees fee and expenses 6,000
Miscellaneous expenses 971
---------
Total Expenses 294,011
Expenses voluntarily reimbursed by Adviser (14,000)
---------
Net Expenses 280,011
---------
Net investment loss (14,949)
---------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investment transactions 442,297
Change in unrealized appreciation on investments 3,570,194
---------
Net realized and unrealized gain on investments 4,012,491
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,997,542
==========
See accompanying Notes to Financial Statements
27
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Year For the Year
Ended Ended
June 30, 1995 June 30, 1994
------------- -------------
OPERATIONS
Net investment loss ($ 14,949) ($ 23,052)
Net realized gain on investment
transactions 442,297 203,086
Change in unrealized appreciation on
investments 3,570,194 186,561
----------- ------------
Net increase in net assets resulting from
operations 3,997,542 366,595
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:*
Net investment income 0 (9,642)
Net realized gain from investment transactions (174,096) (39,344)
----------- ------------
(174,096) (48,986)
----------- ------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS
- - Note 2 6,672,056 6,548,697
----------- ------------
TOTAL INCREASE IN NET ASSETS 10,495,502 6,866,306
NET ASSETS:
Beginning of year 9,892,397 3,026,091
----------- ------------
End of year $20,387,899 $ 9,892,397
=========== ============
* Does not include $68,435 short-term capital gain ($0.052 per share) and
$373,784 long-term capital gain ($0.286 per share) distributed July 21, 1995
to shareholders of record as of July 17, 1995.
See accompanying Notes to Financial Statements
28
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Year Ended Year Ended October 1, 1992+
June 30, 1995 June 30, 1994 to June 30, 1993
------------- ------------- ----------------
<S> <C> <C> <C>
Net asset value at beginning of period $12.37 $10.98 $10.00
------ ------ ------
Income from Investment Operations
- ---------------------------------
Net investment income (loss) (0.01) (0.03) 0.03
Net realized and unrealized gains on investments 3.54 1.53 0.95
---- ---- ----
Total from investment operations 3.53 1.50 0.98
---- ---- ----
Less Distributions
- ------------------
Dividends from net investment income 0.00 (0.03) 0.00
Distributions from net realized gains (0.22) (0.08) 0.00
---- ---- ----
Total distributions (0.22) (0.11) 0.00
---- ---- ----
Net asset value at end of period $15.68 $12.37 $10.98
====== ====== ======
Total return** 28.96% 13.75% 13.07%*
====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $20,387,899 $9,892,397 $3,026,091
Ratio of expenses to average net assets before
reimbursement by Adviser 2.00% 2.67% 7.85%*
Ratio of expenses to average net assets after
reimbursement by Adviser 1.91% 2.23% 1.87%*
Ratio of net investment loss to average
net assets before reimbursement by Adviser (0.20%) (0.76%) (5.24%)*
Ratio of net investment income (loss) to average net
assets after reimbursement by Adviser (0.10%) (0.32%) 0.74%*
Portfolio turnover rate 51% 51% 63%
</TABLE>
+Commencement of operations
*Annualized
**Total return does not reflect 5.0% maximum sales charge.
See accompanying Notes to Financial Statements
29
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
NOTE 1 - ACCOUNTING POLICIES
The HomeState Pennsylvania Growth Fund (the "Fund") is a portfolio series of The
HomeState Group, a Pennsylvania common law trust operating as a diversified
open-end management company registered under the Investment Company Act of 1940,
as amended. The Fund was organized on August 26, 1992, and commenced operations
on October 1, 1992. Operations up to October 1, 1992 were limited to issuance of
10,000 shares at $10.00 per share to the Fund's investment adviser. Under normal
circumstances the Fund invests a minimum of 65% of its total net assets in the
securities of issuers with headquarters or significant operations in the
Commonwealth of Pennsylvania. Because of the Fund's investment objective, it may
subject the Fund to risk from economic changes and political developments
occurring within Pennsylvania. Following is a summary of significant accounting
policies, in conformity with generally accepted accounting principles, which
were consistently followed by the Fund in the preparation of its financial
statements:
Security Valuation - Investment securities traded on a national securities
exchange are valued at the last reported sales price at 4:00 p.m. Eastern time,
unless there are no transactions on the valuation date, in which case they are
valued at the last reported bid price. Securities traded over-the-counter are
valued at the last reported sales price unless there is no reported sales price,
in which case the last reported bid price is used. Debt securities with
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Where market quotations are not readily available,
securities are valued using methods which the Board of Trustees believe in good
faith accurately reflects their fair value.
Income Recognition - Interest income is accrued daily. Dividend income is
recorded on the ex-dividend date.
Securities Transactions - Security transactions are accounted for on the date
the securities are purchased or sold. Realized gains and losses on securities
sold are determined using the identified cost method.
Distributions to Shareholders - The Fund records distributions to shareholders
on the ex-dividend date. Net gains realized from securities transactions, if
any, will normally be distributed to shareholders in July and December. The
amounts of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid-in capital in the period that the difference arises.
Accordingly, accumulated net investment loss as of June 30, 1994 of $22,963 and
net investment loss of $14,949 for the year ended June 30, 1995, have been
charged to paid-in capital. These reclassifications have no effect on net assets
or net asset values per share.
Federal Income Taxes - The Fund intends to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies, including
the distribution of substantially all of its taxable income. Accordingly, no
provision for federal income taxes is considered necessary in the financial
statements.
NOTE 2 - CAPITAL STOCK
At June 30, 1995, there were 50,000,000 authorized shares of beneficial
interest, with no par value. As of June 30, 1995, the Fund had 1,300,002 shares
issued and outstanding. Capital share transactions for the year ended June 30,
1995 and for the year ended June 30, 1994 were:
30
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year For the Year
------------ ------------
Ended June 30, 1995 Ended June 30, 1994
------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sales 670,899 $9,021,148 601,358 $7,524,528
Reinvested distributions 13,102 161,946 4,055 48,277
Redemptions (183,880) (2,511,038) (81,123) (1,024,108)
------- --------- ------ ---------
Net increase 500,121 $6,672,056 524,290 $6,548,697
======= ========== ======= ==========
NOTE 3 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
aggregated $13,466,065 and $6,991,537, respectively, for the period ended June
30, 1995.
At June 30, 1995, net unrealized appreciation for reporting and Federal income
tax purposes aggregated $3,860,133, of which $4,263,970 related to appreciated
securities and $403,837 related to depreciated securities.
NOTE 4 - EXPENSES AND TRANSACTIONS WITH AFFILIATED PARTIES
Emerald Advisers, Inc. serves as the investment adviser (the "Adviser") to the
Fund for which it receives investment advisory fees from the Fund. The fee is
based on average net assets at the annual rate of 0.75% on assets up to and
including $250 million, 0.65% for assets in excess of $250 million and up to and
including $500 million, 0.55% for assets in excess of $500 million and up to and
including $750 million, and 0.45% for assets in excess of $750 million. For the
year ended June 30, 1995, the Fund had incurred investment advisory fees of
$106,017. Under the terms of the investment advisory agreement which expires on
December 31, 1995, Emerald Advisers, Inc. will reimburse the Fund if the Fund's
total expenses exceed the most restrictive expense limitation in effect by a
state regulatory agency where the Fund's shares are registered for purchase. The
Adviser may also voluntarily reimburse the Fund for certain expenses. For the
year ended June 30, 1995, the Adviser voluntarily reimbursed expenses totalling
$14,000. At June 30, 1995, Emerald Advisers, Inc. owned 100 shares of the Fund.
Fund/Plan Broker Services, Inc. is the principal underwriter and distributor of
Fund shares, and received $29,000 in commissions for selling Fund shares for the
year ended June 30, 1995. The Fund has a distribution plan which expires on
December 31, 1995 (the "Plan") pursuant to which it reimburses Fund/Plan Broker
Services, Inc. for a portion of the costs incurred in distributing the Fund's
shares, including amounts paid to brokers or dealers, at an annual rate not to
exceed 0.35% of the Fund's average daily net assets. During the year ended June
30, 1995, the Fund incurred expenses totalling $35,339 pursuant to the Plan.
Fund/Plan Services, Inc. is the transfer and dividend disbursing agent and
provides accounting and pricing services for the Fund under the terms of
agreements which expire on October 1, 1995. During the year ended June 30, 1995,
the Fund incurred transfer agency fees totalling $51,901 and accounting and
pricing services fees totalling $28,352.
The Fund's Declaration of Trust provides that each Trustee affiliated with the
Fund's Adviser shall serve without compensation and each Trustee who is not so
affiliated shall receive fees from the income of the Fund, and expense
reimbursements for each Trustees meeting attended. An unaffiliated Trustee's
annual fee shall not exceed $1,000. The unaffiliated Trustees received as a
group fees and reimbursements totalling $6,000 for the period ended June 30,
1995. A member of the Fund's Board of Trustees who is not affiliated with the
Adviser is employed as a practicing attorney and is a partner in the law firm of
Duane, Morris & Heckscher, the Fund's legal counsel.
31
<PAGE>
==============================================================================
The HomeState Pennsylvania Growth Fund
Report of Independent Accountants
To the Board of Trustees
and Shareholders of
The HomeState Pennsylvania Growth Fund
(a series of The HomeState Group)
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The HomeState Pennsylvania Growth
Fund (the "Fund") at June 30, 1995, the results of its operations, the changes
in its net assets and the financial highlights for each of the respective
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Philadelphia, Pennsylvania
August 4, 1995
32
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
REPORT FROM MANAGEMENT
Dear Shareholder: August 3, 1995
We are extremely pleased to report the results for The HomeState Pennsylvania
Growth Fund's (the "Fund") third fiscal year. The total return for the twelve
month period ended June 30, 1995 was 28.96%, substantially better than market
benchmarks such as the S&P 500's return of 26.02% and the Wilshire 5000's (a
composite of all issues traded in the New York, American and NASDAQ exchanges)
return of 24.72%. The Fund's results were also substantially higher than Russell
2000 (a small company index) which was up 20.07%. The Fund's results were also
better than our peer groups as represented by returns compiled by Lipper
Analytical Services Inc. The Lipper Growth Funds average return was 20.58% and
General Equity Funds average return was 20.10% for the year ended June 30, 1995.
The Fund is also pleased to report our excellent performance since inception
(October 1, 1992 to June 30, 1995):
Fund/Index Since Inception (10/1/92)
---------- -------------------------
HomeState PA Growth (at net asset value) 61.08%
S&P 500 (reinvested) 40.44%
Wilshire 5000 (reinvested) 42.16%
Lipper Averages:
Growth Fund Averages 38.73%
General Equity Funds Average 40.50%
The Fund received national recognition for its quarterly performance ending June
30, 1995, when Morningstar Inc. ranked us in the top 25 growth funds in the
nation from their database of 636 growth-oriented funds. The Fund's performance
results are a testament to our investment philosophy and strategy of investing
in our own "backyard" and of the management's emphasis on on-site fundamental
research. The Fund's focus continues to be investing in undervalued growth
companies primarily headquartered in the Commonwealth of Pennsylvania.
While the second half of 1994 witnessed some growth in the fund, the predominant
growth came in the first half of 1995. The Fund was well positioned to take
advantage of the market's rise due to our emphasis of investing in the growth
segment of the marketplace. Our viewpoint on a profit-led economy with little or
no inflation kept us focused on the best growth companies found by our own
research team. Our research approach is to be in continual contact with
Pennsylvania's finest companies, positioning the Fund in companies with the best
future prospects. Currently, this bottom-up fundamental approach teamed with
tough valuation models has positioned the Fund with the greatest percentage
invested in technology, followed by the materials and services sector. While a
great many managers have been nervous over cyclical stocks, our process has
positioned us in these above average growers, for which our clients have
continually benefitted. Our fundamental thesis keeps us invested in value-added
capital goods suppliers such a Kennametal, JLG Industries, Met-Pro, and
Technitrol.
A positive has been added to the marketplace recently and we expect it to
continue over the foreseeable future. This positive is the corporate buyer. The
second quarter witnessed more than $100 billion in U.S. mergers. This record
amount included IBM's takeover of Lotus Development and Computer Associates
takeover of Legent Corp, the latter of which benefitted HomeState. (Legent
represented over 1% of the portfolio when its acquisition was announced.)
Lastly, on the valuation question, we believe this productivity driven cycle is
far from over. Therefore, this leads us to believe the cycle will last longer
and will not be squashed in 1995. This productivity trend combined with a
political environment calling for less regulation will continue to benefit small
growth stocks. It is therefore the reason we believe Pennsylvania, with an
abundance in small growth stocks, will be a major source of investment returns
over the rest of this cycle.
33
<PAGE>
===============================================================================
The HomeState Pennsylvania Growth Fund
The best performing sector in the first half of 1995 was technology. The Fund
fully participated in this sector with approximately 30% invested in technology
stocks, including our largest holding, Safeguard Scientifics. Holdings in this
sector are divided into six separate industries. Our overweighting of this
sector (30.88% vs. the S&P 500 weighting 14.14%) is derived from superior
earnings growth prospects and still attractive valuation levels. Nineteen of our
technology holdings have earnings growth estimates exceeding 20% (several over
30%) in each of the next 2 years. The technology sector continues to be the
beneficiary of Corporate America's drive for increased productivity. We believe
we are in the early and developing stage of a prolonged productivity enhancement
trend.
The Fund has been increasing our exposure to the health care industry with the
exception of the HMO group. We avoided the debacle in HMO stocks because we
correctly predicted the squeeze on margins created by greater competition.
Specific focus of our almost 12% invested in health care is in the biotech
industry as well as individual opportunities such as Genesis Health Ventures,
Mylan Labs, and Renal Treatment Centers. Our biotech issues greatly benefitted
the portfolio in the 1st half of 1995. The Fund's investment in Magainin
Pharmaceuticals appreciated significantly in the 4th fiscal quarter due to a new
anti-infective drug. Without potential health care reform legislation we believe
selective opportunities in health care stocks will be available in Pennsylvania
stocks. Health care stocks have always been a significant factor in the
Pennsylvania universe.
In the last year, the Commonwealth of Pennsylvania had been recognized for its
economic development budget and business vitality by the Corporation for
Enterprise Development. In its 1994 Development Report Card Pennsylvania ranked
in the top five states in terms of business climate. In addition, The National
Association of State Development Agencies recognized Pennsylvania, with a $200
million outlay per year, as having the best funded business assistance program
in the country. The first budget from the Ridge Administration has been passed
and signed. This budget is significant due to its focus on reducing business
taxes. On a retroactive basis, Pennsylvania businesses have seen their net
corporate income tax rate reduced to single digits. With a greater use of net
operating losses, Pennsylvania entrepreneurs received a significant boost to
their business. In addition, the Ben Franklin Program has been recognized
nationally and copied elsewhere as one of the finest economic development
programs in the country. This is just one of many Pennsylvania programs which
ranks the Commonwealth first in economic development funding. A beneficiary of
these dollars is increased employment: Pennsylvania's employment has grown by
over 60,000 new jobs in the past year.
Pennsylvania's growth prospects for the future can also be seen in start-ups and
the venture capital community in the State. Both the Great Valley and the King
of Prussia areas rank in the nation's top 35% for new companies. Pennsylvania's
emphasis on technology and biotechs bodes well for Pennsylvania's business
community, because these should be the fastest growing sectors over the next
decade.
Our Fund has been growing as well. Total net assets more than doubled from June
30, 1994 to June 30, 1995. We welcome our many new shareholders and thank our
entire Fund family for your continuing confidence. Please don't hesitate to
contact us if you have any questions or comments regarding your HomeState
investment.
Kenneth G. Mertz II, CFA
Chief Investment Officer
34
<PAGE>
APPENDIX A:
-----------
DESCRIPTION OF RATINGS
Following are descriptions of investment securities ratings from Moody's
Investor Services ("Moody's") and Standard & Poor's Corporation ("S & P"). See
pages 4 and 5 of this Statement for how these ratings relate to investments in
the Fund's portfolio.
I. Commercial Paper Ratings:
- ----------------------------
A. Moody's: Issuers rated Prime-1 have a superior capacity, issuers rated
Prime-2 have a strong capacity, and issuers rated Prime-3 have an acceptable
capacity for the repayment of short-term promissory obligations.
B. S & P: Issues rated A are the highest quality obligations. Issues in this
category are regarded as having the greatest capacity for timely payment.
For issues designated A-1 the degree of safety regarding timely payment is
very strong. For issues designated A-2 the capacity for timely payment is
also strong, but not as high as for A-1 issues. Issues designated A-3 have a
satisfactory capacity for timely payment.
II. Corporate Bond Ratings:
- --------------------------
A. Moody's:
Aaa - Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
maybe other elements present which make the long term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
35
<PAGE>
These categories are considered to be of "Investment Grade" by Moody's. Moody's
applies numerical modifiers "1," "2," and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
B. S & P:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal &
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
S & P classifies corporate bonds of these ratings to be of "Investment Grade."
Plus (+) or Minus (-): The ratings from AA to B may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
III. Preferred Stock Ratings:
- -----------------------------
Both Moody's and S & P use the same designations for corporate bonds as they
do for preferred stock except in the case of Moody's preferred stock ratings,
the initial letter rating is not capitalized. While the descriptions are
tailored for preferred stocks, the relative quality descriptions are comparable
to those described above for corporate bonds.
Ratings by Moody's and S & P represent their respective opinions as to the
investment quality of the rated obligations. These ratings do not constitute a
guarantee that the principal and interest payable under these obligations will
be paid when due, but rather serve as a general guide in comparing prospective
investments.
36
<PAGE>
APPENDIX B
----------
PENNSYLVANIA-BASED CORPORATIONS
In order to present a prospective investor in the Fund with a general idea of
the size and composition of the universe of Pennsylvania-based publicly-traded
companies, this Appendix provides a listing of such companies identified by
the Adviser as: 1. Being available for purchase by the general public, either
as listed on major exchanges (New York Stock Exchange, American Stock Exchange,
or NASDAQ Stock Market), or available over the counter; 2. Having their
principal headquarters located in Pennsylvania. This listing does not purport
to be complete and is based on information derived from publicly available
documents.
The listing is a general guide of Pennsylvania-based companies and is not
meant to serve as a listing of companies whose stocks are currently held or may
be held in the future by the Fund. See "Investment Objectives and Policies" in
the Prospectus and "Additional Information Concerning Investment Objectives
and Policies" in this Statement for an explanation how portfolio investments
are chosen, and certain limitations on what investments the Fund can purchase.
Appendix B information is presented as follows:
Company Name Symbol (if applicable) Location of Headquarters
- ------------ ---------------------- ------------------------
(Listing begins on the next page.)
37
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
1 202 Data Systems TOOT
2 Acap Corp. ACAP
3 ACNB Corp. ACNB
4 Acrodyne ACRO
5 Action Industries ACX
6 ADAGE ADGE
7 Adelphia Communication ADLA.C
8 Adience NONE
9 Advanta ADVN.A
10 AEL Industries AELN.A
11 Aero Services International AERO
12 Air Products APD
13 Airgas ARG
14 Alco Standard ASN
15 Alcoa AA
16 Allegheny Ludlum ALS
17 Allegheny Valley Bancorp. NONE
18 Allen Organ AORG.B
19 Aloette Cosmetics ALET
20 AM Communications AMCI
21 Amalgamated Automotive AAI
22 Ambassador Bank of the Commonwealth NONE
23 American Eagle Outfitters AEOS
24 American Travellers ATVC
25 AmeriSource ASHC
26 Ametek AME
27 AMP Incorporated AMP
28 Ampco-Pittsburgh AP
29 Amsco International ASZ
30 Apogee Inc. APGG
31 Apollo Bancorp, Inc. NONE
32 Arco Chemical RCM
33 Armco AS
34 Armstrong County Trust Company NONE
35 Armstrong World ACK
36 Arnold Industries AIND
37 Arrow International ARRO
38 Associated Communication ACCM.A
39 Astea International, Inc. ATEA
40 Astrotech International AIX
41 Atlantic Central Bankers Bank NONE
42 Autoclave Engineers ACLV
43 Aydin Corp. AYD
44 Baker, Michael Corp. BKR
45 Bank of Landisburg NONE
38
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
46 Bankers' Financial Services Corporation BKSV*
47 Bankvest Inc. NONE
48 BCB Financial Services Corp. NONE
49 Bell Atlantic BEL
50 Berger Holdings Ltd. BGRH
51 Bethlehem Corp. BET
52 Bethlehem Steel BS
53 Betz Labs BTL
54 BHC Financial BHCF
55 Biocontrol Tech BICO
56 Black Box Corp. BBOX
57 Blair BL
58 Blue Ridge Real Estate Co. BLRGZ
59 Bon Ton BONT
60 Bowline Corp. BOLN*
61 Brandywine Realty Trust BDN
62 Bridgeville Savings BRFC
63 Bryn Mawr Bank Corp. BMTC
64 BT Financial BTFC
65 Buck Hill Falls Co. NONE
66 Buckeye Partners, L.P. BPL
67 Buffalo Valley Telephone BUFF*
68 Burnham BURCA*
69 C Cor Electronics CCBL
70 C-Tec CTEX
71 Cable Design Technologies CDTC
72 Cabot Medical CBOT
73 Calgon Carbon CCC
74 Canondale Corp. BIKE
75 Carbide/Graphite Group CGGI
76 Cardinal Bancorp Inc. PA NONE
77 Carpenter Technology CRS
78 Castle Energy Corp. CECX
79 CCFNB Bancorp Inc. NONE
80 CDI Corp. CDI
81 Ceco Filters Inc. CEC
82 Cedar Group Inc. CGMV
83 Centercore CCOR
84 Centocor CNTO
85 Central Sprinkler CNSP
86 Century Financial Corp. CYFN*
87 Cephalon CEPH
88 CGS Scientific Corp. CGSC
89 Chambers Development CDV/A
90 Charming Shoppes CHRS
39
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
91 Charter Power System 1 CHP
92 Chemcial Leaman CLEA
93 Chester Valley Bancorp CVAL
94 Cigna CI
95 Citizen and Northern Corp. CZNC
96 Citizens Bankcorp. NONE
97 Citizens Bank and Trust Company CZNP*
98 Citizens Financial Services Inc. NONE
99 Citizens, Inc. NONE
100 Citizens National Bank of Ashland CIZP*
101 Citizens National Bank of Meyersdale CZNS*
102 Clearfield Bank & Trust Comapny CLFD*
103 CMAC Investment Corp. CMT
104 CNB Financial Corp. CNBB
105 Codorus Valley Bancorp Inc. CVLY*
106 Columbia Financial Corporation CLBF*
107 Comcast CMCSK
108 Comm Bancorp NONE
109 Commerce Bank/Harrisburg COBH
110 Commercial National Financial Corp. CNAF*
111 Commonwealth Federal Savings Bank CMSB
112 Communciations Group CMGI
113 Community Bankers Corp. NONE
114 Community Banks CBKI
115 Community Bank, National Association CMYN*
116 Community Independent Bank CMYI*
117 Community Ntl. Bank of Northwestern PA NONE
118 Computer Research Inc. CORE
119 Concord Health CHGR
120 Conestoga Enterprises Inc. NONE
121 Conrail CRR
122 Consolidated Natural Gas CNG
123 Constitution Bancorp, Inc. NONE
124 Consumers Financial Corp. CFIN
125 CoreStates CFL
126 Craftmatic Contour Industries Inc. CRCC
127 Crown American Realty Trust CWN
128 Crown Cork & Seal CCK
129 CSS Industries CSS
130 Dauphin Deposit DAPN
131 Deb Shops DEBS
132 Dentsply XRAY
133 Derma Sciences DSCI
134 Digimetrics Inc. DIGMC
135 Digital Descriptor Systems DDSI
40
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
136 DiMark DMK
137 Dimeco NONE
138 DNB Financial Corp. NONE
139 Donegal Group DGIC
140 DQE DQE
141 Dravo DRV
142 Drovers Bancshares Corp. DROV*
143 Eagle National Bank NONE
144 East Penn Bank NONE
145 East Prospect State Bank NONE
146 Eastern Environmental EESI
147 ECC International ECC
148 Ecogen EECN
149 Elderton State Bank NONE
150 Electro Kinetic Systems EKSIA
151 Emcee Broadcast Products ECIN
152 Elverson National Bank ELVN*
153 Emclaire Financial Corp. NONE
154 Emons Transportation Group EMHO
155 Environmental Tectonics ETC
156 Ephrata National Bank EPNB*
157 Equitable Resources EQT
158 Erie Family Life Insurance ERIF*
159 ExecuFirst FXBC
160 Exide EX
161 Extended Product Life EXED
162 Farmers National Bank of Kittanning NONE
163 Farmers National Bank of Newville NONE
164 Farmers & Merchants Bank FMMB*
165 FedOne Savings Bank, F.A. NONE
166 Fidelity Bancorp FSBI
167 Fidelity Deposit and Discount Bank FDDB*
168 Financial Trust FITC
169 First Bank of Philadelphia FBKP
170 First Bell Bancorp Inc. FBBC
171 First Capitol FCYP*
172 First Colonial Group Inc. FTCG
173 First Commercial Bank of Philadelphia NONE
174 First Commonwealth Financial FCF
175 First Harrisburg Bancorp FFHP
176 First Jermyn FJMY*
177 First Keystone Corp. FKYS*
178 First Leesport Bancorp, Inc. FLPB*
179 First Lehigh Corporation FLHI*
180 First National Bancorp. NONE
41
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
181 First National Bank of Gallitzin FIGA*
182 First National Bank of Canton FINC*
183 First National Bank of Fredicksburg NONE
184 First National Bank of Lilly NONE
185 First National Bank of Liverpool NONE
186 First National Bank of Marysville FNBM*
187 First National Bank of Newport FNBT*
188 First National Bank of Port Allegheny FIPG*
189 First National Bank of Reynoldsville NONE
190 First National Bank of Slippery Rock FNSL*
191 First National Bank of Spangler FNBG*
192 First National Bank of Spring Mills NONE
193 First National Community Bank NONE
194 First Philson Financial Corp. FPHN*
195 First Shenango Bancorp, Inc. SHEN
196 First Star Savings Bank FSRS
197 First Sterling Bancorp. NONE
198 First United National Bank NONE
199 First West Chester Corp. FWCC
200 First Western FWBI
201 FJF Financial Mutual Holding Company NONE
202 Fleetwood Bank Corporation NONE
203 FNB Bancorp, Inc. NONE
204 FNB Financial Corporation FBAN
205 FNBM Financial Corporation NONE
206 FNH Corporation NONE
207 Foamex International FMXI
208 Fore Systems FORE
209 Foster, L.B. FSTRA
210 Founders Bank NONE
211 FPA Bank FPO
212 Franklin First Financial Services FRAF
213 Freda Corp. FRDA
214 Fulton Bancshares NONE
215 Fulton Financial FULT
216 General Devices GDIC
217 General Nutrition Corp. GNCI
218 Genesis Health Ventures GHV
219 Geriatric & Medical GEMC
220 Giant Cement GCHI
221 Gilbert Associates GILB.A
222 Glatfelter, P.H. GLT
223 Glen Rock State Bank GLRO*
224 Global Environmental Corp. GLEN
225 Global Spill Management GSMI
42
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
226 GMIS GMIS
227 Gracecare Health Systems Inc. GCHS*
228 Grant Street National Bank GSNB
229 Greater Pottsville Federal S&LA NONE
230 Guaranty Bancshares GBNC
231 Halifax National Bank NONE
232 Hamlin Bank and Trust Company NONE
233 Hanover Bancorp. HOVB*
234 Hanover Foods Corp. NONE
235 Harleysville Group HGIC
236 Harleysville Nat'l Corp. HNBC
237 Harleysville Savings HARL
238 Harris Savings Bank HARS
239 Harsco Corporation HSC
240 Healthcare Services Group HCSG
241 Health Rite HLRT
242 Heinz HNZ
243 Herley Industries HRLY
244 Herndon National Bank NONE
245 Hershey Foods HSY
246 Hoblitzell National Bank of Hyndman NONE
247 Honat Bancorp HONT*
248 Hope Technologies HOPK*
249 Horsehead Resources Development HHRD
250 Hunt Manufacturing HUN
251 IBAH, Inc. IBAH
252 IBT Bancorp, Inc. IBTB
253 ICC Technology ICGN
254 II VI IIVI
255 Independent American Financial Corp. NONE
256 Industrial Scientific ISCX
257 Inertial Motors Corp. IMTS*
258 Information Systems Acquisitions Corp. ISAC
259 Innovative Tech Systems ITSY
260 Integra Financial ITG
261 Integrated Circuit Systems ICST
262 Intelligent Electronics INEL
263 InterDigital Communications IDC
264 International Canine Genetics ICGI
265 Irex Corp. IREX
266 Iron & Glass Bancorp, Inc. IRGB*
267 J & L Specialty Steels JL
268 Jetronic Industries JET
269 JLG Industries JLGI
270 Johnstown America JAII
43
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
271 Jones Apparel Group JNY
272 Jonestown Bank & Trust Company NONE
273 JTNB Bancorp NONE
274 Judicate Inc. JUDG
275 Juniata Valley Financial Corp. JUVF*
276 Kennametal Inc. KMT
277 Keystone Financial Inc. KSTN
278 Keystone Heritage Group Inc. KHGI
279 Kish Bancorp, Inc. KISB*
280 Kleinerts KLRT
281 Kranzco Realty Trust KRT
282 Kulicke Soffa KLIC
283 Lake Ariel Bancorp, Inc. LABN*
284 Lannett Co. Inc. LANN*
285 Laurel Capital Group LARL
286 Laurentian Capital LQ
287 Lewistown Trust Company LEWI*
288 Liberty Property Trust LRY
289 Liberty Technology LIBT
290 Lock Haven Savings Bank NONE
291 Lukens LUC
292 Luzerne National Bank Corporation NONE
293 Madison Bancshares Group LTD NONE
294 Magainin Pharmaceuticals MAGN
295 Mainline Bancorp. NONE
296 Manor National Bank MANR*
297 Mark Centers Trust MCT
298 Marlton Technology MTY
299 Mars National Bank MNBP*
300 Masland MSLD
301 Matthews International Corporation MATW
302 Mauch Chunk Trust Company NONE
303 Medco Group Inc. NONE
304 Med-Design MEDD
305 Mellon Bank MEL
306 Menley & James MENJ
307 Mercer County State Bancorp MCSB*
308 Mercersburg Financial Corporation NONE
309 Merchants National Bank of Bangor MCHT*
310 Merchants National Bank of Kittanning NONE
311 Merchants of Shenandoah Ban-Corp MSHN*
312 Meridian Bancorp MRDN
313 Met-Pro MPR
314 Metrobank of Philadelphia, N.A. NONE
315 Mid Penn Bancorp MPEN*
316 Mifflinburg Bancorp, Inc. NONE
44
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
317 Mine Safety Appliances MNES
318 Miners Bank of Lykens MNRB*
319 Miners Nat'l Bancorp MNBC
320 MK Rail MKRL
321 Montour Bank NONE
322 Moore Products MORP
323 Mother's Work MWRK
324 Mountbatten, Inc. MTBN
325 Moxham Bank Corporation MOXM*
326 Moyco Industries MOYC*
327 Muncy Bank Financial MNCY*
328 Musicom MUSO
329 Mylan Labs MYL
330 National American Bancorp NABN*
331 National Bank of Malvern NONE
332 National Bank of Olyphant NONE
333 National Media NM
334 National Penn Bancshares NPBC
335 National Record Mart NRMI
336 Neffs Bancorp, Inc. NEFF*
337 New Bethelem Bank NBET*
338 New Tripoli Bancorp NETN*
339 Nobel Education Dynamics NEDI
340 Nocopi NOOP*
341 North East Bancshares, Inc. NONE
342 North Pittsburgh System NORY*
343 Northern Lehigh Bancorp, Inc. NOLE*
344 NorthStar Health Services NSTR
345 Northumberland National Bank NONE
346 Novacare NOV
347 Noxso NOXO
348 NSD Bancorp NONE
349 Nuclear Research Corp. NONE
350 Nuclear Support NSSI
351 Numar NUMR
352 Numerex NMRX
353 Nutrition Management NMSCA
354 Oakhurst Company OAK
355 O'Brien Energy System OBS
356 Old Forge Bank OLDF*
357 OMEGA OMEF
358 Orbisonia Community Bancorp, Inc. NONE
359 Orrstown Financial Services ORRB*
360 Owosso Corp. OWOS
361 Palm Bancorp NONE
45
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
362 Parkvale Financial PVSA
363 PCI Services PCIS
364 PDG Environmental PDGE
365 Penn American Group PAGI
366 Penn Engineering & Mfg. PNN
367 Penn First Bancorp PWBC
368 Penn Laurel Financial Corporation NONE
369 Penn National Gaming PENN
370 Penn Security Bank and Trust Company PSBT*
371 Penn Virginia PVIR
372 Penncore Financial Services Corporaiton NONE
373 Pennrock Finanical Services Corp. PRFS*
374 Penns Woods Bancorp Inc. PWOD*
375 Pennsylvania Capital Bank NONE
376 Pennsylvania Enterprises PNT
377 Pennsylvania Power & Light PPL
378 Pennsylvania Real Estate Inv. Trust PEI
379 Pennsylvania State Bank NONE
380 PennTreaty American Corp. PTAC
381 Peoples Bank of Oxford PPBK*
382 Peoples Bank of Unity NONE
383 Peoples Financial Corporation, Inc. NONE
384 Peoples Financial Services Corporation, Inc. NONE
385 Peoples Ltd. NONE
386 Peoples National Bank of Rural Valley NONE
387 Peoples State Bank PSEB
388 Pep Boys PBY
389 Phoenix Bancorp, Inc. NONE
390 Philadelphia Consolidated Holding Corp. PHLY
391 PECO PE
392 Philadelphia Suburban PSC
393 Piercing Pagoda PGDA
394 Pioneer American Holding Company Corp. NONE
395 Pitt-Desmoines PDM
396 PNC Financial PNC
397 PPG Industries PPG
398 Premier Bank NONE
399 Prime Bancorp. PSAB
400 Progress Financial PFNC
401 Prophet 21 PXXI
402 Provident American PAMC
403 QNB Corp. QNBC*
404 Quad Systems QSYS
405 Quaker Chemical QCHM
406 Quigley Corp. QGYC
46
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
407 QVC Network QVCN
408 Reading Co. RDGCA
409 Regent Bancshares RBNK
410 Renal Treatment Centers RXTC
411 Rent Way RWAY
412 Resource America REXI
413 Respironics RESP
414 Rhone Poulac-Rorer RPR
415 Right Management Consultants RMCI
416 Rite Aid RAD
417 Robec ROBC
418 Robroy Industries RROYA*
419 Rochester & Pittsburgh Coal Company REPT
420 Rohm & Haas ROH
421 Royal Bank RBPA.A
422 R&B Inc. RBIN
423 Safeguard Scientifics SFE
424 Salem SBS
425 Scan Graphics SCNG
426 Scanforms Inc. SCFM
427 Scott Paper SPP
428 Second National Bank of Masontown NONE
429 Security First Bank SFMP
430 SEI Corp. SEIC
431 Selas SLS
432 Shared Medical Systems SMED
433 Shawnee Financial Services Corporation NONE
434 SI Handling SIHS
435 Sigma Alpha Entertainment Group LTD SAEG
436 Sinter Metals SNM
437 Smithfield State Bank of Smithfield NONE
438 SMT Health Services SHED
439 Somerset Trust Company SOMT*
440 Southwest National SWPA
441 Sovereign Bancorp SVRN
442 Spectrum Control SPEC
443 SPS Technologies ST
444 State Bancshares SBNP
445 Steel City Products SCPI
446 Sterling Financial Corp. SLFI*
447 Strawbridge & Clother STRW.A
448 STV Group STVI
449 SubMicron SUBM
450 Suburban Federal Savings Bank SUBF*
451 Sulcus Computer SUL
47
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
452 Summit Bancorp NONE
453 Sun Bancorp SUBI
454 Sun Company SUN
455 Sungard Data Systems SNDT
456 Super Rite SUPR
457 Supra Medical SUM
458 Surgical Laser Technologies SLTI
459 Susquehanna Bancshares SUSQ
460 Sylvan Foods SYLN
461 Systems & Computer Tehcnology SCTC
462 S&T Bancorp. STBA
463 Tasty Baking TBC
464 Technitrol TNL
465 Teleflex TFX
466 Tel-Save Holdings TALK
467 TF Financial Corp. NONE
468 Thermal Industries THMP
469 Toll Brothers TOL
470 Total Containment, Inc. TCIX
471 Tower Bancorp. TOBC*
472 Transducer Systems TSIC
473 Troy Hill Bancorp. THBC
474 Tseng Labs TSNG
475 Turbotville National Bank TVNB*
476 Tuscarora Plastics TUSC
477 UGI Corp. UGI
478 UNB Corporation NONE
479 Uni-Marts UNI
480 Union Bancorp UBTP*
481 Union National Financial Corp. NONE
482 Union Pacific UNP
483 Unisys UIS
484 United Bank of Philadelphia NONE
485 United Valley Bank NONE
486 Universal Health Services UHS
487 Univest Corporation of Pennsylvania UVSP
488 Urban Outfitters URBN
489 USA BancShares USAB
490 USA Technologies USAN
491 US Wats Inc. USWI
492 USBANCorp. UBAN
493 USX - Marathon MRO
494 USX Delhi DGP
495 USX - U.S. Steel X
496 UTI Energy Corporation UTI
48
<PAGE>
PENNSYLVANIA COMPANY LIST
symbol
497 U.S. Bioscience UBS
498 U.S. Healthcare USHC
499 Valley Forge Scientific VLFG
500 Vineyard Oil and Gas NONE
501 Vishay Intertechnology VSH
502 VWR VWRX
503 V. F. Corp VFC
504 Walshire Inc. WALS
505 Wayne County Bank & Trust Company WYBP*
506 Weis Markets WMK
507 West WST
508 West Milton State Bank NONE
509 Westinghouse WX
510 Westinghouse Airbrake WAB
511 Westmoreland Coal WCX
512 Weston Roy F. WSTN.A
513 Woodlands Bank NONE
514 WVS Financial Corp. WVFC
515 York Financial YFED
516 York International YRK
517 York Water YWTR
518 Zurn Ind. ZRN
519 Zynaxis ZNXS
49
