Filed with the Securities and Exchange Commission on October 4 , 1996.
File No. 33-48940
File No. 811-6722
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ______ [ ]
Post-Effective Amendment No. 4 [ X ]
------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 [ X ]
-----
THE HOMESTATE GROUP
----------------------------------
(Exact Name of Registrant as Specified in Charter)
1857 WILLIAM PENN WAY, SUITE 203, LANCASTER, PA 17605
-------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (717) 396-7864
--------------
Scott L. Rehr
1857 WILLIAM PENN WAY, SUITE 203, LANCASTER, PA
---------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
X immediately upon filing pursuant to paragraph (b)
-----
_____ on ___________ pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on ___________ pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on ___________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
X This post-effective amendment designates a new effective date
----- for a previously filed post-effective amendment.
TOTAL NUMBER OF PAGES: _____ EXHIBIT INDEX ON PAGE: ____
<PAGE>
CROSS-REFERENCE SHEET
THE HOMESTATE GROUP
Items Required By Form N-1A
PART A - PROSPECTUS
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Expense Table
Investment Objectives and Policies
Purchase Information
3. Condensed Financial Financial Highlights
Information
4. General Description of InvestmenT Objectives and Policies
Registrant Management of the Fund Brokerage
Allocation
5. Management of the Fund Management of the Fund
5A. Management's Discussion [Contained in the Fund's Annual
of Fund Performance Report, President's Letter]
6. Capital Stock and Cover Page
Other Securities Dividends, Distributions and Taxes
General Information
7. Purchase of Securities How to Purchase Shares of the
Being Offered Fund Valuing the Fund's Shares
Management of the Fund/The
Distribution Plan
8. Redemption or How to Redeem Shares of the Fund
Repurchase
9. Pending Legal Not Applicable
Proceedings
<PAGE>
THE HOMESTATE GROUP
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION
Caption in Statement of
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION
- -------- ------------ ------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives Additional Information
and Policies Concerning Investment
Objectives and Policies
Portfolio Turnover
Appendix A
14. Management of the Trustees and Officers
Registrant
15. Control Persons and Trustees and Officers
Principal Holders Other Information Securities
16. Investment Advisory Investment Advisor and
and Other Services Other Service Providers
17. Brokerage Allocation Additional Brokerage Allocation
18. Capital Stock and Redemptions
Other Securities Description of the Fund
19. Purchase, Redemption Redemptions
and Pricing of Net Asset Value and Dividends
Securities Being
Offered
20. Tax Status Additional Dividends,
Distributions and Taxes Information
21. Underwriters Distributor
22. Calculation of Measuring Performance
Performance
23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS
DATED OCTOBER 1, 1996
[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
<PAGE>
PROSPECTUS DATED OCTOBER 1, 1996
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." Currently, there is
only one series 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
1, 1996 has been filed with the Securities and Exchange Commission (the
"SEC") 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 COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- ------------------------------------------------------------------------
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
- -------------------------------------------------------------------------
<PAGE>
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...................................... 0.35%
Other Expenses.................................. 0.75%
-------
TOTAL OPERATING EXPENSES........................ 1.85%
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 $105 $145 $256
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, 1996.
<PAGE>
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 as part of the Fund's
financial statements by the Fund's independent accountants and should be
read in conjunction with the financial statements. The Report of
Independent Accountants and financial statements included in the Fund's
Annual Report to shareholders for the period ended June 30, 1996 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:
For a share outstanding throughout each period:
PERIODS ENDED
-----------------------------------
6/30/96 6/30/95 6/30/94 6/30/93+
------- ------- ------- --------
Net asset value at
beginning of period................ $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)........ (0.07) (0.01) (0.03) 0.03
Net realized and unrealized
gains on investments............... 6.17 3.54 1.53 0.95
------ ------ ------ ------
Total from investment operations.... 6.10 3.53 1.50 0.98
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment
income............................ 0.00 --- (0.03) ---
Distributions from net realized
gains............................. (0.53) (0.22) (0.08) ---
------ ------ ------ ------
Total distributions................. (0.53) (0.22) (0.11) ---
------ ------ ------ ------
Net asset value at end of period.... $21.25 $15.68 $12.37 $10.98
------ ------ ------ ------
Total return**...................... 39.94% 28.96% 13.75% 13.07%*
------ ------ ------ ------
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted).................... $55,828 $20,388 $9,892 $3,026
Ratio of expenses to average net
assets before reimbursement by
Adviser............................ 1.85% 2.00% 2.67% 7.85%*
Ratio of expenses to average net
assets after reimbursement by
Adviser............................ na++ 1.91% 2.23% 1.87%*
Ratio of net investment loss to
average net assets before
reimbursement by Adviser........... (0.58)% (0.20)% (0.76)% (5.24)%*
Ratio of net investment income
(loss) to average net assets
after reimbursement by Adviser..... na++ (0.10)% (0.32)% 0.74%*
Average commission rate paid........ $0.0961 --- --- ---
Portfolio turnover rate............. 66% 51% 51% 63%
- -----------------
+ From commencement of operations: October 1, 1992.
* Annualized.
** Total return does not reflect 5.0% maximum sales charge.
++ Not applicable: no reimbursements were made by the Adviser.
<PAGE>
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 having
significant operations in the Commonwealth of Pennsylvania (i.e. at
least 50% of their revenues are derived from operating units located 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 biopharmaceutical 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.
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 that 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
the least transitory population of any state in the nation (81% of the
current population was born in the State).
Pennsylvania's workforce totals more than 5.9 million, ranking it
as the sixth largest labor pool in the nation. The State's seasonally
adjusted unemployment rate stood at 5.1% in July, 1996, versus 5.4% for
the U.S. economy as a whole. By comparison, neighboring New Jersey's
rate was 6.1%. Pennsylvania 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.
Pennsylvania is the only state in the nation with two cities
(Philadelphia and Pittsburgh) listed in Fortune's top 10 cities with the
largest number of Fortune 500 companies. 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 institutions. 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 that 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 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 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 pursuing its stated investment objective.
The Fund may from time to time invest 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 put or call options, 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.
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:
SALES CHARGE AS A
PERCENTAGE OF: DEALER'S CONCESSION
DOLLAR AMOUNT INVESTED OFFERING PRICE N.A.V. (AS A % OF OFFERING PRICE)
- ---------------------- -------------- ------ --------------------------
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
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:
(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 SEC-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.
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.
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.
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 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 reasonable procedures to confirm that
instructions communicated by telephone are genuine. If either fails to
employ such 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.
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 regular trading on 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.
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 SEC 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 $187 million at August 31, 1996. 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
other registered mutual funds, 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 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 SEC 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.
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 SEC, of
Article III Section 26 of the Rules of Fair Practice by the NASD, 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.
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 SEC under that Act, the Board of Trustees has
determined that transactions for the Fund may be executed by affiliated
brokers if, in the judgment 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 semi-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.
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.
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
<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.)
- ------------------------------------------------------------------------------
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
Rodney Square Distributors, Inc. THE HOMESTATE
Rodney Square North PENNSYLVANIA GROWTH FUND
1100 North Market Street
Wilmington, DE 19890-0001
ADMINISTRATOR
TRANSFER AGENT AND DATED OCTOBER 1, 1996
ACCOUNTING AGENT -----------------------------
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
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 1, 1996
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 1, 1996. 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
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. 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;
(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;
(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).
(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 and 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 regular trading on the New York Stock Exchange (the
"Exchange") every day the Exchange is open for trading. The Exchange
usually 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 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.
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.
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 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 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.
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.
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, POSITION AND OCCUPATION FOR PREVIOUS FIVE YEARS
SCOTT L. REHR*, 1857 William Penn Way, Lancaster, PA 17601, President
and Trustee, age 33, has been Senior Vice President and Treasurer of
Emerald Advisers, Inc. since 1991. He was Vice President of Weik
Investment Services, Inc. from 1990 to 1991. He was Vice President of
Penn Square Mutual Fund and The William Penn Interest Income Fund from
1989 to 1990 and Director of Investor Services, Penn Square Management
Corp. from 1986 to 1989.
BRUCE E. BOWEN, 1536 Buttonbush Circle, Palm City, Fl 34990, Trustee,
age 59, is currently a private investor. He retired as Vice Chairman
and Secretary of Penn Square Mutual Fund, positions he held from 1968 to
1988 and Vice Chairman and Secretary of William Penn Interest Income
Fund positions he held from 1987 to 1988. He also served as Vice
President and Secretary of Penn Square Management Corp. from 1964 to
1988. He also was a Director of Berk-Tek, Inc. from 1987 to 1991 and
Director of Morgan Corporation, from 1989 to 1991.
KENNETH G. MERTZ II, C.F.A.*, 1857 William Penn Way, Lancaster, PA
17601, Trustee, Vice President and Chief Financial Officer, age 44, has
been President and Chief Investment Officer of Emerald Advisers, Inc.
since 1992. He was Chief Investment Officer for the Pennsylvania State
Employes Retirement System from 1985 to 1992. He was a Member of the
National Advisory Board, Northwest Center for Professional
Education/Real Estate Investment for Pension Funds from 1991 to 1992 and
a Member of the Advisory Board, APA/Fostin Pennsylvania Venture Capital
Fund from 1987 to 1992.
DANIEL W. MOYER IV, 1857 William Penn Way, Lancaster, PA 17601, Vice
President and Secretary, age 41, has been Vice President of Emerald
Advisers, Inc. since 1992 as well as a Registered Representative for
First Montauk Securities Corp. since 1992. He was the Branch Office
Manager for Keogler Morgan & Co. and a Registered Representative and
Director for Financial Management Group from 1988 to 1992.
SCOTT C. PENWELL, ESQ. ** 305 North Front Street, Harrisburg, PA 17108,
Trustee, age 43, has been a partner at Duane, Morris & Heckscher since
1981. He has also been Chairman of the Securities Regulation Committee
of the Corporation, Banking and Business Law Section of the Pennsylvania
Bar Association since 1994.
DR. H. J. ZOFFER, Joseph M. Katz School of Business, 366 Mervis Hall,
Pittsburgh, PA 15260, Trustee, age 66, has been Professor of Business
Administration at Joseph M. Katz School of Business since 1966. He was
Dean of Joseph M. Katz School of Business, University of Pittsburgh from
1966 to 1996. He is also a Director of Penwood Savings Association.
* 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, 1996, the Trustees received fees totaling $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 September 20, 1996, 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.
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
September 20, 1996.
The Following persons owned of record 5% or more of the Fund's
outstanding shares as of September 20, 1996:
NAME ADDRESS % OF OWNERSHIP
- ---- ------- --------------
Mac & Co. P.O. Box 3198, Pittsburgh, PA 15230-3198 5.82%
Smith Barney Inc. 388 Greenwich St., NY, NY 10013 8.24%
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:
NAME: ADVISER FUND
- ----- -------------- ----
Scott L. Rehr Vice President, Director Trustee,President
Treasurer
Kenneth M. President, Director Trustee, Vice
Mertz II, C.F.A President, Chief
Investment Officer
Daniel W. Vice President, Director Vice President,
Moyer IV Secretary
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 other registered mutual funds but
comparable to fees paid by equity funds of a similar investment
objective and size. For the fiscal years ended June 30, 1996, 1995 and
1994, EAI received management fees from the Fund, before voluntary
reimbursement of expenses, totaling $246,310, $106,017 and $53,255,
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
agents 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 period from November 20, 1995 through June 30,
1996, Rodney Square Management Corporation received fees from the Fund
totaling $106,524. For the period from July 1, 1995 through November 19,
1995, the fiscal year ended June 30, 1995, and the fiscal year ended
June 30, 1994, Fund/Plan Services, Inc., the Fund's previous transfer
and accounting agent, received fees from the Fund totaling $21,022,
$80,253 and $70,372, 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, 1996, CSFN received custodial fees from the Fund
totaling $31,586. Price Waterhouse LLP, 30 South Seventeenth Street,
Philadelphia, PA 19103, are the independent accountants which audit the
annual financial statements of the Fund.
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 reimburse 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 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 period from November 20, 1995 through June 30, 1996, the
Fund incurred expenses totaling $84,202 pursuant to the Plan. For the
period from July 1, 1995 through November 19, 1995, the fiscal year
ended June 30, 1995 and the fiscal year ended June 30, 1994, the Fund
incurred $31,665, $35,339 and $17,751, respectively, in 12b-1 fees to
Fund/Plan Broker Services, Inc., the Fund's previous distributor,
pursuant to the Fund's Distribution Plan. Of the amounts incurred above
for the fiscal years ended June 30, 1996, 1995 and 1994 $79,721, $26,584
and $15,215, 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 fiscal year ended June 30, 1996, the Fund incurred
brokerage commissions aggregating $127,600.
PORTFOLIO TURNOVER RATE. The portfolio turnover rate is calculated
by dividing the lesser of the Fund's annual purchases or sales of
portfolio securities for the particular fiscal year by the monthly
average value of the portfolio securities owned by the Fund during the
year. All securities, including options, whose maturity or expiration
date at the time of aquisition was one year or less are to be excluded
from both the numerator and the denominator. The portfolio turnover
rate of the Fund for the fiscal years ended June 30, 1996 and 1995 was
66% and 51%, respectively.
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 held for a number of years with an Ending Redeemable Value of
that investment, according to the following formula:
(ERV/P)1/n - 1 = T
where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at end of the
period of a hypothetical $1,000 payment
made at the beginning of that period.
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION
1 YEAR OCTOBER 1, 1992
ENDED THROUGH
SALES LOAD JUNE 30, 1996 JUNE 30, 1996
---------- ------------- -------------
5.00% 32.94% 22.51%
None 39.94% 24.20%
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:
P(1 + T)n = 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.
<PAGE>
HOMESTATE
---------
PENNSYLVANIA [GRAPHIC CAPITAL "E" IN AN OCTAGONAL-SHAPED LOGO] GROWTH FUND
ANNUAL REPORT
------------------
JUNE 30, 1996
<PAGE>
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
--------------------------------------
ABOUT THE FUND
--------------
The HomeState Pennsylvania Growth Fund seeks long-term growth of capital
through investment primarily in the common stocks of companies with
headquarters or significant operations in the Commonwealth of
Pennsylvania.
FUND MANAGEMENT HAS IDENTIFIED THREE KEY POINTS AS COMPONENTS OF ITS
INVESTMENT STRATEGY:
PENNSYLVANIA AS A PRIMARY MARKET
--------------------------------
The State is home to over 500 publicly traded companies, including 33
Fortune 500 companies. Pennsylvania's $244 billion economy is similar
in size to that of many individual countries, including Mexico and South
Korea. Its corporate profile is diverse, from traditional manufacturing
companies to state-of-the-art biopharmaceutical firms, with growth and
expansion in medical and health services, trade, education and financial
institutions.
UNCOVERING INVESTMENT OPPORTUNITIES
-----------------------------------
The Fund's investment adviser, Emerald Advisers, Inc., employs a full-
time research staff to explore the local Pennsylvania companies that are
often ignored by traditionally nationally oriented research firms.
Emerald's mission is to keep a constant eye on the State's business
community, actively updating a company's progress by talking to its
management, employees, suppliers, customers and competitors.
AN EXPERIENCED MANAGEMENT TEAM
------------------------------
Emerald Advisers, Inc.'s team of investment professionals bring to the
Fund diverse background experience gained from the securities brokerage,
trust and banking, institutional investment advisory and mutual fund
industries.
The Fund's portfolio is managed by Kenneth G. Mertz II, CFA, who
previously served as chief investment officer to the $12 billion
Pennsylvania State Employees Retirement System.
BY SEEKING OUT THE INVESTMENT OPPORTUNITIES FOUND HERE IN OUR HOME
STATE, OUR EXPERIENCED INVESTMENT PROFESSIONALS WORK TO PROVIDE FUND
SHAREHOLDERS WITH WHAT WE CALL. . .
"THE HOMESTATE ADVANTAGE."
THIS REPORT CONTAINS INFORMATION ABOUT THE FUND'S PERFORMANCE. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. AN INVESTMENT IN THE
FUND WILL FLUCTUATE IN VALUE SO THAT YOUR ACCOUNT, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN YOUR ORIGINAL PURCHASE PRICE.
<PAGE>
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
THE FUND AT A GLANCE JUNE 30, 1996
- ------------------------------------------------------------------------------
HOMESTATE PENNSYLVANIA GROWTH FUND PERFORMANCE COMPARISON VS. S&P 500*
GROWTH OF HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-92 Dec-92 Mar-93 Jun-93 Sep-93 Dec-93 Mar-94 Jun-94
------ ------ ------ ------ ------ ------ ------ ------
HomeState
Pennsylvania
Growth Fund 9496.68 10322.89 10446.35 10427.35 11743.16 12291.17 12051.49 11859.74
S&P 500 10000.00 10504.86 10965.86 11018.08 11302.22 11564.84 11127.91 11173.42
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94 Dec-94 Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96
------ ------ ------ ------ ------ ------ ------ ------
HomeState
Pennsylvania
Growth Fund 12671.50 12525.18 13110.47 15295.55 17148.04 18083.12 18948.53 21415.00
S&P 11718.81 11716.16 12855.43 14080.65 15198.50 16112.16 16976.33 17735.98
</TABLE>
TOP TEN HOLDINGS AS OF JUNE 30, 1996
ISSUE % OF FUND ISSUE % OF FUND
- ----- --------- ----- ---------
1. Safeguard Scientifics, Inc. 3.67% 6. Genrad, Inc. 1.82%
2. Technitrol, Inc. 2.18% 7. Charter Power Systems, Inc. 1.71%
3. Penn Treaty American Corp. 1.95% 8. Right Management Consultants 1.70%
4. Met-Pro Corp. 1.88% 9. Bel Fuse, Inc. 1.67%
5. Harsco Corp. 1.84% 10. Sungard Data Systems,Inc. 1.67%
3
- ---------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
REPORT FROM MANAGEMENT
- ---------------------------------------------------------------------------
July 31, 1996
Dear Shareholder:
We are pleased to report the performance results for the HomeState
Pennsylvania Growth Fund's fourth fiscal year. The total return without
adjustments for sales charges for the twelve-month period ended June 30,
1996 was 39.94%, substantially better than market benchmarks such as the
Standard & Poor's 500 Index return of 25.96% and the Wilshire 5000 Index (a
composite of all issues traded on the New York, American and NASDAQ
exchanges) return of 26.24%. The Fund's results were also substantially
higher than the Russell 2000 ( a small company index), which was up 23.94%
including reinvested dividends, and the Morningstar Growth Funds average,
which was up 23.10%. Including the Fund's full 5.0% sales charge over the
period, the Fund was up 32.94%.
Performance results for the Fund for periods ended June 30, 1996 are as
follows:
AVERAGE ANNUALIZED RETURNS
---------------------------- CUMULATIVE
SINCE TOTAL
INCEPTION RETURNS
FUND/INDEX ONE YEAR THREE YEARS 10/1/92 SINCE 10/1/92
- ---------- -------- ----------- ------- -------------
HomeState PA Growth (at N.A.V.) + 39.94% + 27.13% + 24.20% + 125.42%
HomeState PA Growth + 32.94% + 24.98% + 22.51% + 114.15%
(at Maximum Offering Price)
Standard & Poor's 500 Index + 25.96% + 17.20% + 16.50% + 77.29%
Wilshire 5000 Index + 36.47% + 16.80% + 16.90% + 79.58%
Morningstar Growth Funds Ave. + 30.74% + 15.16% + 15.81% + 73.38%
The Standard & Poor's 500 and Wilshire 5000 indices are unmanaged stock
market indices and their returns assume the reinvestment of all dividends.
The Morningstar Growth Funds average is a composite average of 836, 489,
and 403 growth-oriented funds over the one year, three year, and since
inception (10/1/92) time periods, respectively. Please keep in mind that
past performance is no guarantee of future results and investment return
and principal value will fluctuate so that shares may be worth more or less
than their original value. Some of the Fund's returns are higher due to
the manager's maintenance of expenses.
These performance results helped your HomeState Fund receive national
attention in the last few months. The Fund was cited by Lipper Analytical
Services, Inc. as one of the Top 15 Growth Funds in the nation, ranking #13
of 619 funds measured for the one year period ended June 30, 1996 and #4 of
379 growth funds for the three-year period also ended June 30th. And
finally, Morningstar, Inc. awarded the Fund their highest rating, a Five
4
- ---------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
REPORT FROM MANAGEMENT
- ---------------------------------------------------------------------------
Star (*****) rating for the three year period ended June 30th. Only 10% of
the 1,848 equity funds measured received five stars. For the one year
period ended June 30th, the Fund received a Three Star (***) rating out of
2,882 equity funds.*
As these results reflect, the stock market environment has been almost
ideal for investors through the month of June. The lowering of interest
rates since the Spring of 1995, a lack of inflationary pressures and
accelerating earnings had resulted in considerably above-average returns.
The market highs of April and May were accentuated by "momentum players"
who weren't making long-term investment decisions but rather pushing stocks
higher based on favorable technical charts. The market drop since these
highs has been sharp and we finally have a correction greater than 10% as
this letter is written. While this correction has been mainly concentrated
in the NASDAQ exchange, all market participants have certainly felt the
pain. It is natural that the leadership stocks of this market be subjected
to profit-taking. The strength of this market has been centered in
technology stocks as well as the small-cap issues and therefore the
correction has been exacerbated by a lack of liquidity in many of these
issues.
In our opinion, the stock market remains undervalued on a price-to-earnings
basis, as it trades at less than 16 times trailing earnings as we end July.
We also believe the market is also undervalued on a price-to-cash flow
basis, assuming that both earnings and cashflow are still increasing. This,
of course, is the current dilemma for all stock market participants. As has
been the usual case with each earnings period for the last two years, the
market displays signs of nervousness during the final week of the quarter
and the first two weeks of the reporting period, as the early negative
earnings reports saturate the marketplace. While this time period is never
easy, this particular period has generated extra concerns due to the market
heights and the lack of strength in the bond market.
Stock market "Bears" are pointing to many indicators for signs of weakness.
Included is the lack of Dow Jones Industrial Index and Standard & Poor's
500 Index gains since mid-February, even given the record billions of new
cash flowing into mutual funds (in fact, the inflows for the first six
months of 1996 have exceeded the entire amount for 1995). Also cited are
the churning at the market high in May, the commodity price increases in
1996, higher interest rates, extreme increases in employment numbers and
housing starts. While we could negate each such argument in terms of
expectations for the second half (we believe economic growth will slow from
the first half), the real keys and therefore the real problems for market
"Bulls" are wage inflation and earnings growth.
Our philosophy remains in place to invest in the best growth companies with
pricing power and an ability to control their pricing points and therefore
their own destiny. These companies are usually niche players and market-
share leaders. We are also looking for stable growth companies: stability
of earnings means less risk and more confidence in earnings estimates. In a
time of such anxiety about the stock market, we are pleased that so many of
these leading growth companies are found right here in our own backyard.
Our in-depth, on-site research is a crucial part of our process of reducing
potential risk.
5
- ---------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
REPORT FROM MANAGEMENT
- ---------------------------------------------------------------------------
Finally, we are pleased to note that the Fund's total assets have risen by
more than 160% for the fiscal year 1996, and Emerald Advisers, Inc., the
Fund's investment adviser, now manages more than $150 million for
individual and institutional investors. We welcome our many new
shareholders to the HomeState family. As always, we thank you for your
confidence and support, and welcome your comments or questions.
Sincerely,
/s/ Kenneth G. Mertz II
Kenneth G. Mertz II
Chief Investment Officer
*Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 6/30/96. The ratings are subject to change every
month. Past performance is no guarantee of future results. Morningstar
ratings are calculated from the fund's three-, five-, and ten- year
average annual returns (if applicable) in excess of 90-day Treasury bill
returns with appropriate fee adjustments, and a risk factor that reflects
fund performance below 90-day T-bill returns.
6
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
COMMON STOCK - 88.1%
COMMUNICATIONS & BROADCASTING - 3.9%
American Telecasting, Inc.#*............ 22,200 $ 294,150
Comcast Corp., Special (A Shares)*...... 37,650 696,525
EZ Communications, Inc. (A Shares)#*.... 10,000 237,500
Palmer Wireless, Inc. (A Shares)#*...... 3,000 60,000
People's Choice TV Corp.#*.............. 17,000 310,250
Tel-Save Holdings, Inc.*................ 10,000 212,500
Wireless Cable of Atlanta, Inc.#*....... 21,800 359,700
-------------
2,170,625
-------------
FINANCE, INSURANCE & REAL ESTATE - 12.1%
INSURANCE CARRIERS - 5.1%
American Travellers Corp.*.............. 31,250 718,750
Donegal Group, Inc...................... 19,900 343,275
Penn-America Group, Inc................. 30,000 498,750
Penn Treaty American Corp.*............. 50,750 1,091,125
Walshire Assurance Co................... 14,350 218,837
-------------
2,870,737
-------------
LIFE INSURANCE - 0.3%
Provident American Corp.*............... 17,700 183,637
-------------
NATIONAL COMMERCIAL BANKS - 1.4%
First Capitol Bank/York, PA*............ 4,800 108,000
Mellon Bank Corp........................ 11,450 652,650
-------------
760,650
-------------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 1.9%
Parkvale Financial Corp................. 9,108 229,977
Patriot Bank Corp....................... 21,500 274,125
Prime Bancorp, Inc...................... 10,255 190,358
Sovereign Bancorp, Inc.................. 16,537 165,370
York Financial Corp..................... 11,650 195,139
-------------
1,054,969
-------------
STATE & NATIONAL BANKS - 3.4%
BT Financial Corp....................... 5,483 185,051
Commerce Bancorp, Inc.#................. 14,825 348,387
First Colonial Group, Inc............... 11,481 212,398
Kish Bancorp............................ 600 30,600
Omega Financial Corp.................... 6,000 198,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 7
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
Sun Bancorp, Inc........................ 12,090 $ 361,189
Susquehanna Bancshares, Inc............. 20,000 535,001
-------------
1,870,626
-------------
TOTAL FINANCE, INSURANCE & REAL ESTATE............ 6,740,619
-------------
MANUFACTURING - 44.3%
CHEMICALS & ALLIED PRODUCTS - 1.9%
MacDermid, Inc.#........................ 7,400 518,000
OM Group, Inc.#......................... 13,500 529,875
-------------
1,047,875
-------------
COMMUNICATION EQUIPMENT - 0.3%
C-COR Electronics, Inc.*................ 10,900 196,200
-------------
COMPUTER & OFFICE EQUIPMENT - 9.0%
Black Box Corp.*........................ 16,200 384,750
HDS Network Systems, Inc.*.............. 28,000 245,000
Iomega Corp.#*.......................... 25,000 725,000
Nocopi Technologies, Inc.*.............. 70,000 55,300
SI Handling Systems, Inc................ 33,850 346,963
Safeguard Scientifics, Inc.*............ 26,300 2,051,400
SubMicron Systems, Inc.*................ 69,800 610,750
Tseng Laboratories, Inc.*............... 60,000 577,500
-------------
4,996,663
-------------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 2.6%
Cohu, Inc.#............................. 20,500 415,125
Genrad, Inc.#*.......................... 61,500 1,014,750
-------------
1,429,875
FOOD & BEVERAGE - 1.4%
Hershey Foods Corp...................... 11,000 807,124
-------------
IRON & STEEL - 0.6%
Carpenter Technology Corp............... 11,100 355,200
-------------
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES - 13.4%
Allen Organ Co. (B Shares).............. 9,300 363,863
AMETEK, Inc............................. 26,500 576,375
AMP, Inc................................ 7,600 304,950
Amphenol Corp. (A Shares)#*............. 15,500 356,500
Bel Fuse, Inc.#*........................ 55,360 934,200
Berg Electronics Corp.#*................ 8,000 190,000
Cable Design Technologies*.............. 20,700 677,925
Charter Power Systems, Inc.............. 27,500 955,625
8 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
Emcee Broadcast Products, Inc.*......... 96,900 $ 750,975
Harsco Corp............................. 15,300 1,028,925
JPM Company*............................ 14,100 118,088
Technitrol, Inc......................... 30,700 1,216,488
-------------
7,473,914
-------------
MISCELLANEOUS INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
York International Corp................. 11,000 569,250
-------------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 0.7%
Penn Engineering & Manufacturing Corp.
(A Shares) 5,200 122,850
Penn Engineering & Manufacturing Corp.*. 15,600 294,450
-------------
417,300
-------------
OPTICAL & OPHTHALMIC GOODS, PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.9%
II-VI, Inc.*............................ 31,000 499,875
-------------
PETROLEUM REFINING - 0.4%
Tesoro Petroleum Corp.#*................ 21,500 247,250
-------------
PHARMACEUTICAL PREPARATIONS - 3.1%
Aronex Phamaceuticals, Inc.#*........... 40,000 210,000
Centocor, Inc.*......................... 20,500 612,438
IBAH, Inc.*............................. 56,500 452,000
Integra Lifesciences Corp.#*............ 11,000 107,250
Magainin Pharmaceuticals, Inc.*......... 10,000 105,000
Neose Technologies, Inc.*............... 11,500 235,750
-------------
1,722,438
-------------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 2.7%
Arrow International, Inc................ 10,000 270,000
Healthdyne Technologies, Inc.#*......... 29,500 383,500
Medical Technology and Innovations, Inc.* 145,000 435,000
Respironics, Inc.*...................... 22,000 407,000
-------------
1,495,500
-------------
RUBBER & PLASTICS - 0.4%
Tuscarora, Inc.......................... 12,000 253,500
-------------
SPECIAL INDUSTRIAL MACHINERY - 1.9%
Met-Pro Corp............................ 56,300 1,048,587
-------------
TELECOMMUNICATIONS EQUIPMENT - 0.6%
Tollgrade Communications, Inc.*......... 14,000 322,000
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 9
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
TEXTILES & APPAREL - 0.9%
Jones Apparel Group, Inc.*.............. 10,000 $ 491,250
-------------
TRANSPORTATION - 0.8%
Buckeye Partners, L.P................... 12,000 456,000
-------------
TRANSPORTATION EQUIPMENT - 1.7%
JLG Industries, Inc..................... 12,500 928,124
-------------
TOTAL MANUFACTURING............................... 24,757,925
-------------
REAL ESTATE INVESTMENT TRUSTS - 1.1%
Liberty Property Trust.................. 29,700 590,288
-------------
SERVICES - 18.1%
BUSINESS SERVICES - 3.0%
CRW Financial, Inc.*.................... 12,325 425,213
Physician Support Systems, Inc.*........ 13,000 294,125
Right Management Consultants*........... 26,000 949,000
-------------
1,668,338
-------------
COMPUTER SERVICES - 8.3%
Ansoft Corp.*........................... 48,500 351,625
Ansys, Inc.*............................ 9,000 118,125
Astea International, Inc.*.............. 13,500 327,375
Datastream Systems, Inc.#*.............. 15,000 528,750
DecisionOne Holdings Corp.*............. 25,900 615,125
Fore Systems, Inc.*..................... 5,000 180,625
Integrated Systems Consulting Group,
Inc.*................................. 6,383 124,468
Metatools, Inc.#*....................... 14,000 329,000
Microleague Multimedia, Inc.*........... 15,000 101,250
Physician Computer Network, Inc.#*...... 22,000 254,375
SCI Systems, Inc.#*..................... 15,000 609,375
STB Systems, Inc.#*..................... 10,500 179,812
Sungard Data Systems, Inc.*............. 23,200 930,900
-------------
4,650,805
-------------
ENGINEERING SERVICES - 0.6%
Astrotech International Corp.*.......... 63,766 358,684
-------------
FINANCE SERVICES - 0.5%
DVI, Inc.*.............................. 19,500 307,125
-------------
10 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
HOME HEALTHCARE SERVICES - 1.0%
Amercian Homepatient, Inc.#*............ 8,000 $ 354,000
Home Health Corp.*...................... 13,700 185,806
-------------
539,806
-------------
MEDICAL & HEALTH SERVICES - 4.7%
Apria Healthcare Group, Inc.#*.......... 6,500 203,937
Community Care of America, Inc.#*....... 24,000 288,000
Corecare Systems, Inc.*................. 70,000 175,000
Genesis Health Ventures, Inc.*.......... 23,700 743,588
Mariner Health Group, Inc.#*............ 8,000 147,000
PMR Corp.#*............................. 6,000 62,250
Renal Treatment Centers, Inc.*.......... 15,500 445,625
SMT Health Services, Inc.*.............. 64,300 546,550
-------------
2,611,950
-------------
TOTAL SERVICES.................................... 10,136,708
-------------
ELECTRIC, GAS & WATER UTILITIES - 1.0%
Philadelphia Suburban Corp.............. 22,000 544,500
-------------
WHOLESALE & RETAIL TRADE - 7.6%
MISCELLANEOUS RETAIL STORES - 2.2%
National Media Corp.*................... 48,000 846,000
Rite Aid Corp........................... 12,000 357,000
-------------
1,203,000
-------------
RETAIL APPAREL & ACCESSORY STORES - 1.8%
Mothers Work, Inc.*..................... 14,000 357,000
Piercing Pagoda, Inc.*.................. 35,900 664,150
-------------
1,021,150
-------------
WHOLESALE CHEMICALS & DRUGS - 1.4%
AmeriSource Health Corp. (A Shares)*.... 23,400 778,050
-------------
WHOLESALE MISCELLANEOUS - 2.2%
Alco Standard Corp...................... 17,300 782,825
APS Holding Corp.#*..................... 8,000 176,000
VWR Scientific Products Corp.*.......... 18,250 292,000
-------------
1,250,825
-------------
TOTAL WHOLESALE & RETAIL TRADE ................... 4,253,025
-------------
TOTAL COMMON STOCK (COST $38,182,007)............. 49,193,690
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 11
- -------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1996
- -------------------------------------------------------------------------
MARKET
SHARES VALUE**
------ -------
MONEY MARKET MUTUAL FUNDS - 10.6%
CoreFund Treasury Reserve Portfolio..... 2,000,000 $ 2,000,000
CoreFund Fiduciary Reserve Portfolio.... 1,850,000 1,850,000
SEI Liquid Asset Trust - Government
Portfolio.............................. 2,060,741 2,060,741
-------------
TOTAL MONEY MARKET MUTUAL FUNDS (COST $5,910,741).. 5,910,741
-------------
TOTAL INVESTMENTS (COST $44,092,748) - 98.7%............ 55,104,431
-------------
OTHER ASSETS AND LIABILITIES, NET - 1.3%................ 723,622
-------------
NET ASSETS - 100.0%..................................... $ 55,828,053
-------------
** See Note 2 to Financial Statements.
* Non-income producing security.
# Non-Pennsylvania Company as defined in the Fund's current prospectus
(the aggregate of value of such securities amounted to $10,373,936 as
of June 30, 1996).
12 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996
- ------------------------------------------------------------------------------
ASSETS
Investments in securities at market
value (cost $44,092,748).................. $55,104,431
Cash....................................... 181,328
Receivables for:
Dividends and interest.................... 34,866
Investment securities sold................ 89,563
Capital shares sold....................... 2,091,672
-----------
Total Assets............................. 57,501,860
-----------
LIABILITIES
Payables for:
Investment securities purchased........... 1,511,380
Capital shares repurchased................ 14,604
Accrued expenses........................... 147,823
-----------
Total Liabilities........................ 1,673,807
-----------
NET ASSETS................................. $55,828,053
===========
NET ASSETS CONSISTED OF:
Shares of beneficial interest, no par
value, 50,000,000 authorized; 2,627,170
issued and outstanding.................... $41,223,258
Accumulated net realized gain on
investments............................... 3,593,112
Unrealized appreciation on investments..... 11,011,683
-----------
Net Assets............................... $55,828,053
===========
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE ($55,828,053/2,627,170 shares)...... $21.25
======
Maximum offering price per share
(100/95 of net asset value per share)..... $22.37
======
See accompanying Notes to Financial Statements 13
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends................................. $352,171
Interest.................................. 64,499
-----------
Total Investment Income................ 416,670
-----------
EXPENSES
Advisory fees............................. 246,310
12b-1 fees................................ 115,867
Administration fees....................... 31,973
Transfer agent fees....................... 60,211
Custodial fees............................ 31,586
Accounting services fees.................. 35,362
Professional fees......................... 38,321
Printing expenses......................... 8,932
Registration fees......................... 7,612
Trustees fees and expenses................ 6,070
Miscellaneous expenses.................... 23,757
-----------
Total Expenses......................... 606,001
-----------
NET INVESTMENT LOSS........................ (189,331)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investment
transactions............................. 3,898,165
Change in unrealized appreciation
on investments........................... 7,151,550
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS............................... 11,049,715
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................. $10,860,384
===========
14 See accompanying Notes to Financial Statements
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30,1995
------------- ------------
OPERATIONS
Net investment loss....................... $(189,331) $ (14,949)
Net realized gain on investment
transactions............................. 3,898,165 442,297
Change in unrealized appreciation
on investments........................... 7,151,550 3,570,194
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................... 10,860,384 3,997,542
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:+
Net realized gain from investment
transactions............................. (747,908) (174,096)
----------- -----------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS - Note 3............... 25,327,678 6,672,056
----------- -----------
TOTAL INCREASE IN NET ASSETS............... 35,440,154 10,495,502
NET ASSETS:
Beginning of year......................... 20,387,899 9,892,397
----------- -----------
End of year............................... $55,828,053 $20,387,899
=========== ===========
+ Does not include $998,584 short-term capital gain ($0.37 per share)
and $2,375,010 long-term capital gain ($0.88 per share) distributed
July 22, 1996 to shareholders of record as of July 15, 1996.
See accompanying Notes to Financial Statements 15
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
PERIODS ENDED
------------------------------------------
6/30/96 6/30/95 6/30/94 6/30/93+
------- ------- ------- --------
Net asset value at
beginning of period............... $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------
Income from Investment Operations
- ---------------------------------
Net investment income (loss)....... (0.07) (0.01) (0.03) 0.03
Net realized and unrealized
gains on investments.............. 6.17 3.54 1.53 0.95
------ ------ ------ ------
Total from investment operations. 6.10 3.53 1.50 0.98
------ ------ ------ ------
Less Distributions
- ------------------
Dividends from net investment
income........................... 0.00 0.00 (0.03) 0.00
Distributions from net realized
gains............................ (0.53) (0.22) (0.08) 0.00
------ ------ ------ ------
Total distributions.............. (0.53) (0.22) (0.11) 0.00
------ ------ ------ ------
Net asset value at end of period... $21.25 $15.68 $12.37 $10.98
====== ====== ====== ======
Total return**..................... 39.94% 28.96% 13.75% 13.07%*
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)................... $55,828 $20,388 $9,892 $3,026
Ratio of expenses to average
net assets before
reimbursement by Adviser.......... 1.85% 2.00% 2.67% 7.85%*
Ratio of expenses to average
net assets after
reimbursement by Adviser.......... na++ 1.91% 2.23% 1.87%*
Ratio of net investment loss
to average net assets before
reimbursement by Adviser.......... (0.58)% (0.20)% (0.76)% (5.24)%*
Ratio of net investment income
(loss) to average net assets
after reimbursement by Adviser.... na++ (0.10)% (0.32)% 0.74%*
Average commission rate paid....... $0.0961 - - -
Portfolio turnover rate............ 66% 51% 51% 63%
+ From commencement of operations: October 1, 1992.
* Annualized.
** Total return does not reflect 5.0% maximum sales charge.
++ Not applicable: no reimbursements were made by the Adviser.
16 See accompanying Notes to Financial Statements
- ------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996
- ------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF FUND
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.
The investment 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. Under normal circumstances, the Fund will invest at
least 65% of its total assets in such companies. Consequently, the
Fund may be subject to risk from economic changes and political
developments occurring within Pennsylvania.
NOTE 2 - SIGNIFICANT ACCOUNTING PRINCIPLES
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 mean between the
closing asked price and the closing 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 mean between the closing
asked price and the closing 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, net investment loss of $189,331 for
17
- ------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1996
- ------------------------------------------------------------------------
the fiscal year ended June 30, 1996 has been charged to paid-in
capital. This reclassification has 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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 3 - CAPITAL STOCK
At June 30, 1996, there were 50,000,000 authorized shares of
beneficial interest with no par value. As of June 30, 1996, the Fund
had 2,627,170 shares issued and outstanding. Capital share
transactions for the fiscal years ended June 30, 1996 and June 30,
1995 were:
FOR THE FISCAL YEAR FOR THE FISCAL YEAR
ENDED JUNE 30, 1996 ENDED JUNE 30, 1995
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------
Sales..................... 1,551,022 $29,459,053 670,899 $9,021,148
Reinvested distributions.. 41,712 681,175 13,102 161,946
Redemptions............... (265,566) (4,812,550) (183,880) (2,511,038)
--------- ----------- -------- ----------
Net increase.............. 1,327,168 $25,327,678 500,121 $6,672,056
========= =========== ======== ==========
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term
investments, aggregated $39,153,336 and $20,947,081, respectively, for
the fiscal year ended June 30, 1996.
At June 30, 1996, net unrealized appreciation for reporting and
Federal income tax purposes aggregated $11,011,683, of which
$12,107,658 related to appreciated securities and $1,095,975 related
to depreciated securities.
NOTE 5 - 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
18
- ------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1996
- ------------------------------------------------------------------------
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 fiscal
year ended June 30, 1996, the Fund had incurred investment advisory
fees of $246,310. Under the terms of the investment advisory agreement
which expires on December 31, 1996, 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
fiscal year ended June 30, 1996, the Adviser made no voluntary
expense reimbursements. At June 30, 1996, Emerald Advisers, Inc.
owned 100 shares of the Fund.
Rodney Square Distributors, Inc. ("RSD"), a wholly owned subsidiary of
Wilmington Trust Company, is the sole distributor of Fund shares
pursuant to a Distribution Agreement with the Fund dated as of
November 20, 1995. The Fund has adopted a distribution services plan
(the "Plan") under Rule 12b-1 of the Investment Company Act of 1940.
The Plan allows the Fund to reimburse RSD 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 period from November 20,
1995, through June 30, 1996, the Fund incurred expenses totaling
$84,202 pursuant to the Plan. Prior to November 20, 1995, Fund/Plan
Broker Services, Inc. served as the principal underwriter and
distributor of Fund shares. During the period from July 1, 1995,
through November 19, 1995, the Fund incurred expenses totaling $31,665
pursuant to the Plan.
Pursuant to separate Administration, Accounting Services and Transfer
Agency Agreements with the Fund, each dated November 20, 1995, Rodney
Square Management Corporation ("RSMC"), a wholly owned subsidiary of
Wilmington Trust Company, serves as administrator, accounting and
transfer agent. During the period from November 20, 1995 through June
30, 1996, the Fund paid RSMC administration fees totaling $31,973,
accounting services fees totaling $24,592 and transfer agent fees
totaling $49,959.
Prior to November 20, 1995, Fund/Plan Services, Inc. served as the
transfer and dividend disbursing agent and provided accounting and
pricing services for the Fund. During the period from July 1, 1995
through November 19, 1995, the Fund paid Fund/Plan Services, Inc.
transfer agency fees totaling $10,252, and accounting and pricing
services fees totaling $10,770.
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. 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.
Legal fees aggregating $21,308 during the fiscal year ended June 30,
1996 were paid to Duane, Morris & Heckscher.
19
<PAGE>
(THIS PAGE LEFT INTENTIONALLY BLANK)
<PAGE>
- ------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
--------------------------------------
INVESTMENT ADVISER BOARD OF TRUSTEES:
------------------ ------------------
EMERALD ADVISERS, INC. BRUCE E. BOWEN
LANCASTER, PA KENNETH G. MERTZ II, CFA
SCOTT C. PENWELL, Esq.
DISTRIBUTOR SCOTT L. REHR
----------- H.J. ZOFFER, PHD
RODNEY SQUARE DISTRIBUTORS, INC.
WILMINGTON, DE FUND MANAGEMENT
---------------
ADMINISTRATOR AND EMERALD ADVISERS, INC.
TRANSFER AGENT 1857 WILLIAM PENN WAY
---------------- P.O. BOX 10666
RODNEY SQUARE MANAGEMENT CORPORATION LANCASTER, PA 17605
WILMINGTON, DE
SHAREHOLDER SERVICES
CUSTODIAN --------------------
--------- RODNEY SQUARE MANAGEMENT CORPORATION
CORESTATES FINANCIAL CORP. P.O. BOX 8987
PHILADELPHIA, PA WILMINGTON, DE 19899-9752
INDEPENDENT ACCOUNTANTS TELEPHONE NUMBERS
----------------------- -----------------
PRICE WATERHOUSE LLP THE FUND (800) 232-0224
PHILADELPHIA, PA THE FUND (VIA
THE INTERNET) [email protected]
LEGAL COUNSEL MARKETING / BROKER
------------- SERVICES (800) 232-OK-PA
DUANE, MORRIS & HECKSCHER SHAREHOLDER
HARRISBURG, PA SERVICES (800) 892-1351
DAILY NEWSPAPER QUOTES
----------------------
"HomeStPA"
SYMBOL: HSPGX
THIS REPORT IS FOR THE GENERAL INFORMATION OF FUND SHAREHOLDERS. FOR MORE
DETAILED INFORMATION ABOUT THE FUND, PLEASE CONSULT A COPY OF THE FUND'S
CURRENT PROSPECTUS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY A COPY OF
THE CURRENT PROSPECTUS.
- ------------------------------------------------------------------------------
<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.
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.
<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
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
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
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
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
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
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
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
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
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
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
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
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
<PAGE>
EXHIBITS AND PART C OF N1-A REGISTRATION STATEMENT
THE HOMESTATE GROUP
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements:
Included in Part A of this Registration Statement:
Financial Highlights for the period October 1, 1992 (Commencement
of Operations) to June 30, 1993 and for each of the three years in
the period ended June 30, 1996.
Included in Part B of this Registration Statement:
Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations, for the fiscal year ended June 30, 1996
Statement of Changes in Net Assets, for the fiscal years ended
June 30, 1995 and June 30, 1996
Financial Highlights for the period October 1, 1992 (Commencement
of Operations) to June 30, 1993 and for each of the three years in
the period ended June 30, 1996.
Notes to Financial Statements
(b.) Exhibits:
1. Declaration of Trust, dated August 26, 1992, and joinder of
additional trustees (Incorporated by reference to Exhibit 1 to Pre-
Effective Amendment No. 3 to this Registration Statement filed on
September 25, 1992.)
2. None
3. None
4. Form of Certificate of Common Stock(Incorporated by reference to
Exhibit 4 to Pre-Effective Amendment No. 3 to this Registration
Statement filed on September 25, 1992.)
5. Investment Advisory Agreement (Incorporated by reference to
Exhibit 5 to Pre-Effective Amendment No. 3 to this Registration
Statement filed on September 25, 1992.)
6. (a) Distribution Agreement between The HomeState Group and Rodney
Square Distributors, Inc. dated November 20, 1995
(b) Form of Selected Dealer Agreement*
7. None
8. Custody Agreement between The HomeState Group and CoreStates
Financial Corp. (Incorporated by reference to Exhibit 8 to Pre-
Effective Amendment No. 3 to this Registration Statement filed on
September 25, 1992.)
9. (a) Transfer Agency Agreement The HomeState Group and Rodney
Square Management Corporation dated November 20, 1995.
(b) Accounting Services Agreement The HomeState Group and Rodney
Square Management Corporation dated November 20, 1995.
(c) Administration Agreement The HomeState Group and Rodney Square
Management Corporation dated November 20, 1995.
10. None
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS CONTINUED
11. Consent of Price Waterhouse LLP
12. None
13. Subscription Agreement (Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to this Registration Statement filed
on September 25, 1992.)
14. None
15. Rule 12b-1 Plan (Incorporated by reference to Exhibit 15 to Pre-
Effective Amendment No. 3 to this Registration Statement filed on
September 25, 1992.)
16. Schedule for Computation of Performance Quotation
17. Financial Data Schedule
18. None
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF AUGUST 31, 1996)
(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
Shares of beneficial
interest $.01 par value
The HomeState Pennsylvania 4,439
Growth Fund
ITEM 27. INDEMNIFICATION
The Declaration of Trust (filed as Exhibit 1) provides for indemnification
of Trustees, as set forth in Section 13 thereof.
The Registrant's Distribution Agreement (filed as Exhibit 6) provides for
indemnification of the principal underwriter against certain losses, as set
forth in Section 8 thereof.
It is expected that the Registrant will obtain a directors' and officers'
liability policy covering specific types of errors and omissions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to such provisions of the Declaration of Trust,
Distribution Agreement, or statutes or otherwise, the Registrant has been
advised that in the opinion of a Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any such action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the shares of the Registrant, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
said Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Emerald Advisers, Inc. performs investment advisory services for the
Registrant and certain other investment advisory clients. Emerald
Advisers, Inc. also serves as General Partner to Emerald Partners, L.P., a
Pennsylvania-chartered investment limited partnership.
As Emerald Advisers, Inc. is a wholly-owned corporation (incorporated on
November 14, 1991), each director and officer of the corporation has held
various positions with other companies prior to the founding of Emerald
Advisers, Inc. Information as to the directors and officers of Emerald
Advisers, Inc. is included in its Form ADV filed on November 14, 1991and
most recently supplemented on May 31, 1996 with the Securities Exchange
Commission File No. 801-40263 and is incorporated by reference herein.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The Rodney Square Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund
The Rodney Square Tax-Exempt Fund
1838 Investment Advisors Funds
Heitman Real Estate Fund, Institutional Class
Kiewit Mutual Fund
The Olstein Funds
(b)
(1) (2) (3)
Name and Principal Position and Offices with Position and Offices
BUSINESS ADDRESS RODNEY SQUARE DISTRIBUTORS, INC. WITH REGISTRANT
Jeffrey O. Stroble President, Secretary, None
1105 North Market St. Treasurer & Director
Wilmington, DE 19890
Martin L. Klopping Director None
Rodney Square North
1100 North Market St.
Wilmington, DE 19890
Neil Curran Vice President None
1105 North Market St.
Wilmington, DE 19890
(c) None.
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
Certain accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder and the records relating to the duties of the
Registrant's transfer agent will be maintained by Rodney Square Management
Corporation, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001. Records relating to the duties of the Registrant's
custodian will be maintained by CoreStates Financial Corp., P.O. Box 7558,
Philadelphia, PA 19101-7558.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32 UNDERTAKINGS
The Registrant will undertake to call a special meeting of shareholders if
shareholders representing at least 10% of the Registrant's outstanding
voting shares request such a meeting for the purpose of voting on the
removal of a Trustee or Trustees. Under such circumstances, the Registrant
will assist in shareholder communications as required by Section 16(c) of
the Act.
The Registrant hereby undertakes to furnish a copy of the Registrant's
Annual Report to shareholders and to each person to whom a copy of the
Registrant's Prospectus is deliverd, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Lancaster, and State of Pennsylvania, on the 30th day of September, 1996.
THE HOMESTATE GROUP
By: /s/ Scott L. Rehr
Scott L. Rehr, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Scott L. Rehr President (Principal September 27, 1996
Scott L. Rehr Executive Officer)
and Trustee
/s/ Bruce E. Bowen
Bruce E. Bowen Trustee September 25, 1996
/s/ Kenneth G. Mertz Vice President,
Kenneth G. Mertz CIO, and Trustee September 27, 1996
/s/ Scott C. Penwell
Scott C. Penwell, Esq. Trustee September 26, 1996
/s/ H.J. Zoffer
H.J. Zoffer Trustee September 24, 1996
<PAGE>
Form N-lA
Exhibit Index
Exhibit
Number Description of Document Page
- ------- ----------------------- ----
6(a) Distribution Agreement
6(b) Form of Selected Dealer Agreement
9(a) Transfer Agency Agreement
9(b) Accounting Services Agreement
9(c) Administration Agreement
11 Consent of Independent Accountants
16 Schedule for Computation of Performance
Quotation
17 Financial Data Schedule
Exhibit 6(a)
THE HOMESTATE GROUP
RODNEY SQUARE DISTRIBUTORS, INC.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of the 20th day of November,
1995, between The HomeState Group , a Pennsylvania common law trust (the
"Trust"), having its principal place of business in Lancaster,
Pennsylvania, and Rodney Square Distributors, Inc., a corporation organized
under the laws of the State of Delaware (the "Distributor"), having its
principal place of business in Wilmington, Delaware.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company and offers for public sale one or more distinct, series of shares
of beneficial interest ("Series") each corresponding to a distinct
portfolio;
WHEREAS, each share of a Series represents an undivided interest in the
assets, subject to the liabilities, allocated to that Series and each
Series has a separate investment objective and policies;
WHEREAS, at the present time, the Trust exists of one Series, (each a
"Portfolio," and two or more together "Portfolios");
WHEREAS, the Trust wishes to employ the services of Distributor, with
such assistance from its affiliates as the latter may provide, such
employment to take effect as of November 20, 1995; and
WHEREAS, Distributor wishes to provide distribution services to the
Trust as set forth below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties agree as follows:
1. SALE OF SHARES. The Trust grants to the Distributor the right to
sell shares of beneficial interest of all Series of the Trust, now or
hereafter created, (the "Shares") on its behalf during the term of this
Agreement and subject to the registration requirements of the Securities
Act of 1933, as amended (the "1933 Act"), and of the laws governing the
sale of securities in various states (the "Blue Sky Laws") under the
following terms and conditions: the Distributor (i) shall have the right
to sell, as agent on behalf of the Trust, Shares authorized for issue and
registered under the 1933 Act and applicable Blue Sky Laws; and (ii) shall
sell such Shares only in compliance with the terms set forth in the Trust's
currently effective registration statement any Plan of Distribution of the
Trust or its series ("Plan") as may be in effect from time to time and any
further limitations the trustees of the Trust may impose. Distributor may
enter into selling agreements with selected dealers and others for the sale
of Trust Shares and will act only on its own behalf as principal in
entering into such selling agreements.
2. SALE OF SHARES BY THE TRUST. The rights granted to the
Distributor shall be non-exclusive in that the Trust reserves the right to
sell its Shares to investors on applications received and accepted by the
Trust. Further, the Trust reserves the right to issue Shares in connection
with (a) the merger or consolidation of the assets of, or acquisition by
<PAGE>
the Trust through purchase or otherwise, with any other investment company,
trust or personal holding company; and (b) a pro rata distribution directly
to the holders of Shares in the nature of a stock dividend or split-up.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to
issued Shares of all Series of the Trust, Shares of all Series of the Trust
held in its treasury in the event that in the discretion of the Trust
treasury shares shall be sold, and Shares of all Series of the Trust
repurchased for resale.
4. PUBLIC OFFERING PRICE. Except as otherwise noted in the Trust's
current Prospectus (the "Prospectus") or Statement of Additional
Information (the "SAI") with respect to each Series, all Shares sold to
investors by the Distributor or the Trust will be sold at the public
offering price. The public offering price for all accepted subscriptions
will be the net asset value per Share, plus applicable sales load,if any,
determined in the manner described in the Trust's current Prospectus or SAI
with respect to the applicable series. The Trust shall in all cases
receive the net asset value per Share on all sales.
5. SUSPENSION OF SALES. If and whenever the determination of net
asset value is suspended and until such suspension is terminated, no
further orders for Shares shall be processed by the Distributor except such
unconditional orders placed with the Distributor before it had knowledge of
the suspension. In addition, the Trust reserves the right to suspend sales
and the Distributor's authority to process orders for Shares on behalf of
the Trust if, in the judgment of the Trust, it is in the best interests of
the Trust to do so. Suspension will continue for such period as may be
determined by the Trust. In addition, the Trust and Distributor reserve
the right to reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights granted
to the Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for Shares of the
Trust. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. Distributor agrees to use all reasonable
efforts to ensure that taxpayer identification numbers provided for
shareholders of the Trust are correct.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by
the Trust to give any information or to make any representations other than
those contained in the appropriate registration statements, Prospectuses or
SAI's filed with the Securities and Exchange Commission under the 1933 Act
and applicable Blue Sky Laws (as those registration statements,
Prospectuses and SAI's may be amended from time to time), or contained in
shareholder reports or other material that may be prepared by or on behalf
of the Trust for the Distributor's use. This shall not be construed to
prevent the Distributor from preparing and distributing, in compliance with
applicable laws and regulations, sales literature or other material as it
may deem appropriate. Distributor will furnish or cause to be furnished
copies of such sales literature or other material to the President of the
Trust or his designee and will provide him with a reasonable opportunity to
comment on it. Distributor agrees to take appropriate action to cease
using such sales literature or other material to which the Trust reasonably
objects as promptly as practicable after receipt of the objection.
<PAGE>
8. REGISTRATION OF SHARES. The Trust agrees that it will take all
action necessary to register Shares under the 1933 Act (subject to the
necessary approval, if any, of its shareholders) so that there will be
available for sale the number of Shares the Distributor may reasonably be
expected to sell. The Trust shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor
may reasonably request for use in connection with the distribution of
Shares of each series of the Trust.
9. EXPENSES, COMPENSATION AND REIMBURSEMENT
(a)The Trust shall pay all fees and expenses:
(i)in connection with the preparation, setting in type and filing
of any registration statement, Prospectus and SAI under the
1933 Act, and any amendments thereto, for the issue of its
Shares;
(ii) in connection with the registration and qualification of
Shares for sale in the various states in which the Board of
Trustees (the "Trustees") of the Trust shall determine it
advisable to qualify such Shares for sale (including
registering the Trust or Series as a broker or dealer or any
officer of the Trust as agent or salesperson in any state);
(iii)of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Trust in their
capacity as such; and
(iv) of preparing, setting in type, printing and mailing
Prospectuses, SAI's, and any supplements thereto, sent to
existing shareholders.
(b)The Distributor shall pay costs of:
(i)printing and distributing Prospectuses, SAI's and reports
prepared for its use in connection with the offering of the
Shares for sale to the public;
(ii) any other literature used in connection with such offering;
(iii)advertising in connection with such offering including, but
not limited to the following: public relations services, sales
presentations, media charges, preparation, printing and mailing
of advertising and sales literature, data processing necessary
to support a distribution effort, printing and mailing
prospectuses and distribution and shareholder servicing
activities of brokers/dealers and other financial institutions;
and
(iv) any additional out-of-pocket expenses incurred in connection
with these costs.
(c)In addition to the services described above, Distributor will
provide services including assistance in the production of
marketing and advertising materials for the sale of Shares of the
Trust and their review for compliance with applicable regulatory
requirements, entering into dealer agreements with broker-dealers
<PAGE>
to sell Shares of the Trust and monitoring their financial strength
and contractual compliance, providing, directly or through its
affiliates certain investor support services, personal service, and
the maintenance of shareholder accounts.
(d)In connection with the services to be provided by the Distributor
under this Agreement, the Distributor shall receive a fee payable
monthly of $3,000 per annum from the Trust and reimbursement from
the Trust's Investment Advisor which may include without limitation
reimbursement for the expenses incurred pursuant to Section 9(b)
hereof. The Trust authorizes Distributor to debit each Portfolio's
custody account for fees and out-of-pocket expenses which are
rendered for the services performed under this Agreement.
10.INDEMNIFICATION.
(a)The Trust agrees to indemnify and hold harmless the Distributor
and each of its trustees and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
1933 Act against any loss, liability, claim, damages or expense
(including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damages, or expense and reasonable
counsel fees incurred in connection therewith) arising by reason of
any person acquiring any Shares, based upon the 1933 Act or any
other statute or common law, alleging any wrongful act of the Trust
or any of its employees or representatives, or based upon the
grounds that the registration statements, Prospectuses, SAI's,
shareholder reports or other information filed or made public by
the Trust (as from time to time amended) included an untrue
statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements
not misleading. However, the Trust does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of
the Distributor. In no case (i) is the indemnity of the Trust in
favor of the Distributor or any person indemnified to be deemed to
protect the Distributor or any person against any liability to the
Trust or its security holders to which the Distributor or such
person would otherwise be subject by reason of willful misfeasance,
bad faith or ordinary negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this Section 10(a) with
respect to any claim made against the Distributor or any person
indemnified unless the Distributor or person, as the case may be,
shall have notified the Trust in writing of the claim within a
reasonable time after the summons or other first written
notification giving information of the nature of the claim shall
have been served upon the Distributor or any such person or after
the Distributor or such person shall have received notice of
service on any designated agent. However, except to the extent the
Trust is harmed, thereby failure to notify the Trust of any claim
shall not relieve the Trust from any liability which it may have to
the Distributor or any person against whom such action is brought
other than on account of its indemnity agreement contained in this
Section 10(a). The Trust shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the
<PAGE>
defense of any suit brought to enforce any claims, but if the Trust
elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor, or person
or persons, defendant or defendants in the suit. In the event the
Trust elects to assume the defense of any suit and retain counsel,
the Distributor, officers or trustees or controlling person(s) or
defendant(s) in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Trust does not elect
to assume the defense of any suit, it will reimburse the
Distributor, officers or trustee or controlling person(s) or
defendant(s) in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Trust agrees to notify the
Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in
connection with the issuance or sale of any of the Shares.
(b)The Distributor also covenants and agrees that it will indemnify
and hold harmless the Trust and each of its trustees and officers
and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability,
damages, claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages,
claim or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any Shares,
based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its
employees or representatives, or alleging that the registration
statements, Prospectuses, SAI's, shareholder reports or other
information filed or made public by the Trust (as from time to time
amended) included an untrue statement of a material fact or omitted
to state a material fact required to be stated or necessary in
order to make the statements not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity
with, information furnished in writing to the Trust by or on behalf
of the Distributor. In no case (i) is the indemnity of the
Distributor in favor of the Trust or any person indemnified to be
deemed to protect the Trust or any person against any liability to
which the Trust or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of
its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in
this Section 10(b) with respect to any claim made against the Trust
or any person indemnified unless the Trust or person, as the case
may be, shall have notified the Distributor in writing of the claim
within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall
have been served upon the Trust or any such person or after the
Trust or such person shall have received notice of service on any
designated agent. However, failure to notify the Distributor of
any claim shall not relieve the Distributor from any liability
which it may have to the Trust or any person against whom the
action is brought other than on account of its indemnity agreement
contained in this Section 10(b). In the case of any notice to the
Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense
of any suit brought to enforce any claims, but if the Distributor
elects to assume the defense, the defense shall be conducted by
<PAGE>
counsel chosen by it and satisfactory to the Trust, to its officers
and trustees and to any controlling person(s) or any defendants(s)
in the suit. In the event the Distributor elects to assume the
defense of any suit and retain counsel, the Trust or controlling
person(s) or defendant(s) in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the
Distributor does not elect to assume the defense of any suit, it
will reimburse the Trust, its officers or Trustees, controlling
person(s) or defendant(s) in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees
to notify the Trust promptly of the commencement of any litigation
or proceedings against it in connection with the issue and sale of
any of the Shares.
11. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become
effective as of the date first written above, and unless terminated as
provided, shall continue in force for two (2) years from the date of its
execution and thereafter from year to year, provided continuance is
approved at least annually by either (i) the vote of a majority of the
trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Trust, and (ii) the vote of a majority of those
trustees of the Trust who are not interested persons of the Trust and who
are not parties to this Agreement or interested persons of any party, cast
in person at a meeting called for the purpose of voting on the approval.
This Agreement shall automatically terminate in the event of its
assignment. As used in this Section 11, the terms "vote of a majority of
the outstanding voting securities," "assignment" and "interested person"
shall have the respective meanings specified in the 1940 Act and the rules
enacted thereunder as now in effect or as hereafter amended. In addition
to termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated without the payment of any penalty
by vote of a majority of the trustees of the Trust who are not interested
persons of the Trust, or by vote of a majority of the outstanding voting
securities of the Trust, on not more than sixty (60) days' written notice
to the Trust. This Agreement may be terminated by the Distributor upon not
less than sixty (60) days' prior written notice to the Trust.
12. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail,
postage prepaid, to the other party to this Agreement at its principal
place of business.
13. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
14. GOVERNING LAW. To the extent that state law has not been preempted
by the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement shall
be administered, construed and enforced according to the laws of the State
of Delaware.
15. SHAREHOLDER LIABILITY. Distributor acknowledges that it has
received notice of and accepts the limitations of liability set forth in
the Trust's Declaration of Trust. Distributor agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that Distributor
shall have recourse solely against the assets of the Portfolio with respect
to which the Trust's obligations hereunder relate and shall have no
<PAGE>
recourse against the assets of any other Portfolio or against any
shareholder, Trustee, officer, employee, or agent of the Trust.
16. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. This Agreement may be
executed in two counterparts, each of which taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THE HOMESTATE GROUP
By: _____________________________
Scott L. Rehr, President
RODNEY SQUARE DISTRIBUTORS, INC.
By: _____________________________
Jeffrey O. Stroble, President
Acknowledgment as to the reimbursement with
respect to marketing expenses of Rodney Square
Distributors, Inc. as Distributor:
Emerald Advisors, Inc.
as Investment Advisor
By: _____________________________
Kenneth M. Mertz II, President
Date:________________________
Exhibit 6(b)
RODNEY SQUARE DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT FOR NON-PROPRIETARY FUNDS
THIS SELECTED DEALER AGREEMENT is made as of the _____ day of
_______________, 1996, between Rodney Square Distributors, Inc. ("RSD") and
the broker-dealer listed in Schedule B ("BD").
WHEREAS, each company listed on Schedule A hereof (each a "Fund" and
collectively, the "Funds") is registered under the Investment Company Act
of 1940 (the "1940 Act"), as amended as an open-end management investment
company and each Fund is authorized to issue one or more series of shares
of common stock or beneficial interest, as the case may be ("Shares");
WHEREAS, RSD is the exclusive distributor of the Shares pursuant to
certain agreement(s) with the (respective) Fund(s); and
WHEREAS, BD desires to serve as a selected dealer for the Shares;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed among the parties as follows:
1. PURCHASE OF SHARES. BD may, from time to times purchase Shares from
RSD in accordance with the terms of this Agreement. In connection
with each such purchase, BD shall act as principal for its own
account; BD shall have no authority to act as agent for RSD or any of
the Funds. BD agrees that it shall purchase Shares only from RSD,
either directly or through a securities dealer, such as Fund/Serv
("Clearing Broker") with which BD and RSD have established clearing
arrangements. BD agrees to purchase Shares of the Funds only in
transactions contemplating the simultaneous resale of such Shares to
investors and in no event shall BD place orders for Shares unless it
has already received customers orders to purchase Shares at the
applicable Public Offering Price.
2. ACCEPTANCE OF PURCHASE ORDERS. Orders received from BD for the
purchase of Shares ("Purchase Orders") shall be accepted by RSD only
at the price ("Public Offering Price") set forth in the then effective
prospectus used in connection with the sale of such shares (the
"Prospectus"). Purchase Orders shall be handled in accordance with
such oral or written instructions that RSD may forward to BD from time
to time and shall be subject to procedures relating to the purchase of
Shares disclosed in the Prospectus. Purchase Orders for Shares of the
"Money Market Funds" as listed in Schedule A must be received together
with full payment in Federal Funds. Payment for Shares of the "Load
Funds" as listed in Schedule A must be received by RSD within three
business days after receipt of the Purchase Order. RSD reserves the
right, from time to time and in our sole discretion, to limit the
aggregate orders for Shares of the Load Funds placed by BD for which
payment has not yet been received. In addition, all orders are
subject to acceptance or rejection by RSD or the relevant Fund in the
sole discretion of either. Purchase Orders shall be subject to
receipt by the Funds' Transfer Agent of all required documents in
proper form and to the minimum initial and subsequent purchase
requirements set forth in the Prospectus.
3. DEALER REALLOWANCE. BD shall receive compensation in connection with
the sale of Shares of Load Funds in the form of dealer reallowances at
<PAGE>
the percentage of the Public Offering Price applicable to Shares
purchased by BD, specified in the Prospectus. It is understood that
the Public Offering Price may reflect variations in sales charges, if
any, applicable to the sales of such Shares in accordance with certain
purchase plans set forth in such Prospectus. BD agrees that it will
apply any such variations uniformly to all offerees in accordance with
the provisions of the Prospectus and will not combine customer orders
to reach "breakpoints" established in the Prospectus unless expressly
permitted by the Prospectus or in writing by RSD or withhold any
customer order so as to profit therefrom. BD agrees and understands
that dealer reallowances will be paid based upon the schedule set
forth in the Prospectus and that, in accordance with such schedule,
dealer reallowances will be lower in the case of purchases to which
reduced sales charges apply. However, where the reduced sales charge
is in connection with a letter of intent, adjustment to a higher
dealer reallowance will be made to reflect actual purchases by the
investor if investor should fail to fulfill the letter of intent. No
dealer reallowances shall be payable in respect of Load Fund Shares
purchased through reinvestment of dividends or distributions or with
respect to Load Fund Shares purchased in exchange for other Shares
unless specifically set forth in the Prospectus. If any Load Fund
Shares sold to BD under the terms of this Agreement are tendered for
redemption or repurchase within seven business days after the date of
confirmation to BD of its purchase order therefor, BD agrees to pay
forthwith to RSD the full amount of the dealer reallowance on the
original sale.
4. REDEMPTIONS, REPURCHASES AND EXCHANGES. Orders for the redemption or
repurchase of Shares ("Redemption Orders") as well as exchange
requests shall be handled in accordance with procedures set forth in
the Prospectus and, to the extent consistent with the Prospectus, oral
or written instruction forwarded to BD by RSD from time to time. RSD
will, upon request assist BD in processing Redemption Orders and
exchange requests. All such orders and requests are subject to the
timely receipt by the Funds' Transfer Agent of all required documents
in good order. If such documents are not received within a reasonable
time after the order or request is placed, it will be subject to
cancellation, in which case BD agrees to be responsible for any
resulting loss incurred by RSD or the Funds.
5. COMPLIANCE WITH SECURITIES LAWS. BD shall not offer or sell any
Shares except under circumstances that will result in compliance with
the applicable federal and state securities laws. In connection with
sales and offers to sell Shares, BD will furnish or cause to be
furnished to each person to whom any such sale or offer is made, at or
prior to the time of offering or sale, a copy of the Prospectus and,
if requested, the related statement of additional information ("SAI").
RSD shall, upon request, supply BD with reasonable quantities of
Prospectuses and SAIs for its use in connection with the offer and
sale of the Shares. BD shall will not furnish to any person any
information in connection with the sale of Shares that is inconsistent
in any respect with the information contained in such Prospectus or
SAI.
RSD shall, from time to time, inform BD as to the states and
jurisdictions in which RSD believes the Shares have been qualified for
sale under, or are exempt from the requirements of, the respective
securities laws of such states and jurisdictions. BD agree that it
<PAGE>
will not offer or sell Shares in any state or jurisdiction in which
such Shares are not registered, unless any such offer or sale is made
in a transaction that qualifies for an exemption from such
registration. BD agrees to indemnify RSD and the Fund(s) against any
claim, liability, expense or loss in any way arising out of any sale
or exchange of Shares by BD in any state or jurisdiction in which
Shares are not so registered or qualified.
BD hereby agrees to maintain all records required by law relating to
transactions on the Shares, and upon the request of RSD, or of the
Funds, promptly make such of these records available to RSD or the
Funds' Administrator as are requested. In addition BD hereby agrees
to establish appropriate procedures and reporting forms and/or
mechanisms and schedules in conjunction with RSD and the Funds'
Administrator, to enable the Funds to identify the location, type of,
and sales to all accounts opened and maintained by BD's customers or
by BD on behalf of BD's customers.
BD hereby agrees to abide by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the "NASD") and all
applicable federal and state laws. Reference is specifically made to
Section 26 of Article III of such Rules, which Section is incorporated
herein by reference. RSD assumes no responsibility in connection with
the registration of the BD under the laws of the various states or
under federal law or BD's qualification under any such law to offer or
sell Shares. BD agrees to indemnify RSD and the Fund(s) against any
claim, liability, expense or loss in any way arising out of any sale
or exchange of Shares by BD in any state or jurisdiction in which BD
is not so registered or qualified.
The signing of this Agreement and the purchase of Shares pursuant
hereto is a representation to RSD that BD is a member in good standing
of the NASD and a properly registered broker-dealer under the 1934
Act. This Agreement shall terminate automatically in the event of BD
ceases to be a member in good standing of the NASD or upon the
occurrence of any event adversely affecting BD's registration as a
broker-dealer under the 1934 Act
BD represents and warrants that it is a member of the Securities
Investor Protection Corporation (SIPC) in good standing and agrees to
notify RSD of any changes in BD's status with the SIPC.
Notwithstanding the aforementioned, BD agrees to make a notation on
all confirmations for transaction stating that it is not a member of
the SIPC as required by Rule 10b-10 of the 1934 Act.
6. USE OF SALES MATERIALS. BD shall not use any advertising or sales
materials of any kind relating to the Funds or using the name of the
Funds or RSD or any affiliate of either unless such material is
provided to BD by RSD or unless BD has obtained the prior written
consent of RSD. Neither BD nor any other person is authorized to make
any representation in connection with the offer and sale of the Shares
except those contained in the Prospectus and SAI or as expressly
authorized in writing by RSD. If BD should make any such unauthorized
representation, or use, or cause others to use, advertising or sales
material not provided to BD by RSD or without RSD's prior approval, BD
shall indemnify RSD and the (relevant) Fund from and against any and
all claims, liability, expense or losses in any way arising out of or
in any way connected with such representation.
<PAGE>
7. CONFIRMATIONS. BD agrees to send confirmations of orders to its
customers as required by Rule 10b-10 of the Securities Exchange Act of
1934 (the "1934 Act") and agrees to pay any costs in connection
therewith. BD agrees to use all reasonable efforts to ensure that
taxpayer identification numbers provided by it on behalf of investors
are correct.
8. SUSPENSION OF SALES; AMENDMENTS. RSD shall have full authority to
take such action as it may deem advisable in respect of all matters
pertaining to the continuous offering of Shares; in particular and
without limitation, the right in its discretion and without notice to
BD to suspend sales or withdraw the offering of Shares. Upon notice
to BD, RSD may amend this Agreement and BD agrees that any Purchase
Order placed by it after notice of any amendment to this Agreement has
been sent to BD shall constitute its agreement to such amendment.
9. DISTRIBUTION FEES PURSUANT TO RULE 12B-1 PLAN. BD shall be entitled
to receive distribution fees in connection with its sales and
promotional efforts hereunder in accordance with the Plan of
Distribution adopted by the Fund. Such fees shall be payable in the
amounts and in the manner set forth in Schedule C to this agreement,
which Schedule is expressly incorporated herein.
10. NO AGENCY CREATED. Nothing in this Agreement shall be deemed or
construed to make BD an employee, agent, representative or partner of
any of the Funds or of RSD, and BD is not authorized to act for RSD or
for any Fund or to make any representations on RSD's or the Funds'
behalf. BD acknowledges that this Agreement is not exclusive and that
RSD may enter into similar arrangement with others. BD and RSD agree
that each will be responsible for its own expenses in connection with
its activities hereunder and each will be responsible for complying
with the federal and state laws governing the operation of their
respective business and the NASD Rules.
11. TERMINATION AND ASSIGNMENT. This Agreement shall also be terminable
without penalty upon thirty (30) days' written notice to RSD by BD and
upon ten (10) days' written notice to BD by RSD; provided, however,
that any termination of this Agreement by operation of this Section 11
shall not affect any unpaid obligations under Sections 2, 3 or 9 of
this Agreement or the liability, indemnity and legal fee provisions of
Sections 5, 6, 12 and 17 of this Agreement. This Agreement shall not
be assignable by any of the parties hereto. Nothing in this Agreement
is intended to confer upon any person other than the parties hereto
and their successors, any rights or remedies under or by reason of
this Agreement, other than those expressly set forth herein.
12. LEGAL FEES. If any claims are asserted against RSD or the Funds
regarding claims to which BD has indemnified these parties herein, the
parties shall have the right to engage in their own defense, including
the selection and engagement of counsel of their choosing and all
costs of such defense shall be borne by BD.
13. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to RSD, at 1100 N. Market Street,
Wilmington, Delaware, 19890; if to BD at the address listed on
Schedule B.
<PAGE>
14. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This
Agreement constitutes the entire agreement between the parties and
supercedes all prior agreements.
15. GOVERNING LAW. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware without regard to the conflict of law rules.
16. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or
effect.
17. CLEARING BROKERS. RSD acknowledges that BD may utilize the services
of one or more Clearing Brokers with respect to purchases of Shares by
BD's customers. BD acknowledges that this agreements authorizes only
it, and not any Clearing Broker employed by BD, to offer or sell
Shares under this Agreement. RSD agrees to accept Purchase Orders
from any Clearing Broker that BD identifies to RSD in writing as
authorized to place orders on BD's behalf, provided that BD agrees
that RSD and the Funds shall be entitled to treat such orders as
though they had been placed by BD directly. In addition, except where
the context otherwise requires, references in this Agreement to BD
shall be deemed to include references to any Clearing Broker employed
by BD. BD agrees to cause any such Clearing Broker to abide by BD's
obligations and agreements under this Agreement, and that BD's
agreement with any such Clearing Broker will reflect the Clearing
Broker's obligation to abide by such obligations and agreements.
Neither RSD nor the Funds shall be liable hereunder to BD or to any
Clearing Broker for any claim, liability, expense or loss in any way
arising from BD's arrangements with such Clearing Broker, and BD
agrees to hold RSD and the Funds harmless from and against any claim,
liability, expense or loss in any way arising from the activities of
the Clearing Broker in connection with Purchase Orders, Redemption
Orders or exchange requests initiated by BD.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RODNEY SQUARE DISTRIBUTORS, INC.
By: _____________________________
Jeffrey O. Stroble, President
LAKEWOOD FINANCIAL SERVICES, INC.
By: _____________________________
(Name,Title)
<PAGE>
RODNEY SQUARE DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT FOR NON-PROPRIETARY FUNDS
SCHEDULE A
The HomeState Pennsylvania Growth Fund
<PAGE>
RODNEY SQUARE DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT FOR NON-PROPRIETARY FUNDS
SCHEDULE B
Elizabeth A. Smith
Lakewood Financial Services, Inc.
405 Park Avenue, Suite 401
New York, NY 10022
Phone:___________________________
Fax:_____________________________
<PAGE>
RODNEY SQUARE DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT FOR NON-PROPRIETARY FUNDS
SCHEDULE C
Set forth below is a table of total sales charges or underwriting
commisions and dealer concessions. The Distributor may provide additional
compensation to dealers in connection with sales of shares of the Fund(s).
<TABLE>
<CAPTION>
Total Sales Charge
<S> <C> <C> <C>
Dealer Concession
Size of Transaction As a Percentage of As a Percentage of As a Percentage of
at Offering Price Offering Price Net Asset Value Offering Price
====================================================================================
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 and above 0.00% 0.00% 0.00%
</TABLE>
In addition to the Dealer concession, the dealer may be paid a 12b-1 trail
commision. The trail commision will be paid quarterly to the dealer of
record.
Exhibit 9(a)
THE HOMESTATE GROUP
RODNEY SQUARE MANAGEMENT CORPORATION
TRANSFER AGENCY AGREEMENT
THIS TRANSFER AGENCY AGREEMENT is made as of the 20th day of November,
1995, between The HomeState Group, a Pennsylvania common law trust (the
"Trust"), having its principal place of business in Lancaster,
Pennsylvania, and Rodney Square Management Corporation, a corporation
organized under the laws of the State of Delaware ("Rodney Square"), having
its principal place of business in Wilmington, Delaware.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company and offers for public sale one or more distinct, series of shares
of beneficial interest ("Series") each corresponding to a distinct
portfolio;
WHEREAS, each share of a Series represents an undivided interest in
the assets, subject to the liabilities, allocated to that Series and each
Series has a separate investment objective and policies;
WHEREAS, at the present time, the Trust consists of one Series;
WHEREAS, the Trust desires to avail itself of the services of Rodney
Square to serve as the Trust's transfer agent; and
WHEREAS, Rodney Square is willing to furnish such services to the
Trust with respect to each Series listed in Schedule A to this Agreement
(each, a "Portfolio," and two or more together "Portfolios") on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Trust and Rodney Square agree as follows:
1. APPOINTMENT. The Trust hereby appoints Rodney Square as transfer
agent, registrar and dividend disbursing agent for the shares of beneficial
interest of the Trust (the "Shares") and as servicing agent in connection
with the disbursements of dividends and distributions and as shareholders'
servicing agent for the Trust, each such appointment to take effect as of
the date first written above, and Rodney Square shall act as such and
perform its obligations thereof upon the terms and conditions hereafter set
forth and in accordance with the principles of principal and agent
enunciated by the common law.
2. DOCUMENTS. The Trust has furnished Rodney Square with copies
properly certified or authenticated of each of the following:
a. The Trust's Declaration of Trust and all amendments thereto
and restatements thereof;
b. The Trust's By-laws and all amendments thereto and
restatements thereof (such By-laws, as presently in effect and as they
shall from time to time be amended or restated, are herein called "By-
laws");
c. Resolutions of the Trust's Board of Trustees authorizing the
appointment of Rodney Square to provide certain transfer agency services to
the Trust and approving this Agreement;
<PAGE>
d. The Trust's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act as filed with the Securities and
Exchange Commission ("SEC") on July 1, 1992;
e. The Trust's most recent Registration Statement on Form N-1A
under the Securities Act of 1933 (the "1933 Act") (File No. 33-48940) and
under the Investment Company Act (File No. 811-6722), as filed with the SEC
relating to shares of beneficial interest in the Trust, and all amendments
thereto;
f. The Trust's most current Prospectuses and Statements of
Additional Information relating to the Portfolio(s); and
g. The executed Trust agreements listed on Schedule C hereto;
and
h. All documents and records held by previous transfer agency
service providers on behalf of the Trust; and
i. If required, a copy of either (i) a filed notice of
eligibility to claim the exclusion from the definition of "commodity pool
operator" contained in Section 2(a)(1)(A) of the Commodity Exchange Act
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the Commodity Futures Trading Commission
("CFTC"), or (ii) a letter which has been granted the Trust by the CFTC
which states that the Trust will not be treated as a "pool" as defined in
Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which
has been granted the Trust by the CFTC which states that CFTC will not take
any enforcement action if the Trust does not register as a "commodity pool
operator."
The Trust will furnish Rodney Square from time to time with
copies, properly certified or authenticated, of all additions, amendments
or supplements to the foregoing, if any.
3. DEFINITIONS.
a. Authorized Person. As used in this Agreement, the term
"Authorized Person" means any officer of the Trust and any other person,
whether or not any such person is an officer or employee of the Trust, duly
authorized by the Trustees of the Trust to give Oral and Written
Instructions on behalf of the Portfolio(s) and certified by the Secretary
or Assistant Secretary of the Trust or any amendment thereto as may be
received by Rodney Square from time to time.
b. Oral Instructions. As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by Rodney
Square from an Authorized Person or from a person reasonably believed by
Rodney Square to be an Authorized Person. The Trust agrees to deliver to
Rodney Square, at the time and in the manner specified in Section 4(b) of
this Agreement, Written Instructions confirming Oral Instructions.
c. Written Instructions. As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
telegram, cable, telex or facsimile, signed by an Authorized Person and
received by Rodney Square.
4. INSTRUCTIONS CONSISTENT WITH DECLARATION OF TRUST, ETC.
<PAGE>
a. Unless otherwise provided in this Agreement, Rodney Square
shall act only upon Oral or Written Instructions. Although Rodney Square
may know of the provisions of the Declarations of Trust and Bylaws of the
Trust, Rodney Square may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with any provisions of
such Declarations of Trust or Bylaws or any vote, resolution or proceeding
of the shareholders, or of the Trustees, or of any committee thereof
b. Rodney Square shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Rodney
Square pursuant to this Agreement. The Trust agrees to forward to Rodney
Square Written Instructions confirming Oral Instructions in such manner
that the Written Instructions are received by Rodney Square by the close of
business of the same day that such Oral Instructions are given to Rodney
Square. The Trust agrees that the fact that such confirming Written
Instructions are not received by Rodney Square shall in no way affect the
validity of the transactions or enforceability of the transactions
authorized by such Oral Instructions. The Trust agrees that Rodney Square
shall incur no liability to the Trust in acting upon Oral Instructions
given to Rodney Square hereunder concerning such transactions, provided
such instructions reasonably appear to have been received from an
Authorized Person.
5. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of
contrary Written Instructions, Rodney Square is authorized to take the
following actions:
a. Issuance of Shares. Upon receipt of a purchase order from
the Distributor, as defined in the Distribution Agreement between the Trust
and the Distributor or a prospective shareholder for the purchase of Shares
and sufficient information to enable Rodney Square to establish a
shareholder account or to issue Shares to an existing shareholder account,
and after confirmation of receipt or crediting of Federal funds for such
order from Rodney Square's designated bank, Rodney Square shall issue and
credit the account of the investor or other record holder with Shares in
the manner described in the Prospectus. Rodney Square shall deposit all
checks received from prospective shareholders into an account on behalf of
the Trust, and shall promptly transfer all Federal funds received from such
checks to the Custodian, as defined in the Custodian Agreement between the
Trust and the Custodian. (References herein to "Custodian" shall also be
construed to refer to a "Sub-Custodian" if such appointment has been made.)
If so directed by the Distributor, the confirmation supplied to the
shareholder to mark such issuance will be accompanied by a Prospectus.
b. Transfer of Shares; Uncertificated Securities. Where a
shareholder does not hold a certificate representing the number of Shares
in its account and does provide Rodney Square with instructions for the
transfer of such Shares which include a signature guaranteed by a
commercial bank, trust company or member firm of a national securities
exchange and such other appropriate documentation to permit a transfer,
then Rodney Square shall register such Shares and shall deliver them
pursuant to instructions received from the transferor, pursuant to the
rules and regulations of the SEC, and the laws of the Commonwealth of
Pennsylvania relating to the transfer of shares of beneficial interest.
c. Share Certificates. If at any time the Portfolio issues
share certificates, the following provisions will apply:
<PAGE>
(1) The Trust will supply Rodney Square with a sufficient
supply of share certificates representing Shares, in the
form approved from time to time by the Trustees of the
Trust, and, from time to time, shall replenish such supply
upon request of Rodney Square. Such share certificate shall
be properly signed, manually or by facsimile signature, by
the duly authorized officers of the Trust, and shall bear
the corporate seal or facsimile thereof of the Trust, and
notwithstanding the death, resignation or removal of any
officer of the Trust, such executed certificates bearing the
manual or facsimile signature of such officer shall remain
valid and may be issued to shareholders until Rodney Square
is otherwise directed by Written Instructions.
(2) In the case of the loss or destruction of any
certificate representing Shares, no new certificate shall be
issued in lieu thereof, unless there shall first have been
furnished an appropriate bond of indemnity issued by a
surety company approved by Rodney Square.
(3) Upon receipt of signed share certificates, which shall
be in proper form for transfer, and upon cancellation or
destruction thereof, Rodney Square shall countersign,
register and issue new certificates for the same number of
Shares and shall deliver them pursuant to instructions
received from the transferor, the rules and regulations of
the SEC, and the laws of the State of Delaware relating to
the transfer of shares of beneficial interest.
(4) Upon receipt of the share certificates, which shall be
in proper form for transfer, together with the shareholder's
instructions to hold such share certificates for
safekeeping, Rodney Square shall reduce such Shares to
uncertificated status, while retaining the appropriate
registration in the name of the shareholder upon the
transfer books.
(5) Upon receipt of written instructions from a shareholder
of uncertificated securities for a certificate in the number
of shares in its account, Rodney Square will issue such
share certificates and deliver them to the shareholder.
d. Redemption of Shares. Upon receipt of a redemption order
from the Distributor or a shareholder, Rodney Square shall redeem the
number of Shares indicated thereon from the redeeming shareholder's account
and receive from the Trust's Custodian and disburse pursuant to the
instructions of a redeeming shareholder or his or her agent the redemption
proceeds therefor, or arrange for direct payment of redemption proceeds by
the Custodian to the redeeming shareholder or as instructed by the
shareholder or his or her agent, in accordance with such procedures and
controls as are mutually agreed upon from time to time by and among the
Trust, Rodney Square and the Trust's Custodian.
6. AUTHORIZED ISSUED AND OUTSTANDING SHARES. The Trust agrees to
notify Rodney Square promptly of any change in the number of authorized
Shares and of any change in the number of Shares registered under the 1933
Act, as amended or termination of the Trust's declaration under Rule 24f-2
of the 1940 Act. The Trust has advised Rodney Square, as of the date
<PAGE>
hereof, of the number of Shares (i) held in any redemption or repurchase
account, and (ii) registered under the 1933 Act, as amended, which are
unsold. In the event that the Trust shall declare a stock dividend, a
stock split or a reverse stock split, the Trust shall deliver to Rodney
Square a certificate, upon which Rodney Square shall be entitled to rely
for all purposes, certifying (i) the number of Shares involved, (ii) that
all appropriate trust action has been taken, and (iii) that any amendment
to the Declarations of Trust of the Trust which may be required has been
filed and is effective. Such certificate shall be accompanied by an
opinion of counsel to the Trust relating to the legal adequacy and effect
of the transaction.
7. DIVIDENDS AND DISTRIBUTIONS. The Trust shall furnish Rodney
Square with appropriate evidence of action by the Trust's Trustees
authorizing the declaration and payment of dividends and distributions as
described in the Prospectus. After deducting any amount required to be
withheld by any applicable tax laws, rules and regulations or other
applicable laws, rules and regulations, Rodney Square shall in accordance
with the instructions in proper form from a shareholder and the provisions
of the Trust's Declarations of Trust and Prospectus, issue and credit the
account of the shareholder with Shares, or, if the shareholder so elects,
pay such dividends or distributions in cash to the shareholder in the
manner described in the Prospectus. In lieu of receiving from the Trust's
Custodian and paying to shareholders cash dividends or distributions,
Rodney Square may arrange for the direct payment of cash dividends and
distributions to shareholders by the Custodian, in accordance with such
procedures and controls as are mutually agreed upon from time to time by
and among the Trust, Rodney Square and the Trust's Custodian.
Rodney Square shall prepare, file with the Internal Revenue Service
and other appropriate taxing authorities, and address and mail to
shareholders such returns and information relating to dividends and
distributions paid by the Trust as are required to be so prepared, filed
and mailed by applicable laws, rules and regulations, or such substitute
form of notice as may from time to time be permitted or required by the
Internal Revenue Service. On behalf of the Trust, Rodney Square shall mail
certain requests for shareholders' certifications under penalties of
perjury and pay on a timely basis to the appropriate Federal authorities
any taxes to be withheld on dividends and distributions paid by the Trust,
all as required by applicable Federal tax laws and regulation.
In accordance with the Prospectus, resolutions of the Trust's Trustees
that are not inconsistent with this Agreement and are provided to Rodney
Square from time to time, and such procedures and controls as are mutually
agreed upon from time to time by and among the Trust, Rodney Square and the
Trust's Custodian, Rodney Square shall arrange for issuance of Shares
obtained through transfers of funds from shareholders' accounts at
financial institutions.
8. COMMUNICATIONS WITH SHAREHOLDERS.
a. Communications to Shareholders. Rodney Square will address
and mail all communications by the Trust to its shareholders, including
reports to shareholders, confirmations of purchases and sales of Shares,
semi-annual statements, dividend and distribution notices and proxy
material for its meetings of shareholders. Rodney Square will receive and
tabulate the proxy cards for shareholder meetings.
<PAGE>
b. Correspondence. Rodney Square will answer such
correspondence from shareholders, securities brokers and others relating to
its duties hereunder and such other correspondence as may from time to time
be mutually agreed upon between Rodney Square and the Trust.
9. SERVICES TO BE PERFORMED. Rodney Square shall be responsible for
administering and/or performing transfer agent functions, for acting as
service agent in connection with dividend and distribution functions and
for performing shareholder account functions in connection with the
issuance, transfer and redemption or repurchase (including coordination
with the Trust's custodian bank in connection with shareholder redemption
by check) of the Trust's Shares as set forth in Schedule B. The details of
the operating standards and procedures to be followed shall be determined
from time to time by agreement between Rodney Square and the Trust and may
be expressed in written schedules which shall constitute attachments to
this Agreement.
10. RECORDKEEPING AND OTHER INFORMATION.
a. Rodney Square shall maintain records of the accounts for
each Shareholder showing the items listed in Schedule C.
b. Rodney Square shall create and maintain all necessary
records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940
Act and the rules thereunder and any applicable regulations of the Federal
Deposit Insurance Corporation ("FDIC") or any successor regulatory
authority, as the same may be amended from time to time, and those records
pertaining to the various functions performed by it hereunder. All records
shall be the property of the Trust at all times and shall be available for
inspection and use by the Trust. Where applicable, such records shall be
maintained by Rodney Square for the periods and in the places required by
Rule 31a-2 under the 1940 Act and any applicable regulations of the FDIC or
any successor regulatory authority.
c. Rodney Square shall not be responsible for the records
required to be maintained by any predecessor transfer agency service
provider except those provided to Rodney Square together with proper
documentation and accepted in writing by Rodney Square. Rodney Square
shall not be required to bear the cost of any necessary conversion of any
records or data nor shall Rodney Square assume any responsibility for the
having available and maintaining any computer systems required to read or
otherwise interpret any predecessor transfer agency service provider's
computer-formatted records.
11. AUDIT, INSPECTION AND VISITATION. Rodney Square shall make
available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and
inspection by the Trust or any person retained by the Trust. Upon
reasonable notice by the Trust, Rodney Square shall make available during
regular business hours its facilities and premises employed in connection
with its performance of this Agreement for reasonable visitation by the
Trust, or any person retained by the Trust.
12. RIGHT TO RECEIVE ADVICE.
a. ADVICE OF TRUST. If Rodney Square shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive,
<PAGE>
from the Trust directions or advice, including Oral or Written Instructions
where appropriate.
b. ADVICE OF COUNSEL. If Rodney Square shall be in doubt as to
any question of law involved in any action to be taken or omitted by Rodney
Square, it may request advice at its own cost from counsel of its own
choosing (who may be the regularly retained counsel for the Trust or Rodney
Square or the in-house counsel for Rodney Square, at the option of Rodney
Square).
c. CONFLICTING ADVICE. In case of conflict between directions,
advice or Oral or Written Instructions received by Rodney Square pursuant
to subsection a of this Section and advice received by Rodney Square
pursuant to subsection b of this Section, Rodney Square shall be entitled
to rely on and follow the advice received pursuant to the latter provision
alone.
d. PROTECTION OF RODNEY SQUARE. Rodney Square shall be
protected in any action or inaction which it takes in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subsections a or b of this Section which Rodney Square, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. However, nothing in this Section shall
be construed as imposing upon Rodney Square any obligation (i) to seek such
direction, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions
when received, unless, under the terms of another provision of this
Agreement, the same is a condition to Rodney Square's properly taking or
omitting to take such action. Nothing in this subsection shall excuse
Rodney Square when an action or omission on the part of Rodney Square
constitutes willful misfeasance, bad faith, negligence or reckless
disregard by Rodney Square of its duties under this Agreement.
13. COMPENSATION. For the performance of its obligations under this
Agreement, the Trust shall pay Rodney Square with respect to each Portfolio
in accordance with the fee arrangements described in Schedule E attached
hereto, as such schedule may be amended from time to time. Certain other
fees and expenses incurred pursuant to this Agreement are payable by the
Trust or the shareholder on whose behalf the service is performed are also
listed in Schedule E. The Trust shall reimburse Rodney Square for all
reasonable out-of-pocket expenses incurred by Rodney Square or its agents
in the performance of its obligations hereunder. Such reimbursement for
expenses incurred in any calendar month shall be made on or before the
tenth day of the next succeeding month. The Trust authorizes Rodney Square
to debit each Portfolio's custody account for fees and out-of-pocket
expenses which are rendered for the services performed under this
Agreement.
The term "out-of-pocket expenses" shall mean the following expenses
incurred by Rodney Square in the performance of its obligations hereunder:
the cost of stationery and forms (including but not limited to checks,
proxy cards, and envelopes), the cost of postage, the cost of insertion of
non-standard size materials in mailing envelopes and other special mailing
preparation by outside firms, the cost of first-class mailing insurance,
the cost of external electronic communications as approved by the Trustees
(to include telephone and telegraph equipment and an allocable portion of
the cost of personnel responsible for the maintenance of such equipment),
<PAGE>
toll charges, data communications equipment and line charges and the cost
of microfilming of shareholder records (including both the cost of storage
as well as charges for access to such records). If Rodney Square shall
undertake the responsibility for microfilming shareholder records, it may
be separately compensated therefor in an amount agreed upon by the
principal financial officer of the Trust and Rodney Square, such amount not
to exceed the amount which would be paid to an outside firm for providing
such microfilming services.
14. USE OF RODNEY SQUARE'S NAME. The Trust shall not use the name of
Rodney Square in any Prospectus, SAI, sales literature or other material
relating to the Trust in a manner not approved prior thereto, provided,
however, that Rodney Square shall approve all uses of its name which merely
refer in accurate terms to its appointments hereunder or which are required
by the SEC or a state securities commission and, provided further, that in
no event shall such approval be unreasonably withheld.
15. USE OF TRUST'S NAME. Rodney Square shall not use the name of the
Trust or the Portfolios of the Trust or material relating to the Trust or
the Portfolios on any checks, bank drafts, bank statements or forms for
other than internal use in a manner not approved prior thereto, provided,
however, that the Trust shall approve all uses of its name which merely
refer in accurate terms to the appointment of Rodney Square hereunder or
which are required by the FDIC, the SEC or a state securities commission,
and, provided, further, that in no event shall such approval be
unreasonably withheld.
16. SECURITY. Rodney Square represents and warrants that the various
procedures and systems which Rodney Square has implemented with regard to
safeguarding from loss or damage attributable to fire, theft or any other
cause (including provision for twenty-four hours a day restricted access)
the Trust's blank checks, records and other data and Rodney Square's
records, data, equipment, facilities and other property used in the
performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. The parties shall
review such systems and procedures on a periodic basis.
17. INSURANCE. Upon request Rodney Square shall provide the Trust
with details regarding its insurance coverage, and Rodney Square shall
notify the Trust should any of its insurance coverage be materially
changed. Such notification shall include the date of change and the reason
or reasons therefor. Rodney Square shall notify the Trust of any material
claims against it, whether or not they may be covered by insurance and
shall notify the Trust from time to time as may be appropriate of the total
outstanding claims made by Rodney Square under its insurance coverage.
18. ASSIGNMENT OF DUTIES TO OTHERS. Neither this Agreement nor any
rights or obligations hereunder may be assigned by Rodney Square without
the written consent of the Trust. Rodney Square may, however, at any time
or times in its discretion appoint (and may at any time remove) any other
bank or trust company, which is itself qualified under the Securities
Exchange Act of 1934 to act as a transfer agent, as its agent to carry out
such of the services to be performed under this agreement as Rodney Square
may from time to time direct; provided, however, that the appointment of
any agent shall not relieve Rodney Square of any of its responsibilities or
liabilities hereunder.
19. INDEMNIFICATION.
<PAGE>
a. The Trust agrees to indemnify and hold harmless Rodney
Square, its directors, officers, employees, agents and representatives from
all taxes, charges, expenses, assessments, claims and liabilities
including, without limitation, liabilities arising under the 1933 Act, the
Securities Exchange Act of 1934 and any applicable state and foreign laws,
and amendments thereto (the "Securities Laws"), and expenses, including
without limitation reasonable attorneys' fees and disbursements arising
directly or indirectly from any action or omission to act which Rodney
Square takes (i) at the request of or on the direction of or in reliance on
the advice of the Trust or (ii) upon Oral or Written Instructions. Neither
Rodney Square nor any of its nominees shall be indemnified against any
liability (or any expenses incident to such liability) arising out of
Rodney Square's or its directors', officers', employees', agents' and
representatives own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
b. Rodney Square agrees to indemnify and hold harmless the
Trust from all taxes, charges, expenses, assessments, claims and
liabilities arising from Rodney Square's obligations pursuant to this
Agreement (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws,
and amendments thereto) and expenses, including (without limitation)
reasonable attorneys' fees and disbursements arising directly or indirectly
out of Rodney Square's or its directors', officers', employees', agents'
and representatives own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this Agreement
c. In order that the indemnification provisions contained in
this Section 19 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
20. RESPONSIBILITY OF RODNEY SQUARE. Rodney Square shall be under no
duty to take any action on behalf of the Trust except as specifically set
forth herein or as may be specifically agreed to by Rodney Square in
writing. Rodney Square shall be obligated to exercise due care and
diligence in the performance of its duties hereunder, to act in good faith
and to use its best efforts in performing services provided for under this
Agreement. Rodney Square shall be liable for any damages arising out of or
in connection with Rodney Square's performance of or omission or failure to
perform its duties under this Agreement to the extent such damages arise
out of Rodney Square's negligence, reckless disregard of its duties, bad
faith or willful misfeasance.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, Rodney Square, in connection with its duties
under this Agreement, shall not be under any duty or obligation to inquire
into and shall not be liable for (i) the validity or invalidity or
authority or lack thereof of any Oral or Written Instruction, notice or
other instrument which conforms to the applicable requirements of this
Agreement, and which Rodney Square reasonably believes to be genuine; or
<PAGE>
(ii) subject to the provisions of Section 21 hereof, delays or errors or
loss of data occurring by reason of circumstances beyond Rodney Square's
control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
21. ACTS OF GOD, ETC. Rodney Square shall not be liable for delays
or errors occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority, national
emergencies, labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mails, transportation,
communication or power supply. In the event of equipment breakdowns beyond
its control, Rodney Square shall, at no additional expense to the Trust,
take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto. Rodney Square shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
22. AMENDMENTS. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
Rodney Square and the Trust shall regularly consult with each other
regarding Rodney Square's performance of its obligations and its
compensation hereunder. In connection therewith, the Trust shall submit to
Rodney Square at a reasonable time in advance of filing with the SEC copies
of any amended or supplemented registration statements (including exhibits)
under the 1933 Act and the 1940 Act, and a reasonable time in advance of
their proposed use, copies of any amended or supplemented forms relating to
any plan, program or service offered by the Trust. Any change in such
material which would require any change in Rodney Square's obligations
hereunder shall be subject to Rodney Square's approval, which shall not be
unreasonably withheld. In the event that such change materially increases
the cost to Rodney Square of performing its obligations hereunder, Rodney
Square shall be entitled to receive reasonable compensation therefor.
23. DURATION, TERMINATION, ETC. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or terminated orally,
but only by written instrument which shall make specific reference to this
Agreement and which shall be signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
This Agreement shall become effective as of the date first written
above, and shall continue in effect for three (3) years from the date of
its execution and thereafter from year to year, provided continuance after
the three (3) year period is approved at least annually by (i) the vote of
a majority of the Trustees of the Trust and (ii) the vote of a majority of
those Trustees of the Trust who are not interested persons of the Trust,
and who are not parties to this Agreement or interested persons of any
party, cast in person at a meeting called for the purpose of voting on the
approval. This Agreement may be terminated at any time by six months'
written notice given by Rodney Square to the Trust or six months' written
notice given by the Trust to Rodney Square; and provided further that this
Agreement may be terminated immediately at any time for cause either by the
Trust or by Rodney Square in the event that such cause remains unremedied
for a period of time not to exceed ninety days after receipt of written
<PAGE>
specification of such cause. Any such termination shall not affect the
rights and obligations of the parties under Section 19 hereof.
Upon the termination hereof, the Trust shall reimburse Rodney Square
any fees incurred as a result of the termination conversion for any out-of-
pocket expenses reasonably incurred by Rodney Square including or during
the period prior to the date of such termination. In the event that the
Trust designates a successor to any of Rodney Square's obligations
hereunder, Rodney Square shall, at the expense and direction of the Trust,
transfer to such successor a certified list of the shareholders of the
Trust (with name, address, and, if provided, tax identification or Social
Security number), a complete record of the account of each shareholder, and
all other relevant books, records and other data established or maintained
by Rodney Square hereunder. Rodney Square shall be liable for any losses
sustained by the Trust as a result of Rodney Square's failure to accurately
and promptly provide these materials.
Upon the termination of this Agreement within the initial three (3)
year term by the Trust or the Trust's Board of Trustees, the Trust shall
pay to Rodney Square with respect to each Portfolio in accordance with the
provisions of liquidated damages described in Schedule E attached hereto,
as such schedule may be amended from time to time.
24. REGISTRATION AS A TRANSFER AGENT. Rodney Square represents that
it is currently registered with the appropriate Federal agency for the
registration of transfer agents, and that it will remain so registered for
the duration of this Agreement. Rodney Square agrees that it will promptly
notify the Trust in the event of any material change in its status as a
registered transfer agent. Should Rodney Square fail to be registered with
the FDIC or any successor regulatory authority as a transfer agent at any
time during this Agreement, the Trust may, on written notice to Rodney
Square, immediately terminate this Agreement.
25. NOTICE. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed, postage prepaid, to the other
party to this Agreement at its principal place of business.
26. FURTHER ACTIONS. Each Party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
27. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
28. GOVERNING LAW. To the extent that state law has not been
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this
Agreement shall be administered, construed and enforced according to the
laws of the State of Delaware.
29. SHAREHOLDER LIABILITY. Rodney Square acknowledges that it has
received notice of and accepts the limitations of liability set forth in
the Trust's Declaration of Trust. Rodney Square agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that Rodney Square
shall have recourse solely against the assets of the Portfolio with respect
to which the Trust's obligations hereunder relate and shall have no
recourse against the assets of any other Portfolio or against any
shareholder, Trustee, officer, employee, or agent of the Trust.
<PAGE>
30. MISCELLANEOUS. Both parties agree to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two counterparts, each of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this agreement as
of the day and year first above written.
THE HOMESTATE GROUP
By: _____________________________
Scott L. Rehr, President
RODNEY SQUARE MANAGEMENT
CORPORATION
By: _____________________________
Martin L. Klopping, President
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE A
THE HOMESTATE GROUP
PORTFOLIO LISTING
The HomeState Pennsylvania Growth Fund
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE B
THE HOMESTATE GROUP
TRUST AGREEMENTS SCHEDULE
1. The Investment Advisory Agreement between The HomeState Group
(the "Trust") and Emerald Advisors, Inc., a Pennsylvania
corporation (the "Adviser"), dated as of _________________, 1994;
2. The Administration Agreement between the Trust and Rodney Square
Management Corporation, a Delaware Corporation ("Rodney Square"),
dated as of November 20, 1995;
4. The Accounting Services Agreement between the Trust and Rodney
Square, dated as of November 20, 1995;
4. The Custodian Agreement between the Trust and CoreStates
Financial Corp., dated as of_________________;
5. The Distribution Agreement between the Trust and Rodney Square
Distributors, Inc., dated as of November 20, 1995;
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE C
THE HOMESTATE GROUP
SERVICES TO BE PERFORMED
Rodney Square will perform the following functions as transfer agent on an
ongoing basis with respect to each Portfolio:
a. furnish state-by-state registration reports;
b. provide toll-free lines for direct shareholder use, plus customer
liaison staff with on-line inquiry capacity;
c. mail duplicate confirmations to dealers and other financial
institutions ("Service Organization") of their clients' activity,
whether executed through the Service Organization or directly with
Rodney Square;
d. provide detail for underwriter or Service Organization
confirmations and other Service Organization shareholder accounting,
in accordance with such procedures as may be agreed upon between the
Trust and Rodney Square;
e. provide shareholder lists and statistical information concerning
shareholder accounts to the Trust;
f. provide timely notification of Portfolio activity and such other
information as may be agreed upon from time to time between Rodney
Square and the Portfolio or the Custodian, to the Trust or the
Custodian; and
g. with respect to dividends and distributions, prepare and file
required reports with the Internal Revenue Service ("IRS"), prepare
and mail reports to shareholders as required by the IRS and described
in the Prospectus and Statement of Additional Information.
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE D
THE HOMESTATE GROUP
SHAREHOLDER RECORDS
Rodney Square shall maintain records of the accounts for each shareholder
showing the following information:
a. name, address and United States Tax Identification or Social
Security number;
b. number of Shares held and number of Shares for which
certificates, if any, have been issued, including certificate numbers
and denominations;
c. historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price for
all transactions on a shareholder's account;
d. any stop or restraining order placed against a shareholder's
account;
e. any correspondence relating to the current maintenance of a
shareholder's account;
f. information with respect to withholding; and,
g. any information required in order for Rodney Square to perform
any calculations contemplated or required by this Agreement.
<PAGE>
TRANSFER AGENCY AGREEMENT
SCHEDULE E
THE HOMESTATE GROUP
FEE SCHEDULE
For the services Rodney Square provides under the Transfer Agency Agreement
attached hereto, The HomeState Group (the "Trust") agrees to pay Rodney
Square a fee for transfer agency services equal to the following:
Fee per Annum
Type of Trust/Account per Account
--------------------- -------------
Annual Dividend $12.00/year
Semi/Quarterly Dividend $12.00/year
Monthly Dividend $15.00/year
Daily Accrual Fund $18.00/year
calculated on a group basis and subject to a $27,000 minimum.
This transfer agency fee shall be pro-rated and payable monthly as soon
as practicable after the last day of each month based on the average of
the daily net assets of each Portfolio, as determined at the close of
business on each day throughout the month.
Out of pocket expenses shall be reimbursed by the Trust to Rodney
Square or paid directly by the Trust. Such expenses include but are
not limited to the following:
a. Toll-free lines (if required)
b. Forms, envelopes, checks, checkbooks
c. Postage (bulk, pre-sort, first-class at current prevailing
rates)
d. Hardware/phone lines for remote terminal(s) (if required)
e. Microfiche/Microfilm
f. Wire fee for receipt or disbursement - $5.00 per wire
g. Mailing fee - approximately $30.00 per 1,000 items
h. Cost of proxy solicitation, mailing and tabulation (if required)
i. Certificate issuance - $2.00 per certificate
j. Record retention storage - $15.00 per cubic foot per year
k. Development/programming costs/special projects - time and
material
l. ACH transaction charges - $0.25 per transaction
m. "B" notice mailing - $5.00 per item
n. Locating lost shareholders in anticipation of escheating - $5.00
per name
Additional Expenses (paid by shareholder):
- ------------------------------------------
Direct IRA/Keogh processing $10.00 per account per annum
$ 5.00 new account set-up fee
$ 2.50 per distribution
$10.00 per transfer out
<PAGE>
National Securities Clearing Corporation (NSCC) Charges
- -------------------------------------------------------
1. - FUND/SERV
Participation Fee $50.00 per month
CPU Access Fee $40.00 per month
Transaction Fee $ .50 per transaction
NSCC will deduct it's monthly fee on the 15th of each month from Rodney
Square's cash settlement that day. These charges will be included on
the next month's T/A bill as out-of-pocket expenses.
2. - Networking
Participation Fee $250.00 per month
CPU Access Fee $ 40.00 per month
Account Fee $ .045 per month on
monthly dividend funds
$ .030 per month on all
other dividend payables
Rodney Square System Access Charges for NSCC
- --------------------------------------------
1. - FUND/SERV
Base Facility Use Fee $500.00 per month
Transaction Fee $ .25 per transaction
Plus: out-of-pocket expenses for settlements, wire charges, NSCC pick-
up charges, etc.
2. - Networking
Base Facility Use Fee $500.00 per month
Matrix Level Charges:
Level 1, 2 or 4 $ .24 per account per month
Level 3 $ .06 per account per month
Rodney Square Wire Order Desk:
- ------------------------------
Master/Omnibus Account $ 1.00 per purchase/redemption
transaction
Payment
- -------
The above will be billed within the first five (5) business days of
each month and will be paid by wire within five (5) business days of
receipt.
LIQUIDATED DAMAGES:
Upon the termination of the attached Agreement within the initial three (3)
year term by the Trust or the Trust's Board of Trustees , the Trust shall
pay to Rodney Square six (6) months of base fees in liquidated damages with
respect to each Portfolio.
Exhibit 9(b)
THE HOMESTATE GROUP
RODNEY SQUARE MANAGEMENT CORPORATION
ACCOUNTING SERVICES AGREEMENT
AGREEMENT made this 20th day of November, 1995, by and between The
HomeState Group, a Pennsylvania common trust (the "Trust"), having its
principal place of business in the Lancaster, Pennsylvania, and Rodney
Square Management Corporation, a corporation organized under the laws of
the State of Delaware ("Rodney Square"), having its principal place of
business in Wilmington, Delaware.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company and offers for public sale one or more distinct series of shares of
beneficial interest ("Series"), each corresponding to a distinct portfolio;
WHEREAS, each share of a Series represents an undivided interest in
the assets, subject to the liabilities, allocated to that Series and each
Series has a separate investment objective and policies;
WHEREAS, at the present time, the Trust consists of one Series;
WHEREAS, the Trust desires to employ Rodney Square to provide certain
accounting services;
WHEREAS, Rodney Square is willing to furnish such services to the
Trust with respect to each Series listed on Schedule A to this Agreement
(each a "Portfolio," and two or more together "Portfolios") on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Rodney Square agree as follows:
1. APPOINTMENT. The Trust hereby appoints Rodney Square to provide
certain accounting services to the Trust for the period and on the terms
set forth in this Agreement. Rodney Square accepts such appointment and
agrees to furnish the services herein set forth in return for the
compensation provided for in Section 11 of this Agreement. Rodney Square
agrees to comply with all relevant provisions of the Investment Company Act
and applicable rules and regulations thereunder, and to remain open for
business on any day on which the New York Stock Exchange, the Philadelphia
branch office of the Federal Reserve and Wilmington Trust Company are open
for business. The Trust may from time to time issue separate series or
classes or classify and reclassify shares of such series or class. Rodney
Square shall identify to each such series or class property belonging to
such series or class and in such reports, confirmations and notices to the
Trust called for under this Agreement shall identify the series or class to
which such report, confirmation or notice pertains.
2. DOCUMENTS. The Trust has furnished Rodney Square with copies
properly certified or authenticated of each of the following:
a. The Trust's Declaration of Trust and all amendments thereto
and restatements thereof;
<PAGE>
b. The Trust's By-laws and all amendments thereto and
restatements thereof (such By-laws, as presently in effect and as they
shall from time to time be amended or restated, are herein called "By-
laws");
c. Resolutions of the Trust's Board of Trustees authorizing the
appointment of Rodney Square to provide certain accounting services to the
Trust and approving this Agreement;
d. Schedule B identifying and containing the signatures of the
Trust's officers and other persons authorized ("Authorized Persons") to
sign "Written Instructions" (as used in this Agreement to mean written
instructions delivered by hand, mail, telegram, cable, telex or facsimile
sending device and received by Rodney Square, signed by two Authorized
Persons) on behalf of the Trust;
e. The Trust's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act as filed with the Securities and
Exchange Commission ("SEC") on July 1, 1992;
f. The Trust's most recent Registration Statement on Form N-1A
under the Securities Act of 1933 (the "1933 Act") (File No. 33-48940) and
under the Investment Company Act (File No. 811-6722), as filed with the SEC
relating to shares of beneficial interest in the Trust, and all amendments
thereto;
g. The Trust's most current Prospectuses and Statements of
Additional Information relating to the Portfolio(s);
h. The executed Trust agreements listed on Schedule C hereto;
i. All documents and records held by previous accounting
service providers on behalf of the Trust; and
j. If required, a copy of either (i) a filed notice of
eligibility to claim the exclusion from the definition of "commodity pool
operator" contained in Section 2(a)(1)(A) of the Commodity Exchange Act
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the Commodity Futures Trading Commission
("CFTC"), or (ii) a letter which has been granted the Trust by the CFTC
which states that the Trust will not be treated as a "pool" as defined in
Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which
has been granted the Trust by the CFTC which states that CFTC will not take
any enforcement action if the Trust does not register as a "commodity pool
operator."
The Trust will furnish Rodney Square from time to time with
copies, properly certified or authenticated, of all additions, amendments
or supplements to the foregoing, if any.
3. INSTRUCTIONS CONSISTENT WITH DECLARATION OF TRUST, ETC.
a. Unless otherwise provided in this Agreement, Rodney Square
shall act only upon Oral and Written Instructions. ("Oral Instructions"
used in this Agreement shall mean oral instructions actually received by
Rodney Square from an Authorized Person or from a person reasonably
believed by Rodney Square to be an Authorized Person. "Written
Instructions" used in this Agreement shall mean written instructions signed
<PAGE>
by two Authorized Persons delivered by hand, mail, telegram, cable, telex
or facsimile, and received by Rodney Square. "Authorized Person" used in
this Agreement means any officer of the Trust and any other person, whether
or not any such person is an officer of the Trust, duly authorized by the
Board of Trustees of the Trust to give Oral and Written Instructions on
behalf of the Portfolio(s) and certified by the Secretary or an Assistant
Secretary of the Trust or any amendment thereto as may be received by
Rodney Square from time to time.) Although Rodney Square may know of the
provisions of the Declaration of Trust and By-laws of the Trust, Rodney
Square in its capacity under this Agreement may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent
with any provisions of such Declaration of Trust or Bylaws or any vote,
resolution or proceeding of the shareholders, or of the Board of Trustees,
or of any committee thereof.
b. Rodney Square shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by Rodney
Square pursuant to this Agreement. The Trust agrees to forward to Rodney
Square Written Instructions confirming Oral Instructions in such manner
that the Written Instructions are received by Rodney Square, whether by
hand delivery, telex, facsimile or otherwise, by the close of business of
the same day that such Oral Instructions are given to Rodney Square. The
Trust agrees that the fact that such confirming Written Instructions are
not received by Rodney Square shall in no way affect the validity of the
transactions or enforceability of the transactions authorized by the Trust
by giving Oral Instructions. The Trust agrees that Rodney Square shall
incur no liability to the Trust in acting upon Oral Instructions given to
Rodney Square hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized
Person.
4. PORTFOLIO ACCOUNTING.
a. Rodney Square shall provide the following accounting
functions on a daily basis:
(1)Journalize each Portfolio's investment, capital share
and income and expense activities;
(2)Verify investment buy/sell trade tickets when received
from the Advisor(s) and transmit trades to the Trust's
Custodian for proper settlement;
(3)Maintain individual ledgers for investment securities;
(4)Maintain historical tax lots for each security;
(5)Reconcile cash and investment balances of each Portfolio
with the Custodian, and provide the Advisor(s) with the
beginning cash balance available for investment
purposes;
(6)Update the cash availability throughout the day as
required by the Advisor(s);
(7)Post to and prepare each Portfolio's Statement of Assets
and Liabilities and Statement of Operations;
<PAGE>
(8)Calculate expenses payable pursuant to the Trust's
various contractual obligations;
(9)Control all disbursements from the Trust on behalf of
each Portfolio and authorize such disbursements upon
Written Instructions;
(10)Calculate capital gains and losses;
(11)Determine each Portfolio's net income;
(12)At the Portfolio's expense obtain security market prices
or if such market prices are not readily available, then
obtain such prices from services approved by the
Advisor(s), and in either case calculate the market or
fair value of each Portfolio's investments;
(13)In the case of debt instruments with remaining
maturities of sixty (60)days or less, calculate the
amortized cost value of those instruments;
(14)Transmit or mail a copy of the portfolio valuations to
the Advisor(s);
(15)Compute the net asset value of each Portfolio;
(16)Compute each Portfolio's yields, total returns, expense
ratios and portfolio turnover rate; and
(17)Prepare and monitor the expense accruals and notify
Trust management of any proposed adjustments.
b. In addition, Rodney Square will:
(1)Prepare monthly financial statements, which will include
without limitation the Schedule of Investments, the
Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, the
Cash Statement, and the Schedule of Capital Gains and
Losses;
(2)Prepare monthly security transactions listings;
(3)Prepare monthly broker security transactions summaries;
(4)Supply various Trust and Portfolio statistical data as
requested on an ongoing basis;
(5)Assist in the preparation of support schedules necessary
for completion of Federal and state tax returns;
(6)Assist in the preparation and filing of the Trust's
annual and semiannual reports with the SEC on Form N-
SAR;
(7)Assist in the preparation and filing of the Trust's
annual and semiannual reports to shareholders and proxy
statements;
<PAGE>
(8)Assist with the preparation of amendments to the Trust's
registration statements on Form N-1A and other filings
relating to the registration of shares; and
(9)Monitor each Portfolio's status as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended from time to time;
(10)Determine the amount of dividends and other
distributions payable to shareholders as necessary to,
among other things, maintain the qualification as a
regulated investment company of each Portfolio of the
Trust under the Code.
5. RECORDKEEPING AND OTHER INFORMATION. Rodney Square shall
create and maintain all necessary records in accordance with all applicable
laws, rules and regulations, including, but not limited to, records
required by Section 31(a) of the Investment Company Act and the rules
thereunder, as the same may be amended from time to time, pertaining to the
various functions (described above) performed by it and not otherwise
created and maintained by another party pursuant to contract with the
Trust. All records shall be the property of the Trust at all times and
shall be available for inspection and use by the Trust or the Trust's
authorized representatives. Upon reasonable request of the Trust, copies
of such records shall be provided by Rodney Square to the Trust or the
Trust's authorized representatives at the Trust's expense. Where
applicable, such records shall be maintained by Rodney Square for the
periods and in the places required by Rule 31a-2 under the Investment
Company Act.
Rodney Square shall not be responsible for the records
required to be maintained by any predecessor accounting service provider
except those provided to Rodney Square together with proper documentation
and accepted in writing by Rodney Square. Rodney Square shall not be
required to bear the cost of any necessary conversion of any records or
data nor shall Rodney Square assume any responsibility for the having
available and maintaining any computer systems required to read or
otherwise interpret any predecessor accounting service provider's computer-
formatted records.
6. LIAISON WITH ACCOUNTANTS. Rodney Square shall act as liaison
with the Trust's independent public accountants and shall provide account
analysis, fiscal year summaries and other audit related schedules. Rodney
Square shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information
is made available to such accountants for the expression of their opinion,
as such may be required by the Trust from time to time.
7. CONFIDENTIALITY. Rodney Square agrees on behalf of itself and
its employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its
prior, present or potential shareholders, and not to use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except, after prior notification to and approval in
writing by the Trust, which approval shall not be unreasonably withheld and
may not be withheld where Rodney Square may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Trust.
<PAGE>
8. EQUIPMENT FAILURE. In the event of equipment failures beyond
Rodney Square's control, Rodney Square shall, at no additional expense to
the Trust, take reasonable steps to minimize service interruptions but
shall have no liability with respect thereto. Rodney Square shall enter
into and shall maintain in effect with appropriate parties one or more
agreements making reasonable provision of emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
9. RIGHT TO RECEIVE ADVICE.
a. ADVICE OF TRUST. If Rodney Square shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive,
from the Trust directions or advice, including Oral or Written Instructions
where appropriate.
b. ADVICE OF COUNSEL. If Rodney Square shall be in doubt as to
any question of law involved in any action to be taken or omitted by Rodney
Square, it may request advice at its own cost from counsel of its own
choosing (who may be the regularly retained counsel for the Trust or Rodney
Square or the in-house counsel for Rodney Square, at the option of Rodney
Square).
c. CONFLICTING ADVICE. In case of conflict between directions,
advice or Oral or Written Instructions received by Rodney Square pursuant
to subsection A of this Section and advice received by Rodney Square
pursuant to subsection B of this Section, Rodney Square shall be entitled
to rely on and follow the advice received pursuant to the latter provision
alone.
d. PROTECTION OF RODNEY SQUARE. Rodney Square shall be
protected in any action or inaction which it takes in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subsections A or B of this Section which Rodney Square, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. However, nothing in this Section shall
be construed as imposing upon Rodney Square any obligation (i) to seek such
direction, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions
when received, unless, under the terms of another provision of this
Agreement, the same is a condition to Rodney Square's properly taking or
omitting to take such action. Nothing in this subsection shall excuse
Rodney Square when an action or omission on the part of Rodney Square
constitutes willful misfeasance, bad faith, negligence or reckless
disregard by Rodney Square of its duties under this Agreement.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided herein in Sections 4 and 5, the Trust assumes full
responsibility for ensuring that the Trust complies with all applicable
requirements of the Securities Act of 1933 (the "1933 Act"), the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act, the CEA and any laws,
rules and regulations of governmental authorities having jurisdiction.
11. COMPENSATION. For the performance of its obligations under this
Agreement, the Trust shall pay Rodney Square with respect to each Portfolio
in accordance with the fee arrangements described in Schedule A attached
hereto, as such schedule may be amended from time to time. The Trust shall
reimburse Rodney Square for all reasonable out-of-pocket expenses incurred
<PAGE>
by Rodney Square or its agents in the performance of its obligations
hereunder. Such reimbursement for expenses incurred in any calendar month
shall be made on or before the tenth day of the next succeeding month. The
Trust authorizes Rodney Square to debit each Portfolio's custody account
for fees and out-of-pocket expenses which are rendered for the services
performed under this Agreement.
12. INDEMNIFICATION.
a. The Trust agrees to indemnify and hold harmless Rodney
Square, its directors, officers, employees, agents and representatives from
all taxes, charges, expenses, assessments, claims and liabilities
including, without limitation, liabilities arising under the 1933 Act, the
1934 Act and any applicable state and foreign laws, and amendments thereto
(the "Securities Laws"), and expenses, including without limitation
reasonable attorneys' fees and disbursements arising directly or indirectly
from any action or omission to act which Rodney Square takes (i) at the
request of or on the direction of or in reliance on the advice of the Trust
or (ii) upon Oral or Written Instructions. Neither Rodney Square nor any
of its nominees shall be indemnified against any liability (or any expenses
incident to such liability) arising out of Rodney Square's or its
directors', officers', employees', agents' and representatives own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
b. Rodney Square agrees to indemnify and hold harmless the
Trust from all taxes, charges, expenses, assessments, claims and
liabilities arising from Rodney Square's obligations pursuant to this
Agreement (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws,
and amendments thereto) and expenses, including (without limitation)
reasonable attorneys' fees and disbursements arising directly or indirectly
out of Rodney Square's or its directors', officers', employees', agents'
and representatives own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this Agreement.
c. In order that the indemnification provisions contained in
this Section 12 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
13. RESPONSIBILITY OF RODNEY SQUARE. Rodney Square shall be under no
duty to take any action on behalf of the Trust except as specifically set
herein or as may be specifically agreed to by Rodney Square in writing. In
the performance of its duties hereunder, Rodney Square shall be obligated
to exercise care and diligence and to act in good faith and to use its best
efforts within reasonable limits in performing services provided for under
this Agreement. Rodney Square shall be responsible for its own negligent
failure to perform its duties under this Agreement, but to the extent that
duties, obligations and responsibilities are not expressly set forth in
this Agreement, Rodney Square shall not be liable for any act or omission
<PAGE>
which does not constitute willful misfeasance, bad faith or negligence on
the part of Rodney Square or reckless disregard by Rodney Square of such
duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, Rodney Square
in connection with its duties under this Agreement shall not be under any
duty or obligation to inquire into and shall not be liable for or in
respect of (i) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms
to the applicable requirements of this Agreement, and which Rodney Square
reasonably believes to be genuine; or (ii) delays or errors or loss of data
occurring by reason of circumstances beyond Rodney Square's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown (except as provided in Section 8),
flood or catastrophe, acts of God, insurrection, war, riots or failure of
the mails, transportation, communication or power supply, which
circumstances Rodney Square shall take reasonable actions to minimize loss
of data therefor.
14. DURATION, TERMINATION, ETC. The provisions of this Agreement may
not be changed, waived, discharged or terminated orally, but only by
written instrument that shall make specific reference to this Agreement and
that shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall become effective as of the date first written
above, and unless terminated as provided, shall continue in force for three
(3) years from the date of its execution and thereafter from year to year,
provided continuance after the three (3) year period is approved at least
annually by (i) the vote of a majority of the Trustees of the Trust and
(ii) the vote of a majority of those Trustees of the Trust who are not
interested persons of the Trust, and who are not parties to this Agreement
or interested persons of any party, cast in person at a meeting called for
the purpose of voting on the approval. This Agreement may at any time be
terminated on sixty (60) days' written notice given to Rodney Square or by
Rodney Square by six (6) months' written notice given to the Trust;
provided, however, that the foregoing provisions of this Agreement may be
terminated immediately at any time for cause either by the Trust or by
Rodney Square in the event that such cause shall have remained unremedied
for sixty (60) days or more after receipt of written specification of such
cause.
Upon the termination of this Agreement, the Trust shall pay to Rodney
Square such compensation as may be payable for the period prior to the
effective date of such termination, including reimbursement for any out-of-
pocket expenses reasonably incurred by Rodney Square to such date. In the
event that the Trust designates a successor to any of Rodney Square's
obligations hereunder, Rodney Square shall, at the expense and direction of
the Trust, transfer to such successor all relevant books, records and other
data established or maintained by Rodney Square under the foregoing
provisions.
Upon the termination of this Agreement within the initial three (3)
year term by the Trust or the Trust's Board of Trustees, the Trust shall
pay to Rodney Square with respect to each Portfolio in accordance with the
provisions of liquidated damages described in Schedule A attached hereto,
as such schedule may be amended from time to time.
<PAGE>
15. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
16. NOTICE. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed, postage prepaid, to the other
party to this Agreement at its principal place of business.
17. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
18. FURTHER ACTIONS. Each Party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
19. GOVERNING LAW. To the extent that state law has not been
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this
Agreement shall be administered, construed and enforced according to the
laws of the State of Delaware.
20. DELEGATION. On thirty (30) days' prior written notice to the
Trust, Rodney Square may assign any part or all its rights and delegate its
duties hereunder to any wholly owned direct or indirect subsidiary of
Wilmington Trust Company provided that (i) the delegate agrees with Rodney
Square to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations; (ii) Rodney Square shall remain
responsible for the performance of all of its duties under this Agreement;
(iii) Rodney Square and such delegate shall promptly provide such
information as the Trust may request; and (iv) Rodney Square shall respond
to such questions as the Trust may ask, relative to the delegation,
including (without limitation) the capabilities for the delegate.
21. SHAREHOLDER LIABILITY. Rodney Square acknowledges that it has
received notice of and accepts the limitations of liability set forth in
the Trust's Declaration of Trust. Rodney Square agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that Rodney Square
shall have recourse solely against the assets of the Portfolio with respect
to which the Trust's obligations hereunder relate and shall have no
recourse against the assets of any other Portfolio or against any
shareholder, Trustee, officer, employee, or agent of the Trust.
22. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties thereto, and supersedes all matter
hereof, provided that the parties hereto may embody in one or more separate
documents their agreement, if any, with respect to Written and/or Oral
Instructions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement
shall be binding and shall inure to the benefits of the parties hereto and
their respective successors.
IN WITNESS WHEREOF the parties have caused this instrument to be
signed on their behalf by their respective officers thereunto duly
authorized all as of the date first written above.
<PAGE>
THE HOMESTATE GROUP
By: _____________________________
Scott L. Rehr, President
RODNEY SQUARE MANAGEMENT
CORPORATION
By: _____________________________
Martin L. Klopping, President
<PAGE>
ACCOUNTING SERVICES AGREEMENT
SCHEDULE A
THE HOMESTATE GROUP
PORTFOLIO LISTING AND FEE SCHEDULE
For the services Rodney Square provides under the Accounting Services
Agreement attached hereto, The HomeState Group (the "Trust") on behalf of
the Portfolios listed below agrees to pay Rodney Square an annual
accounting fee per Portfolio equal to the following:
Year One
--------
$45,000 for Portfolio assets up to $50 million plus;
0.03% of the Portfolio assets of $50 million to $100 million plus;
0.02% of Portfolio assets in excess of $100 million; and
less $5,000.
Year Two
--------
$45,000 for Portfolio assets up to $50 million plus;
0.03% of the Portfolio assets of $50 million to $100 million plus;
0.02% of Portfolio assets in excess of $100 million.
Year Three
----------
$5,000 plus;
$45,000 for Portfolio assets up to $50 million plus;
0.03% of the Portfolio assets of $50 million to $100 million plus;
0.02% of Portfolio assets in excess of $100 million.
This accounting fee shall be pro rated and payable monthly as soon as
practicable after the last day of each month based on the average of the
daily net assets of each Portfolio listed below, as determined at the close
of business on each day throughout the month.
Out of pocket expenses shall be reimbursed by the Trust to Rodney Square or
paid directly by the Trust.
PORTFOLIOS:
The HomeState Pennsylvania Growth Fund
LIQUIDATED DAMAGES:
Upon the termination of the attached Agreement within the initial three (3)
year term by the Trust or the Trust's Board of Trustees , the Trust shall
pay to Rodney Square six (6) months of base fees in liquidated damages with
respect to each Portfolio.
<PAGE>
ACCOUNTING SERVICES AGREEMENT
SCHEDULE B
THE HOMESTATE GROUP
AUTHORIZED PERSONS
The following persons have been duly authorized by the Board of
Trustees to give Oral and Written Instructions on behalf of the above-named
Trust:
Scott L. Rehr ___________________________
Kenneth M. Mertz II, C.F.A. ___________________________
Daniel W. Moyer IV ___________________________
[Robert C. Hancock] ___________________________
[Patrick D. Ivkovich] ___________________________
[John J. Kelley] ___________________________
[Martin L. Klopping] ___________________________
[Diane D. Marky] ___________________________
[Marilyn Talman] ___________________________
<PAGE>
ACCOUNTING SERVICES AGREEMENT
SCHEDULE C
THE HOMESTATE GROUP
TRUST AGREEMENTS SCHEDULE
1. The Investment Advisory Agreement between The HomeState Group
(the "Trust") and Emerald Advisors, Inc., a Pennsylvania
corporation (the "Adviser"), dated as of _________________, 1994;
2. The Administration Agreement between the Trust and Rodney Square
Management Corporation, a Delaware Corporation ("Rodney Square"),
dated as of November 20, 1995;
3. The Transfer Agency Agreement between the Trust and Rodney
Square, dated as of November 20, 1995;
4. The Custodian Agreement between the Trust and CoreStates
Financial Corp., dated as of_________________;
5. The Distribution Agreement between the Trust and Rodney Square
Distributors, Inc., dated as of November 20, 1995;
Exhibit 9(c)
THE HOMESTATE GROUP
RODNEY SQUARE MANAGEMENT CORPORATION
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of the 20th day of November,
1995, between The HomeState Group , a Pennsylvania common law trust (the
"Trust"), having its principal place of business in Lancaster,
Pennsylvania, and Rodney Square Management Corporation, a corporation
organized under the laws of the State of Delaware ("Rodney Square"), having
its principal place of business in Wilmington, Delaware.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company
and offers for public sale distinct series of shares of beneficial interest
("Series") each corresponding to a distinct portfolio;
WHEREAS, each share of a Series represents an undivided interest in
the assets, subject to the liabilities, allocated to that Series and each
Series has a separate investment objective and policies;
WHEREAS, at the present time, the Trust consists of one Series;
WHEREAS, the Trust desires to employ Rodney Square to provide certain
administrative services;
WHEREAS, Rodney Square is willing to furnish such services to the
Trust with respect to each Series listed on Schedule A to this Agreement
(each a "Portfolio," and two or more together "Portfolios") on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Rodney Square agree as follows:
1. APPOINTMENT. The Trust hereby appoints and employs Rodney Square
as agent to perform those services described in this Agreement for the
Trust such appointment to take effect at the close of business on the date
first written above. Rodney Square shall act under such appointment and
perform the obligations thereof upon the terms and conditions hereinafter
set forth and in accordance with the principles of principal and agent
enunciated by the common law.
2. DOCUMENTS. The Trust has furnished Rodney Square with copies
properly certified or authenticated of each of the following:
a. The Trust's Declaration of Trust and all amendments thereto
and restatements thereof;
b. The Trust's By-laws and all amendments thereto and
restatements thereof (such By-laws, as presently in effect and as they
shall from time to time be amended or restated, are herein called "By-
laws");
c. Resolutions of the Trust's Board of Trustees authorizing the
appointment of Rodney Square to provide certain administrative services to
the Trust and approving this Agreement;
<PAGE>
d. The Trust's Notification of Registration filed pursuant to
Section 8(a) of the Investment Company Act as filed with the Securities and
Exchange Commission ("SEC") on July 1, 1992;
e. The Trust's most recent Registration Statement on Form N-1A
under the Securities Act of 1933 (the "1933 Act") (File No. 33-48940) and
under the Investment Company Act (File No. 811-6722), as filed with the SEC
relating to shares of beneficial interest in the Trust, and all amendments
thereto;
f. The Trust's most current Prospectuses and Statements of
Additional Information relating to the Portfolio(s); and
g. The executed Trust agreements listed on Schedule B hereto;
and
h. All documents and records held by previous administrative
service providers on behalf of the Trust; and
i. If required, a copy of either (i) a filed notice of
eligibility to claim the exclusion from the definition of "commodity pool
operator" contained in Section 2(a)(1)(A) of the Commodity Exchange Act
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the Commodity Futures Trading Commission
("CFTC"), or (ii) a letter which has been granted the Trust by the CFTC
which states that the Trust will not be treated as a "pool" as defined in
Section 4.10(d) of the CFTC's General Regulations, or (iii) a letter which
has been granted the Trust by the CFTC which states that CFTC will not take
any enforcement action if the Trust does not register as a "commodity pool
operator."
The Trust will furnish Rodney Square from time to time with
copies, properly certified or authenticated, of all additions, amendments
or supplements to the foregoing, if any.
3. PORTFOLIO ADMINISTRATION. Subject to the direction and control
of the Board of Trustees of the Trust and to the extent not otherwise the
responsibility of, or provided by, the Trust or other supply agents of the
Trust, Rodney Square shall provide the following administrative services:
a. Supply:
(i) office facilities (which may be in Rodney Square's or
its affiliates' own offices);
(ii) non-investment related statistical and research data;
(iii)executive and administrative services;
(iv) stationery and office supplies at Trust expense;
(v) corporate secretarial services, such as the
preparation and distribution of materials at Trust
expense for meetings of the Board of Trustees or
shareholders; and
(vi) Trustees' and Officers' questionnaires.
b. Prepare and file, if necessary, reports to shareholders of
the Trust and reports with the Securities and Exchange Commission (the
"SEC"), state securities commissions and Blue Sky authorities including
preliminary and definitive proxy materials, post-effective amendments to
the Trust's registration statement, Rule 24f-2 Notices, Form N-SAR filings
and prospectus supplements;
<PAGE>
c. Monitor the Trust's compliance with the investment
restrictions and limitations imposed by the 1940 Act, and state Blue Sky
laws and applicable regulations thereunder, the fundamental and non-
fundamental investment policies and limitations set forth in the Prospectus
and SAI, and the investment restrictions and limitations necessary for each
Portfolio of the Trust to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
or any successor statute;
d. Monitor sales of the Trust's shares and ensure that such
shares are properly, registered as required with the SEC and applicable
state authorities;
e. Prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other distributions to
shareholders;
f. Prepare financial statements and footnotes and other
financial information with such frequency and in such format as required to
be included in reports to shareholders and the SEC;
g. Review sales literature and file such with regulatory
authorities, as necessary;
h. Provide information regarding material developments in state
securities regulation; and
i. Provide personnel to serve as officers of the Trust if so
elected by the Board of Trustees.
4. EXPENSES OF THE TRUST. The Trust agrees that it will pay all its
expenses other than those expressly stated to be payable by Rodney Square
hereunder, which expenses payable by the Trust shall include, without
limitation:
a. Fees payable for investment advisory services provided by
the Trust's investment Adviser;
b. Fees payable for services provided by the Trust's
independent public accountants;
c. Fees payable for accounting services;
d. The cost of obtaining quotations for calculating the value
of the assets of each Portfolio;
e. Taxes levied against the Trust or any Portfolio;
f. Brokerage fees, mark-ups and commissions in connection with
the purchase and sale of portfolio securities;
g. Costs, including the interest expense, of borrowing money;
h. Costs and/or fees incident to holding meetings of the Board
of Trustees and shareholders, preparation (including typesetting and
printing charges) and mailing of prospectuses, reports and proxy materials
to the existing shareholders of the Trust, filing of reports with
regulatory bodies, maintenance of the Trust's corporate existence, and
registration of shares with federal and state securities authorities;
<PAGE>
i. Legal fees and expenses;
j. Costs of printing share certificates representing shares of
the Trust;
k. Fees payable to, and expenses of, members of the Board of
Trustees who are not "interested persons" of the Trust;
l. Out-of-pocket expenses incurred in connection with the
provision of administration, custodial and transfer agency services;
m. Premiums payable on the fidelity bond required by Section
17(g) of the 1940 Act, and any other premiums payable on insurance policies
related to the Trust's business and the investment activities of its
Portfolios;
n. Distribution fees, if any;
o. Service fees, if any, payable by each Portfolio to the
Distributor for providing personal services to the shareholders of each
Portfolio and for maintaining shareholder accounts for those shareholders;
p. Fees, voluntary assessments and other expenses incurred in
connection with the Trust's membership in investment company organizations;
and
q. Such non-recurring expenses as may arise, including actions,
suits or proceedings to which the Trust is a party and the legal obligation
which the Trust may have to indemnify its Trust and officers with respect
thereto.
Except as otherwise agreed by Rodney Square, Rodney Square will not
reimburse the Trust for (or have deducted from its fees payable under this
Agreement) any Trust expenses in excess of any expense limitations imposed
by state securities commissions having jurisdiction over the sale of
Portfolio shares.
5. RECORDKEEPING AND OTHER INFORMATION. Rodney Square shall create
and maintain all necessary records in accordance with all applicable laws,
rules and regulations, including, but not limited to, records required by
Section 31(a) of the 1940 Act and the rules thereunder, as the same may be
amended from time to time, pertaining to the various functions (described
above) performed by it and not otherwise created and maintained by another
party pursuant to contract with the Trust. All records shall be the
property of the Trust at all times and shall be available for inspection
and use by the Trust. Where applicable, such records shall be maintained
by Rodney Square for the periods and in the places required by Rule 31a-2
under the 1940 Act.
Rodney Square shall not be responsible for the records
required to be maintained by any predecessor administration service
provider except those provided to Rodney Square together with proper
documentation and accepted in writing by Rodney Square. Rodney Square
shall not be required to bear the cost of any necessary conversion of any
records or data nor shall Rodney Square assume any responsibility for the
having available and maintaining any computer systems required to read or
otherwise interpret any predecessor administration service provider's
computer-formatted records.
<PAGE>
6. AUDIT, INSPECTION AND VISITATION. Rodney Square shall make
available during regular business hours all records and other data created
and maintained pursuant to the foregoing provisions of this Agreement for
reasonable audit and inspection by the Trust, any person retained by the
Trust or any regulatory agency having authority over the Trust.
7. APPOINTMENT OF AGENTS. Rodney Square may at any time or times in
its discretion appoint (and may at any time remove) other parties as its
agent to carry out such of the provisions of this Agreement as Rodney
Square may from time to time direct; provided, however, that the
appointment of any such agent shall not relieve Rodney Square of any of its
responsibilities or liabilities hereunder.
8. RIGHT TO RECEIVE ADVICE.
a. ADVICE OF TRUST. If Rodney Square shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive,
from the Trust directions or advice, including oral or written Instructions
where appropriate.
b. ADVICE OF COUNSEL. If Rodney Square shall be in doubt as to
any question of law involved in any action to be taken or omitted by Rodney
Square, it may request advice at its own cost from counsel of its own
choosing (who may be the regularly retained counsel for the Trust or Rodney
Square or the in-house counsel for Rodney Square, at the option of Rodney
Square).
c. CONFLICTING ADVICE. In case of conflict between directions,
advice or oral or written instructions received by Rodney Square, Rodney
Square shall be entitled to rely on and follow the advice received by
written instructions alone.
d. PROTECTION OF RODNEY SQUARE. Rodney Square shall be
protected in any action or inaction which it takes in reliance on any
directions, advice or oral or written instructions received pursuant to
subsections a or b of this Section which Rodney Square, after receipt of
any such directions, advice or oral or written instructions, in good faith
believes to be consistent with such directions, advice or oral or written
instructions, as the case may be. However, nothing in this Section shall
be construed as imposing upon Rodney Square any obligation (i) to seek such
direction, advice or oral or written Instructions, or (ii) to act in
accordance with such directions, advice or oral or written Instructions
when received, unless, under the terms of another provision of this
Agreement, the same is a condition to Rodney Square's properly taking or
omitting to take such action. Nothing in this subsection shall excuse
Rodney Square when an action or omission on the part of Rodney Square
constitutes willful misfeasance, bad faith, negligence or reckless
disregard by Rodney Square of its duties under this Agreement.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided herein, the Trust assumes full responsibility for
ensuring that the Trust complies with all applicable requirements of the
Securities Act of 1933 (the "1933 Act"), the Securities Exchange Act of
1934 (the "1934 Act"), the 1940 Act, the CEA and any laws, rules and
regulations of governmental authorities having jurisdiction.
10. COMPENSATION. For the performance of its obligations under this
Agreement, the Trust shall pay Rodney Square with respect to each Portfolio
<PAGE>
in accordance with the fee arrangements described in Schedule A attached
hereto, as such schedule may be amended from time to time. The Trust shall
reimburse Rodney Square for all reasonable out-of-pocket expenses incurred
by Rodney Square or its agents in the performance of its obligations
hereunder. Such reimbursement for expenses incurred in any calendar month
shall be made on or before the tenth day of the next succeeding month. The
Trust authorizes Rodney Square to debit each Portfolio's custody account
for fees and out-of-pocket expenses which are rendered for the services
performed under this Agreement.
11. USE OF RODNEY SQUARE'S NAME. The Trust shall not use the name of
Rodney Square or any of its affiliates in any Prospectus, SAI, sales
literature or other material relating to the Trust in a manner not approved
prior thereto in writing by Rodney Square; provided, however, that Rodney
Square shall approve all uses of its and its affiliates' names that merely
refer in accurate terms to their appointments hereunder or that are
required by the SEC or a state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
12. USE OF TRUST'S NAME. Neither Rodney Square nor any of its
affiliates shall use the name of the Trust or material relating to the
Trust on any forms (including any checks, bank drafts or bank statements)
for other than internal use in a manner not approved prior thereto by the
Trust; provided, however, that the Trust shall approve all uses of its name
that merely refer in accurate terms to the appointment of Rodney Square
hereunder or that are required by the SEC or a state securities commission;
and further provided, that in no event shall such approval be unreasonably
withheld.
13. LIABILITY OF RODNEY SQUARE OR AFFILIATES. Rodney Square and its
affiliates shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, except to the extent of a loss resulting from
willful misfeasance, bad faith, negligence or reckless disregard of their
obligations and duties under this Agreement. Any person, even though also
an officer, director, employee or agent of Rodney Square or any of its
affiliates who may be or become an officer or director of the Trust, shall
be deemed, when rendering services to the Trust as such officer or acting
on any business of the Trust in such capacity (other than services or
business in connection with Rodney Square's duties under this Agreement),
to be rendering such services to or acting solely for the Trust and not as
an officer, director, employee or agent or one under the control or
direction of Rodney Square or any of its affiliates, even though paid by
one of those entities. Rodney Square shall not be liable or responsible
for any acts or omissions of any predecessor administrator or any other
persons having responsibility for matters to which this Agreement relates
nor shall Rodney Square be responsible for reviewing any such act or
omissions. Rodney Square shall, however, be liable for its own acts and
omissions subsequent to assuming responsibility under this Agreement as
herein provided.
14. INDEMNIFICATION.
a. The Trust agrees to indemnify and hold harmless Rodney
Square, its directors, officers, employees, agents and representatives from
all taxes, charges, expenses, assessments, claims and liabilities
including, without limitation, liabilities arising under the Securities Act
of 1933, the Securities Exchange Act of 1934 and any applicable state and
<PAGE>
foreign laws, and amendments thereto (the "Securities Laws"), and expenses,
including without limitation reasonable attorneys' fees and disbursements
arising directly or indirectly from any action or omission to act which
Rodney Square takes (i) at the request of or on the direction of or in
reliance on the advice of the Trust or (ii) upon oral or written
instructions from the Trust. Neither Rodney Square nor any of its nominees
shall be indemnified against any liability (or any expenses incident to
such liability) arising out of Rodney Square's or its directors',
officers', employees', agents' and representatives own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and obligations
under this Agreement.
b. Rodney Square agrees to indemnify and hold harmless the
Trust from all taxes, charges, expenses, assessments, claims and
liabilities arising from Rodney Square's obligations pursuant to this
Agreement (including, without limitation, liabilities arising under the
Securities Laws, and any state and foreign securities and blue sky laws,
and amendments thereto) and expenses, including (without limitation)
reasonable attorneys' fees and disbursements arising directly or indirectly
out of Rodney Square's or its directors', officers', employees', agents'
and representatives own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this Agreement.
c. In order that the indemnification provisions contained in
this Section 14 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
15. RESPONSIBILITY OF RODNEY SQUARE. Rodney Square shall be under no
duty to take any action on behalf of the Trust except as specifically set
herein or as may be specifically agreed to by Rodney Square in writing. In
the performance of its duties hereunder, Rodney Square shall be obligated
to exercise care and diligence and to act in good faith and to use its best
efforts within reasonable limits in performing services provided for under
this Agreement. Rodney Square shall be responsible for its own negligent
failure to perform its duties under this Agreement, but to the extent that
duties, obligations and responsibilities are not expressly set forth in
this Agreement, Rodney Square shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith or negligence on
the part of Rodney Square or reckless disregard by Rodney Square of such
duties, obligations and responsibilities. Without limiting the generality
of the foregoing or of any other provision of this Agreement, Rodney Square
in connection with its duties under this Agreement shall not be under any
duty or obligation to inquire into and shall not be liable for or in
respect of (i) the validity or invalidity or authority or lack thereof of
any oral or written instruction, notice or other instrument which conforms
to the applicable requirements of this Agreement, and which Rodney Square
reasonably believes to be genuine; or (ii) delays or errors or loss of data
occurring by reason of circumstances beyond Rodney Square's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of
<PAGE>
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply, which circumstances Rodney Square shall take
reasonable actions to minimize loss of data therefor.
16. DURATION, TERMINATION, ETC. The provisions of this Agreement may
not be changed, waived, discharged or terminated orally, but only by
written instrument that shall make specific reference to this Agreement and
that shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
This Agreement shall become effective as of the date first
written above, and unless terminated as provided, shall continue in force
for three (3) years from the date of its execution and thereafter from year
to year, provided continuance after the three (3) year period is approved
at least annually by (i) the vote of a majority of the Trustees of the
Trust and (ii) the vote of a majority of those Trustees of the Trust who
are not interested persons of the Trust, and who are not parties to this
Agreement or interested persons of any party, cast in person at a meeting
called for the purpose of voting on the approval. This Agreement may at
any time be terminated on sixty (60) days' written notice given to Rodney
Square or by Rodney Square by six (6) months' written notice given to the
Trust; provided, however, that the foregoing provisions of this Agreement
may be terminated immediately at any time for cause either by the Trust or
by Rodney Square in the event that such cause shall have remained
unremedied for sixty (60) days or more after receipt of written
specification of such cause. Any such termination shall not affect the
rights and obligations of the parties under Section 13 hereof.
Upon the termination of this Agreement, the Trust shall pay to
Rodney Square such compensation as may be payable for the period prior to
the effective date of such termination, including reimbursement for any out-
of-pocket expenses reasonably incurred by Rodney Square to such date. In
the event that the Trust designates a successor to any of Rodney Square's
obligations hereunder, Rodney Square shall, at the expense and direction of
the Trust, transfer to such successor all relevant books, records and other
data established or maintained by Rodney Square under the foregoing
provisions.
Upon the termination of this Agreement within the initial three
(3) year term by the Trust or the Trust's Board of Trustees, the Trust
shall pay to Rodney Square with respect to each Portfolio in accordance
with the provisions of liquidated damages described in Schedule A attached
hereto, as such schedule may be amended from time to time.
17. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
Rodney Square and the Trust shall regularly consult with each
other regarding Rodney Square's performance of its obligations and its
compensation under the foregoing provisions. In connection therewith, the
Trust shall submit to Rodney Square at a reasonable time in advance of
filing with the SEC copies of any amended or supplemented registration
statement of the Trust (including exhibits) under the Securities Act of
1933, as amended, and the 1940 Act, and, a reasonable time in advance of
their proposed use, copies of any amended or supplemented forms relating to
any plan, program or service offered by the Trust. Any change in such
materials that would require any change in Rodney Square's obligations
<PAGE>
under the foregoing provisions shall be subject to the burdened party's
approval, which shall not be unreasonably withheld. In the event that a
change in such documents or in the procedures contained therein increases
the cost to Rodney Square of performing its obligations hereunder by more
than an insubstantial amount, Rodney Square shall be entitled to receive
reasonable compensation therefor.
18. NOTICE. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed, postage prepaid, to the other
party to this Agreement at its principal place of business.
19. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
20. FURTHER ACTIONS. Each Party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
21. GOVERNING LAW. To the extent that state law has not been
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this
Agreement shall be administered, construed and enforced according to the
laws of the State of Delaware.
22. SHAREHOLDER LIABILITY. Rodney Square acknowledges that it has
received notice of and accepts the limitations of liability set forth in
the Trust's Declaration of Trust. Rodney Square agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that Rodney Square
shall have recourse solely against the assets of the Portfolio with respect
to which the Trust's obligations hereunder relate and shall have no
recourse against the assets of any other Portfolio or against any
shareholder, Trustee, officer, employee, or agent of the Trust.
23. MISCELLANEOUS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in two counterparts, each of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
THE HOMESTATE GROUP
By: _________________________________
Scott L. Rehr, President
RODNEY SQUARE MANAGEMENT
CORPORATION
By: _________________________________
Martin L. Klopping, President
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE A
THE HOMESTATE GROUP
PORTFOLIO LISTING AND FEE SCHEDULE
For the services Rodney Square provides under the Administration Agreement
attached hereto, The HomeState Group (the "Trust") agrees to pay Rodney
Square an annual administration fee as listed below equal to:
Year One
--------
$0 million to $50 million 0.15%
$50 million to $200 Million 0.10%
in excess of $200 million 0.07%
less $5,000
calculated on a group basis and subject to the following minimums:
$50,000 for initial Portfolio of Series
$20,000 for each additional Portfolio of the Series
less $5,000
Year Two
--------
$0 million to $50 million 0.15%
$50 million to $200 Million 0.10%
in excess of $200 million 0.07%
calculated on a group basis and subject to the following minimums:
$50,000 for initial Portfolio of Series
$20,000 for each additional Portfolio of the Series
Year Three
----------
$5,000 plus,
$0 million to $50 million 0.15%
$50 million to $200 Million 0.10%
in excess of $200 million 0.07%
calculated on a group basis and subject to the following minimums:
$5,000 plus,
$50,000 for initial Portfolio of Series
$20,000 for each additional Portfolio of the Series
This administration fee shall be pro rated and payable monthly as soon as
practicable after the last day of each month based on the average of the
daily net assets of each Portfolio, as determined at the close of business
on each day throughout the month.
Out of pocket expenses shall be reimbursed by the Trust to Rodney Square or
paid directly by the Trust.
<PAGE>
LIQUIDATED DAMAGES:
Upon the termination of the attached Agreement within the initial three (3)
year term by the Trust or the Trust's Board of Trustees , the Trust shall
pay to Rodney Square six (6) months of base fees in liquidated damages with
respect to each Portfolio.
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE B
THE HOMESTATE GROUP
TRUST AGREEMENTS SCHEDULE
1. The Investment Advisory Agreement between The HomeState Group
(the "Trust") and Emerald Advisors, Inc., a Pennsylvania
corporation (the "Adviser"), dated as of _________________, 1994;
2. The Accounting Services Agreement between the Trust and Rodney
Square Management Corporation, a Delaware Corporation ("Rodney
Square"), dated as of November 20, 1995;
3. The Transfer Agency Agreement between the Trust and Rodney
Square, dated as of November 20, 1995;
4. The Custodian Agreement between the Trust and CoreStates
Financial Corp., dated as of_________________;
5. The Distribution Agreement between the Trust and Rodney Square
Distributors, Inc., dated as of November 20, 1995;
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of the Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 26, 1996, relating to the financial statements and financial
highlights of HomeState Pennsylvania Growth Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Custodian and Independent Accountants" in such Statement of
Additional Information and to the references under the headings "Financial
Highlights" and "General Information" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
September 26, 1996
Exhibit 16
FUND NAME: HOMESTATE PENNSYLVANIA GROWTH FUND
(STANDARDIZED RETURNS)
1 YR INCEPTION
------ ---------
# YEARS IN PERIOD 1 3.750685
AVERAGE ANNUAL TOTAL RETURN 32.94% 22.51%
CUMULATIVE TOTAL RETURN 32.94% 114.15%
MAXIMUM SALES LOAD 5.00% 5.00%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)1/N -1 = T (ERV/P) - 1 = T
(1,329.44/1,000)1 -1 = T (1,329.44/1,000) -1 = T
0.3294 = T 0.3294 = T
32.94% = T 32.94% = T
INCEPTION THROUGH 06/30/96
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)1/N -1 = T (ERV/P) -1 = T
(2,141.47/1,000)1/3.750685 -1 = T (2,141.47/1,000) -1 = T
0.2251 = T 1.1415 = T
22.51% = T 114.15% = T
Exhibit 17
[ARTICLE] 6
[CIK] 0000889188
[NAME] THE HOMSTATE GROUP
[SERIES]
[NUMBER] 1
[NAME] THE HOMESTATE PENNSYLVANIA GROWTH FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] JUN-30-1996
[PERIOD-START] JUL-01-1995
[PERIOD-END] JUN-30-1996
[INVESTMENTS-AT-COST] 44093
[INVESTMENTS-AT-VALUE] 55104
[RECEIVABLES] 2217
[ASSETS-OTHER] 181
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 57502
[PAYABLE-FOR-SECURITIES] 1511
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 163
[TOTAL-LIABILITIES] 1674
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 41223
[SHARES-COMMON-PRIOR] 16085
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3593
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11012
[NET-ASSETS] 55828
[DIVIDEND-INCOME] 352
[INTEREST-INCOME] 65
[OTHER-INCOME] 0
[EXPENSES-NET] 606
[NET-INVESTMENT-INCOME] (189)
[REALIZED-GAINS-CURRENT] 3898
[APPREC-INCREASE-CURRENT] 7151
[NET-CHANGE-FROM-OPS] 10860
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 748
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1551
[NUMBER-OF-SHARES-REDEEMED] 266
[SHARES-REINVESTED] 42
[NET-CHANGE-IN-ASSETS] 35440
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 443
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 246
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 606
[AVERAGE-NET-ASSETS] 32751
[PER-SHARE-NAV-BEGIN] 15.68
[PER-SHARE-NII] (0.07)
[PER-SHARE-GAIN-APPREC] 6.17
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.53)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 21.25
[EXPENSE-RATIO] 1.85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>