Filed with the Securities and Exchange Commission on October 30,
1997
File No. 33-48940
File No. 811-6722
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 9 x
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 x
(Check appropriate box or boxes.)
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)
Approximate Date of Proposed Public Offering: Upon effective
--------------
date of this registration statement
- -----------------------------------
It is proposed that this filing will become effective (check
appropriate box)
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:
This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT
OF 1933:
An indefinite number of securities is being registered under the
Securities Act of 1933 pursuant to Rule 24f-2 thereunder.
<PAGE>
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
The HomeState Group
HomeState Pennsylvania Growth Fund
HomeState Select Opportunities Fund
Items Required By Form N-1A
PART A - PROSPECTUS
Form N-1A
Item Number Location in Prospectus
- ------------ ----------------------
1. Cover Page Cover Page
2. Synopsis Expense; Risk Factors
3. Condensed Financial Financial Highlights;
Information Performance Calculations
4. General Description of Cover Page; Investment Objectives
Registrant and Techniques; Risk Factors
5. Management of the Fund Management of the Funds; The
Investment Adviser; The
Administration, Accounting and
Transfer Agent Transactions
5A. Management's Discussion of To be provided in
Fund Performance Registrant's Annual Report to
Shareholders
6. Capital Stock and other Dividends, Distributions and
Securities Taxes; General Information
7. Purchase of Securities Being Offered How to Purchase
Shares of the Funds; The
Distributor; Valuing the
Funds' Shares; The
Distribution Plans
8. Redemption or Repurchase How to Redeem Shares of
the Funds
9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
The HomeState Group
The Year 2000 ("Y2K") Fund
Items Required By Form N-1A
PART A - PROSPECTUS*
Form N-1A
Item Number Location in Prospectus
- ----------- -----------------------
1. Cover Page Cover Page
2. Synopsis The Y2K Fund Expense Summary;
Risk Factors
3. Condensed Financial Not Applicable
Information
4. General Description of Investment Objectives and Policies;
Registrant Risk Factors; Investment Objective,
Policies and Risks; Investment
Policies and Techniques;
Investment Restrictions
5. Management of the Fund Management of the Fund; The
Investment Adviser;
Administrator, Accounting and
Transfer Agent; Portfolio
Transactions
5A. Management's Discussion of To be provided in
Fund Performance Registrant's Annual Report to
Shareholders
6. Capital Stock and other How to Purchase
Securities Shares; Purchasing Shares;
Dividends, Distributions and
Taxes; General Information
7. Purchase of Securities Purchasing
Being Offered Shares; Distributor;
Shareholder Services; Valuing
the Fund's Shares
8. Redemption or Repurchase How to Redeem Shares of the
Fund; General Redemption
Information
9. Pending Legal Proceedings Not Applicable
*PREVIOUSLY FILED WITH THE REGISTRANT'S POST-EFFECTIVE AMENDMENT NO. 8 TO
REGISTRATION STATEMENT (FILED ON SEPTEMBER 15, 1997) AND INCORPORATED
HEREIN BY REFERENCE.
<PAGE>
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
The HomeState Group
HomeState Pennsylvania Growth Fund
HomeState Select Opportunities Fund
Items Required By Form N-1A
PART B - STATEMENT OF ADDITIONAL INFORMATION
Form N-1A Location in Statement
Item Number of Additional Information
- ----------- -------------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page; Table of Contents
12. General Information and History General Information
13. Investment Objectives and Investment Objectives and
Policies Policies; Investment Limitations
14. Management of the Registrant Management of the Fund;
Investment Adviser
15. Control Persons and Principal Management of the Fund
Holders of Securities
16. Investment Advisory and Other Investment Adviser
Services
17. Brokerage Allocation ands Other Portfolio Transactions
Practices
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Purchase of Shares;
Pricing of Securities Being Redemption of Shares;
Securities Being Offered Shareholder Services
20. Tax Status General Information
21. Underwriters Management of the Fund
22. Calculation of Performance Data Performance Calculations
23. Financial Statements Financial Statements
<PAGE>
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
The HomeState Group
The Year 2000 ("Y2K") Fund
Items Required By Form N-1A
PART B - STATEMENT OF ADDITIONAL INFORMATION *
Form N-1A Location in Statement
Item Number of Additional Information
- ----------- -------------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page; Table of Contents
12. General Information and General
History
13. Investment Objectives and Additional Information Concerning
Policies Investment Objectives,
Policies and Risks; Fundamental
Restrictions; Non-Fundamental
Restrictions
14. Management of the Registrant Management of the Fund;
Investment Adviser
15. Control Persons and Principal Management of the Fund
Holders of Securities
16. Investment Advisory and Other Investment Adviser and Principal
Services Underwriter
17. Brokerage Allocation Additional Brokerage
Allocation Information
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Additional Purchase and
Pricing of Securities Redemption Information
Being Offered
20. Tax Status General Information
21. Underwriters Management of the Fund
22. Calculation of Performance Measuring Performance
23. Financial Statements Not Applicable
*PREVIOUSLY FILED WITH THE REGISTRANT'S POST-EFFECTIVE AMENDMENT NO. 8 TO
REGISTRATION STATEMENT (FILED ON SEPTEMBER 15, 1997) AND INCORPORATED
HEREIN BY REFERENCE.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
PROSPECTUS DATED OCTOBER 30, 1997
THE HOMESTATE GROUP Mailing 1857 William Penn Way, P.O. Box 10666
Address Lancaster, PA 17605-0666
Phone (800) 232-0224 - Toll- Free
(717) 396-7864 - Local & International
INVESTMENT OBJECTIVES AND POLICIES
The HomeState Group (the "Trust") is an open-end management
company, organized on August 26, 1992, as a common law trust
under Pennsylvania law. The Trust is registered as a "series
fund." Currently, there are three series: the HomeState
Pennsylvania Growth Fund, the HomeState Select Opportunities Fund
(the "Funds") and the Year 2000 ("Y2K") Fund. Shares offered by
this Prospectus are for the HomeState Pennsylvania Growth Fund
and the HomeState Select Opportunities 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. The Fund will usually invest in a diversified
portfolio of common stock of approximately 120 companies. There
is no assurance the Fund will achieve this investment objective
(See "Investment Objectives and Policies").
THE HOMESTATE SELECT OPPORTUNITIES FUND - The objective of the
Fund is long-term appreciation of capital through investments in
a non-diversified portfolio of U.S. securities, without regard to
any further issuer location limitations. The Fund will typically
invest in the common stock of no more than fifty U.S. companies.
Due to potential concentration in these issues, the Fund will
close to new investors when total net assets surpass $100
million. While the Fund can invest in companies of varying size,
it will usually emphasize companies having a market
capitalization of less than $1 billion. There is no assurance the
Fund will achieve this investment objective (See "Investment
Objectives and Policies").
PURCHASE INFORMATION
Shares of each Fund can be purchased through any independent
securities dealer having a sales agreement with the Funds'
Distributor, at the then-current net asset value plus a sales
charge of 4.75%. There are several ways to purchase shares at a
reduced sales charge. The required minimum initial investment in
each Fund is $500 and the minimum subsequent investment is $50.
The minimum initial and subsequent investment amounts are $50
under the Funds' AutoInvest Plan. See "How to Purchase Shares of
the Funds" for more information.
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 30, 1997 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 Funds' trustees and officers, a
list of investment policies and restrictions, and further details
about the management and operations of each Fund, and is
available at no charge by writing or calling the Funds at the
address or phone numbers listed above.
For further information concerning a new account, call the Funds
at (800) 232-0224. For questions about an established account,
call Rodney Square Management Corporation, the Funds' shareholder
servicing agent, at (800) 892-1351.
Shares of the Funds are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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 6
Investment Techniques 6
Risk Factors 9
Investment Restrictions 12
How to Purchase Shares of the Funds 12
How to Redeem Shares of the Funds 15
How to Exchange Shares of the Funds 16
Valuing the Funds' Shares 16
Management of the Funds 17
Brokerage Allocation 19
Dividends, Distributions and Taxes 20
General Information 21
<PAGE>
THE HOMESTATE GROUP
===============================================================================
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(As a percentage of Maximum offering price)....... 4.75%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 EXPENSES2
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
HOMESTATE PENNSYLVANIA HOMESTATE SELECT
GROWTH FUND OPPORTUNITIES FUND
---------------------- ------------------
Management Fees............... 0.75% 0.00%4
12b-1 Fees3................... 0.35% 0.35%
Other Expenses
(After Reimbursement)........ 0.67% 2.00%5
------- ------
Total Operating Expenses 1.77% 2.35%5
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 Funds, assuming a 5% annual return and
redemption at the end of each period:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
HomeState Pennsylvania Growth Fund.. $65 $101 $139 $246
HomeState Select Opportunities Fund. $70 $117 $167 $303
This table is provided to help you understand the expense of
investing in the Funds and your share of the operating expenses
which the Funds incur. 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 Funds' actual annual returns
will vary.
1 The rules of the SEC require that the maximum sales charge (in
the Funds' case, 4.75% 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 Funds" for more information.
2 The table shows expenses based on the Funds' management fees
and distribution service (12b-1)fees and other expenses on an
annualized basis for the period ended June 30, 1997.
3 Because of the 12b-1 fee, long-term shareholders may indirectly
pay more than the economic equivalent of the maximum permitted
front-end sales charge.
4 The management fee would have been 1.00% if the adviser had not
waived their fee.
5 The Adviser has agreed to limit the Fund's ordinary operating
expenses to no more than 2.35% at least through and including
June 30, 1998. Absent that limitation, the "Other Expenses" and
"Total Operating Expenses" would have been 6.75% and 8.10%,
respectively.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
FINANCIAL HIGHLIGHTS
The following table presents per share financial information
for the HomeState Pennsylvania Growth Fund since its commencement
of operations on October 1, 1992. This information has been
audited and reported on by The HomeState Group's independent
accountants, in connection with the audit of the Financial Statements.
The Report of Independent Accountants and financial
statements included in The HomeState Group's Annual Report to
shareholders for the period ended June 30, 1997, which should be
read in conjunction with this information, are incorporated
by reference into this Prospectus. The HomeState Group's
Annual Report contains additional performance information that
will be made available without charge upon request directed to
Emerald Advisers, Inc. at (800)-232-0224.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
PENNSYLVANIA GROWTH FUND
<TABLE>
<CAPTION>
PERIODS ENDED
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/30/97 6/30/96 6/30/95 6/30/94 6/30/93+
------- ------- ------- ------- --------
Net asset value at
beginning of period..... $21.25 $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------ ------
Income from Investment
- ----------------------
Operations
- ----------
Net investment income
(loss) ................. (0.07) (0.07) (0.01) (0.03) 0.03
Net realized and
unrealized gain on
investments............. 1.78 6.17 3.54 1.53 0.95
------ ------ ------ ------ ------
Total from investment
operations............ 1.71 6.10 3.53 1.50 0.98
------ ------ ------ ------ ------
Less Distributions
- -------------------
Dividends from net
investment income ...... 0.00 0.00 0.00 (0.03) 0.00
Distributions from net
realized gains ......... (1.41) (0.53) (0.22) (0.08) 0.00
------ ------ ------ ------ ------
Total distributions.... (1.41) (0.53) (0.22) (0.11) 0.00
------ ------ ------ ------ ------
Net asset value at end
of period .............. $21.55 $21.25 $15.68 $12.37 $10.98
====== ====== ====== ====== ======
Total return**........... 9.56% 39.94% 28.96% 13.75% 13.07%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)........... $89,577 $55,828 $20,388 $9,892 $3,026
Ratio of expenses to
average net assets
before reimbursement
by Adviser............... 1.77% 1.85% 2.00% 2.67% 7.85%*
Ratio of expenses to
average net assets after
reimbursement by Adviser. na1 na1 1.91% 2.23% 1.87%*
Ratio of net investment
loss to average net
assets before
reimbursement by Adviser. (0.39)% (0.58)% (0.20)% (0.76)% (5.24)%*
Ratio of net investment
income (loss) to
average net assets
after reimbursement by
Adviser.................. na1 na1 (0.10)% (0.32)% 0.74%*
Average commission
rate paid................. $0.0941 $0.0961 - - -
Portfolio turnover rate... 50% 66% 51% 51% 63%
<FOOTNOTE>
+ From commencement of operations: October 1, 1992.
* Annualized.
** Total return does not reflect 4.75% maximum sales charge.
1 Not applicable: no reimbursements were made by the Adviser.
</FOOTNOTE>
</TABLE>
<PAGE>
THE HOMESTATE GROUP
===============================================================================
FINANCIAL HIGHLIGHTS
The following table presents per share financial information
for the HomeState Select Opportunities Fund since its
commencement of operations on February 18, 1997. This information
has been audited and reported on by The HomeState Group's
independent accountants, in connection with the audit of the
financial statements. The Report of Independent Accountants
and financial statements included in The HomeState Group's Annual
Report to shareholders for the period ended June 30, 1997, which
should be read in conunction with this information, are
incorporated by reference into this Prospectus. The HomeState
Group's Annual Report contains additional performance information
that will be made available without charge upon request directed
to Emerald Advisers, Inc. at (800)-232-0224.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, 1997+:
SELECT OPPORTUNITIES FUND
Net asset value at
beginning of period........ $10.00
------
Income from Investment
- ----------------------
Operations
- ----------
Net investment loss....... (0.03)
Net realized and
unrealized gain on
investments................ 1.73
------
Total from investment
operations............... 1.70
------
Net asset value at end
of period ................. $11.70
======
Total return**.............. 17.00%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)............. $5,628
Ratio of expenses to
average net assets
before reimbursement
by Adviser and waivers..... 8.10%*
Ratio of expenses to
average net assets after
reimbursement by Adviser
and waivers................ 2.35%*
Ratio of net investment
loss to average net
assets before
reimbursement by Adviser
and waivers................. (6.85)%*
Ratio of net investment
loss to average net assets
after reimbursement by
Adviser and waivers......... (1.10)%*
Average commission
rate paid................... $0.0983
Portfolio turnover rate...... 59%
+ From commencement of operations: February 18, 1997.
* Annualized.
** Total return does not reflect 4.75% maximum sales charge.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
INVESTMENT OBJECTIVES AND POLICIES
The HomeState Group is registered as a "series" fund whereby each
individual series of the Trust, 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, two series
are in operation: the HomeState Pennsylvania Growth Fund and the
HomeState Select Opportunities Fund. The discussion of investment
objectives and policies that follows relates only to each
specific series as noted. Future series of the Trust would have
their own distinct objectives and policies. Each series may also
employ the techniques described below under "Investment
Techniques" and are subject to specific risks described below
under "Risk Factors."
THE HOMESTATE PENNSYLVANIA GROWTH FUND
The Fund's objective is long-term growth through capital
appreciation. The Fund seeks to achieve this goal mainly by
investing in a diversified portfolio of companies that have their
headquarters in the Commonwealth of Pennsylvania, or companies
based elsewhere but have significant operations in the
Commonwealth of Pennsylvania (i.e. at least 50% of their revenues
are derived from operating units 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 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.
THE HOMESTATE SELECT OPPORTUNITIES FUND
The objective of the Fund is long-term appreciation of capital
through investments in a non-diversified portfolio of securities.
The Fund seeks to achieve this goal by typically investing in the
common stock of no more than fifty U.S. companies. While the Fund
can invest in companies of varying size, it will usually
emphasize companies having a market capitalization of less than
$1 billion.
The Fund may invest a larger percentage of its assets in a
particular security or issuer than the average diversified mutual
fund, and will focus on those companies identified by the Fund's
adviser as having what it believes are superior prospects for
price appreciation. Due to potential concentration in these
issues, the Fund will close to new investors when total net
assets surpass $100 million. The Fund's annual portfolio turnover
rate is expected to not exceed one hundred and fifty percent.
Higher portfolio turnover rates increase transaction costs and
the possibility of realizing taxable capital gains. 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.
INVESTMENT TECHNIQUES
The following are the investment techniques that may be used by
the Funds. Any discussion of an investment technique specific to
one series will be noted.
EQUITY SECURITIES
Under normal circumstances the Funds will invest a minimum of 65%
of its total assets in common stocks, preferred stocks and
securities convertible into common and preferred stocks.
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 Funds will strive to invest in
companies with strong balance sheets and dominant or leading
positions in niche markets. The Funds 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 company for possible inclusion in a Fund's
portfolio, 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 companies. The Adviser estimates that approximately 80
<PAGE>
THE HOMESTATE GROUP
===============================================================================
percent of the HomeState Pennsylvania Growth Fund's equity
holdings have historically been a result of this in-house
research effort and that this percentage will be even higher in
the HomeState Select Opportunities Fund. The HomeState Select
Opportunities Fund, however, will not share the HomeState
Pennsylvania Growth Fund's geographic limitation.
SMALL COMPANIES
The Funds can each invest in companies from a wide range of
industries and of varying size, but both will include smaller
companies. The HomeState Select Opportunities Fund will usually
emphasize these smaller companies. Smaller companies are
generally not as widely followed by institutional investment
analysts as larger companies such as those listed on the New York
Stock Exchange. According to surveys by brokerage firms, over 60
percent of all companies listed on the NASDAQ Stock Exchange and
American Stock Exchange have two or fewer analysts following the
company. The Funds' adviser believes that this lack of generally
available information about smaller companies presents an
opportunity for investment managers who provide their own
research analysis to spot developing trends before such
information is widely distributed among the larger investment
community.
REGIONAL INVESTING
To pursue its objective, the HomeState Pennsylvania Growth 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 Funds' 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.
OTHER INVESTMENT TECHNIQUES
Both Funds may also invest up to 35 percent of the value of their
total assets in 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 Funds invest are likely to decrease in times of rising
interest rates. Conversely, when rates fall, the value of the
Funds' debt securities may rise. Price changes of these debt
securities held by the Funds have a direct impact on the net
asset value per share of the Funds. 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
"Appendix A" of the Funds' Statement of Additional Information
for further information). The Funds 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 Funds 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 Funds 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
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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.
On those occasions when, in the opinion of the Funds' investment
adviser, market conditions warrant a temporary defensive
approach, the Funds may invest more than 35 percent of their
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 Funds have adopted a temporary defensive position they will
not be achieving their stated investment objective.
The Funds may from time to time engage in repurchase agreements.
That is, a seller may sell securities to the Fund and agree to
repurchase the securities at the Funds' 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
Funds. Repurchase agreements involve certain risks, including
seller's default on its obligation to repurchase or seller's
bankruptcy.
OPTIONS AND SHORT-SELLING STRATEGIES - In managing the HomeState
Select Opportunities Fund, the adviser may engage in certain
options and short selling strategies to hedge various market
risks or to enhance potential gain. Certain special
characteristics of and risks associated with using these
instruments are discussed below. Use of options and short
selling is subject to applicable regulations of the SEC, the
several options exchanges upon which these instruments may be
traded, and the various state regulatory authorities. The Board
of Trustees has adopted investment guidelines (described below)
reflecting these trading regulations.
The Fund will not use leverage in its options and short-selling
strategies. Accordingly, the Fund will comply with guidelines
established by the SEC with respect to coverage of these
strategies and will either (1) set aside liquid, unencumbered,
daily marked-to-market assets in a segregated account with the
Fund's custodian in the prescribed amount; or (2) hold securities
or other options whose values are expected to offset ("cover")
its obligations thereunder.
OPTIONS STRATEGIES - The HomeState Select Opportunities Fund may
purchase and write (sell) options on securities and securities
indices that are traded on U.S. exchanges and in the over-the-
counter ("OTC") market. The Fund may purchase call options on
securities in which it is authorized to invest in order to fix
the cost of a future purchase. Call options also may be used as
a means of enhancing returns by, for example, participating in an
anticipated price increase of a security. In the event of a
decline in the price of the underlying security, use of this
strategy would serve to limit the potential loss to the Fund to
the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the
Fund either sells or exercises the option, any profit eventually
realized would be reduced by the premium paid. The Fund may also
write covered call options of securities in which it is
authorized to invest for hedging purposes or to increase return
in the form of premiums received.
The Fund may purchase put options on securities that it holds in
order to hedge against a decline in the market value of the
securities held or to enhance return. The put option enables a
Fund to sell the underlying security at the predetermined
exercise price; thus, the potential for loss to the Fund below
the exercise price is limited to the option premium paid. If the
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THE HOMESTATE GROUP
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market price of the underlying security is higher than the
exercise price of the put option, any profit the Fund realizes on
the sale of the security is reduced by the premium paid for the
put option less any amount for which the put option may be sold.
The Fund may also write covered put options on securities in
which it is authorized to invest for hedging purposes or to
increase return in the form of premiums received.
Securities used to cover OTC call options written by the Fund are
considered illiquid and therefore subject to the Fund's
limitations on investing in illiquid securities. The Fund may
purchase put and call options and write covered put and call
options on indexes in much the same manner as the more
traditional options discussed above. The Fund may purchase and
write covered straddles on securities or indexes. The Fund may
purchase put and call warrants with values that vary depending on
the change in the value of one or more specified indexes ("index
warrants"). For a more complete discussion of these and other
related techniques, investors are directed to the Trust's
Statement of Additional Information.
OPTIONS GUIDELINES - The HomeState Select Opportunities Fund has
adopted the following investment guidelines to govern its use of
options strategies; these guidelines may be modified by the Board
of Trustees without shareholder approval:
1. the Fund will write only covered options, and each such
option will remain covered so long as the Fund is obligated
under the option; and
2. the Fund will not write put or call options having
aggregate exercise prices greater than 25% of its net assets.
These guidelines do not apply to options attached to or acquired
with or traded together with their underlying securities and do
not apply to securities that incorporate features similar to
options.
SHORT-SELLING - If the HomeState Select Opportunities Fund
anticipates that the price of a security will decline, it may
sell the security short and borrow the same security from a
broker or other institution to complete the sale. The Fund may
realize a profit or loss depending upon whether the market price
of a security decreases or increases between the date of the
short sale and the date on which the Fund must replace the
borrowed security. As a hedging technique, the Fund may seek to
lower some of the risk associated with short sales by purchasing
call options on securities sold short by the Fund. Such options
would lock in a future purchase price and protect the Fund in
case of an unanticipated increase in the price of a security sold
short by the Fund.
Whenever the Fund effects a short sale, it will set aside in
segregated accounts cash, U.S. Government Securities or other
liquid assets equal to the difference between (i) the market
value of the securities sold short; and (ii) any cash or U.S.
Government Securities required to be deposited as collateral with
the broker in connection with the short sale (but not including
the proceeds of the short sale). Until the Fund replaces the
security it borrowed to make the short sale, it must maintain
daily the segregated account at such a level that the amount
deposited in it, plus the amount deposited with the broker as
collateral, will equal the current market value of the securities
sold short. No more than 25% of the value of the Fund's total
net assets will be, when added together, (i) deposited as
collateral for the obligation to replace securities borrowed to
effect short sales; and (ii) allocated to segregated accounts in
connection with short sales. The Fund's ability to make short
sales may be limited by a requirement applicable to "regulated
investment companies" under Subchapter M of the Internal Revenue
Code that no more than 30% of the Fund's gross income in any year
may be the result of gains from the sale of property held for
less than three months.
RISK FACTORS
GENERAL
The principal risk factor associated with an investment in the
Funds is that the market value of the portfolios' securities may
decrease and result in a decrease in the value of a shareholder's
investment. All investments, including those in mutual funds,
have risks, and no investment is suitable for all investors. The
Funds are intended for long-term investors.
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SMALL COMPANIES
The Funds' portfolios will include smaller companies, those
defined by the Funds' adviser as having a market capitalization
of less than $1 billion. Stocks of "small cap" companies tend to
be more volatile and less liquid than stocks of large companies.
"Small cap" companies, as compared to larger companies, may have
a shorter history of operations, may not have as great an ability
to raise additional capital, may have a less diversified product
line making them more susceptible to market pressure, may have a
smaller public market for their shares, and may not be nationally
recognized.
REGIONAL INVESTING
Due to its geographic limitation, the HomeState Pennsylvania
Growth 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. The HomeState
Select Opportunities Fund has 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.
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Since the HomeState Pennsylvania Growth 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 5.3% in July 1997,
versus 4.8% for the U.S. economy as a whole. By comparison,
neighboring New Jersey's rate was 5.4%. 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 ten 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.
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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.
NON-DIVERSIFICATION
As a "non-diversified" Fund, the HomeState Select Opportunities
Fund has the ability to invest a larger percentage of its assets
in the stock of a smaller number of companies than a
"diversified" fund. Because the appreciation or depreciation of a
single portfolio security may have a greater impact on the net
asset value of the Fund, the net asset value per share of the
Fund can be expected to fluctuate more than that of a comparable
"diversified" fund. See Investment Restriction Number 1, below.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING
The Fund may effectively terminate its right or obligations under
an option by entering into a closing transaction. Closing
transactions essentially permit the Fund to realize profits or
limit losses on its options positions prior to the exercise or
expiration of the option. If the Fund is unable to effect a
closing purchase transaction with respect to options it has
acquired, the Fund will have to allow the options to expire
without recovering all or a portion of the option premiums paid.
If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not
be able to sell the underlying securities or currencies or
dispose of assets used as cover until the options expire or are
exercised, and the Fund may experience material losses due to
losses on the option transaction itself and in the covering
securities.
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In considering the use of options to enhance returns or for
hedging purposes, particular note should be taken of the
following:
1. The value of an option position will reflect, among other
things, the current market price of the underlying security
or index, the time remaining until expiration, the
relationship of the exercise price to the market price, the
historical price volatility of the underlying security or
index, and general market conditions.
2. Options normally have expiration dates of up to three
years.
3. A position in an exchange-listed option may be closed out
only on an exchange that provides a secondary market for
identical options. Closing transactions may be effected
with respect to options traded in the OTC market only by
negotiating directly with the other party to the option
contract or in a secondary market for the option if such
market exists.
4. With certain exceptions, exchange listed options generally
settle by physical delivery of the underlying security.
5. The Fund's activities in the options markets may result in
a higher portfolio turnover rate and additional brokerage
costs; however, the Fund also may save on commissions by
using options as a hedge rather than buying or selling
individual securities in anticipation of, or as a result
of, market movements.
SHORT-SELLING
Short-selling is a technique that may be considered speculative
and involves risk beyond the initial capital necessary to secure
each transaction. In addition, the technique could result in
higher operating costs for the Fund and have adverse tax effects
for the investor. Investors should consider the risks of such
investments before investing in the Fund.
For a more detailed discussion of these risks, investors are
directed to the Trust's Statement of Additional Information.
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INVESTMENT RESTRICTIONS
The Funds are subject to specific fundamental investment
restrictions, which may not be changed without a vote of a
majority of their outstanding shares. Following is a discussion
of some of these fundamental restrictions:
The HomeState Pennsylvania Growth 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. Invest in, write or sell put or call options, straddles,
spreads or combinations thereof.
4. Invest in commodities or commodity contracts.
5. 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 HomeState Select Opportunities Fund may not:
1. Invest more than 25% of the value of its assets in the
equity or debt of one issuer (other than obligations issued
or guaranteed by the U.S. Government), nor, in respect of
at least 50% of its assets, 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 U.S.
Government.
2. Invest more than 25% of total assets in one industry.
3. Borrow money, except from a bank or for purposes of
purchasing securities on margin (provided that such
purchases may not exceed 120% of total assets taken at
current value); such borrowing will be limited to no more
than 5% of net assets.
The Funds may not :
1. Acquire more than 10% of the voting securities of any one
issuer.
2. Issue or sell senior securities.
The aforementioned investment limitations are considered at the
time the investment securities are purchased.
See the Funds' Statement of Additional Information for the full
text of these policies and the Funds' 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 Funds 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 Funds' principal distributor. If an
investor would like assistance in locating a dealer, he or she
should contact the Funds. 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. Investors may be
charged a fee if they effect transactions through a broker or
agent.
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Shares of the Funds are purchased at net asset value per share
next determined after an order is received (See "Valuing the
Funds' Shares"), plus any applicable sales charge as described
below, which is known as the "offering price." Funds'
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 Funds shares (See "Management of
the Funds - The Distribution Plan").
At a meeting held on November 21, 1996 the Trust's Board of
Trustees voted to reduce the sales load of the HomeState
Pennsylvania Growth Fund. As a result, effective February 18,
1997 the maximum sales load on the purchase of shares of the
Funds is 4.75%. 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 4.75% 4.99% 4.25%
$50,000 to $250,000 3.75 3.90 3.25
$250,000 to $500,000 2.75 2.83 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. Shareholders may qualify by aggregating purchases
being made or that have been made in both Funds:
1. REACH "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 Funds or their 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 Funds' 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 Funds' 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 Funds 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 Funds at the net asset
value without sales charge;
(ii)Shareholders who have redeemed any or all of their
shares of the Funds 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;
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(iii)Shareholders of the HomeState Pennsylvania Growth
Fund or the HomeState Select Opportunities Fund may
exchange their Fund shares into shares of the other
Fund at net asset value without sales charge;
(iv)The HomeState Pennsylvania Growth Fund only: 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;
(v) Investor's shares purchased by advisory accounts
managed by SEC-registered investment advisers or bank
trust departments;
(vi)Trustees, Officers, Employees (and those retired) of
the Funds, their 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 Funds
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 Funds 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
Funds 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 Funds 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 Funds 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 Funds 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 or
HomeState Select Opportunities Fund)
(followed by the name in which the account is
registered, and the account number).
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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 each 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
Funds provide 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.
AUTOINVEST PLAN
The Funds also provide for an automatic investment plan whereby
shareholders may arrange to make regular monthly, quarterly, semi-
annual, or annual investments in the Funds. Investment amounts
are automatically debited from the shareholder's checking
account. The minimum initial and subsequent investment pursuant
to this plan is $50.
GENERAL PURCHASE INFORMATION
Purchase orders for shares of the Funds placed with a registered
broker-dealer must be received by the broker-dealer before the
close of the NYSE to receive the Funds' 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 Funds' valuation calculated on the next business day.
The Funds may refuse any order for the purchase of shares which
the Board of Trustees deems as not in the best interests of the
Funds.
Stock certificates representing shares of the Funds are not
issued except upon written request. 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 Funds' 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 Funds'
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
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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 Funds' Transfer Agent receives all
telephone calls for telephone instructions on a recorded phone
line. The Funds and/or their Transfer Agent will employ such
reasonable procedures to confirm that instructions communicated
by telephone are genuine. If they fail to employ reasonable
procedures, the Funds may be liable for any losses due to
unauthorized or fraudulent instructions. The Funds reserve 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.
SYSTEMATIC WITHDRAWL PLAN
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.
GENERAL REDEMPTION INFORMATION
If a shareholder seeks to redeem shares that were purchased
within fifteen days of the redemption request, the Funds may
delay payment until such time as the funds in question have been
properly cleared and collected by the Funds.
Due to the relatively high administration cost of smaller
shareholder accounts, the Funds reserve 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 Funds or as an active
participant in the AutoInvest Plan. The Funds 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 and the
HomeState Select Opportunities Fund may be exchanged for shares
of each other at the then current net asset value by calling the
Funds' Transfer Agent by 4:00 p.m. Eastern Time on a normal
Business Day; or for shares of any other funds which may be
introduced by the Adviser; or 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. Exchanges of the Funds' shares involve the
redemption of the Funds' shares and therefore an exchange may
cause the realization of gains or losses for income tax purposes.
VALUING THE FUNDS' SHARES
The HomeState Pennsylvania Growth Fund's and the HomeState Select
Opportunities Fund's daily closing prices are listed in many
newspapers in the mutual fund prices section as "HomeStPA" and
"HomeStOp," respectively. The net asset value and offering price
of the shares of the Funds are determined once on each Business
Day as of the close of the NYSE, which on a normal Business Day
is usually 4:00 p.m. Eastern Time. A "Business Day" is defined as
a day in which the NYSE is open for trading. Holidays currently
observed by the NYSE are New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Each Fund's
value is
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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 Funds will fluctuate
with market conditions as the value of the investment portfolio
changes.
With approval of the Board of Trustees, the Funds may use a
pricing service, bank or broker-dealer experienced in such
matters to value the Funds' 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 Funds' shares,
see "Additional Information Concerning Valuing the Funds' Shares"
in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
THE BOARD OF TRUSTEES
The operations and management of the Trust are the responsibility
of the 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 Funds.
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 $325 million at September 30, 1997. 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 investment advisory agreements (the "Advisory
Agreements"), the Adviser furnishes each Fund with investment
advisory and administrative services which are necessary to
conduct the Fund's business. Specifically, the Adviser manages
the Funds' investment operations and furnishes advice with
respect to the purchase and sale of securities on a daily basis.
The HomeState Pennsylvania Growth Fund agreement is dated
September 1, 1992 and the HomeState Select Opportunities Fund
agreement is dated February 1, 1997.
Kenneth G. Mertz II, CFA, President of Emerald Advisers, Inc.,
and Vice President and Chief Investment Officer of the Funds, is
primarily responsible for the day-to-day management of the Funds'
portfolios. Mr. Mertz has had this responsibility since the
HomeState Pennsylvania Growth 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. Mr. Mertz has had this
responsibility with the HomeState Select Opportunities Fund since
its inception.
Under the terms of the Advisory Agreements, the Funds pay 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:
HomeState Pennsylvania Growth Fund: 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%.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
HomeState Select Opportunities Fund: for assets up to and
including $100,000,000: 1.0%; for assets in excess of
$100,000,000: 0.90%. The Fund will be closed to new investors
when total net assets surpass $100 million. These fees are higher
than most other registered investment companies but comparable to
fees paid by equity funds of a similar investment objective and
size.
The Funds pay all of its expenses other than those expressly
assumed by the Adviser. Specifically, the Funds pay the fees and
expenses of their 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 Funds' 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 Funds to the extent
such fee exceeds the most restrictive expense limitation in
effect by a state regulatory agency where the Funds' 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 to waive its advisory fee and/or reimburse
other expenses for the HomeState Select Opportunities Fund for
the period at least through and including June 30, 1998 so that
total Fund operating expenses are capped at 2.35% or less.
The Adviser has agreed that a percentage of its net advisory fee
income earned from the HomeState Pennsylvania Growth Fund (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 the HomeState Pennsylvania Growth
Fund's net advisory fee income.
THE ADMINISTRATOR, ACCOUNTING AND TRANSFER AGENT
Pursuant to separate administration, accounting services and
transfer agency agreements each dated November 20, 1995, as
amended, 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. For its
services as administrator, Rodney Square receives an annual fee
paid monthly from the Funds, based on the Funds' daily assets, of
0.15% on the first $50 million (subject to a minimum fee of $50,000),
0.10% on the next $150 million and 0.07% on assets in excess of
$200 million. As accounting agent, Rodney Square determines net
asset value and provides accounting services to the Funds. Also,
Rodney Square, as transfer agent, performs certain shareholder
servicing duties as listed in the Transfer Agency Agreement.
THE CUSTODIAN
Pursuant to a separate custodian agreement (the "Custodian
Agreement"), Wilmington Trust Company, 1100 North Market Street,
Wilmington, DE 19890 (the "Custodian"), has been retained to
serve as custodian to the Funds' 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 Funds. 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 Funds.
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 Funds.
<PAGE>
THE HOMESTATE GROUP
===============================================================================
THE DISTRIBUTION PLANS
The Distributor will incur certain expenses while providing
selling and sales distribution services for the Funds, including
such costs as compensation to broker-dealers for (i) selling
shares of the Funds, and (ii) providing information and advice to
their shareholder clients regarding ongoing investment in the
Funds, as well as advertising, promotional and printing expenses.
To promote shares of the Funds to the general public, each Fund
has adopted a distribution services plan (the "Plans") under Rule
12b-1 of the Investment Company Act of 1940 (the "Act"). The
Plans allow the Funds to reimburse the Distributor for costs
specifically described in this Section. The Distributor receives
no other compensation from the Funds, except that (i) any sales
charge collected will be paid to the Distributor (See "How to
Purchase Shares of the Funds"), 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 the Funds' shares.
The Funds pay 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 Funds. The Funds' Adviser is responsible to pay the
Distributor for any unreimbursed distribution expenses.
Pursuant to the Plans, a broker-dealer may receive a maintenance
commission in the amount of 0.25% (annualized) of the average net
assets maintained in the Funds by their clients.
The Funds may also compensate a bank under the Plans only to the
extent that a bank may serve as a "service organization,"
providing administrative and accounting services for the Funds'
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 the Funds' 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 Trust adopted the Plans after
determining the Plans would likely benefit the Funds and their
shareholders to the extent that the Plans 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 Funds 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 Board of Trustees will annually review the success of the
Plans in meeting these objectives based on information provided
by the Adviser.
Future regulatory review and revision of Rule 12b-1 by the SEC,
of Rule 2830 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 Funds' Plans. The
Board of Trustees will promptly modify the Plans 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 Funds. 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 Funds may be
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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 Funds will be declared and
paid semi-annually, in the months of January and July. Capital
gains, if any, realized by the Funds will be declared and paid
semi-annually in the months of July and December. The Record and
Declaration 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 Funds 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 Funds,
the Funds do 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 Funds 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 Funds' 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 Funds
reserve the right to invest the amount of the returned check in
additional shares of the Funds 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 Funds are series of a Pennsylvania common law
trust, they will not be liable for corporate income or franchise
tax in the Commonwealth of Pennsylvania. Further, shares of the
Funds are exempt from Pennsylvania personal property taxes.
The Trust 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 Funds satisfy: (1) two gross income tests
that ensure the Funds earn income from investing activities; (2)
two diversification tests that limit the concentration of the
Funds' investment assets in any one issuer; and (3) a series of
distribution rules which require that the Funds distribute to
shareholders substantially all of their investment company
taxable income and net tax-exempt interest income. Each
individual series of the Trust is expected to be treated as a
separate corporation for most federal income tax purposes. So
long as each 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 Funds 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 Funds 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 Funds a certified taxpayer
identification number ("TIN"). The Funds are required to withhold
31% from reportable payments including ordinary income dividends,
capital gains distributions, and redemptions occurring in
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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 Trust do not have
preemptive or conversion rights, and are fully-paid and non-
assessable when issued.
Since The HomeState Group 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 Trust 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 are
entitled to one vote per share, and do not have cumulative voting
rights.
The HomeState Group currently issues shares of beneficial
interest with no par value, in two series. Additional series may
be added in the future by the Board of Trustees. Each share of
each Fund has pro rata distribution rights, and shares equally in
dividends and distributions of the respective Fund series.
Shareholders will receive an annual report containing financial
statements which have been audited by the Funds' independent
accountants, and a semi-annual report containing unaudited
financial statements. Each report will include a list of
investment securities held by the Funds. Shareholders may contact
the Funds for additional information.
Duane, Morris & Heckscher, 305 North Front Street, Harrisburg, PA
17108, is legal counsel to the Trust.
Price Waterhouse LLP, 30 South Seventeenth Street, Philadelphia,
PA 19103, is the independent accountant for the Trust.
MANAGEMENT OF THE FUNDS
TRUSTEES - Bruce E. Bowen, Kenneth G. Mertz II, C.F.A., Scott C.
Penwell, Esq., Scott L. Rehr, 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; Diane D. Marky, Assistant Secretary
<PAGE>
[BLANK PAGE]
<PAGE>
THE HOMESTATE GROUP
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---------------------------------------------------
I FUND INFORMATION I
I I
I NEW ACCOUNTS - (800) 232-0224 I
I I
I EXISTING ACCOUNTS/ORDERS - (800) 892-1351 I
I I
I BROKERS ONLY - (800) 232-OK-PA I
I I
I SYMBOLS: I
I PENNSYLVANIA GROWTH FUND: HSPGX I
I SELECT OPPORTUNITIES FUND: HSSAX I
I I
----------------------------------------------------
<PAGE>
THE HOMESTATE GROUP
===============================================================================
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
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware, 19890
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>
THE HOMESTATE GROUP
HomeState Pennsylvania Growth Fund
HomeState Select Opportunities Fund
- -----------------------------------
1857 William Penn Way
P.O. Box 10666
Lancaster, PA 17605-0666
INVESTMENT ADVISER
GENERAL FUND INFORMATION
EMERALD ADVISERS, INC. STATEMENT OF
P.O. Box 10666 ADDITIONAL INFORMATION
Lancaster, PA 17605-0666
THE HOMESTATE GROUP
DISTRIBUTOR THE HOMESTATE PENNSYLVANIA
RODNEY SQUARE DISTRIBUTORS, INC. GROWTH FUND
Rodney Square North THE HOMESTATE SELECT
1100 North Market Street OPPORTUNITIES FUND
Wilmington, DE 19890-0001
ADMINISTRATOR
TRANSFER AGENT AND
ACCOUNTING AGENT
RODNEY SQUARE MANAGEMENT CORPORATION DATED OCTOBER 30, 1997
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
CUSTODIAN
WILMINGTON TRUST COMPANY
1100 North Market Street
Wilmington, DE 19890-0001
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 30, 1997
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 "Trust"), and two of its operating series
funds: The HomeState Pennsylvania Growth Fund and The HomeState Select
Opportunities Fund (the "Funds"). This Statement is not a Prospectus
and should be read in conjunction with the Funds' Prospectus. This
Statement is only authorized for distribution when accompanied or
preceded by a copy of the Funds' Prospectus dated October 30, 1997.
You may obtain a free copy of the Prospectus by writing the Funds,
P.O. Box 10666, Lancaster, PA 17605, or by calling (717) 396-7864.
TABLE OF CONTENTS
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 Funds............................................... 12
Board of Trustees and Officers of the Funds................. 12
Person Controlling the Funds................................ 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 - Hedging Strategies....................................... 37
Appendix C - Pennsylvania Based Companies............................. 37
<PAGE>
ADDITIONAL INFORMATION CONCERNING INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The HomeState Group is registered as a "series" fund, whereby
each individual series of the Trust, in effect, represents a separate
mutual fund with its own objectives and policies. Currently, there are
three series: The HomeState Pennsylvania Growth Fund, The HomeState
Select Opportunities Fund and The Year 2000 ("Y2K") Fund. The
discussion of investment objectives and policies that follows relates
only to The HomeState Pennsylvania Growth Fund and The HomeState
Select Opportunities Fund. In the likely event that further series' of
the Trust are introduced, these new series would have their own
separate objectives and policies and would be disclosed here as such.
The HomeState Pennsylvania Growth 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).
The HomeState Select Opportunities Fund's objective is long-term
appreciation of capital through investments in a non-diversified
portfolio of equity securities. The Fund seeks to achieve this goal by
typically investing in the common stock of no more than fifty U.S.
companies. While the Fund can invest in companies of varying size, it
will usually emphasize companies having a market capitalization of
less than $1 billion. The Fund may invest a larger percentage of its
assets (more than the average diversified fund) in a particular
security or industry, and will focus on those companies identified by
the Fund's adviser as having what it believes are superior prospects
for price appreciation.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment policies and restrictions may not be
changed without the approval of a majority of each Fund's outstanding
shares. For these purposes, a majority of shares of each 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 HomeState Pennsylvania Growth 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. Invest in, write, or sell put or call options, straddles,
spreads or combinations thereof.
4. Make short sales.
<PAGE>
5. 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;
6. Pledge, mortgage or hypothecate assets, except to secure
borrowings permitted by Item (5) above, and then only pledge
securities not exceeding ten percent (10%) of the Fund's total assets
(at current value);
7. Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and sales
of securities;
8. Purchase or sell commodities, commodity contracts or futures
contracts;
The HomeState Select Opportunities Fund may not:
1. Invest more than 25% of the value of its assets in the
equity or debt of one issuer (other than obligations issued or
guaranteed by the U.S. Government), nor, in respect of at least 50% of
its assets, 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 U.S. Government.
2. Invest more than 25% of total assets in one industry.
3. Borrow money, except from a bank or for purposes of
purchasing securities on margin (provided that such purchases may not
exceed 120% of total assets taken at current value); such borrowing
will be limited to no more than 5% of net assets.
The Funds may not :
1. Issue or sell senior securities;
2. 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;
3. 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;
4. 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;
5. 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;
<PAGE>
6. Invest in the securities of other investment companies
(except in no-load, open-end money market mutual funds, and except in
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.
7. 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)
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 Funds have also adopted the following non-fundamental investment
policies. These policies may be changed by the Funds' Board of
Trustees without shareholder approval.
The HomeState Pennsylvania Growth Fund:
1. Will not buy or sell oil, gas or other mineral leases,
rights or royalty contracts;
2. 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);
3. 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);
4. 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;
The HomeState Select Opportunities Fund:
1. Will not invest more than 15% 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);
2. May engage in options strategies, in which the Fund will
either: (i) set aside liquid, unencumbered, daily marked-to-market
assets in a segregated account with the Fund's custodian in the
prescribed amount; or (ii) hold securities or other options or futures
contracts whose values are expected to offset ("cover") its
obligations thereunder. Securities, currencies or other options or
futures contracts used for cover cannot be sold or closed out while
the strategy is outstanding, unless they are replaced with similar
assets;
3. May not write put or call options having aggregate exercise
prices greater than 25% of the Fund's net assets, except with respect
to options attached to or acquired with or traded together with their
underlying securities and securities that incorporate features similar
to options; and
4. May make short sales.
The Funds:
1. Will not invest in foreign currencies or foreign options;
2. Will not issue long-term debt securities;
3. Will not invest more than ten percent (10%) of its total
assets (at current value) in repurchase agreements, and will not
invest in repurchase agreements maturing in more than seven days. (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
Funds' management acknowledges these risks, it is expected that they
can be controlled through careful monitoring procedures.)
4. May invest their 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 Funds will only purchase CD's from such
institutions covered by FDIC insurance, and only to the dollar amount
insured by the FDIC.)
5. May invest in securities convertible into common stock, but
only when the Funds' 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
<PAGE>
Funds 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
Funds will purchase only those convertible securities which have
underlying common stock with potential for long-term growth in EAI's
opinion. The Funds 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).
6. Will maintain their portfolio turnover rate at a percentage
consistent with their investment objective, in the case of the
HomeState Pennsylvania Growth Fund: long-term growth, in the case of
The HomeState Select Opportunities Fund: long-term appreciation of
capital. The Funds 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 the Funds' Adviser to be
desirable and consistent with a sound investment policy. The Funds may
dispose of securities whenever the Adviser deems advisable without
regard to the length of time held. The HomeState Pennsylvania Growth
Fund is not expected to exceed a portfolio turnover rate of 80% on an
annual basis; The HomeState Select Opportunities Fund is not expected
to exceed a portfolio turnover rate of 150% on an annual basis.
ADDITIONAL FUND VALUATION INFORMATION
Each Fund determines its net asset value per share daily by
subtracting its liabilities (including accrued expenses and dividends
payable) from its total assets (the market value of the securities the
Fund holds plus cash or other assets, including interest accrued but
not yet received) and dividing the result by the total number of
shares outstanding. Each Fund's net asset value per share is
calculated as of the close of trading on the New York Stock Exchange
(the "Exchange") every day the Exchange is open for trading. The
Exchange closes at 4:00 p.m. Eastern Time on a normal business day.
Presently, the Exchange is closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
Temporary investments held by the Funds' portfolios having a
remaining maturity of less than sixty days when purchased and
securities originally purchased with maturities in excess of sixty
days but which currently have maturities of sixty days or less may be
valued at cost, adjusted for amortization of premiums or accrual of
discounts, if in the judgment of the Board of Trustees such methods of
valuation are appropriate, or under such other methods as the Board of
Trustees may from time to time deem to be appropriate. The cost of
those temporary securities that had original maturities in excess of
sixty days shall be determined by their fair market value as of the
sixty-first day prior to maturity. All other securities and assets in
the portfolios will be appraised in accordance with those procedures
established in good faith in computing the fair market value of these
assets by the Board of Trustees.
<PAGE>
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 three 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 preemptive 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 to 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.
<PAGE>
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
The Funds' 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 Funds, as well as a
table of applicable sales charges for the Funds. The following is
additional information which may be of interest to investors.
The Funds are currently making a continuous offering of their
shares. The Funds receive the entire net asset value of shares sold.
The Funds 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 Funds' 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 Funds' 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
Funds 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 Trust may be purchased at a reduced sales
charge to certain investors listed in the Funds' Prospectus and below.
The shareholders' purchases in the series of the Trust may be
aggregated in order to qualify for reduced sales charges.
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 Funds' 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 fiscal years ended June 30, 1997 and 1996, RSD received $166,908
and $105,374, respectively. For the period ended June 30, 1995, Fund/Plan
Broker Services, Inc., the Funds' previous distributor, received $263,145
in sales charges on sales of shares of the HomeState Pennsylvania Growth
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 Funds' Prospectus:
<PAGE>
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 Funds 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 Funds' 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 Funds.
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 escrow 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.
<PAGE>
Once received from the dealer, the sales charge adjustment will be
used to purchase additional shares of the Trust'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 Funds
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
Funds' then-current net asset value, so that no sales charge will be
levied. Investors should call the Funds 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 July and
December. 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 Funds reserve the right to invest the check
in additional shares of the Funds at the then-current net asset value
and to convert your account's election to automatic reinvestment of
all distributions, until the Funds' 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
Funds' 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.
<PAGE>
TAXES
Each series of the Trust is treated as a separate Fund for
federal income tax purposes. Each 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, each 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 each 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, a Fund does not qualify for such special tax
treatment, that 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 a Fund fails to distribute in a
calendar year substantially all of its ordinary income for such year
and substantially all of its net capital 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, that Fund will
be subject to a 4% excise tax on the undistributed amounts. Each Fund
intends generally to make distributions sufficient to avoid imposition
of the 4% excise tax. In calculating its income, each 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 a 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.
<PAGE>
CAPITAL GAINS - When you purchase shares of a 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, each 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 each 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 Funds should consult with
their tax adviser to determine the suitability of shares of the Funds
as an investment through such plans, and the precise effect of such an
investment on their particular tax situation.
MANAGEMENT OF THE FUNDS
Board of Trustees and Officers of the Trust
The following individuals hold positions as Trustees and/or
Officers of the Trust. Their position with the Trust 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 34, 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.
<PAGE>
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 44, 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.
Diane D. Marky, Rodney Square North, 1100 N. Market St., Wilmington,
DE 19890-0001, Assistant Secretary, age 33, has been a Senior Fund
Administrator of RSMC since 1994 and a Fund Administration Officer of
RSMC since July 1991. She was a Mutual Fund Accountant for RSMC from
1989 to 1991.
* Employee of Emerald Advisers, Inc. and "Interested Person" within
the meaning of the Investment Company Act of 1940.
** Employee of the Trust's Legal Counsel and therefore an "Interested
Person" within the meaning of the Investment Company Act of 1940.
The Trustees of the Funds who are not employed by the Adviser,
the Distributor, or their affiliates (the "Disinterested Trustees")
receive an annual retainer of $2,500 for the HomeState Pennsylvania
Growth Fund and $ 1,000 for the HomeState Select Opportunities Fund,
$350 for each Trustees meeting attended, and $100 for each Audit
Committee meeting attended. For the year ended June 30, 1997, the
Trustees received fees totaling $18,150 for their services. The Funds
will also reimburse the Independent Trustees' travel expenses incurred
attending Board meetings.
<PAGE>
COMPENSATION TABLE
AGGREGATE PAY
AGGREGATE PAY FROM SELECT YEAR 2000 TOTAL PAY
FROM PA GROWTH OPPROTUNITIES ("Y2K") FROM FUND
NAME AND TITLE FUND FUND FUND COMPLEX (1)
- ---------------- -------------- ------------- ----------- -----------
Scott L. Rehr, $0 $0 $0 $0
Trustee and
President
Bruce E. Bowen, 4,000 2,050 2,500 8,550
Trustee
Daniel W. Moyer, 0 0 0 0
IV,
Vice-President
and Secretary
Kenneth G. 0 0 0 0
Mertz, II,
Trustee, Vice-
President and
Chief Investment
Officer
Scott C. 4,000 2,050 2,500 8,550
Penwell,
Trustee
Dr. H. J. Zoffer 4,000 2,050 2,500 8,550
Trustee
(1) No pension or retirement benefits are provided for trustees or
officers of the Funds.
The Officers of the Funds receive no compensation for their
services as such.
As of September 30, 1997 the Trustees and Officers of the Funds
owned, as a group, less than one percent of the outstanding shares of
the Funds.
The Declaration of Trust provides that the Trust will indemnify
the 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 Trust,
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 Trust, at its
expense, may provide liability insurance for the benefit of its
Trustees, officers and employees.
Persons Controlling the Funds
To the knowledge of the Funds, no person owned of record or
beneficially 25% or more of each Fund's outstanding shares as of
September 30, 1997.
To the knowledge of the Funds, no person owned of record or
beneficially 5% or more of HomeState Select Opportunities Fund's
outstanding shares as of September 30, 1997.
<PAGE>
The following persons owned of record or beneficially 5% or more
of the HomeState Pennsylvania Growth Fund's outstanding shares as of
September 30, 1997:
NAME ADDRESS % OF OWNERSHIP
- ---- ------- ----------------
Smith Barney Inc. 388 Greenwich St., NY, NY 10013 12.4%
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, 1100
N. Market Street, Wilmington, DE 19890-0001, are the Funds' investment
adviser and distributor, respectively. The Distributor is not
obligated to sell any specific amount of shares of the Funds 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 Funds. Some officers of the
Funds are employed by the Adviser and may also distribute shares of
the Funds as registered representatives of the Distributor.
Effective August 19, 1994, Emerald Advisers, Inc. the investment
adviser of the Funds, 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, Paul W. Ware and Judy S. Ware. The following
individuals have the following positions and offices with the
Trust and EAI:
NAME POSITION(S) WITH ADVISER POSITION(S) WITH TRUST
----- ------------------------ ----------------------
Scott L. Rehr Senior Vice President; Trustee; President
Treasurer; Director
Kenneth G. Mertz President; Director Trustee; Vice
II, C.F.A. President; Chief
Investment Officer
Daniel W. Moyer, IV Vice President; Vice President;
Director Secretary
In carrying out its responsibilities under the investment
advisory contract with the Funds, EAI furnishes or pays for all
facilities and services furnished or performed for, or on behalf of,
the Funds. Such items may include, but are not limited to: office
facilities, office support materials and equipment, records and
personnel necessary to manage the Funds' daily affairs. In return for
these services, the Funds have agreed to pay EAI an annualized fee,
based on the average market value of the net assets of the Funds,
computed each business day and paid to EAI monthly. The fee is paid as
follows:
<PAGE>
HOMESTATE PENNSYLVANIA GROWTH FUND:
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%
HOMESTATE SELECT OPPORTUNITIES FUND:
Assets $0 to $100 Million 1.00%
Over $100 Million 0.90%
The Fund will be closed to new investors when total net
assets surpass $100 million.
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, 1997, 1996 and
1995, EAI received management fees from the HomeState Pennsylvania
Growth Fund, before voluntary reimbursement of expenses, totaling
$528,528, $246,310, and $106,017, respectively. For the period ended
June 30, 1997, EAI received management fees from the HomeState Select
Opportunities Fund, before voluntary reimbursement of expenses,
totaling $11,200. For the period ended June 30, 1997, EAI waived its
entire fee, $11,200 and reimbursed the HomeState Select Opportunities
Fund $47,862.
The Funds pay all of its expenses other than those expressly
assumed by the Adviser. Specifically, the Funds pay the fees and
expenses of their transfer agent, custodian, independent accountants
and legal counsel. These fees are generally for the costs of necessary
professional services, regulatory compliance, and those pertaining to
maintaining the Funds' 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 a Fund to the
extent such fee exceeds the most restrictive expense limitation in
effect by a state regulatory agency where that Fund's shares are
registered for purchase. The Adviser reserves the right to voluntarily
waive any portion of its advisory fee at any time.
<PAGE>
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 Funds. As administrator,
Rodney Square provides administrative and operational services and
facilities. As transfer, dividend disbursing, and shareholder
servicing agent for the Funds, Rodney Square is responsible for all
such corresponding duties, including: maintenance of the Funds'
shareholders' records, transactions involving the Funds' 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 Funds.
For the fiscal years ended June 30,1997 Rodney Square received fees
totaling $302,133 and for the period from November 20, 1995 through
June 30, 1996, Rodney Square received fees totaling $106,524.
For the period from July 1, 1995 through November 19, 1995, the
fiscal year ended June 30, 1995, Fund/Plan Services, Inc., The
HomeState Pennsylvania Growth Fund's previous transfer and
accounting agent, received fees from the Fund totaling $21,022 and
$80,253, respectively.
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Wilmington Trust Company, 1100 North Market Street, Wilmington,
DE 19890 ("WTC") is the custodian of the securities and cash of the
Funds. Price Waterhouse LLP, 30 South Seventeenth Street,
Philadelphia, PA 19103, are the independent accountants which audit
the annual financial statements of the Funds.
THE DISTRIBUTION PLANS
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 Trust 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 Funds' 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 and the HomeState Select
Opportunities Fund are both currently operating with Distribution
Plans (the "Plans"). Each Fund has adopted a Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the
Plans are to permit the Funds to compensate the Distributor for
services provided and expenses incurred by it in promoting the sale of
shares of the Series, reducing redemptions, or maintaining or
improving services provided to shareholders by the Distributor or
dealers. By promoting the sale of shares and/or reducing redemptions,
the Plan should help provide a continuous cash flow, affording the
Adviser the ability to purchase and redeem securities without forcing
the Adviser to make unwanted redemptions of existing portfolio
securities.
<PAGE>
The Plans provide for quarterly payments by each 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 Trust's Board of Trustees
to reduce the amount of payments or to suspend the Plans 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. At present, the
Trustees have approved payments under the Plans 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
each Fund's average net assets. Continuance of the Plans 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 Plans must be likewise approved by separate votes of
the Trustees and the Disinterested Trustees of the Trust. The Plans
may not be amended in order to increase materially the costs which the
Funds bear for distribution pursuant to the Plans without also being
approved by a majority of the outstanding voting securities of a Fund.
The Plans terminate automatically in the event of their assignment and
may be terminated without penalty, at any time, by a vote of the
majority of (i) the outstanding voting securities of a Fund, or (ii)
the Disinterested Trustees.
For the fiscal year ended June 30, 1997, the HomeState
Pennsylvania Growth Fund incurred expenses totaling $249,651 pursuant
to the Distribution Plan. The HomeState Select Opportunities Fund
incurred expenses totaling $3,920.
ADDITIONAL BROKERAGE ALLOCATION INFORMATION
EAI places orders for the purchase or sale of portfolio
securities of the Funds. 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 Funds, but not
all such services furnished are used to advise the Funds. 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 Funds'
research purposes, then EAI, based upon allocations of expected use,
bears that portion of the service's cost that directly relates to non-
Funds research use. The management fee paid by the Funds 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 Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.
<PAGE>
For the fiscal years ended June 30, 1997, 1996 and 1995, The
HomeState Pennsylvania Growth Fund incurred brokerage commissions
aggregating $187,194, $127,600 and $91,506, respectively. During the
fiscal year ended June 30, 1997, transactions of the Fund aggregating
$46,908,216 were allocated to brokers providing research, statistical
and other related services and $208,752 in brokerage commissions were
paid on these transactions. For the period ended June 30, 1997, The
HomeState Select Opportunities Fund incurred brokerage commissions
aggregating $21,558.
PORTFOLIO TURNOVER RATE. The portfolio turnover rate is
calculated by dividing the lesser of each Fund's annual purchases and
sales of portfolio securities for the particular fiscal year by the
monthly average value of the portfolio securities owned by each Fund
during the year. All securities, including options, whose maturity or
expiration date at the time of acquisition was one year or less are to
be excluded from both the numerator and the denominator. The
portfolio turnover rate of The HomeState Pennsylvania Growth Fund for
the fiscal years ended June 30, 1997 and 1996 was 50% and 66%,
respectively. The portfolio turnover rate for The HomeState Select
Opportunities Fund for the period ended June 30, 1997 was 59%.
MEASURING PERFORMANCE
Average annual total return data ("Standardized Return") for the
Funds may from time to time be presented in the Prospectus, this
Statement and in advertisements. Each 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.
HomeState Pennsylvania Growth Fund
AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION
1 YEAR OCTOBER 1, 1992
ENDED THROUGH
SALES LOAD JUNE 30, 1997 JUNE 30, 1997
----------- ------------- ----------------
4.75% 4.36% 19.73%
NONE 9.56% 20.96%
<PAGE>
HomeState Select Opportunities Fund
SINCE INCEPTION
February 18, 1997
THROUGH
SALES LOAD JUNE 30, 1997
----------- ----------------
4.75% 11.44%
NONE 17.00%
Total return data ("Non-Standardized Return") may also be
presented from time to time. The calculation of each 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 a 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.
Each 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. A Fund
may quote Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. A Fund may also quote financial
and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
FINANCIAL STATEMENTS
The Schedule of Investments as of June 30, 1997; the Statement of
Assets and Liabilities as of June 30, 1997; the Statement of
Operations for the fiscal year ended June 30, 1997; the Statement of
Changes in Net Assets for the fiscal years ended June 30, 1997 and
June 30, 1996 for the Pennsylvania Growth Fund and for the fiscal
year ended June 30, 1997 for the Select Opportunities Fund; the Financial
Highlights for the fiscal years ended June 30, 1997, 1996, 1995, 1994,
and for the period October 1, 1992 (commencement of operations) to
June 30, 1993 for the Pennsylvania Growth fund and for the fiscal year
ended June 30, 1997 for the Select Opportunities fund and the Notes to the
Financial Statements and the Report of Independent Accountants, each
of which is included in the Annual Report to the shareholders of the
Fund as of and for the fiscal year ended June 30, 1997, are attached
hereto.
<PAGE>
THE HOMESTATE GROUP
WELCOME TO THE HOMESTATE MUTUAL FUNDS
-------------------------------------
HomeState currently offers two mutual funds: the HomeState
Pennsylvania Growth Fund and the HomeState Select Opportunities
Fund. Both funds offer investors a unique investment strategy
aimed at pursuing long-term growth: what we call "The HomeState
Advantage."
IN-DEPTH, ON SITE RESEARCH
--------------------------
HomeState's own in-house team of research analysts believes in a
common-sense, fundamental approach to choosing investments.
Whenever we can, we visit a company before investing, talking to
its management and employees, as well as its suppliers, customers
and competitors.
PROFESSIONAL PORTFOLIO MANAGEMENT
---------------------------------
HomeState's chief investment officer is Kenneth G. Mertz II, CFA.
Ken has over eighteen years' experience in the money management
industry, including seven years as chief investment officer of a
$12 billion public pension fund. Ken has managed portfolios in
both "up" and "down" markets and this experience guides him as he
seeks to actively reduce risk.
UNIQUE INVESTMENT OPPORTUNITIES
-------------------------------
HomeState's two mutual funds each focus on areas we feel are
largely ignored by other institutional money managers:
- companies based in our home state of Pennsylvania; and
- smaller-sized companies, with special attention to
technology companies.
[HOMESTATE Invests a minimum 65% of its assets in companies
PENNSYLVANIA headquartered or with significant operations in
GROWTH FUND Pennsylvania.
Logo]
[HOMESTATE Invests in a portfolio of no more than 50 U.S.
SELECT companies, emphasizing those with a market
OPPORTUNITIES capitalization of less than $1 billion.
FUND logo]
In-Depth, On-Site Research. Professional Portfolio Management.
Unique Investment Opportunities. That's THE HOMESTATE ADVANTAGE.
Funds that invest in a particular state or region may involve
a greater degree of risk than funds with a more
geographically diversified portfolio. Investing in smaller
companies' stock can involve higher risk and increased
volatility than larger stocks. This report contains
information about the Funds' performance. Past performance is
no guarantee of future results. An investment in the Funds
will fluctuate in value so that your account, when redeemed,
may be worth more or less than your original purchase price.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT
- -------------------------------------------------------------------------------
July 15, 1997
Dear Shareholder:
Welcome to the fifth annual fiscal year-end report for the
HomeState Pennsylvania Growth Fund, and the first shareholder
report for the new HomeState Select Opportunities Fund. June 30th
marked the end of a fiscal year filled with growth and challenge
for the HomeState Funds. On the growth side of the ledger, assets
in our flagship PA Growth Fund increased from $55.8 million on
June 30, 1996 to over $89.5 million a year later. More than 5,900
shareholders now share in our quest to find long-term growth
opportunities primarily through investments in local Pennsylvania-
based companies. The 1997 fiscal year also gave birth to our
second fund. The Select Opportunities Fund was launched on
February 18th, sailing directly into the midst of one of the more
choppy and turbulent equity markets of recent years. The unusual
dominance of the large-cap investing style during the past
several quarters has made for a challenging marketplace for small-
cap investors like HomeState. As detailed on the following pages,
however, portfolio manager Ken Mertz's skillful, experienced
management style has thus far produced handsome short-term
results for Select Fund shareholders and continued growth for PA
Growth Fund owners.
Both HomeState Funds utilize the same building blocks for a
successful fund: the efforts of our own research team and the
careful guidance of Ken Mertz. The PA Growth Fund holds a
diversified portfolio of 100 - 130 companies, most of which are
based in Pennsylvania. The Select Fund is comprised of no more
than 50 U.S. companies (with no specific focus on Pennsylvania
companies) selected as having the greatest potential for superior
long-term growth. The Select Fund can also employ hedging and
shorting strategies, and investors can expect greater short-term
volatility in this more aggressive fund.*
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT - (CONTINUED)
- -------------------------------------------------------------------------------
While the ups and downs and contrasts created by market
cycles seem more pronounced as of late, we remain committed to
providing our shareholders with an investment philosophy of hands-
on research analysis and experienced portfolio management of
unique investment opportunities, primarily in the smaller company
sector. This focus hasn't changed since HomeState's inception.
Between now and our December report, the PA Growth Fund will
celebrate five full years of operation. We are proud of the long-
term performance record the Fund has achieved, and look forward
to providing shareholders in both funds with "The HomeState
Advantage" for years to come. We thank you for your continuing
support and always welcome your comments, questions and
suggestions.
Sincerely,
/S/ Scott L. Rher
Scott L. Rehr
President
* If the Advisor anticipates that the price of a security will decline,
the advisor may sell the security short and borrow the same security
from a broker or the other institution to complete the sale. The Fund
may realize a profit or loss depending upon whether the market price
of a security decreases or increases between the date of the short sale
and the date on which the Fund must replace the borrowed security.
Short-selling is a technique that may be considered speculative and
involves risk beyond the initial capital necessary to secure each
transaction. Short-selling could result in higher operating costs
for the Fund and have adverse tax effects for the investor.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
THE FUND AT A GLANCE
- -------------------------------------------------------------------------------
HOMESTATE PENNSYLVANIA GROWTH FUND PERFORMANCE COMPARISON VS. S&P 500*
GROWTH OF HYPOTHETICAL $10,000 INVESTMENT
HomeState Pennsylvania Growth Fund S&P 500
---------------------------------- -------
Sep-92 $9,496.68 $10,000.00
Dec-92 $10,322.90 $10,504.90
Mar-93 $10,446.40 $10,965.90
Jun-93 $10,427.40 $11,018.10
Sep-93 $11,743.20 $11,302.20
Dec-93 $12,291.20 $11,564.80
Mar-94 $12,051.50 $11,127.90
Jun-94 $11,859.70 $11,173.40
Sep-94 $12,671.50 $11,718.80
Dec-94 $12,525.20 $11,716.10
Mar-95 $13,110.50 $12,855.40
Jun-95 $15,295.60 $14,080.70
Sep-95 $17,148.00 $15,198.50
Dec-95 $18,083.10 $16,112.20
Mar-96 $18,948.50 $16,976.30
Jun-96 $21,415.00 $17,736.00
Sep-96 $21,282.10 $18,279.00
Dec-96 $21,992.60 $19,801.00
Mar-97 $20,631.30 $20,333.00
Jun-97 $23,524.10 $23,881.00
*The S&P 500 Index is an unmanaged index of 500 stocks
weighted by market capitalization.
+ Past performance is not indicative of future performance.
The Fund's total returns since Inception (October 1, 1992)
and for one year reflect the effect of the maximum sales
load charge of 4.75%. Without the sales charge, the total
returns would have been 9.56% and 20.96% respectively. The
maximum sales load incurred changed from 5.00% to 4.75% on
February 18, 1997.
AVG. ANNUAL RETURN+
1 YEAR INCEPTION
HOMESTPA 4.36% 19.73%
S&P 500 34.68% 20.11%
THE HOMESTATE PENNSYLVANIA GROWTH FUND
TOP TEN HOLDINGS AS OF JUNE 30, 1997
ISSUE % OF FUND ISSUE % OF FUND
- ----- --------- ----- ---------
1. Technitrol, Inc. 2.82% 6. GenRad. Inc. 1.81%
2. SI Handling Systems,Inc. 2.25% 7. Donegal Group, Inc. 1.77%
3. Penn Treaty American Corp 2.07% 8. Rite Aid Corp. 1.75%
4. Piercing Pagoda, Inc. 1.92% 9. Harsco Corp. 1.75%
5. Safeguard Scientifics, Inc. 1.86% 10. Susquehanna Bancshares, Inc. 1.74%
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT - PENNSYLVANIA GROWTH FUND
- -------------------------------------------------------------------------------
July 15, 1997
Dear Shareholder:
We are pleased to report the performance results for the
HomeState Pennsylvania Growth Fund. The total return without
adjustment for sales charges for the twelve month period ended
June 30, 1997 was 9.56%. These results were achieved in a very
difficult and volatile market, especially for the smaller
companies in which the Fund specializes.
Performance since inception remains above comparable market
benchmarks as well our market fund peer group.
Performance results for the Fund for periods ended June 30,
1997 are as follows:
AVERAGE ANNUALIZED RETURNS*
--------------------------- CUMULATIVE
SINCE INCEPTION TOTAL RETURNS
FUND/INDEX ONE YEAR THREE YEARS 10/1/92 SINCE 10/1/92
- ---------- -------- ----------- -------------- --------------
HomeState PA Growth
(at N.A.V.) 9.56% 25.51% 20.96% 146.97%
HomeState PA Growth
(at Maximum
Offering Price) 4.36% 23.49% 19.73% 135.24%
Standard & Poor's
500 Index 34.68% 28.83% 20.11% 138.81%
Russell 2000 Index 16.34% 20.07% 18.20% 121.30%
Wilshire 5000 Index 29.31% 26.73% 19.40% 132.11%
Morningstar Small
Company 14.06% 22.96% 19.37% 131.91%
Funds Average
The S&P 500, Wilshire 5000 and Russell 2000 are unmanaged
stock market indices without any associated expenses and their
returns assume the reinvestment of all dividends. The
Morningstar Small Company Funds average includes the total return
(without effects of sales charges) for the one-year, three-year
and HomeState Fund since inception periods ended June 30, 1997
for 431, 273 and 149 small company-oriented funds, respectively.
Please remember that past performance is no guarantee of future
results.
Your Fund received some national recognition in the February
28, 1997 edition of USA TODAY. In the article "Finding Returns
by Investing Close to Home" the Fund was featured as a leading
state and regional stock mutual fund for its three-year
performance. Not only is this a testament to our skills in
selecting growth opportunities but also a testament to the many
fine Pennsylvania-based companies that we have in the portfolio.
The past six months since our last report were particularly
difficult for small company growth portfolios like the Fund.
While the financial press focused on new highs for the Dow Jones
Industrials, smaller companies were in a "stealth" bear market.
At one point (the end of April) the performance gap between the
Russell 2000 Index (a small company index) and the Standard and
Poor's 500 (the proxy for large companies) exceeded 25%. The
Russell 2000 has been in existence since 1979 and this marks the
first occasion this performance gap ever exceeded 25%.
* Past performance is no guaratnee of future results.
The value and performance return of an investment in the Fund will
flucltuate with market conditions, so that, shares when redeemed,
may be worth more or less than their original purchase price.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT - PENNSYLVANIA GROWTH FUND (CONTINUED)
- -------------------------------------------------------------------------------
The lagging performance of small companies in general was a
result of Federal Reserve Chairman Alan Greenspan's, citing the
market's "irrational exuberance," and the Fed Board eventually
raising interest rates. We currently believe the economy is
slowing on its own, that the Federal Reserve was afraid of its
own shadow, and that inflation is not a problem in the
foreseeable future. The recent picture of inventory growth, a
slowing in retail sales, a rise in unemployment claims and a
decrease in factory orders provides a picture of adequate
economic growth, low inflation, and relatively low interest
rates. This scenario is a very attractive one for equity
investors.
We believe the factors that led to outperformance by large
companies, such as financial reengineering, strong export growth,
and greater safety, have been played out and factored into
current prices. Today the value and growth prospects reside in
the small company marketplace where the expertise of the
HomeState Funds exists. For example, the Micro-Cap Research
Group of Natwest Securities presents the following relationship
for the Russell 2000 Index: Current fiscal-year growth of 25.3%
and a Price Earnings ratio of just 20 times. For the S&P 500 the
growth rate is 10.1% and the Price Earnings ratio is 18.7 times.
This comparison indicates that greater growth and better
valuation exists in smaller companies.
Given the Federal Reserve's intention to limit the U.S.
economy's growth rate as a method to control inflation, we
continue to emphasize investments in companies that rank #1 or #2
in their market niches. Our list of holdings reflects our
commitment to find growth companies that are market leaders, but
are selling at attractive valuation levels.
The current lack of pricing power in most industries focuses
our attention on revenue or top-line growth. For without
adequate top-line growth, most companies will not be able to grow
their bottom-line earnings at a rate sufficient for inclusion in
the Fund. We also continue to focus on our "Keys of Investing":
1. LEADERSHIP. Leadership is of utmost importance in selecting
companies for investment; leadership in management, market share,
and earnings growth. 2. RESEARCH. We utilize our own team of
research analysts to find this leadership. 3. INDEPENDENT
THOUGHT. We do not use "group think" or "fad" investing. We
create a portfolio that often bears little resemblance to others
or to the market at-large. 4. RISK AVERSE. We seek to
understand the risks embedded in each equity by diversifying the
portfolio. 5. ATTENTION TO VALUATION. We invest in growth
companies which are not fully appreciated by the market.
In summary, we believe our process of hands-on fundamental
research, combined with professional portfolio management, will
continue to enable us to uncover and manage quality growth
opportunities in the market.
Sincerely,
/S/ Kenneth G. Mertz II, CFA
Kenneth G. Mertz II, CFA
Chief Investment Officer
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
THE FUND AT A GLANCE
- -------------------------------------------------------------------------------
HOMESTATE SELECT OPPORTUNITIES FUND PERFORMANCE COMPARISON VS. RUSSELL 2000*
GROWTH OF HYPOTHETICAL $10,000 INVESTMENT
Index HomeState Select Opportunities Fund Russel 2000
- ----- ----------------------------------- -----------
Feb-97 $9,525.00 $10,000.00
Jun-97 $11,144.30 $10,778.00
*The Russell 2000 Index is an unmanaged index of 2000 socks
weighted by market capitalization.
+ Past performance is not indicative of future performance.
The Fund's total returns from Inception (February 18, 1997)
through June 30, 1997 reflect the effect of the maximum
sales load charge of 4.75%. Without the sales charge, the
total return would have been 17.00%.
AGGREGATE TOTAL RETURNs+
SINCE INCEPTION
HomeStSel 11.44%
Russell 2000 7.78%
THE HOMESTATE SELECT OPPORTUNITIES FUND
TOP TEN HOLDINGS AS OF JUNE 30, 1997
ISSUE % OF FUND ISSUE % OF FUND
- ----- --------- ----- ---------
1. Technitrol, Inc. 3.40% 6. Systems & Computer
2. Penn Treaty American Corp. 3.27% Technology Corp. 2.95%
3. UTI Energy Corp. 3.24% 7. Safeguard Scientifics 1.75%
4. GenRad,Inc. 3.22% 8. Keane, Inc. 2.77%
5. SI Handling Systems Inc. 3.16% 9. Piercing Pagoda, Inc. 2.68%
10. Cable Design Technologies 2.62%
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT - SELECT OPPORTUNITIES FUND
- -------------------------------------------------------------------------------
July 15, 1997
Dear Shareholder:
We are pleased to report the Select Opportunities Fund had an
auspicious start. Since the inception of this fund on February
18, 1997, the total return without adjustments for sales charges
through June 30, 1997 was 17.00%. This was substantially better
than the Russell 2000 Index (a small company index) which was up
7.78% including reinvested dividends.
Performance results for the Fund for the period ended June
30, 1997 are as follows:
AGGREGATE RETURNS
-----------------
SINCE INCEPTION
2/18/97
---------------
HomeState Select Opportunities
(at N.A.V.) 17.00%
HomeState Select Opportunities
(at Maximum Offering Price) 11.44%
Russell 2000 Index 7.78%
Wilshire 5000 Index 7.76%
The volatility in the market, especially for the smaller
growth companies in which the Select Opportunities Fund invests
caused a great deal of concern for many investors over the past
few months. The unique characteristics of the Fund has enabled
it to benefit from this volatility. The Fund may sell "short" or
buy put options on securities which it believes are overvalued
based on its fundamentals.* This allows the Select Opportunities
Fund an opportunity to perform in poor markets, as well as good
markets.
*Past performance is no guarantee of future results. The value
and performance return of an investment in the Fund will flucuate
with market conditions, so that, shares when redeemed, may be worth
more or less than their original purchase price. If the advisor
anticipates that the price of a security will decline, the advisor
may sell the security short and borrow the same security from a
broker or other institution to complete the sale. The Fund may
realize a profit or loss depending upon whether the market price of
a security decreases or increases between the date of the short sale
and the date on which the Fund must replace the borrowed security.
Short-selling is a technique that may be considered speculative and
involves risk beyond the initial capital necessary to secure each
transaction. Short-selling could result in higher operating costs
for the Fund and have adverse tax effects for the investor. If the
Fund is unable to effect a closing transaction, which essentially
permits the Fund to realize a profit or limit losses, with respect
options it has acquired, the Fund will have to allow the options to
expire without recovering all or a portion of the option premiums paid.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT FROM MANAGEMENT - SELECT OPPORTUNITIES FUND (CONTINUED)
- -------------------------------------------------------------------------------
This portfolio at the end of the fiscal year was more
concentrated than the Pennsylvania Growth portfolio but was still
well-diversified. Our heaviest concentration was in the
Technology sector, especially information technology and Year
2000 consultants and solution providers. Technology stocks,
especially small niche companies, provide many investment
opportunities in the future as providers of new solutions and
productivity enhancers for business as well as consumers. It is
in this area that our in-house research team has devoted
countless hours, days, and also nights to finding superior growth
companies with `real' solutions for tomorrow's world.
Our research approach with the Fund's companies is to find
growth opportunities in companies which have little research
coverage by Wall Street type firms. This lack of research
coverage we believe creates investment opportunities. Our
ability to spot new industries, market leaders, new solution
providers, and undervalued growth leaders has enabled us to pick
these "select opportunities" and hopefully reward our investors
with above market rates of returns.
In summary, our dedication to the under-researched small and
micro company universe enables us to provide you with our
"Select" list of companies as one of your portfolio choices.
Sincerely,
/S/ Kenneth G Mertz, II, CFA
Kenneth G. Mertz II, CFA
Chief Investment Officer
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
COMMON STOCK - 99.1%
COMMUNICATIONS & BROADCASTING - 1.6%
Comcast Corp. (A Shares)*............... 65,150 $ 1,392,581
-----------
FINANCE & INSURANCE - 22.9%
INSURANCE CARRIERS - 6.6%
Conseco, Inc.++.......................... 27,300 1,010,100
Donegal Group, Inc...................... 64,900 1,581,937
Penn Treaty American Corp.*............. 60,750 1,860,469
Penn-America Group, Inc................. 98,250 1,479,891
-----------
5,932,397
-----------
NATIONAL COMMERCIAL BANKS - 1.7%
First Capitol Bank/York, PA............. 4,800 160,200
Mellon Bank Corp........................ 29,900 1,349,238
-----------
1,509,438
-----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 4.2%
Parkvale Financial Corp................. 35,547 981,986
Patriot Bank Corp....................... 40,800 708,900
Prime Bancorp, Inc...................... 27,155 685,664
Sovereign Bancorp, Inc.................. 49,844 760,121
York Financial Corp..................... 31,615 628,348
-----------
3,765,019
-----------
STATE & NATIONAL BANKS - 10.4%
1st United Bancorp++.................... 10,000 175,000
BT Financial Corp....................... 33,641 1,471,794
Commerce Bancorp, Inc.++................ 37,091 1,437,276
First Colonial Group, Inc............... 27,805 670,796
Keystone Financial, Inc................. 17,900 559,375
Kish Bancorp............................ 600 43,800
Omega Financial Corp.................... 36,680 1,274,630
Onbancorp, Inc.......................... 7,500 382,500
PNC Bank Corp........................... 10,000 416,250
Signet Banking Corp.++.................. 23,500 846,000
Sun Bancorp, Inc........................ 12,695 453,828
Susquehanna Bancshares, Inc............. 39,600 1,554,300
-----------
9,285,549
-----------
TOTAL FINANCE & INSURANCE......................... 20,492,403
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
MANUFACTURING - 42.3%
CHEMICALS & ALLIED PRODUCTS - 3.2%
Macdermid, Inc.++........................ 32,500 $ 1,490,937
OM Group, Inc.++......................... 41,500 1,374,687
-----------
2,865,624
-----------
COMPUTER & OFFICE EQUIPMENT - 4.8%
Iomega Corp.++*......................... 31,000 616,125
Safeguard Scientifics, Inc.*............ 52,300 1,663,794
SI Handling Systems, Inc................ 108,950 2,015,575
-----------
4,295,494
-----------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 2.2%
Cohu, Inc.++*........................... 11,500 359,375
GenRad, Inc.++*......................... 71,500 1,617,687
-----------
1,977,062
-----------
ELECTRONIC TECHNOLOGY - 0.9%
Integrated Circuit Systems, Inc.*....... 35,900 814,480
-----------
FOOD & BEVERAGE - 1.7%
Hershey Foods Corp...................... 25,000 1,382,813
Puro Water Group, Inc.++*................ 10,000 58,437
Quigley Corp.*.......................... 7,000 60,813
-----------
1,502,063
-----------
IRON & STEEL - 0.8%
Carpenter Technology Corp............... 15,600 713,700
-----------
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES - 13.5%
Allen Organ Co. (B Shares).............. 9,300 370,838
C & D Technology, Inc................... 35,500 1,331,250
Cable Design Technologies*.............. 52,500 1,545,469
Checkpoint Systems, Inc.++*............. 30,000 481,875
Emcee Broadcast Products, Inc.*......... 96,900 199,856
Harsco Corp............................. 38,600 1,563,300
JPM Co.*................................ 26,600 947,625
Park Electrochemical Corp.++............ 12,000 315,750
Technitrol, Inc......................... 92,400 2,529,450
Teleflex, Inc........................... 37,400 1,168,750
Vishay Intertechnology, Inc.*........... 49,350 1,428,066
Zitel Corp.++*.......................... 10,000 196,250
-----------
12,078,479
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
MISCELLANEOUS INDUSTRIAL MACHINERY & EQUIPMENT - 2.8%
CFM Technologies, Inc.*................. 10,000 $ 327,500
JLG Industries, Inc..................... 27,000 367,875
Met-Pro Corp............................ 102,150 1,545,019
Thermo Electron Corp.++*................. 7,000 240,625
-----------
2,481,019
-----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 0.6%
American United Global, Inc.++*.......... 33,000 189,750
Penn Engineering & Manufacturing Corp.*. 19,600 384,650
-----------
574,400
-----------
OPTICAL & OPHTHALMIC GOODS, PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.0%
II-VI, Inc.*............................ 42,000 882,000
-----------
PETROLEUM REFINING - 3.8%
Buckeye Partners, L.P................... 12,000 542,250
Coastal Corp.++......................... 15,700 835,044
Mapco, Inc.++........................... 12,500 393,750
Tesoro Petroleum Corp.++*............... 55,500 822,094
USX - Marathon Group.................... 28,000 808,500
-----------
3,401,638
-----------
PHARMACEUTICAL PREPARATIONS - 2.5%
IBAH, Inc.*............................. 82,000 292,125
Ligand Pharmaceuticals (B Shares)++*..... 23,000 296,125
Magainin Pharmaceuticals, Inc.*......... 100,000 725,000
Nabi, Inc.++*........................... 33,500 221,938
Neose Technologies, Inc.*............... 40,000 510,000
Viropharma, Inc.*....................... 13,500 241,312
-----------
2,286,500
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 2.0%
Arrow International, Inc................ 24,000 702,000
Covalent Group, Inc.*................... 12,500 75,781
Environmental Tectonics Corp.*.......... 17,500 155,313
Medical Technology & Innovations*....... 145,000 27,550
Respironics, Inc.*...................... 40,000 845,000
-----------
1,805,644
-----------
TELECOMMUNICATIONS EQUIPMENT - 0.9%
Associated Group, Inc. (A Shares)*...... 5,800 232,000
Tollgrade Communications, Inc.*......... 24,850 568,444
-----------
800,444
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
TEXTILES & APPAREL - 1.6%
Jones Apparel Group, Inc.*.............. 30,000 $ 1,432,500
-----------
TOTAL MANUFACTURING............................... 37,911,047
-----------
MINING - 0.0%
Daleco Resources Corp. ++*............... 50,000 10,156
-----------
REAL ESTATE INVESTMENT TRUSTS - 4.8%
Brandywine Realty Trust................. 53,000 1,073,250
Crescent Real Estate Equities Co.
(When Issued)++......................... 17,500 555,625
Crown American Realty Trust............. 46,200 427,350
First Industrial Realty Trust, Inc.++... 32,000 936,000
Liberty Property Trust.................. 52,600 1,308,425
-----------
4,300,650
-----------
SERVICES - 16.1%
BUSINESS SERVICES - 2.5%
CRW Financial, Inc.*.................... 50,475 239,756
Diamond Technology Partners, Inc.++*.... 25,130 260,724
National Media Corp.*................... 17,000 110,500
Physician Support Systems, Inc.*........ 63,000 771,750
SOS Staffing Services, Inc.++*.......... 24,500 379,750
UTI Energy Corp.*....................... 11,000 501,875
-----------
2,264,355
-----------
COMPUTER SERVICES - 7.7%
Ansoft Corp.*........................... 74,000 545,750
Computer Associates International, Inc.. 10,000 556,875
Computer Horizons Corp. ++*............. 10,500 359,625
Daou Systems, Inc.++*................... 12,200 195,200
Keane, Inc.++ .......................... 9,500 494,000
Mastech Corp.*.......................... 67,000 1,348,375
Metacreations Corp.++*.................. 20,000 220,000
Microleague Multimedia, Inc.*........... 25,000 120,312
Prophet 21, Inc.*....................... 7,000 37,625
Sanchez Computer Associates, Inc.*...... 12,000 112,500
Scan-Graphics, Inc.*.................... 17,500 59,063
Seec, Inc.*............................. 12,000 231,000
SunGard Data Systems, Inc.* ............ 31,200 1,450,800
Systems & Computer Technology Corp.*.... 44,000 1,177,000
-----------
6,908,125
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
ENGINEERING SERVICES - 0.6%
Astrotech International Corp.*.......... 78,766 $ 502,133
-----------
HOME HEALTHCARE SERVICES - 0.4%
Home Health Corp.*...................... 35,700 339,150
-----------
MEDICAL & HEALTH SERVICES - 3.9%
Corecare Systems, Inc.*................. 92,000 80,500
Genesis Health Ventures, Inc.*.......... 31,700 1,069,875
Genome Therapeutics Corp.++*............ 33,000 284,625
Renal Treatment Centers, Inc.*.......... 29,400 790,125
SMT Health Services, Inc.*.............. 109,851 1,270,152
-----------
3,495,277
-----------
PERSONAL SERVICES - 1.0%
Crescent Operating, Inc.++.............. 1,750 21,000
Reliance Group Holdings, Inc.++......... 30,000 356,250
Sonus Pharmaceuticals, Inc.++*.......... 20,000 562,500
-----------
939,750
-----------
TOTAL SERVICES.................................... 14,448,790
-----------
UTILITIES - 1.9%
Consolidated Natural Gas Co............. 17,000 914,813
Philadelphia Suburban Corp.............. 42,500 812,813
-----------
1,727,626
-----------
WHOLESALE & RETAIL TRADE - 9.5%
MISCELLANEOUS RETAIL STORES - 3.4%
Borders Group, Inc.++*.................. 63,000 1,519,875
Rite Aid Corp........................... 31,500 1,571,062
-----------
3,090,937
-----------
RETAIL APPAREL & ACCESSORY STORES - 2.0%
Bon-Ton Stores, Inc.*................... 8,000 64,000
Piercing Pagoda, Inc.*.................. 68,400 1,718,550
-----------
1,782,550
-----------
RETAIL EATING & DRINKING PLACES - 0.6%
Schlotzsky's, Inc.++*................... 38,500 529,375
-----------
WHOLESALE - PETROLEUM & PRODUCTS - 0.2%
Harken Energy Corp.*.................... 30,000 210,000
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE PENNSYLVANIA GROWTH FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
WHOLESALE CHEMICALS & DRUGS - 1.5%
Amerisource Health Corp. (A Shares)*.... 26,500 $ 1,321,687
-----------
WHOLESALE ELECTRONIC EQUIPMENT & COMPUTERS - 1.2%
CHS Electronics, Inc.+.................. 40,000 1,060,000
-----------
WHOLESALE MISCELLANEOUS - 0.6%
Ikon Office Solutions, Inc.............. 21,300 531,169
-----------
TOTAL WHOLESALE & RETAIL TRADE.................... 8,525,718
-----------
Total Common Stock (Cost $68,003,903)............. 88,808,971
-----------
MONEY MARKET MUTUAL FUNDS - 1.2%
CoreFund Elite Treasury Reserve Portfolio 100,000 100,000
CoreFund Treasury Reserve Portfolio..... 930,872 930,872
-----------
Total Money Market Mutual Funds (COST $1,030,872).. 1,030,872
-----------
TOTAL INVESTMENTS (COST $69,034,775) - 100.3%........... 89,839,843
-----------
OTHER ASSETS AND LIABILITIES, NET - (0.3)%.............. (262,870)
-----------
NET ASSETS - 100.0%..................................... $ 89,576,973
===========
+ See Note 2 to Financial Statements.
* Non-income producing security.
++Non-Pennsylvania Company as defined in the Fund's current prospectus (the
aggregare value of such securities amounted to $20,723,530 as of June 30,
1997)
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
COMMON STOCK - 92.0%
FINANCE & INSURANCE - 5.9%
INSURANCE CARRIERS - 4.7%
Penn Treaty American Corp.*............. 6,000 $ 183,750
Penn-America Group, Inc................. 5,250 79,078
-----------
262,828
-----------
STATE & NATIONAL BANKS - 1.2%
Omega Financial Corp.................... 2,048 71,168
-----------
TOTAL FINANCE & INSURANCE......................... 333,996
-----------
MANUFACTURING - 48.2%
COMPUTER & OFFICE EQUIPMENT - 10.0%
Information Analysis, Inc.*............. 4,000 105,500
Iomega Corp.*........................... 6,000 119,250
Safeguard Scientifics, Inc.*............ 5,000 159,062
SI Handling Systems, Inc................ 9,600 177,600
-----------
561,412
-----------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 4.9%
Cohu, Inc............................... 3,000 93,750
GenRad, Inc.*........................... 8,000 181,000
-----------
274,750
-----------
ELECTRONIC TECHNOLOGY - 0.9%
Integrated Circuit Systems, Inc.*....... 2,200 49,912
-----------
FOOD & BEVERAGE - 1.8%
Quigley Corp.*.......................... 12,000 104,250
-----------
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES - 14.6%
Cable Design Technologies*.............. 5,000 147,187
Checkpoint Systems, Inc.*............... 8,000 128,500
ORBIT/FR, Inc.*......................... 10,000 97,500
Park Electrochemical Corp. ............. 4,500 118,406
Technitrol, Inc......................... 7,000 191,625
Vishay Intertechnology, Inc.*........... 4,725 136,730
-----------
819,948
-----------
MISCELLANEOUS INDUSTRIAL MACHINERY & EQUIPMENT - 3.7%
CFM Technologies, Inc.*................. 3,000 98,250
Met-Pro Corp............................ 7,300 110,413
-----------
208,663
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 1.0%
American United Global, Inc.*........... 10,000 $ 57,500
-----------
OPTICAL & OPHTHALMIC GOODS, PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.8%
II-VI, Inc.*............................ 4,700 98,700
-----------
PETROLEUM REFINING - 1.8%
Tesoro Petroleum Corp.*................. 7,000 103,688
-----------
PHARMACEUTICAL PREPARATIONS - 1.1%
Halsey Drug Company, Inc.*.............. 14,000 64,750
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 4.9%
Covalent Group, Inc.*................... 5,000 30,312
Environmental Tectonics Corp.*.......... 10,500 93,188
Intest Corp............................. 10,000 90,000
Osteotech, Inc.*........................ 1,500 15,750
Zonagen, Inc.*.......................... 2,000 43,750
-----------
273,000
-----------
TELECOMMUNICATIONS EQUIPMENT - 0.9%
Associated Group, Inc. (A Shares)*...... 1,200 48,000
-----------
TEXTILES & APPAREL - 0.8%
Jones Apparel Group, Inc.*.............. 1,000 47,750
-----------
TOTAL MANUFACTURING............................... 2,712,323
-----------
REAL ESTATE INVESTMENT TRUSTS - 3.7%
Crescent Real Estate Equities Co.
(When Issued).......................... 4,500 142,875
Crown American Realty Trust............. 7,000 64,750
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS............... 207,625
-----------
SERVICES - 22.7%
BUSINESS SERVICES - 7.8%
Diamond Technology Partners, Inc.*...... 7,000 72,625
Physician Support Systems, Inc.*........ 5,000 61,250
SOS Staffing Services, Inc.*............ 8,000 124,000
UTI Energy Corp.*....................... 4,000 182,500
-----------
440,375
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
COMPUTER SERVICES - 12.3%
Computer Horizons Corp.*................ 2,250 $ 77,063
Daou Systems, Inc.*..................... 4,100 65,600
Keane, Inc.* ........................... 3,000 156,000
Mastech Corp.*.......................... 6,750 135,844
Sanchez Computer Associates, Inc.*...... 10,200 95,624
Systems & Computer Technology Corp.*.... 6,200 165,850
-----------
695,981
-----------
MEDICAL & HEALTH SERVICES - 2.5%
SMT Health Services, Inc.*.............. 12,000 138,750
-----------
PERSONAL SERVICES - 0.1%
Crescent Operating, Inc................. 250 3,000
-----------
TOTAL SERVICES.................................... 1,278,106
-----------
WHOLESALE & RETAIL TRADE - 11.5%
MISCELLANEOUS RETAIL STORES - 3.1%
Borders Group, Inc.*.................... 5,500 132,688
Compucom Systems, Inc.*................. 6,000 42,750
-----------
175,438
-----------
RETAIL APPAREL & ACCESSORY STORES - 4.8%
Bon-Ton Stores, Inc.*................... 15,000 120,000
Piercing Pagoda, Inc.*.................. 6,000 150,750
-----------
270,750
-----------
WHOLESALE - PETROLEUM & PRODUCTS - 2.2%
Harken Energy Corp.*.................... 17,500 122,500
-----------
WHOLESALE ELECTRONIC EQUIPMENT & COMPUTERS - 1.4%
CHS Electronics, Inc.................... 3,000 79,500
-----------
TOTAL WHOLESALE & RETAIL TRADE.................... 648,188
-----------
Total Common Stock (Cost $4,575,718).............. 5,180,238
-----------
PAR
---
COMMERCIAL PAPER - 3.6%
CoreStates, 4.25%, 07/01/97 - 07/07/97
(COST $200,000)..................... $200,000 200,000
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE+
------ ------
MONEY MARKET MUTUAL FUNDS - 9.7%
CoreFund Elite Treasury Reserve
Portfolio.............................. 220,000 $ 220,000
SEI Daily Income Prime Obligations
Portfolio.............................. 327,527 327,527
-----------
Total Money Market Mutual Funds (Cost $547,527).... 547,527
-----------
TOTAL INVESTMENTS (COST $5,323,245) - 105.3% 5,927,765
-----------
SECURITIES SOLD SHORT - (0.9)%
Napro Biotherapeutics, Inc*............. 3,500 (25,375)
US Bioscience, Inc.*.................... 2,400 (23,100)
-----------
Total Securities sold short (proceeds $50,596).... (48,475)
-----------
RECEIVABLES FROM BROKERS FOR SECURITIES SOLD SHORT - 1.5% 84,157
-----------
OTHER ASSETS AND LIABILITIES, NET - (5.9)%............ (335,672)
-----------
NET ASSETS - 100.0%................................... $ 5,627,775
============
+ See Note 2 to Financial Statements.
* Non-income producing security.
SEE ACCOMPANYINGNOTES TO FINANCIAL STATEMENTS
<PAGE>
- -----------------------------------------------------------------------------
THE HOMESTATE GROUP
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1997
- -----------------------------------------------------------------------------
PENNSYLVANIA SELECT
GROWTH OPPORTUNITIES
FUND FUND
------------ ---------------
ASSETS
Investments in securities at market value
(identified cost $69,034,775 and $5,323,245,
respectively) (Note2)............... $ 89,839,843 $ 5,927,765
Cash....................................... 82,812 -
Deposits with brokers and custodian bank
for securities sold short.................. - 113,982
Receivables from brokers for securities
sold short................................ - 84,157
Receivables for:
Dividends and interest. ................... 83,746 2,050
Investment securities sold................ 518,515 181,812
Capital shares sold....................... 100,681 107,522
From Adviser.............................. - 14,837
Other assets.............................. - 8,962
--------------- -------------
Total assets........................... 90,625,597 6,441,087
--------------- -------------
LIABILITIES
Securities sold short at market value
(proceeds $50,596) (Note 2)................ - 48,475
Payables for:
Investment securities purchased........... 775,969 622,381
Capital shares repurchased................ 64,516 -
Accrued expenses........................... 208,139 40,846
Other payables............................. - 101,610
--------------- -------------
Total liabilities........................ 1,048,624 813,312
--------------- -------------
NET ASSETS................................. $ 89,576,973 $ 5,627,775
=============== =============
NET ASSETS CONSIST OF:
Shares of beneficial interest.............. $ 70,217,613 $ 4,972,912
Accumulated net realized gain (loss) on
investments............................... (1,445,708) 48,222
Net unrealized appreciation on investments
(Note 4).................................. 20,805,068 604,520
Net unrealized appreciation on securities
sold short................................ - 2,121
--------------- -------------
Net assets.............................. $ 89,576,973 $ 5,627,775
=============== =============
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE ($89,576,973/4,156,088 issued and
outstanding shares, no par value;and
$5,627,775/480,967 issued and outstanding
shares,no par value,respectively).......... $21.55 $11.70
====== ======
Maximum offering price per share
(100/95.25 of $21.55 and 100/95.25 of
$11.70, respectively)..................... $22.62 $12.28
====== ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -----------------------------------------------------------------------------
THE HOMESTATE GROUP
STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30,1997
- -----------------------------------------------------------------------------
PENNSYLVANIA SELECT
GROWTH OPPORTUNITIES
FUND FUND*
------------ ---------------
INVESTMENT INCOME
Dividends................................. $ 823,145 $ 6,037
Interest.................................. 152,567 7,950
-------------- -------------
Total investment income................ 975,712 13,987
============== =============
EXPENSES
Advisory fees............................. 528,528 11,200
12b-1 fees................................ 249,651 3,920
Administration fees....................... 91,670 7,177
Transfer agent fees....................... 129,108 10,621
Custodial fees............................ 41,759 10,000
Accounting services fees.................. 49,201 14,356
Professional fees......................... 52,427 11,573
Printing expenses......................... 46,327 8,124
Registration fees......................... 32,786 9,271
Trustees fees and expenses................ 12,000 3,600
Miscellaneous expenses.................... 16,189 876
--------------- -------------
Total expenses before fee waivers and
reimbursements......................... 1,249,646 90,718
Advisory fee waived (Note 5)............... - (11,200)
Other fees waived (Note 5)................. - (5,335)
Reimbursement from Adviser (Note 5)........ - (47,862)
--------------- -------------
Total expenses,net........................ 1,249,646 26,321
--------------- -------------
NET INVESTMENT LOSS........................ (273,934) (12,334)
--------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investment
transactions.............................. (1,094,445) 48,541
Net realized gain on securities sold
short...................................... - 12,015
Change in net unrealized appreciation on
investments................................ 9,793,385 604,520
Change in net unrealized appreciation on
securities sold short...................... - 2,121
-------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS................................. 8,698,940 667,197
-------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 8,425,006 $ 654,863
============== =============
* For the period February 18, 1997 (commencement of operations) through
June 30, 1997.
+ Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -----------------------------------------------------------------------------
THE HOMESTATE GROUP
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
PENNSYLVANIA SELECT
GROWTH OPPORTUNITIES
FUND FUND*
------------ ---------------
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
OPERATIONS
Net investment loss........................ $ (273,934) $ (12,334)
Net realized gain (loss) on investment
transactions............................... (1,094,445) 48,541
Net realized gain on securities sold
short...................................... - 12,015
Change in unrealized net appreciation on
investments................................ 9,793,385 604,520
Change in unrealized net appreciation on
securities sold short...................... - 2,121
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. 8,425,006 654,863
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS+:
Net realized gain from investment
transactions............................... (3,944,375) -
------------ -----------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS - Note 3................ 29,268,289 4,972,912
------------ -----------
TOTAL INCREASE IN NET ASSETS................ 33,748,920 5,627,775
NET ASSETS:
Beginning of period........................ 55,828,053 -
------------ -----------
End of period.............................. $ 89,576,973 $ 5,627,775
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OPERATIONS
Net investment loss........................ $ (189,331)
Net realized gain on investment transactions 3,898,165
Change in unrealized appreciation on
investments............................... 7,151,550
-------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ 10,860,384
-------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment
transactions............................... (747,908)
-------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS - Note 3................ 25,327,678
-------------
TOTAL INCREASE IN NET ASSETS................ 35,440,154
NET ASSETS:
Beginning of year.......................... 20,387,899
-------------
End of year................................ $ 55,828,053
=============
* For the period February 18, 1997(commencement of operations) through
June 30, 1997.
+ Does not include $ 829,465 long-term capital gain ($0.20 per share) for
the Pennsylvania Growth Fund and $55,890 short-term capital gain ($0.11
per share) for the Select Opportunities Fund distributed July 21, 1997
to shareholders of record as of July 15, 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -----------------------------------------------------------------------------
THE HOMESTATE GROUP
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
PENNSYLVANIA GROWTH FUND
PERIODS ENDED
----------------------------------------------------
6/30/97 6/30/96 6/30/95 6/30/94 6/30/93+
------- ------- ------- ------- --------
Net asset value at
beginning of period..... $21.25 $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------ ------
Income from Investment
- ----------------------
Operations
- ----------
Net investment income
(loss) ................. (0.07) (0.07) (0.01) (0.03) 0.03
Net realized and
unrealized gain on
investments............. 1.78 6.17 3.54 1.53 0.95
------ ------ ------ ------ ------
Total from investment
operations............ 1.71 6.10 3.53 1.50 0.98
------ ------ ------ ------ ------
Less Distributions
- -------------------
Dividends from net
investment income ...... 0.00 0.00 0.00 (0.03) 0.00
Distributions from net
realized gains ......... (1.41) (0.53) (0.22) (0.08) 0.00
------ ------ ------ ------ ------
Total distributions.... (1.41) (0.53) (0.22) (0.11) 0.00
------ ------ ------ ------ ------
Net asset value at end
of period .............. $21.55 $21.25 $15.68 $12.37 $10.98
====== ====== ====== ====== ======
Total return**........... 9.56% 39.94% 28.96% 13.75% 13.07%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)...........$89,577 $55,828 $20,388 $9,892 $3,026
Ratio of expenses to
average net assets
before reimbursement
by Adviser............... 1.77% 1.85% 2.00% 2.67% 7.85%*
Ratio of expenses to
average net assets after
reimbursement by Adviser. na1 na1 1.91% 2.23% 1.87%*
Ratio of net investment
loss to average net
assets before
reimbursement by Adviser.(0.39)% (0.58)% (0.20)% (0.76)% (5.24)%*
Ratio of net investment
income (loss) to
average net assets
after reimbursement by
Adviser.................. na1 na1 (0.10)% (0.32)% 0.74%*
Average commission
rate paid.................$0.0941 $0.0961 - - -
Portfolio turnover rate... 50% 66% 51% 51% 63%
+ From commencement of operations: October 1, 1992.
* Annualized.
** Total return does not reflect 4.75% maximum sales charge.
1 Not applicable: no reimbursements were made by the Adviser.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -----------------------------------------------------------------------------
THE HOMESTATE GROUP
FINANCIAL HIGHLIGHTS - CONTINUED
- -----------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, 1997:
SELECT OPPORTUNITIES FUND
Net asset value at
beginning of period........ $10.00
------
Income from Investment
- ----------------------
Operations
- ----------
Net investment loss....... (0.03)
Net realized and
unrealized gain on
investments................ 1.73
------
Total from investment
operations............... 1.70
------
Net asset value at end
of period ................. $11.70
======
Total return**.............. 17.00%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted)............. $5,628
Ratio of expenses to
average net assets
before reimbursement
by Adviser and waivers..... 8.10%*
Ratio of expenses to
average net assets after
reimbursement by Adviser
and waivers................ 2.35%*
Ratio of net investment
loss to average net
assets before
reimbursement by Adviser
and waivers................. (6.85)%*
Ratio of net investment
loss to average net assets
after reimbursement by
Adviser and waivers......... (1.10)%*
Average commission
rate paid................... $0.0983
Portfolio turnover rate...... 59%
+ From commencement of operations: February 18, 1997.
* Annualized.
** Total return does not reflect 4.75% maximum sales charge.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF FUNDS
The HomeState Group (the "Trust"), an open-end management
company, was established as a Pennsylvania common law trust on
August 26, 1992, and is registered under the Investment
Company Act of 1940, as amended. The Trust has established
two series: the HomeState Pennsylvania Growth Fund and the
HomeState Select Opportunities Fund (each a "Fund" and
collectively, the "Funds"). The investment objective of each
Fund is set forth below.
The HomeState Pennsylvania Growth Fund 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.
To pursue its objective, 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.
The HomeState Select Opportunities Fund commenced operations
on February 18, 1997. The investment objective of the Fund is
long-term appreciation of capital through investments in a non-
diversified portfolio of U.S. securities, without regard to
any further issuer location limitations. The Fund will
typically invest in the common stock of no more than fifty
U.S. companies. It will usually emphasize companies having a
market capitalization of less than $1 billion. To pursue its
objective, the Fund will invest at least 65% of its total
assets in such companies.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies,
in conformity with generally accepted accounting principles,
which were consistently followed by each Fund in the
preparation of their 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.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
INCOME RECOGNITION - Interest income is accrued as earned.
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 - Each 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 for the HomeState Pennsylvania Growth Fund of
$273,934 for the fiscal year ended June 30, 1997 has been
charged to paid in-capital. In addition, net investment loss
for the HomeState Select Opportunities Fund of $12,334 for the
fiscal period ended June 30, 1997 has been reclassified to
accumulated net realized gain on investments. These
reclassifications have no effect on net asset values per share.
FEDERAL INCOME TAXES - Each 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.
CALL AND PUT OPTIONS - The HomeState Select Opportunities Fund
may write and/or purchase exchange-traded call options and
purchase exchange-traded put options on securities in the
Fund. When the Fund writes a call option, an amount equal to
the premium received is reflected as a liability. The amount
of the liability is subsequently "marked to market" to reflect
the current market value of the option written. If an option
which the Fund has written either expires on its stipulated
expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of
the closing transaction exceeds the premium received when the
option is sold), and the liability related to such option is
extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a gain or loss from the sale of
the underlying security, and the proceeds of which are
increased by the premium originally received.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
The premium paid by the Fund for the purchase of a put option
is recorded as an investment and subsequently marked to market
to reflect the current market value of the option purchased.
If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a loss in the
amount of the cost of the option. If the Fund exercises a put
option, it realizes a gain or loss from the sale of the
underlying security, the proceeds of which are decreased by
the premium originally paid. The Fund limits the aggregate
value of puts and call options to 25% of the Fund's net
assets. There were no open option contracts for the HomeState
Select Opportunities Fund at June 30, 1997.
SHORT SALES - The HomeState Select Opportunities Fund may sell
securities short. Short sales are transactions in which the
Fund sells a security it does not own, in anticipation of a
decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to
deliver to the buyer upon the short sale; the Fund then is
obligated to replace the security borrowed by purchasing it in
the open market at some later date. The Fund will incur a
loss if the market price of the security increases between the
date of the short sale and the date on which the Fund replaces
the borrowed security. The Fund will realize a gain if the
security declines in value between those dates. All short
sales must be fully collateralized. The Fund maintains the
collateral in a segregated account consisting of cash, U.S.
Government securities or other liquid assets in an amount at
least equal to the market value of its short positions. The
Fund limits the value of short positions to 25% of the Fund's
net assets. At June 30, 1997, the HomeState Select
Opportunities Fund had 0.9% of its net assets in short
positions.
NOTE 3 - CAPITAL STOCK
At June 30, 1997, each Fund had an authorized unlimited number of
shares of beneficial interest with no par value.
The following table summarizes the capital share transactions of
each Fund:
THE HOMESTATE PENNSYLVANIA GROWTH FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR
JUNE 30, 1997 ENDED JUNE 30, 1996
------------------ --------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sales..................... 1,703,122 $33,155,509 1,551,022 $29,459,053
Reinvested distributions.. 205,183 3,636,915 41,712 681,175
Redemptions............... (379,387) (7,524,135) (265,566) (4,812,550)
--------- ----------- --------- -----------
Net increase.............. 1,528,918 $29,268,289 1,327,168 $25,327,678
========= =========== ========= ===========
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
THE HOMESTATE SELECT OPPORTUNITIES FUND
FOR THE PERIOD FEBRUARY 18, 1997
(COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1997
----------------------------------
SHARES AMOUNT
------ ------
Sales............... 488,935 $5,056,927
Redemptions......... (7,968) (84,015)
------- ----------
Net increase........ 480,967 $4,972,912
======= ==========
NOTE 4 - INVESTMENT TRANSACTIONS
During the periods ended June 30, 1997, purchases and sales of
investment securities (excluding securities sold short and
short-term investments) were as follows:
HOMESTATE PENNSYLVANIA HOMESTATE SELECT
GROWTH FUND OPPORTUNITIES FUND
---------------------- ------------------
Purchases......... $64,500,992 $5,992,584
Sales............. $33,585,183 $1,472,276
The following balances for the Funds are as of June 30, 1997:
<TABLE>
<CAPTION>
COST FOR NET TAX TAX BASIS GROSS TAX BASIS GROSS
FEDERAL INCOME UNREALIZED UNREALIZED UNREALIZED
TAX PURPOSES APPRECIATION APPRECIATION DEPRECIATION
-------------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Pennsylvania
Growth Fund............... $69,155,436 $20,684,407 $23,907,010 $3,222,603
Select Opportunities Fund... 5,326,183 601,582 661,836 60,254
</TABLE>
At June 30, 1997, The HomeState Select Opportunities Fund had
0.9% of its net assets in short positions. For the period
ended June 30, 1997, the cost of investments purchased to
cover short sales and the proceeds from those investments sold
short were $169,794 and $181,809, respectively.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
NOTE 5 - EXPENSES AND TRANSACTIONS WITH AFFILIATED PARTIES
Emerald Advisers, Inc. serves as the investment adviser (the
"Adviser") to the Funds for which it receives investment
advisory fees from each Fund. The fee for the HomeState
Pennsylvania Growth Fund is based on average daily net assets
at the annual rate of 0.75% on assets up to and including $250
million, 0.65% for assets in excess of $250 million up to
and including $500 million, 0.55% for assets in excess of $500
million up to and including $750 million, and 0.45% for
assets in excess of $750 million. The fee for the HomeState
Select Opportunities Fund is based on average daily net assets
at the annual rate of 1.00% on assets up to and including $100
million and 0.90% for assets in excess of $100 million. Under
the terms of the investment advisory agreement which expires
on December 31, 1997, Emerald Advisers, Inc. may also
voluntarily reimburse the Funds for certain expenses. Through
June 30, 1998, the Adviser has voluntarily agreed to waive its
advisory fee and/or reimburse other expenses for the Homestate
Select Opportunities Fund to the extent that the Fund's total
operating expenses exceeds 2.35% of the average daily net
assets of the Fund. At June 30, 1997, Emerald Advisers, Inc.
owned 115 shares of The HomeState Pennsylvania Growth Fund and
100 shares of the HomeState Select Opportunities Fund.
The following table summarizes the advisory fees and expense
waivers/reimburesments for the period ended June 30, 1997:
GROSS ADVISORY FEE REIMBURSEMENT
ADVISORY WAIVED FROM ADVISER
--------- ------------ --------------
Pennsylvania Growth Fund $ 528,528 $ 0 $ 0
Select Opportunities Fund 11,200 11,200 47,862
Rodney Square Distributors, Inc. ("RSD"), a wholly owned
subsidiary of Wilmington Trust Company, is the sole
distributor of the Trust shares pursuant to a Distribution
Agreement with each Fund. Each Fund has adopted a distribution
services plan (the "Plan") under Rule 12b-1 of the Investment
Company Act of 1940. The Plan allows each Fund to reimburse
RSD for a portion of the costs incurred in distributing each
Fund's shares, including amounts paid to brokers or dealers,
at an annual rate not to exceed 0.35% of each Fund's average
daily net assets. During the periods ending June 30, 1997,
the HomeState Pennsylvania Growth Fund and the HomeState
Select Opportunities Fund incurred expenses of $249,651 and
$3,920, respectively, pursuant to the Plan.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED JUNE 30, 1997
- -------------------------------------------------------------------------------
Pursuant to separate Administration, Accounting Services and
Transfer Agency Agreements with each Fund, Rodney Square
Management Corporation ("RSMC"), a wholly owned subsidiary of
Wilmington Trust Company, serves as administrator, accounting
and transfer agent. During the periods ended June 30, 1997,
the HomeState Pennsylvania Growth Fund and the HomeState
Select Opportunities Fund incurred administration fees
totaling $91,670 and $7,177, of which $0 and $1,192 were
waived, respectively, accounting service fees totaling $49,201
and $14,356, of which $0 and $2,384 were waived, respectively,
and transfer agent fees totaling $129,108 and $10,621, of
which $0 and $1,759 were waived, respectively.
The Funds' Declaration of Trust provides that each Trustee
affiliated with the Funds' Adviser shall serve without
compensation and each Trustee who is not so affiliated shall
receive fees from the income of each Fund, and expense
reimbursements for each Trustees meeting attended. An
unaffiliated Trustee's annual fee shall not exceed $1,000. A
member of the Funds' 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 $34,927 and
$4,573 were incurred by the HomeState Pennsylvania Growth Fund
and the HomeState Select Opportunities Fund, respectively, to
Duane, Morris & Heckscher druing the periods ending June 30,
1997.
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
REPORT OF INDEPENDENT ACCOUNTANTS JUNE 30, 1997
- -------------------------------------------------------------------------------
August 1, 1997
To the Trustees and Shareholders of
The HomeState Group
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
the HomeState Pennsylvania Growth Fund and the HomeState Select
Opportunities Fund (constituting The HomeState Group, hereafter
referred to as the "Fund") at June 30, 1997 and the results of each
of their operations, the changes in each of their net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements
and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at June 30, 1997 by correspondence with the custodian
and the application of alternataive auditing procedures for unsettled
security transactions, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
/S/ Price Waterhouse LLP
Philadelphia, PA
<PAGE>
- -------------------------------------------------------------------------------
THE HOMESTATE GROUP
TAX INFORMATION (UNAUDITED) JUNE 30, 1997
- -------------------------------------------------------------------------------
For Federal tax purposes, the HomeState Pennsylvania Growth Fund
hereby designates $2,972,072 as long-term capital gain distributions
paid during fiscal 1997.
<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 MARKETING / BROKER
SERVICES (800) 232-OK-PA
LEGAL COUNSEL SHAREHOLDER
------------- SERVICES (800) 892-1351
DUANE, MORRIS & HECKSCHER
HARRISBURG, PA
24 HOUR PRICING INFORMATION
---------------------------
1-800-232-0224
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.
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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 Funds' 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
OPTIONS AND SHORT SELLING STRATEGIES FOR THE HOMESTATE SELECT
OPPORTUNITIES FUND
REGULATION OF THE USE OF OPTIONS STRATEGIES. As discussed in the
Prospectus, in managing the HomeState Select Opportunities Fund, the
adviser may engage in certain options and short selling strategies to
hedge various market risks or to enhance potential gain. Certain
special characteristics of and risks associated with using these
instruments are discussed below. Use of options and short selling is
subject to applicable regulations of the SEC, the several options
exchanges upon which these instruments may be traded, and the various
state regulatory authorities. The Board of Trustees has adopted
investment guidelines (described below) reflecting those option
trading regulations.
COVER FOR OPTIONS STRATEGIES. The Fund will not use leverage in
its options strategies. Accordingly, the Fund will comply with
guidelines established by the SEC with respect to coverage of these
strategies and will either (1) set aside liquid, unencumbered, daily
marked-to-market assets in a segregated account with the Fund's
custodian in the prescribed amount; or (2) hold securities or other
options or futures contracts whose values are expected to offset
("cover") its obligations thereunder. Securities or other options
used for cover cannot be sold or closed out while the strategy is
outstanding, unless they are replaced with similar assets. As a
result, there is a possibility that the use of cover involving a large
percentage of the Fund's assets could impede portfolio management or
the Fund's ability to meet redemption requests or other current
obligations.
OPTIONS STRATEGIES. The Fund may purchase and write (sell)
options on securities and securities indices that are traded on U.S.
exchanges and in the over-the-counter ("OTC") market. Currently,
options on debt securities are primarily traded on the OTC market.
Exchange-traded options in the U.S. are issued by a clearing
organization affiliated with the exchange on which the option is
listed, which, in effect, guarantees completion of every exchange-
traded option transaction. In contrast, OTC options are contracts
between the Fund and its contra-party with no clearing organization
guarantee unless the parties provide for it. Thus, when the Fund
purchases an OTC option, it relies on the dealer from which it has
purchased the OTC option to make or take delivery of the securities
underlying the option. Failure by the dealer to do so would result in
the loss of any premium paid by the Fund as well as the loss of the
expected benefit of the transaction. Accordingly, before the Fund
purchases or sells an OTC option, the adviser assesses the
creditworthiness of each counterparty and any guarantor or credit
enhancement of the counterparty's credit to determine whether the
terms of the option are likely to be satisfied.
The Fund may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase.
Call options also may be used as a means of enhancing returns by, for
example, participating in an anticipated price increase of a security.
In the event of a decline in the price of the underlying security, use
of this strategy would serve to limit the potential loss to the Fund
to the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the Fund
either sells or exercises the option, any profit eventually realized
would be reduced by the premium paid.
The Fund may purchase put options on securities that it holds in
order to hedge against a decline in the market value of the securities
held or to enhance return. The put option enables the Fund to sell
the underlying security at the predetermined exercise price; thus, the
potential for loss to the Fund below the exercise price is limited to
the option premium paid. If the market price of the underlying
<PAGE>
security is higher than the exercise price of the put option, any
profit the Fund realizes on the sale of the security is reduced by the
premium paid for the put option less any amount for which the put
option may be sold.
The Fund may on certain occasions wish to hedge against a decline
in the market value of securities that it holds at a time when put
options on those particular securities are not available for purchase.
At those times, the Fund may purchase a put option on other carefully
selected securities in which it is authorized to invest, the values of
which historically have a high degree of positive correlation to the
value of the securities actually held. If the adviser's judgment is
correct, changes in the value of the put options should generally
offset changes in the value of the securities being hedged. However,
the correlation between the two values may not be as close in these
transactions as in transactions in which the Fund purchases a put
option on a security that it holds. If the value of the securities
underlying the put option falls below the value of the portfolio
securities, the put option may not provide complete protection against
a decline in the value of the portfolio securities.
The Fund may write covered call options on securities in which it
is authorized to invest for hedging purposes or to increase return in
the form of premiums received from the purchasers of the options. A
call option gives the purchaser of the option the right to buy, and
the writer (seller) the obligation to sell, the underlying security at
the exercise price during the option period. The strategy may be used
to provide limited protection against a decrease in the market price
of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the
market price of the underlying security held by the Fund declines, the
amount of the decline will be offset wholly or in part by the amount
of the premium received by the Fund. If, however, there is an
increase in the market price of the underlying security and the option
is exercised, the Fund will be obligated to sell the security at less
than its market value.
Securities used to cover OTC call options written by the Fund are
considered illiquid and therefore subject to the Fund's limitations on
investing in illiquid securities, unless the OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC
options it writes for a maximum price to be calculated by a formula
set forth in the option agreement. The cover for an OTC call option
written subject to this procedure is considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option. The Fund could lose the ability to
participate in an increase in the value of the underlying securities
above the exercise price because the increase would likely be offset
by an increase in the cost of closing out the call option (or could be
negated if the buyer chose to exercise the call option at an exercise
price below the current market value).
The Fund may also write covered put options on securities in
which it is authorized to invest. A put option gives the purchaser of
the option the right to sell, and the writer (seller) the obligation
to buy, the underlying security at the exercise price during the
option period. So long as the obligation of the writer continues, the
writer may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring it to make payment of the
exercise price against delivery of the underlying security. The
operation of put options in other respects, including their related
risks and rewards, is substantially identical to that of call options.
If the put option is not exercised, the Fund will realize income in
the amount of the premium received. This technique could be used to
enhance current return during periods of market uncertainty. The risk
in such a transaction would be that the market price of the underlying
securities would decline below the exercise price less the premiums
received, in which case the Fund would expect to suffer a loss.
<PAGE>
The Fund may purchase put and call options and write covered put
and call options on indexes in much the same manner as the more
traditional options discussed above, except that index options may
serve as a hedge against overall fluctuations in the securities
markets (or a market sector) rather than anticipated increases or
decreases in the value of a particular security. An index assigns
values to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are effected
with cash payments and do not involve delivery of securities. Thus,
upon settlement of an index option, the purchaser will realize, and
the writer will pay, an amount based on the difference between the
exercise price and the closing price of the index. The effectiveness
of hedging techniques using index options will depend on the extent to
which price movements in the index selected correlate with price
movements of the securities in which the Fund invests. Perfect
correlation is not possible because the securities held or to be
acquired by the Fund will not exactly match the composition of indexes
on which options are purchased or written.
The Fund may purchase and write covered straddles on securities
or indexes. A long straddle is a combination of a call and a put
purchased on the same security where the exercise price of the put is
less than or equal to the exercise price on the call. The Fund would
enter into a long straddle when the adviser believes that it is likely
that prices will be more volatile during the term of the options than
is implied by the option pricing. A short straddle is a combination
of a call and a put written on the same security where the exercise
price on the put is less than or equal to the exercise price of the
call where the same issue of the security is considered "cover" for
both the put and the call. The Fund would enter into a short straddle
when the adviser believes that it is unlikely that prices will be as
volatile during the term of the options as is implied by the option
pricing. In such case, the Fund will set aside cash and/or liquid,
high-grade debt securities in a segregated account with its custodian
equivalent in value to the amount, if any, by which the put is "in-the-
money," that is, that amount by which the exercise price of the put
exceeds the current market value of the underlying security. Because
straddles involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
The Fund may purchase put and call warrants with values that vary
depending on the change in the value of one or more specified indexes
("index warrants"). An index warrant is usually issued by a bank or
other financial institution and gives the Fund the right, at any time
during the term of the warrant, to receive upon exercise of the
warrant a cash payment from the issuer of the warrant based on the
value of the underlying index at the time of exercise. In general, if
the Fund holds a call warrant and the value of the underlying index
rises above the exercise price of the warrant, the Fund will be
entitled to receive a cash payment from the issuer upon exercise based
on the difference between the value of the index and the exercise
price of the warrant; if the Fund holds a put warrant and the value of
the underlying index falls, the Fund will be entitled to receive a
cash payment from the issuer upon exercise based on the difference
between the exercise price of the warrant and the value of the index.
The Fund holding a call warrant would not be entitled to any payments
from the issuer at any time when the exercise price is greater than
the value of the underlying index; the Fund holding a put warrant
would not be entitled to any payments when the exercise price is less
than the value of the underlying index. If the Fund does not exercise
an index warrant prior to its expiration, then the Fund loses the
amount of the purchase price that it paid for the warrant.
The Fund will normally use index warrants as it may use index
options. The risks of the Fund's use of index warrants are generally
similar to those relating to its use of index options. Unlike most
index options, however, index warrants are issued in limited amounts
and are not obligations of a regulated clearing agency, but are backed
only by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than index
options. Index warrants are not likely to be as liquid as index
options backed by a recognized clearing agency. In addition, the
terms of index warrants may limit the Fund's ability to exercise the
warrants at any time or in any quantity.
<PAGE>
OPTIONS GUIDELINES. In view of the risks involved in using the
options strategies described above, the Fund has adopted the following
investment guidelines to govern its use of such strategies; these
guidelines may be modified by the Board of Trustees without
shareholder approval:
(1) the Fund will write only covered options, and each
such option will remain covered so long as the Fund is
obligated under the option; and
(2) the Fund will not write put or call options having
aggregate exercise prices greater than 25% of its net
assets.
These guidelines do not apply to options attached to or acquired
with or traded together with their underlying securities and do not
apply to securities that incorporate features similar to options.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The Fund
may effectively terminate its right or obligation under an option by
entering into a closing transaction. If the Fund wishes to terminate
its obligation to purchase or sell securities under a put or a call
option it has written, the Fund may purchase a put or a call option of
the same series (that is, an option identical in its terms to the
option previously written); this is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase
or sell specified securities under a call or put option it has
purchased, the Fund may sell an option of the same series as the
option held; this is known as a closing sale transaction. Closing
transactions essentially permit the Fund to realize profits or limit
losses on its options positions prior to the exercise or expiration of
the option. If the Fund is unable to effect a closing purchase
transaction with respect to options it has acquired, the Fund will
have to allow the options to expire without recovering all or a
portion of the option premiums paid. If the Fund is unable to effect
a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying securities
or dispose of assets used as cover until the options expire or are
exercised, and the Fund may experience material losses due to losses
on the option transaction itself and in the covering securities.
In considering the use of options to enhance returns or for
hedging purposes, particular note should be taken of the following:
(1) The value of an option position will reflect,
among other things, the current market price of the
underlying security or index, the time remaining until
expiration, the relationship of the exercise price to the
market price, the historical price volatility of the
underlying security or index and general market conditions.
For this reason, the successful use of options depends upon
adviser's ability to forecast the direction of price
fluctuations in the underlying securities markets or, in the
case of index options, fluctuations in the market sector
represented by the selected index.
(2) Options normally have expiration dates of up to
three years. An American style put or call option may be
exercised at any time during the option period while a
European style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration.
The exercise price of the options may be below, equal to or
above the current market value of the underlying security or
index. Purchased options that expire unexercised have no
value. Unless an option purchased by the Fund is exercised
or unless a closing transaction is effected with respect to
that position, the Fund will realize a loss in the amount of
the premium paid and any transaction costs.
<PAGE>
(3) A position in an exchange-listed option may be
closed out only on an exchange that provides a secondary
market for identical options. Although the Fund intends to
purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market, there
is no assurance that a liquid secondary market will exist
for any particular option at any particular time. A liquid
market may be absent if: (i) there is insufficient trading
interest in the option; (ii) the exchange has imposed
restrictions on trading, such as trading halts, trading
suspensions or daily price limits; (iii) normal exchange
operations have been disrupted; or (iv) the exchange has
inadequate facilities to handle current trading volume.
Closing transactions may be effected with respect to
options traded in the OTC markets only by negotiating
directly with the other party to the option contract or in a
secondary market for the option if such market exists.
Although the Fund will enter into OTC options with dealers
that agree to enter into, and that are expected to be
capable of entering into, closing transactions with the
Fund, there can be no assurance that the Fund will be able
to liquidate an OTC option at a favorable price at any time
prior to expiration. In the event of insolvency of the
contra-party, the Fund may be unable to liquidate an OTC
option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, which
would result in the Fund having to exercise those options
that it has purchased in order to realize any profit. With
respect to options written by the Fund, the inability to
enter into a closing transaction may result in material
losses to the Fund.
(4) With certain exceptions, exchange listed options
generally settle by physical delivery of the underlying
security. Index options are settled exclusively in cash for
the net amount, if any, by which the option is "in-the-
money" (where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in
the case of a put option, the exercise price of the option)
at the time the option is exercised. If the Fund writes a
call option on an index, the Fund will not know in advance
the difference, if any, between the closing value of the
index on the exercise date and the exercise price of the
call option itself and thus will not know the amount of cash
payable upon settlement. If the Fund holds an index option
and exercises it before the closing index value for that day
is available, the Fund runs the risk that the level of the
underlying index may subsequently change.
(5) The Fund's activities in the options markets may result
in a higher portfolio turnover rate and additional brokerage costs;
however, the Fund also may save on commissions by using options
as a hedge rather than buying or selling individual securities in
anticipation of, or as a result of, market movements.
SHORT-SELLING
If the Fund anticipates that the price of a security will
decline, it may sell the security short and borrow the same security
from a broker or other institution to complete the sale. The Fund may
realize a profit or loss depending upon whether the market price of a
security decreases or increases between the date of the short sale and
the date on which the Fund must replace the borrowed security. As a
hedging technique, the Fund may purchase options to buy securities
sold short by the Fund.
<PAGE>
Such options would lock in a future purchase
price and protect the Fund in case of an unanticipated increase in the
price of a security sold short by the Fund. Short-selling is a
technique that may be considered speculative and involves risk beyond
the initial capital necessary to secure each transaction. In
addition, the technique could result in higher operating costs for the
Fund and have adverse tax effects for the investor. Investors should
consider the risks of such investments before investing in the Fund.
Whenever the Fund effects a short sale, it will set aside in
segregated accounts cash, U.S. Government Securities or other liquid
assets equal to the difference between (i) the market value of the
securities sold short; and (ii) any cash or U.S. Government Securities
required to be deposited with the broker in connection with the short
sale (but not including the proceeds of the short sale.) Until the
Fund replaces the security it borrowed to make the short sale it must
maintain daily the segregated account at such a level that the amount
deposited in it plus the amount deposited with the broker as
collateral will equal the current market value of the securities sold
short. No more than 25% of the value of the Fund's total net assets
will be, when added together, (i) deposited as collateral for the
obligation to replace securities borrowed to effect short sales; and
(ii) allocated to segregated accounts in connection with short sales.
The Fund's ability to make short sales may be limited by a requirement
applicable to "regulated investment companies" under Subchapter M of
the Internal Revenue Code that no more than 30% of the Fund's gross
income in any year may be the result of gains from the sale of
property held for the less than three months.
<PAGE>
APPENDIX C
PENNSYLVANIA-BASED CORPORATIONS
In order to present a prospective investor in The HomeState
Pennsylvania Growth 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 HomeState
Pennsylvania Growth 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 this Fund can purchase.
Appendix C 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
<PAGE>
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
<PAGE>
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 Company................ 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
<PAGE>
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
<PAGE>
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
<PAGE>
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...................................... BAH
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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Corporation........ 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
<PAGE>
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.................................. CFM
427 Scott Paper ................................... PP
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
<PAGE>
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*
<PAGE>
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 N-1A REGISTRATION STATEMENT
THE HOMESTATE GROUP
Item 24. Financial Statements and Exhibits
(a.) Financial Statements:
Included in Part A of this Registration Statement for the
HomeState Pennsylvania Growth Fund and the HomeState Select
Opportunities Fund:
Financial Highlights for the period October 1, 1992 (Commencement
of Operations) to June 30, 1993 and for each of the four years in
the period ended June 30, 1997 for the HomeState Pennsylvania
Growth Fund and for the period February 18, 1997 (Commencement of
Operations) to June 30, 1997 for the HomeState Select
Opportunities Fund.(Incorporated by reference to Post-Effective
Amendment No. 7 filed August 18, 1997.)
Included in Part B of this Registration Statement for the
HomeState Pennsylvania Growth Fund and the HomeState Select
Opportunities Fund:
Investments, for the HomeState Pennsylvania Growth Fund, June 30,
1997*
Investments, for the HomeState Select Opportunities Fund, June 30,
1997*
Statement of Assets and Liabilities, June 30, 1997*
Statement of Operations, for the fiscal year ended June 30, 1997*
Statement of Changes in Net Assets, for the fiscal years ended
June 30, 1996 and June 30, 1997*
Financial Highlights for the period October 1, 1992 (Commencement
of Operations) to June 30, 1993 and for each of the four years in
the period ended June 30, 1997 for the HomeState Pennsylvania
Growth Fund and for the period February 18, 1997 (Commencement of
Operations) to June 30, 1997 for the HomeState Select
Opportunities Fund.*
Notes to Financial Statements*
* Incorporated by reference to Post-Effective Amendment No. 7 filed
August 18, 1997.
(b.) Exhibits:
1a. The HomeState Group's (the "Registrant") Declaration of Trust,
dated August 26, 1992.
1b. Addendum to the Declaration of Trust dated November 21, 1996 and
Joinder of Additional Trustees. (Incorporated by reference to
Exhibit 1 to Post-Effective Amendment No. 5 to this Registration
Statement filed on November 27, 1996.)
1c. Amendment to the Declaration of Trust (Incorporated by reference
to Exhibit 1b to Post-Effective Amendment No. 8 to this
Registration Statement filed on September 15, 1997.)
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. (a) Investment Advisory Agreement between the Registrant, on
behalf of the HomeState Pennsylvania Growth Fund, and Emerald
Advisers, Inc. dated September 1, 1992. (Incorporated by reference
to Exhibit 5(a) to Post-Effective Amendment No. 5 to this
Registration Statement filed on November 27, 1996.)
(b) Investment Advisory Agreement between the Registrant, on
behalf of the HomeState Select Opportunities Fund, and Emerald
Advisers, Inc. to be dated February 1, 1997. (Incorporated by
reference to Exhibit 5(b) to Post-Effective Amendment No. 5 to
this Registration Statement filed on November 27, 1996.)
(c) Investment Advisory Agreement between the Registrant, on
behalf of The Year 2000 ("Y2K") Fund, and Emerald Advisers, Inc.
dated September 11, 1997 (Incorporated by reference to Exhibit
5(c) to Post-Effective Amendment No. 8 to this Registration
Statement filed on September 15, 1997.)
<PAGE>
6. (a) Distribution Agreement between the Registrant and Rodney
Square Distributors, Inc. dated November 20, 1995. (Incorporated
by reference, excluding Schedule A thereto which is hereby
furnished, to Exhibit 6(a) to Post Effective Amendment No. 4 to
this Registration Statement filed on October 4, 1996.)
(b) Form of Selected Dealer Agreement. (Incorporated by reference
to Exhibit 6(b) to Post Effective Amendment No. 4 to this
Registration Statement filed on October 4, 1996.)
7. None
8. Custody Agreement between the Registrant (The HomeState Group) and
Wilmington Trust Company dated September 11, 1997. (Incorporated
by reference to Exhibit No. 8 to Post-Effective Amendment No. 8 to
this Registration Statement filed on September 15, 1997.)
9. (a) Transfer Agency Agreement between the Registrant and Rodney
Square Management Corporation dated November 20, 1995.
(Incorporated by reference, excluding Schedule A thereto which is
hereby furnished, to Exhibit 9(a) to Post-Effective Amendment No.
4 to this Registration Statement filed on October 4, 1996.)
(b) Accounting Services Agreement between the Registrant and
Rodney Square Management Corporation dated November 20, 1995.
(Incorporated by reference, excluding Schedule A thereto which is
hereby furnished, to Exhibit 9(b) to Post-Effective Amendment No.
4 to this Registration Statement filed on October 4, 1996.)
(c) Administration Agreement between the Registrant and Rodney
Square Management Corporation dated November 20, 1995.
(Incorporated by reference, excluding Schedule A thereto which is
hereby furnished, to Exhibit 9(c) to Post-Effective Amendment No.
4 to this Registration Statement filed on October 4, 1996.)
10. None.
11. Consent of Independent Public Accountants.
12. None.
13. Subscription Agreement.
14. None.
15. (a) Rule 12b-1 Plan for The HomeState Pennsylvania Growth Fund.
(Incorporated by reference to Exhibit 15(a) to Post-Effective
Amendment No. 5 to this Registration Statement filed on November
27, 1996.)
(b) Rule 12b-1 Plan for The HomeState Select Opportunities Fund.
(Incorporated by reference to Exhibit 15(b) to Post-Effective
Amendment No. 5 to this Registration Statement filed on November
27, 1996.)
(c) Rule 12b-1 Plan for The Year 2000 ("Y2K") Fund. (Incorporated
by reference to Exhibit 15(c) to Post-Effective Amendment No. 8 to
this Registration Statement filed on September 15, 1997.)
16. Schedule for Computation of Performance Quotation.
17. Financial Data Schedule.(Incorporated by reference to Exhibit 17
to Post Effective Amendment No. 7 filed on August 18, 1997.)
18. None.
Item 25. Persons controlled by or Under Common Control with Registrant
None
<PAGE>
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Series as of September 30, 1997
Shares of Beneficial Interest $.01 par value:
The HomeState Pennsylvania Growth Fund 6,026
The HomeState Select Opportunities Fund 1,131
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(a)) provides
for indemnification of the principal underwriter against certain losses, as
set forth in Section 10 thereof.
The Registrant has in effect, 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 the 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 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, 1991 and
most recently supplemented on August 11, 1997 with the Securities Exchange
Commission File No. 801-40263 and is incorporated by reference herein.
Item 29. Principal Underwriters
(a) Investment Companies for which Rodney Square
Distributors, Inc. also acts as principal underwriter:
The Rodney Square Fund
The Rodney Square Multi-Manager Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Tax-Exempt Fund
Brazos Mutual Fund
Heitman Real Estate Fund, Institutional Class
Kalmar Pooled Investment Trust
Kiewit Mutual Fund
<PAGE>
Mallard Fund
1838 Investment Advisors Funds
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
Registrant hereby undertakes to file a further Post-Effective
Amendment to include financial Statements for The Year 2000 ("Y2K")
Fund which need not be certified, within four to six months from
the effective date of this Post-Effective Amendment.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of the removal of a
Trustee or Trustees when requested in writing to do so by the
holders of at least 10% of the Registrant's outstanding shares and
in connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940, as amended,
relating to shareholder communications.
<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 October, 1997.
The HomeState Group
Registrant
By:/s/ Scott L. Rehr
-------------------------
Scott L. Rehr
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 to the Registration Statement has been
signed below by the following persons in the capacities and on the
date indicated.
/s/ Scott L. Rehr Trustee, October 30, 1997
- ----------------------------
Scott L. Rehr President
/s/ Kenneth G. Mertz, II * Trustee October 30, 1997
- ---------------------------
Kenneth G. Mertz, II, CFA Vice President
Chief Investment Officer
/s/ Bruce E. Bowen * Trustee October 30, 1997
- ---------------------------
Bruce E. Bowen
/s/ H.J. Zoffer * Trustee October 30, 1997
- ---------------------------
H.J. Zoffer
/s/ Scott C. Pennell * Trustee October 30, 1997
- ---------------------------
Scott C. Penwell, Esq.
*Pursuant to authority granted in a Power of Attorney
By: /s/ Scott L. Rehr
-------------------
Scott L. Rehr
Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
The undersigned and trustees of The HomeState Group (the
"Trust") hereby appoint Scott L. Rehr as attorney-in-fact and
agent, in all capacities, to execute, and to file any of the
documents referred to below relating to the Notification of
Registration on Form N-8A registering the Trust as an investment
company under the Investment Company Act of 1940, as amended,
(the "Act") and the Trust's Registration Statement on Form N-1A
under the Act and under the Securities Act of 1933, including any
and all amendments thereto, covering the registration of the
Trust as an investment company and the sale of shares of the
Trust, including all exhibits and any and all documents required
to be filed with respect thereto with any regulatory authority,
including applications for exemptive order rulings. Each of the
undersigned grants to the said attorney full authority to do
every act necessary to be done in order to effectuate the same as
fully, to all intents and purposes, as he could do if personally
present, thereby ratifying all that said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
The undersigned Trustees hereby execute this Power of
Attorney as of the date specified.
Name Title Date
---- ----- -----
/s/ Scott L. Rehr
- ---------------------
Scott L. Rehr Trustee, President August 18, 1997
/s/ Kenneth G. Mertz,II Trustee, Vice
- ----------------------- President, Chief
Kenneth G. Mertz, II CFA Investment Officer August 18, 1997
/s/ Bruce E. Bowen
- ------------------------
Bruce E. Bowen Trustee August 18, 1997
/s/ Scott C. Penwell Trustee August 18, 1997
- ------------------------
Scott C. Penwell, Esq.
/s/ H.J. Zoffer
- -----------------------
Dr. H.J. Zoffer Trustee August 18, 1997
<PAGE>
File No. 33-48940
File No. 811-6722
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 9
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 9
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE HOMESTATE GROUP
<PAGE>
EXHIBIT INDEX
Item 24(b) Exhibits
Exhibit 1a - Declaration of Trust
Exhibit 11 - Consent of Independent Public Accountants
Exhibit 13 - Subscription Agreement
Exhibit 16 - Schedule of Computation of Performance Quotations
<PAGE>
THE HOMESTATE GROUP
DECLARATION OF TRUST Exhibit 1a
On the 26th day of August, 1992, Bruce E. Bowen, Scott L. Rehr,
and H.J. Zoffer declare themselves to be trustees (the
"Trustees") of a trust to be known as the HomeState Group (the
"Fund"); and further declare that they and their successors as
Trustees shall invest and reinvest all sums received in the Fund
for the benefit of all shareholders of the Fund in accordance
with the laws of the United States and of the Commonwealth of
Pennsylvania, in trust, as follows:
1. PURPOSE
The Fund is a Pennsylvania common law trust formed for the
purpose of acting as an open-end, diversified management
investment company of the series type under and pursuant to the
Investment Company Act of 1940 (the "1940 Act"), except that an
individual Series need not be diversified. It is hereby
expressly declared that a common law trust and not a partnership
is created hereby.
2. SERIES OF THE FUND
A. The Fund shall initially be composed of one Series.
Each Series will have separate investment objectives and
policies, and shares of the Fund will be identified as being
shares of one of the Series. Shares of each Series represent
interests in that Series only, and will be entitled to all income
and gains (or losses) and bear all of the expenses associated
with the operations of that specific Series. Common expenses of
the Fund will be allocated among all of the Series based upon the
respective net assets of each Series.
B. The initial Series of the Fund shall be the HomeState
Pennsylvania Growth Fund ("HPGF").
(i) The investment objective of the HPGF will be
long-term growth of capital through investments primarily in the
common stock of companies with headquarters or significant
operations in the Commonwealth of Pennsylvania.
(ii) The following investment policies and
restrictions may not be changed without the approval of a
majority of the shares of HPGF. For these purposes, a majority
of the shares of HPGF is defined as the vote, at a special
meeting of the shareholders of the HPGF duly called, of more than
fifty percent (50%) of the HPGF's outstanding voting securities.
<PAGE>
The HPGF may not under any circumstances:
(a) 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 HPGF's total assets at the time
of such purchase would be invested in the securities of the
issuer;
(b) Invest more than fifteen percent (15%) of its total assets
in any one industry;
(c) Invest in, write, or sell put or call options, straddles,
spreads or combinations thereof;
(d) 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 HPGF's current total assets, and will be repaid before any
additional investments are purchased. The Fund will not purchase
securities when borrowing exceeds five percent (5%) of total
assets;
(e) Pledge, mortgage or hypothecate assets, except to secure
borrowings permitted by Item (d) above, and then only pledge
securities not exceeding ten percent (10%) of the HPGF's total
assets (at current value);
(f) Issue or sell senior securities;
(g) Make short sales;
(h) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and
sales of securities;
(i) 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;
(j) 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;
(k) Make loans, except by purchase of debt obligations in
which the HPGF may invest in accordance with its investment
policies, or except by entering into qualified repurchase
<PAGE>
agreements with respect to not more than twenty-five percent
(25%) of its total assets (taken at current value).
(l) Purchase or sell commodities, commodity contracts or
futures contracts;
(m) Purchase or hold the securities of any issuer if the
officers or directors of the HPGF 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;
(n) 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;
(o) 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 HPGF 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.
C. The assets and liabilities of each Series will be
segregated on the Fund's books and records. The assets of each
Series will be separately invested and reinvested without regard
to the other Series.
D. The shares of each Series will be entitled to vote as
a separate class with respect to matters affecting that Series or
as otherwise required by applicable law. Where not so required,
the shares of all Series will vote together as a single class.
E. The voting rights of each share of each Series will
be identical to the rights of all other shares within that
Series, and, with respect to matters affecting the Fund
generally, identical to the rights of all other shares of the
Fund. Each share of a Series will entitle the holder thereof to
one vote (and a fractional share shall entitle the holder to a
corresponding fractional vote). Shareholders shall not be
entitled to cumulate votes and shall not have preemptive rights.
Special meetings may be called by holders of at least 10% of the
shares of (i) a singe Series, if the meeting relates to that
Series, or (ii) the entire Fund, if the meeting relates to the
Fund as a whole.
<PAGE>
F. The Trustees may create additional Series of the Fund
at any time, each Series having such objectives, policies, terms
and provisions as the Trustees, in their sole discretion, may
determine, provided, however, that each Series must be consistent
with the other provisions of this Declaration of Trust.
3. SHARES OF THE FUND
Each investor in a Series of the Fund shall have a beneficial
interest in such Series measured by the number of shares which he
owns, and all shares shall be equal in value. The shares shall
be fully paid and non-assessable when issued and have no
preference as to conversion, exchange, dividends or retirement.
The Fund shall be entitled to issue an unlimited number of
shares. The Trustees may, from time to time, divide or combine
the shares of any Series into a greater or lesser number of
shares. An account will be maintained for each shareholder
indicating the number of shares (including fractions) such
shareholder owns. Certificates for shares shall not be issued
unless specifically requested by a purchaser of shares.
4. VALUATION
(a) Date of Valuation: The Trustees will cause the assets of
each Series of the Fund, together with accrued income, to be
valued once on each Business Day as of the close of the New York
Stock Exchange ("NYSE") and before any admission or withdrawal as
of that day. A "Business Day" is defined as a day in which the
NYSE is open for trading.
(b) Method of Valuation: Valuation of the assets of each
Series of the Fund will be made using a method which the Board of
Trustees believes in good faith accurately reflects fair value
and will include adjustment for incomplete settlements, for
securities bought and sold, for accrued interest, for dividends
receivable on stocks quoted ex dividend, and for reserves.
Securities that are traded on an exchange or over-the-counter
will be valued at market value according to the broadest and most
representative market. Bonds and other fixed income securities
may be valued on the basis of prices provided by a pricing
service acceptable to the Trustees. Short-term investments may
be valued at cost.
(c) Net Asset Value Per Share: The net asset value per share
of each share of each Series shall be determined by adding the
value of the Series' securities and other assets, subtracting its
liabilities, and dividing the result by the number of its shares
outstanding at the close of business on each Business Day.
<PAGE>
5. ADMISSIONS AND WITHDRAWALS
(a) Admissions: A person may, with the consent of and in
accordance with guidelines established from time to time by the
Trustees, acquire shares of a Series as of any day by tendering
to the Trustees or their agent before the close of business on
such day a sum equal to the net asset value per share of the
requested Series as of the close of business that day.
(b) Withdrawals: A shareholder may withdraw shares as of any
day if he has given the Trustees or their agent notice not later
than the close of business that day of his intention to do so.
Such notice shall be given in the manner and form prescribed by
the Trustees, and may include withdrawals pursuant to check
writing plans authorized by the Trustees from time to time. For
each share withdrawn, the Custodian shall mail to the shareholder
within seven (7) days thereafter a check representing the net
asset value of each share withdrawn as of that day, less any
transaction charge that may then be in effect.
6. TRANSFER OF SHARES
Shares in the Fund may be transferred in accordance with such
reasonable rules and regulations as may be adopted by the Trustee
from time to time, which rules may be different for certificated
and non-certificated shares. Shareholders will be permitted to
exchange shares between Series by giving such notice as the
Trustees may from time to time require. Replacement of lost or
destroyed certificates will be subject to such rules as the
Trustees may deem necessary and proper.
7. INCOME DISTRIBUTION
A. Dividends declared will be accrued and credited to
each shareholder's account daily at such other times as the
Trustees may determine in accordance with law. Net capital gains
will be distributed at such times as the Trustees may determine
in accordance with law. All capital gains and dividends will be
automatically reinvested in additional shares of the same Series
at the net asset value per share unless the shareholder has
specified he wants dividends and/or capital gains paid to him in
cash.
B. Shareholders who have elected to receive net capital
gains and/or dividends in cash will receive payments of such
amounts due them, if any, monthly (with respect to dividends) and
annually (with respect to capital gains), or at such other times
established by the Trustees.
<PAGE>
8. CUSTODIAN
The Trustees shall, at all times, employ a bank, a trust
company, or a bank and trust company as Custodian of the Fund.
The Custodian shall receive, hold, and disburse all securities
and cash of the Fund and the Trustees shall not, themselves,
receive, hold, or disburse any such securities or cash. The
Custodian shall perform such other services with respect to
recordkeeping, valuation, and other matters pertaining to the
Fund as the Trustees and Custodian shall agree.
9. APPOINTMENT OF ACCOUNTANT
The Trustees shall from time to time select an independent
certified public accountant who will annually prepare a financial
statement of the Fund as required by law. The holders of record
of not less than two-thirds of the outstanding shares of the Fund
may have the appointed accountant removed by filing a declaration
with the Custodian or by a vote at a meeting called for such
purpose. The Trustees shall promptly call a meeting of
shareholders for the purpose of voting upon the removal of such
accountant when requested in writing by holders of at least 10%
of the Fund's outstanding shares.
10. APPOINTMENT, RESIGNATION, AND REMOVAL OF TRUSTEES
(a) Number of Trustees: The number of Trustees shall not be
less than three (3) and not more than twelve (12), the exact
number to be set from time to time by the action of the Trustees
or by a vote of the holders of a majority of the outstanding
shares.
(b) Initial Appointment: All of the Trustees named in this
Declaration of Trust, and all Trustees subsequently appointed or
elected in accordance with this Declaration of Trust, shall serve
until their successors have been elected and qualified, they
resign, or they are removed in accordance with the provisions of
this Declaration of Trust.
(c) Resignation, Removal, and Death: A majority of the
Trustees may, at any time, accept the written resignation of
another Trustee or may remove him from office by written notice
to him and to the Custodian. In addition, the holders of record
of not less than two-thirds of the outstanding shares of the Fund
may have a trustee removed by filling a declaration with the
Custodian or by a vote at a meeting called for such purpose. The
Trustees shall promptly call a meeting of shareholders for the
purpose of voting upon removal of such Trustee(s) when requested
in writing by holders of at
<PAGE>
least 10% of the Fund's outstanding shares. Pending the filling
of any vacancy or vacancies caused by death, resignation, or
removal, the remaining Trustee or Trustees shall have all the
powers and duties of the whole number of Trustees.
(d) Filling Vacancies: If a vacancy occurs in the office of a
Trustee for any reason, including an increase in the number of
Trustees, the other Trustees shall by written notice delivered to
the Custodian appoint a Trustee to fill the vacancy and will
promptly notify the shareholders that they have done so, subject
to the provisions of Section 16(a) of the 1940 Act. The
agreement to be entered into with the Custodian will provide
that, if at any time the Custodian decides that there is no
Trustee available or able to serve, it will call a meeting of the
shareholders to elect at least three (3) Trustees.
(e) Acceptance by Trustees: Any person appointed to the
office of Trustee will execute and file with the Custodian a
writing agreeing to the terms and conditions of this Declaration
of Trust, but this provision shall not apply to reappointments
and reelections of Trustees.
11. POWERS OF TRUSTEES
In addition to any other powers herein expressly or impliedly
given to them, and in addition to such powers as may be vested in
the Trustees by applicable law, the Trustees shall have the
power, in their discretion:
(a) To cause the principal of each Series of the Fund to be
invested and reinvested in bonds, notes, stocks, and other
securities, within the investment objective and policies of each
particular Series, except for a reasonable amount which may be
kept in cash, without being confined to legal investments as
defined under Pennsylvania law, but subject to the provisions of
the 1940 Act relating to the diversification of investments of
diversified management companies, the rules and regulations of
the Securities and Exchange Commission pursuant to such Act as
well as other federal law pertinent thereto, and other provisions
and limitations contained in this Declaration of Trust, and to do
anything required for the protection of any investments;
(b) To employ and remove the Custodian of the Fund, counsel,
an independent certified public accountant, a distributor,
transfer agent, pricing agent, and employees and officers of the
Fund, and such other persons as shall be required for the proper
administration of the Fund, such persons to have such duties,
responsibilities, and authority
<PAGE>
with respect to the Fund as the Trustee may determine, except
that the Trustees shall not have the power to employ an independent
certified public accountant rejected by the shareholders of the Fund;
(c) To employ and remove investment advisor(s) with whom the
Trustees shall enter into written contracts setting forth all
compensatory arrangements and other matters agreed upon between
the Trustees and such investment advisor(s);
(d) To cause the Custodian to pay from the Fund all proper
charges against it, and, in their discretion, to make proper
reserves for such charges, including, without limitation: taxes;
commissions and other expenses in connection with the purchase
and sale of securities held by the Fund; the compensation of the
Trustees, officers and employees of the Fund, of the Investment
Advisor, of the Distributor of the Fund's shares, of the
Custodian, of counsel, and of the independent certified public
accountant; premiums on the fidelity bond of the Trustees; fees
paid to the Securities and Exchange Commission and other
regulatory agencies; costs of transfer and registration of new
and transferred certificates; costs for the purchase, printing,
or for the mailing of, share certificates of the Fund, periodic
reports to shareholders of the Fund, notices to shareholders of
the Fund, proxies and proxy material; amounts required to
effectuate the indemnification of the Trustees and others and of
those who have ceased to be Trustees as provided herein; and any
other sums necessary for the proper conduct of the Fund;
(e) To allocate any such charge to principal or to income or
partly to each;
(f) To allocate stock dividends and extraordinary dividends to
principal or to income or partly to each;
(g) To delegate in writing to one or more of the Trustees and
at any time to assume any or all of the powers of the full Board
of Trustees, including discretionary powers, except that the
following powers may not be so delegated: the powers to appoint
or remove a Trustee, to employ or remove a Custodian or an
independent certified public accountant, to liquidate the Fund or
to amend this Declaration of Trust;
(h) To advance cash from the principal account of the Fund to
the income account and vice versa; and
(k) Generally, except as herein restricted, to do anything
with respect to the property of the Fund that an absolute owner
could do, subject to the duty of acting only for the benefit of
the shareholders.
<PAGE>
12. GENERAL RESTRICTIONS ON POWERS
(a) No person or organization having a contract to furnish or
furnishing managerial, supervisory, distributing, underwriting,
or investment advisory services to the Fund shall receive any
commission, fee, or other payment or otherwise profit directly or
indirectly from sales or purchases by the Fund of securities,
provided, however, that nothing in this paragraph shall prevent
or prohibit payment of a fee to any person for services rendered
to the Fund.
(b) The Trustees shall not cause the Fund to make investments
in violation of the 1940 Act or any regulations of the Securities
and Exchange Commission adopted pursuant thereto, or in
contravention of the provisions of the Internal Revenue Code of
1986, as amended, with respect to regulated investment companies.
13. LIMITATION OF LIABILITY AND INDEMNIFICATION
(a) Limitation of Trustee Liability. Every act or thing done
or omitted, and every power exercised or obligation incurred by
the Trustees or any of them in the administration of this Fund or
in connection with any affairs, property, or concerns of the
Fund, whether ostensibly in their own names or in their Fund
capacity, shall be done, omitted, exercised or incurred by them
as Trustees and not as individuals; and every person contracting
or dealing with the Trustees or having any debt, claim, or
judgment against them or any of them shall look only to the
assets of the Fund for payment or satisfaction. No Trustee or
Trustees of the Fund shall ever be personally liable for or on
account of any contract, debt, tort, claim, damage, judgment, or
decree arising out of or connected with the administration or
preservation of the Fund estate or the conduct of any other
affairs of the Fund.
It is the intention of this Section 13(a) that no Trustee shall
be subject to any personal liability whatsoever to any person for
errors of judgment, mistakes of fact or law, or any action or
failure to act (including without limitation the failure to
compel in any way any former or acting Trustee to redress any
breach of trust) and that all persons shall look solely to the
Fund assets for satisfaction of claims of any nature arising in
connection with the affairs of the Fund; except that nothing in
this Declaration of Trust shall protect any Trustee from any
liability to the Fund or its shareholders to which he would
otherwise be subject by reason of willful malfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office.
<PAGE>
(b) Indemnification of Trustees, Officers and Employees. The
Fund shall indemnify each of its Trustees against all liabilities
and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him in connection with the defense
or disposition of any action, suit, or other proceeding, whether
civil or criminal, in which he may be involved or with which he
may be threatened, while as a Trustee or thereafter, by reason of
his being or having been such a Trustee; except with respect to
any matter as to which he shall have been adjudicated to have
acted in bad faith or reckless disregard of his duties, or with
willful misconduct or gross negligence. The rights accruing to
any person under these provisions shall not exclude any other
right to which he may be lawfully entitled; provided, however,
that no person may satisfy any right of indemnity or
reimbursement except out of the property of the Fund.
The Trustees shall have the power, but not the duty, in their
sole discretion, to indemnify officers and employees of the Fund
to the same extent that Trustees are entitled to indemnification
pursuant to this Section 13(b).
In addition to such rights of indemnification as may be
provided hereunder, the Trustees may purchase insurance against
the risk of liability imposed against Trustees, officers, or
employees by reason of their services on behalf of the Fund.
(c) Reliance on Experts, Etc. Each Trustee, officer, and
representative of the Fund shall, in the performance of his
duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance
in good faith upon the books of account or other records of the
Fund, upon an opinion of counsel satisfactory to the Fund, or
upon reports made to the Fund by any of its officers,
representatives, or employees or by the investment advisor, the
principal underwriter, selected dealers, accountants, appraisers,
or other experts or consultants selected with reasonable care by
the Trustees or officers of the Fund, regardless of whether such
counsel or expert may also be a Trustee.
(d) Limitation of Shareholder Liability. Shareholders shall
not be subject to any personal liability for the acts or
obligations of the Fund and notice of this disclaimer shall be
given in each agreement, obligation or instrument entered into or
executed by the Fund or the Trustees. The Trustees shall have no
power to bind any shareholder personally or to call upon any
shareholder for the payment of any sum of money or assessment
whatsoever other than such as the shareholder may at
<PAGE>
any time personally agree to pay by way of subscription to any
shares or otherwise.
(e) Indemnification of Shareholders. In case any shareholder
or former shareholder shall be held to be personally liable
solely by reason of his being or having been a shareholder and
not because of his acts or omissions or for some other reason,
the shareholder or former shareholder (or his heirs, executors,
administrators, or other legal representatives or, in the case of
a corporation or other entity, its corporate or other general
successor) shall be entitled out of the Fund's assets to be held
harmless from and indemnified against all loss and expense
arising from such liability. The Fund shall, upon request by the
shareholder, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any
judgment thereon.
14. COMPENSATION OF TRUSTEES
Each Trustee who shall be affiliated with the Fund's investment
advisor or the fund's legal counsel or who shall be an officer or
employee of the Fund shall serve without compensation, and each
Trustee who is not so affiliated shall be compensated as
determined from time to time by the Trustees.
15. TAXES
The Trustees will pay from the Fund any tax assessed with
respect to the Fund or any asset of it or the income from it, and
shall, in their discretion, charge this tax to income or to
principal, or partly to both.
16. REPORTS
The Trustees will send to each shareholder, at least semi-
annually, a report of the Fund, containing information and
financial statements required by law, and they will send to each
shareholder, from time to time, the information required for
preparation of individual income tax returns.
17. NOTICES
Any notice or report provided for herein shall be considered as
given to each shareholder if mailed to him at the address
appearing on the Transfer Agent's records for the distribution
of income, with first-class postage affixed.
<PAGE>
18. TERMINATION
The Fund 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 Fund 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 Fund 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 Fund 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.
19. PERSONS DEALING WITH TRUSTEES
Anyone dealing with the Trustees shall be entitled to rely upon
the written or oral statement of any one or more of the Trustees
to whom authority has been delegated to act on behalf of all the
Trustees, or upon his or their representation that such authority
has been delegated to him or them.
20. AMENDMENTS
This Declaration of Trust may be amended from time to time by
all the Trustees with the written consent of the holders of a
majority of the outstanding shares or with the consent of such
holders voting in person or by proxy at a meeting called to pass
upon such amendment; but no amendment shall give any share
preference over any other share. An amendment shall be effective
upon delivery of an appropriate writing to the Custodian, notice
of which will then be given immediately to all the shareholders.
<PAGE>
21. SITUS OF TRUST
The situs of this Fund shall be East Lampeter Township,
Lancaster County, Pennsylvania and this Declaration of Trust
shall be governed and controlled by the laws and statutes of the
Commonwealth of Pennsylvania.
22. MISCELLANEOUS
(a) Close of Business. As used in this Declaration of Trust,
the phrase "close of business," whether with respect to
determining net asset value per share, effecting purchases or
redemptions of shares, or any other purpose, shall be deemed to
mean the close of business of the New York Stock Exchange on the
applicable day unless the Trustees specify another time.
(b) Other Capacities. Any Trustee, officer, representative,
employee, or agent of the Fund, including any investment advisor,
distributor, custodian, or transfer agent, may serve in multiple
capacities for the Fund, and may engage in other business
activities in addition to his or its services on behalf of the
Fund, provided, however, that any such business activities not
related to the Fund do not interfere with the performance of such
person's responsibilities and duties for or on behalf of the
Fund.
(c) Conformance with Law. This Fund has been created to be an
investment company under the 1940 Act. To the extent that any
provision of this Declaration of Trust is inconsistent with the
1940 Act or any regulation thereunder, the regulated investment
company provisions of the Internal Revenue Code of 1986 or any
regulation thereunder, or with other applicable laws or
regulations, such inconsistent provision of this Declaration of
Trust shall be deemed to be amended to so be consistent, or
deemed to be severed from this Declaration of Trust, as
appropriate, without any action by the Trustees or shareholders.
Notwithstanding the foregoing, Section 13 of this Declaration of
Trust shall not be affected in any manner that would increase the
liability of Trustees or shareholders or decrease the
indemnification available to such persons.
<PAGE>
(d) Actions by Written Consent; Telephonic Meetings. Any
action that may be taken by the Trustees may be taken by a
writing signed by all of them. Trustees may participate in
meetings by means of a conference telephone or other similar
equipment pursuant to which each person participating in the
meeting may hear all other persons participating.
IN WITNESS WHEREOF, the undersigned Trustees have signed their
names and affixed their seals the day and year first above
written.
/s/ Bruce E. Bowen
-----------------------------(SEAL)
Bruce E. Bowen
/s/ Scott L. Rehr
---------------------------- (SEAL)
Scott L. Rehr
/s/ H. J. Zoffer
---------------------------- (SEAL)
H. J. Zoffer
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No.
9 to the Registration Statement on form N-1A (the "Registration
Statement") of our report dated August 7,1997, relating to the
financial statements and financial highlights of the HomeState
Pennsylvania Growth Fund and the HomeState Select Opportunities
Fund, constituting The HomeState Group, 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 "Independent Accountants" in such
Statement of Additional Information and to the references to us under
the headings "Financial Highlights"and "General Information" in such
Prospectus. 1
Price Waterhouse LLP
Philadelphia, Pennsylvania
October 29, 1997
September 1992
The HomeState Group Exhibit 13
1857 William Penn Way
Lancaster, Pennsylvania 17601
Re: Investment Representation Letter
Gentlemen:
We have provided the intial capitalization for The HomeState Group
(the "Fund") in the form of an investment of cash in the amount of
$100,000. Such amount is to be invested entirely in The HomeState
Pennsylvania Growth Fund series contained in the Fund. In exchange
for such investment, we have been issued 10,000 shares of beneficial
interest in The HomeState Pennsylvania Growth Fund.
We represent that we have purchased such shares solely as an investment
and not for purposes of resale with a view to distribution. We further
hereby undertake to reimburse the Fund or to accept a reduction in redemption
proceeds due us if any such shares are redeemed prior to the fifth anniversary
of the date the Fund begins its investment activities. The amount of the
reimbursement or reduction in proceeds shall be determined by multiplying the
then remaining unamortized organizational expenses of the Fund by a fraction
whose numerator shall be the number of such shares being redeemed and
denominator shall be the total number of such shares originally purchased
by us then remaining outstanding.
Very truly yours,
EMERALD ADVISERS, INC.
/s/ Scott L. Rehr
Scott L. Rehr
Vice President and Treasurer
EXHIBIT 16
FUND NAME: HOMESTATE PENNSYLVANIA GROWTH FUND
(STANDARDIZED RETURNS)
1 YR INCEPTION
---- ---------
# YEARS IN PERIOD 1 4.750685
AVERAGE ANNUAL TOTAL RETURN 4.36% 19.73%
CUMULATIVE TOTAL RETURN 4.36% 135.24%
MAXIMUM SALES LOAD 4.75% 4.75%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)1/N -1 = T (ERV/P) - 1 = T
(1,043.60/1,000)1 -1 = T (1,043.60/1,000)- 1 = T
0.0436 = T 0.0436 = T
4.36% = T 4.36% = T
INCEPTION THROUGH 06/30/97
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- ------------------------------------ ------------------------
(ERV/P)1/N -1 = T (ERV/P) - 1 = T
(2,352.40/1,000)1/4.750685 -1 = T (2,352.40/1,000) -1 = T
0.1973 = T 1.3524 = T
19.73% = T 135.24% = T
<PAGE>
EXHIBIT 16
FUND NAME: HOMESTATE SELECT OPPORTUNITIES FUND
(STANDARDIZED RETURNS)
1 YR INCEPTION
---- ---------
# YEARS IN PERIOD N/A 0.364384
AVERAGE ANNUAL TOTAL RETURN N/A N/A
CUMULATIVE TOTAL RETURN N/A 11.44%
MAXIMUM SALES LOAD N/A 4.75%
CUMULATIVE TOTAL RETURN
------------------------
(ERV/P) - 1 = T
(1,114.43/1,000) -1 = T
0.1144 = T
11.44% = T
<PAGE>
EXHIBIT 16
FUND NAME: HOMESTATE PENNSYLVANIA GROWTH FUND
(NON-STANDARDIZED RETURNS)
1 YR INCEPTION
---- ---------
# YEARS IN PERIOD 1 4.750685
AVERAGE ANNUAL TOTAL RETURN 9.56% 20.96%
CUMULATIVE TOTAL RETURN 9.56% 146.97%
MAXIMUM SALES LOAD N/A N/A
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------------- -----------------------------
(ERV/P)1/N -1 = T (ERV/P) -1 = T
(1,095.62/1,000)1 -1 = T (1,095.62/1,000) -1 = T
0.0956 = T 0.0956 = T
9.56% = T 9.56% = T
INCEPTION THROUGH 06/30/97
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- ------------------------------------ ----------------------------
(ERV/P)1/N -1 = T (ERV/P) - 1 = T
(2,469.69/1,000)1/4.750685 -1 = T (2,469.69/1,000) - 1 = T
0.2096 = T 1.4697 = T
20.96% = T 146.97% = T
<PAGE>
EXHIBIT 16
FUND NAME: HOMESTATE SELECT OPPORTUNITIES FUND
(NON-STANDARDIZED RETURNS)
1 YR INCEPTION
---- ---------
# YEARS IN PERIOD N/A 0.364384
AVERAGE ANNUAL TOTAL RETURN N/A N/A
CUMULATIVE TOTAL RETURN N/A 17.00%
MAXIMUM SALES LOAD N/A N/A
CUMULATIVE TOTAL RETURN
---------------------------
(ERV/P) - 1 = T
(1,170.00/1,000) - 1 = T
0.1700 = T
17.00% = T
