<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1996
File No. 33-78078
File No. 811-8486
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 3
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO.4
INVENTOR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 254-1000
DAVID G. LEE
C/O SEI CORPORATION
680 E. SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
(Name and Address of Agent for Service)
Copies to:
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
2000 ONE LOGAN SQUARE 1800 M STREET, NW
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, DC 20036
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
- -- on [date] pursuant to paragraph (b)
- -- 60 days after filing pursuant to paragraph (a)
- -- 75 days after filing pursuant to paragraph (a)
- -- on [date] pursuant to paragraph (a) of Rule 485
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of shares of common stock is being registered by this
Registration Statement. Registrant has filed a Rule 24f-2 Notice on July 29,
1996 for its fiscal year ended April 30, 1996.
<PAGE> 2
INVENTOR FUNDS, INC.
POST-EFFECTIVE AMENDMENT NO. 3
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
PART A -
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary; Expense Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant The Corporation; Investment Objectives and Policies;
General Investment Policies; Description of Permitted
Investments and Risk Factors; Investment Limitations;
General Information -- The Corporation
Item 5. Management of the Trust General Information -- Directors of the Corporation;
The Adviser; The Sub-Adviser(s); The Administrator;
The Transfer Agent; The Distributor
Item 6. Capital Stock and Other Securities General Information -- Voting Rights; General
Information -- Shareholder Inquiries; Performance;
General Information -- Dividends; Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Shares; Exchanges; Redemption of
Shares
Item 8. Redemption or Repurchase How to Purchase Shares; Exchanges; Redemption of
Shares
Item 9. Pending Legal Proceedings *
PART B -
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Corporation
Item 13. Investment Objectives and Policies Description of Permitted Investments; Investment
Limitations; Description of Shares
Item 14. Management of the Registrant Directors and Officers of the Corporation; The
Administrator
Item 15. Control Persons and Principal Holders Directors and Officers of the Fund; 5%
of Securities Shareholders
Item 16. Investment Advisory and Other Services The Adviser; The Sub-Adviser(s); The Administrator;
The Distributor; Experts
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares;
of Securities Being Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Performance
Item 23. Financial Statements Financial Statements
</TABLE>
ii
<PAGE> 3
PART C -
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
* Not Applicable
iii
<PAGE> 4
PROSPECTUS INVENTOR FUNDS, INC.
Investment Adviser:
NATIONAL CITY BANK
INVENTOR FUNDS, INC. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
INTERMEDIATE GOVERNMENT SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
CLASS A
Class A Shares of the Funds are offered to individuals and institutional
investors, including customers of affiliates and correspondents of National City
Corporation. Class A shares are sold with a front-end sales load that will be
reduced or waived in certain circumstances. National City Bank, the Funds'
investment adviser, is an affiliate of National City Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING NATIONAL CITY BANK, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1996 has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658, or by calling 1-800-6INVENT (1-
800-646-8368). The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
August 28, 1996
<PAGE> 5
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class A shares of the Corporation's Intermediate Government Securities Fund,
GNMA Securities Fund and Equity Growth Fund (each a "Fund" and, together, the
"Funds").
What are the Investment Objectives and Policies of each Fund? The INTERMEDIATE
GOVERNMENT SECURITIES FUND seeks preservation of capital and a high degree of
liquidity while providing current income by investing primarily in obligations
issued or guaranteed as to principal and interest by the U.S. Government and its
agencies and instrumentalities. The GNMA SECURITIES FUND seeks the highest level
of current income consistent with preservation of capital and a high degree of
liquidity by investing primarily in mortgage pass-through securities issued by
the Government National Mortgage Corporation. The EQUITY GROWTH FUND seeks
capital appreciation by investing primarily in common stocks and securities
convertible into common stocks. There is no assurance that any Fund will meet
its investment objective. See "Investment Objectives and Policies" and
"Description of Permitted Investments and Risk Factors."
What are the Risks involved with an Investment in the Funds? Shares of the
INTERMEDIATE GOVERNMENT SECURITIES, GNMA SECURITIES AND EQUITY GROWTH FUNDS will
fluctuate in value with the value of their underlying portfolio securities.
Values of fixed income securities and, correspondingly, share prices of Funds
invested in such securities tend to vary inversely with interest rates and may
be affected by other market and economic factors as well. Common stocks in which
the Equity Growth Fund may invest may be more volatile and may fluctuate in
value more than other types of investments.
Who is the Adviser? National City Bank serves as the Adviser of the Funds. See
"Expense Summary" and "The Adviser."
Who are the Sub-Advisers? Wellington Management Company serves as Sub-Adviser to
the Intermediate Government Securities Fund and GNMA Securities Fund. STI
Capital Management, N.A. serves as Sub-Adviser to the Equity Growth Fund. See
"The Sub-Advisers."
Who is the Administrator? SEI Fund Resources serves as the Administrator and
shareholder servicing agent of the Corporation. See "Expense Summary" and "The
Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and Federal Reserve
wire system are open for business ("Business Days"). A purchase order for shares
will be executed at a per share price equal to the net asset value per share
next determined after the receipt of the purchase order plus any applicable
sales charges. The minimum initial investment is $500 ($250 for IRAs and $100
for officers, directors, employees or retirees of National City Corporation,
and its affiliates). Net asset value for the Intermediate Government
Securities, GNMA Securities and Equity Growth Funds is determined as of the
close of business of the New York Stock Exchange (currently 4:00 p.m., Eastern
Time, on each Business Day. Redemption orders must be placed prior to 4:00 p.m.,
Eastern Time), on any Business Day. See "Purchase of Shares" and "Redemption of
Shares."
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
2
<PAGE> 6
EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A
SHARES
INTERMEDIATE
GOVERNMENT GNMA EQUITY
SECURITIES SECURITIES GROWTH
FUND FUND FUND
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price) 4.00% 4.00% 4.00%
Maximum Sales Load Imposed
on Reinvested Dividends
(as a percentage of
offering price) None None None
Maximum Contingent Deferred
Sales Charge None None None
Exchange Fee None None None
Wire Redemption Fee $10 $10 $10
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees
(after fee waivers) (1) .55% .51% .62%
Rule 12b-1 Fees (after fee
waivers) (2) .00% .00% .00%
Other Expenses .30% .34% .33%
Total Operating Expenses
(after fee waivers)(3) .85% .85% .95%
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser reserves
the right to terminate the waiver at any time in its sole discretion.
Absent such fee waivers, advisory fees would be .70% for the Intermediate
Government Fund, .70% for the GNMA Securities Fund, and .85% for the Equity
Growth Fund.
(2) The Class A Plan provides that Class A shares will bear the costs of
distribution expenses and related service fees at the annual rate of .25%
of each Fund's average daily net assets. The Distributor has agreed to
voluntarily waive any fees payable pursuant to the Plan. The Distributor
reserves the right to terminate this waiver at any time in its sole
discretion.
(3) Absent the Adviser's voluntary fee waivers and the Distributor's waiver of
12b-1 fees, total operating expenses would be 1.25% for the Intermediate
Government Fund, 1.29% for the GNMA Securities Fund, and 1.43% for the
Equity Growth Fund.
3
<PAGE> 7
EXAMPLE
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
An investor in a Fund would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of each time period:
<S> <C> <C> <C> <C>
Intermediate Government Securities Fund $ 48 $ 66 $ 85 $ 141
GNMA Securities Fund $ 48 $ 66 $ 85 $ 141
Equity Growth Fund $ 49 $ 69 $ 90 $ 152
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class A shares. The Funds also offer
Class B shares, which are subject to the same expenses as Class A shares except
that Class B shares bear no distribution costs or sales loads. Class B shares
are currently not being offered for any Fund.
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares."
Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers ("NASD").
4
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Corporation's independent accountants, as indicated in their reports dated June
14, 1996 and July 26, 1996, on the Corporation's financial statements as of
April 30, 1996 and May 31, 1996, respectively, included in the Corporation's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Corporation's financial statements and
notes thereto. Additional information is set forth in the 1996 Annual Report to
Shareholders and is available without charge by calling 1-800-6INVENT.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Distributions
Net Realized -------------------------------Net
Net and Unrealized Asset
Asset Net Gains from Value
Value Invest- on Securities from Realiz- End Total
Begin- ment Net ed of Return
ning Income Investment Capital Period
of Period income Gains
- -------------------------------------------------------------------------------------------------------------------------------
Equity
Growth
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A(2) $10.69 $0.15 $2.95 $(0.15) $(0.96) $12.68 29.95%
April 30, 1996
April 30, 1995(1) 10.00 0.12 0.71 (0.12) (0.02) 10.69 8.33+
- -------------------------------------------------------------------------------------------------------------------------------
Intermediate Government Securities
- -------------------------------------------------------------------------------------------------------------------------------
Class A(2)
May 31, 1996* $10.04 $0.05 $(0.07) $(0.05) $-- $9.97 (0.19)%+
April 30, 1996 10.02 0.64 0.07 (0.64) (0.05) 10.04 7.09%
April 30, 1995(1) 10.00 0.44 $0.02 (0.44) -- 10.02 4.75+
- -------------------------------------------------------------------------------------------------------------------------------
GNMA Securities
- -------------------------------------------------------------------------------------------------------------------------------
Class A(2)
May 31, 1996* $10.12 $0.05 $(0.09) $(0.05) $-- $10.03 (0.35)%+
April 30, 1996 10.16 0.66 0.14 (0.66) (0.18) 10.12 7.97%
April 30, 1995(1)(3) 10.00 0.48 0.16 (0.48) -- 10.16 6.61+
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Ratio-of Expenses Investment
Assets Ratio of Net to Income
End of Expens- Invest- Average to Average Port-
Period es to ment Net Net Assets folio
(000) Average income to Assets (Excluding Turn-
Net Average (Excluding Waivers) over
Assets Net Assets Waivers) Rate
- ----------------------------------------------------------------------------------------------------------------------------
Equity
Growth
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (2) $61,161 0.95% 1.22% 1.43% 0.74% 168%
April 30, 1996
April 30, 1995(1) 46,657 0.95 1.57 1.48 1.04 110
- ----------------------------------------------------------------------------------------------------------------------------
Intermediate Government Securities
- ----------------------------------------------------------------------------------------------------------------------------
Class A(2)
May 31, 1996* $88,829 0.85% 5.88% 1.25% 5.48% 2%
April 30, 1996 89,901 0.85 6.20 1.25 5.80 94
April 30, 1995(1) 53,316 0.85 6.17 1.33 5.69 172
- ----------------------------------------------------------------------------------------------------------------------------
GNMA Securities
- ----------------------------------------------------------------------------------------------------------------------------
Class A(2)
May 31, 1996* $60,532 0.85% 6.33% 1.28% 5.90% 1%
April 30, 1996 62,161 0.85 6.30 1.29 5.86 149
April 30, 1995(1) 42,212 0.85 6.68 1.40 6.13 226
4.91% --
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* For the period May 1, 1996 through May 31, 1996. All ratios for the period
have been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have been
annualized.
(2) Total Return does not reflect the sales charge.
5
<PAGE> 9
THE CORPORATION
INVENTOR FUNDS, INC. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class A
shares of the Corporation's Intermediate Government Securities Fund
("Intermediate Government Fund"), GNMA Securities Fund and Equity Growth Fund
(each a "Fund" and, together, the "Funds"). Additional information pertaining to
the Corporation may be obtained in writing from SEI Financial Services Company,
680 East Swedesford Road, Wayne, PA 19087-1658 or by calling 1-800-6INVENT
(1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies. There is no assurance
that the investment objective of a Fund will be met.
INTERMEDIATE GOVERNMENT SECURITIES FUND
The investment objective of the Fund is to preserve capital and maintain a high
degree of liquidity while providing current income.
The Fund invests in U.S. Treasury obligations, futures on U.S. Treasury
obligations and obligations issued or guaranteed as to principal and interest by
the agencies and instrumentalities of the U.S. Government. The Fund's
dollar-weighted average maturity ordinarily will be approximately five years;
however, the Sub-Adviser may vary this average maturity substantially in
anticipation of a change in the interest rate environment. Nevertheless, the
Fund will maintain a dollar-weighted average maturity of between three and ten
years under normal circumstances.
GNMA SECURITIES FUND
The investment objective of the Fund is to provide the highest level of current
income consistent with preservation of capital and a high degree of liquidity.
Fund invests primarily (at least 65% of its total assets under normal
conditions) in mortgage pass-through securities guaranteed by the Government
National Mortgage Association ("GNMA"). Any remaining assets may consist of: (i)
obligations of the U.S. Treasury; (ii) obligations issued or guaranteed as to
principal and interest by agencies and instrumentalities of the U.S. Government;
(iii) mortgage-backed securities issued by other government agencies and
privately issued mortgage-backed securities rated at least A by an NRSRO; (iv)
repurchase agreements involving any of such obligations; (v) shares of money
market investment companies investing exclusively in such obligations; and (vi)
futures on U.S. Treasury obligations. The Fund intends to maintain a position in
Money Market instruments sufficient to provide a high degree of liquidity. The
Fund may also engage in dollar rolls, short sales and interest rate swaps.
Under normal market conditions, the estimated average life of the Fund's
holdings of mortgage pass-through and mortgage-backed securities will range
between 4 and 10 years.
EQUITY GROWTH FUND
The investment objective of the Fund is capital appreciation.
The Fund invests primarily in a diversified portfolio of common stocks and
convertible securities which are deemed to be undervalued in the marketplace at
the time of purchase. Dividend income is an incidental consideration compared to
growth of capital. In selecting securities for the Fund, factors that are likely
to affect long-term capital appreciation will be evaluated. Such factors will
include the issuer's background, industry position, historical returns on equity
and the experience and qualifications of the management team. Holding will be
rotated between various market sectors based on economic analysis of the overall
business cycle. The Fund invests primarily (normally at least 65% of its total
assets under normal market conditions) in common stocks and convertible
securities. The Fund may also invest in American Depositary Receipts ("ADRs")
the underlying foreign issuers of which are located in developed countries and
may buy and sell options and futures and options on futures.
GENERAL INVESTMENT POLICIES
In order to meet liquidity needs and for temporary defensive purposes, each of
the Intermediate Government, GNMA Securities and Equity Growth Funds may hold
cash reserves, and may invest up to 100% of its assets in Money Market
Instruments.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay interest
and repay
6
<PAGE> 10
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. Such bonds lack outstanding investment
characteristics and have speculative characteristics as well.
Each Fund may purchase securities on a when-issued basis.
The Intermediate Government, GNMA Securities and Equity Growth Funds may invest
up to 15% of their net assets in illiquid securities.
Each Fund reserves the right to engage in securities lending, although no Fund
has the present intent of doing so. Each such Fund may also borrow money in
amounts up to 33-1/3 of its net assets.
For additional information regarding permitted investments see "Description of
Permitted Investments and Risk Factors" in this Prospectus and the Statement of
Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates for the fiscal year ended April 30, 1996, for the
GNMA Securities Fund and the Equity Fund were 149% and 168%, respectively. Such
turnover rates will likely result in higher brokerage commissions and higher
levels of realized capital gains than if the turnover rates were lower.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities, and repurchase
agreements involving such securities) if as a result, more than 5% of total
assets of the Fund would be invested in the securities of such issuer. With
respect to the Intermediate Government, GNMA Securities and Equity Growth Funds,
this restriction applies only to 75% of each Fund's assets.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities, and repurchase
agreements involving such securities.
The foregoing percentage limitations will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding shares.
THE ADVISER
On May 2, 1996, Integra Financial Corporation, the parent of Integra Trust
Company National Association ("Integra"), the prior investment adviser to the
Inventor Funds, merged with National City Corporation ("National City").
Consummation of the merger resulted in the automatic termination of the
investment advisory agreement under which Integra provided services to the
Funds. In anticipation of a merger and to provide continuity in investment
advisory services to the Funds, the Board of Directors voted on February 12,
1996 to recommend that the shareholders of the Funds approve an investment
advisory agreement with National City Bank (the "Adviser") a wholly-owned
subsidiary of National City. Shareholders of the Funds approved the new advisory
agreement with the Adviser on May 2, 1996. On August 1, 1996, shareholders
approved a reorganization of the Funds wherein each fund would transfer its
assets and liabilities to a fund with similar objectives and policies within the
Armada Funds which are advised by affiliates of National City and the Adviser.
The Adviser sets investment policies, and continuously reviews, supervises and
administers each Fund's investment program. The Adviser discharges its
responsibilities subject to the supervision of, and policies set by, the
Directors of the Corporation.
National City Bank, 1900 East Ninth Street, Cleveland, Ohio 44114, is a
wholly-owned subsidiary of National City Corporation.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of 0.70% for the Intermediate Government and GNMA Securities
Funds and 0.85% for the Equity Growth Fund, based on each Fund's average daily
net assets. The Adviser may from time to time waive all or a portion of its fee
in order to limit the
7
<PAGE> 11
operating expenses of a Fund. Any such waiver is voluntary and may be terminated
at any time in the Adviser's sole discretion. For the fiscal year ended April
30, 1996, Integra, the Funds' prior adviser, received an advisory fee of .55%,
.51% and .62% for the Intermediate Government, GNMA Securities and Equity Growth
Funds, respectively, based on each Fund's average daily net assets.
The Glass-Steagall Act restricts the securities activities of banks such as
National City Bank, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might have to make other investment advisory arrangements.
THE SUB-ADVISERS
The Intermediate Government and GNMA Securities Funds are managed on a
day-to-day basis by Wellington Management Company ("WMC"). STI Capital
Management N.A. ("STI") and, together with WMC, the "Sub-Advisers") manages the
Equity Growth Fund on a day-to-day basis.
The Sub-Advisers make investment decisions for these Funds and continuously
review, supervise and administer the Funds' investment program, subject to the
supervision of, and policies set by, the Adviser and the Directors.
WMC is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. As of May 31, 1996, WMC had
discretionary management authority with respect to approximately $118 billion of
assets. WMC and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960. Wellington Management Company, 75 State Street, Boston, MA 02109, is
a Massachusetts general partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland and John B. Neff.
As Sub-Adviser, WMC is entitled to a fee, calculated daily and paid monthly, at
an annual rate of .18% on the first $50 million of the Intermediate Government
and GNMA Securities Funds aggregate net assets, .15% on the next $50 million,
.10% on the next $400 million and .075% on such Fund's aggregate net assets in
excess of $500 million, pro rated between each Fund based on their respective
average daily net assets. WMC may from time to time waive all or a portion of
its fee from the Adviser. For the fiscal year ended April 30, 1996, WMC received
a fee from Integra of .147% for the Intermediate Government and GNMA Securities
Funds, based on each Fund's average daily net assets.
INTERMEDIATE GOVERNMENT SECURITIES FUND AND
GNMA SECURITIES FUND
Thomas L. Pappas, Vice President of Wellington Management Company, has served as
portfolio manager to the Intermediate Government Securities and GNMA Securities
Funds since their inception. Mr. Pappas has been an investment professional with
Wellington Management Company since 1987.
EQUITY GROWTH FUND
As of June 30, 1996, STI had discretionary management authority with respect to
approximately $11 billion assets. The principal business address of STI is 200
S. Orange Avenue, Orlando, Florida 32802. STI is entitled to a fee, calculated
daily and paid monthly, at an annual rate of .30% of the average daily net
assets of the Equity Growth Fund. STI may from time to time waive all or a
portion of its fee from the Adviser. For the fiscal year ended April 30, 1996,
the STI received from Integra an advisory fee of .30% for the Equity Growth Fund
based on the Fund's average daily net assets.
Anthony Gray, Chief Investment Officer of STI has served as portfolio manager to
the Equity Growth Fund since its inception. Mr. Gray has been with STI since
1979.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") provides the Corporation with
administrative services, including fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also acts as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at a maximum annual rate of 0.18% of the average daily net assets of
the Intermediate Government, GNMA Securities and Equity Growth Funds.
8
<PAGE> 12
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or the "Transfer Agent"), 210 W. 10th Street, Kansas
City, Missouri 64105 serves as the transfer agent and dividend disbursing agent
for the Corporation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. The Class A shares of the Corporation have a Rule
12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to .25%
of their average daily net assets. Financial institutions that are the record
owner of shares for the account of their customers may impose separate fees for
account services to their customers.
The Funds may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased directly by mail, by wire or through an
automatic investment plan ("AIP"). Shares may also be purchased through
broker-dealers, including Integra Brokerage Services Company and Personal
Investment Services, Inc., that have established a dealer agreement with the
Distributor.
HOW TO PURCHASE BY MAIL
You may purchase Class A shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Inventor Funds (Fund Name)," P.O. Box
419320, Kansas City, Missouri 64141-6320. You may purchase more shares at any
time by mailing payment also to DST at the above address. Orders placed by mail
will be executed on receipt of your payment. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees
incurred.
may obtain account application forms by calling the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call the Fund at
1-800-6INVENT (1-800-646-8368) before wiring any funds. An order to purchase
shares by Federal funds wire will be deemed to have been received by the Fund on
the Business Day (defined below) of the wire; provided that the Federal Funds
wire is received by DST prior to 4:00 p.m., Eastern time for the Funds. If DST
does not receive notice by 4:00 p.m., Eastern time for the Funds on the Business
Day of the wire, the order will be executed on the next Business Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC
INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking account
by completing an AIP Application Form. The minimum pre-authorized investment
amount is $25 per month. An AIP Application Form may be obtained by contacting
the Fund at 1-800-6INVENT (1-800-646-8368). The AIP is available only for
additional investments for an existing account.
GENERAL INFORMATION
You may purchase shares of the Funds on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business
Days"). However, shares of the Funds cannot be purchased by Federal Reserve wire
on Federal holidays restricting wire transfers. The minimum initial investment
in any Fund is $500 ($250 for IRAs and $100 for officers, directors, employees
or retirees of National City Bank, or its affiliates). The Distributor may waive
the minimum investment at its discretion. Subsequent purchases of shares must be
at least $25.
A purchase order for shares will be effective as of the Business Day received by
the Transfer Agent if the Transfer Agent receives the order and payment before
4:00 p.m., Eastern time for the Funds. The purchase price (the "Offering Price")
of Class A shares is the net asset value next determined after the purchase
order is effective plus any applicable sales charge.
The net asset value per share is determined as of the close of business of the
New York Stock Exchange (currently 4:00 p.m., Eastern time) for the Funds on
each Business Day by dividing the total market value of that Fund's investments
and other assets, less any liabilities, by the total
9
<PAGE> 13
outstanding shares of the Fund. Purchases will be made in full and fractional
shares calculated to three decimal places. Pursuant to guidelines adopted and
monitored by the Directors of the Corporation, each Fund may use a pricing
service to provide market quotations or fair market valuations. A pricing
service may derive such valuations through the use of a matrix system to value
fixed income securities which considers factors such as securities prices, yield
features, ratings, and developments related to a specific security. Although the
methodology and procedures for determining net asset value are identical for
both classes of a Fund, the net asset value per share of such classes may differ
because of the distribution expenses charged to Class A shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor determines that it is not in the best interest of the
Corporation and/or its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Fund at 1-800-6INVENT (1-800-
646-8368).
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record by
the financial institution. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. Customers should contact their financial institution for
information as to that institution's procedures for transmitting purchase,
exchange or redemption orders to the Corporation.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
SALES LOAD
The following table shows the regular sales charge on Class A shares of the
Intermediate Government, GNMA Securities and Equity Growth Funds to a "single
purchaser" (defined below) together with the sales charge that is reallowed to
certain financial intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES SALES
CHARGE CHARGE REALLOWANCE
AS AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OFFERING OF NET OF OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
<S> <C> <C> <C>
Less than
$100,000 4.00% 4.17% 3.60%
$100,000 but
less than
$250,000 3.00% 3.09% 2.70%
$250,000 but
less than
$500,000 2.00% 2.04% 1.80%
$500,000 but
less than
$1,000,000 1.00% 1.01% .90%
$1,000,000
and above none none none
</TABLE>
The sales charge shown in the table is the maximum sales charge that applies to
sales of Class A shares of the Funds. Under certain circumstances, the
Distributor may use its own funds to compensate financial institutions and
intermediaries in amounts additional to the commissions shown above. In
addition, the Distributor may, from time to time in its sole discretion,
institute one or more promotional incentive programs, which will be paid by the
Distributor from the sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide promotional
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to all dealers selling shares of
the Funds. Ordinarily, such promotional incentives will be offered
10
<PAGE> 14
uniformly to all dealers and will be predicated upon the amount of shares of the
Funds sold by the dealer.
Under certain circumstances, reallowances of up to the entire sales charge may
be paid to certain financial institutions, who might then be deemed to be
"underwriters" under the Securities Act of 1933.
Reduced Sales Charge:
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current market value of previously purchased Class A shares of the Funds sold
subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
Reduced Sales Charge: Letter of Intent
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive credit for such prior purchases
and later purchases benefitting from the Letter, you must notify the Transfer
Agent at the time the Letter is submitted that there are prior purchases that
may apply, and notify the Transfer Agent again at the time of later purchases
that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors, employees or
retirees (and their spouses) of the Corporation, National City Corporation and
its subsidiaries and affiliates; (iv) sold to certain accounts for which the
Adviser or subsidiaries, affiliates and correspondents of National City Bank,
serve in a fiduciary, agency or custodial capacity; (v) issued in plans of
reorganization, such as mergers, asset acquisitions and exchange offers, to
which the Corporation is a party; (vi) purchased with the proceeds of
distributions from employee benefit plans for which the Adviser or its
affiliates act in a custodial or fiduciary capacity, (vii) purchased within
thirty days of a redemption of Class A shares of such Funds (only up to the
amount of such redemption) or (viii) sold to tax-exempt organizations enumerated
in Section 501(c) of the Code or qualified employee benefit plans created under
Sections 401, 403(b)(7) or 457 of the Code (but not IRAs or SEPs). Reduced sales
charges are available on shares of the Funds sold to certain eligible customers
of the Adviser or its affiliates. Please see the Statement of Additional
Information for further information on reduced sales charges. You must notify
the Distributor at the time of your purchase if you are eligible for a waiver of
the sales load.
An investor relying upon any of the categories of waivers of the sales charge
must qualify such waiver in advance of the purchase with the Distributor or the
financial institution or intermediary through which share are purchased by the
investor.
EXCHANGES
You may exchange Class A shares of any Fund for Class A shares of any other Fund
at net asset value, plus any applicable sales charge. Shareholders that meet the
investment criteria established for Class B shares may exchange Class A shares
of any Fund for Class B shares of that Fund once Class B shares are made
available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m., Eastern time for
the on any Business Day, the exchange will occur on that day. The exchange
privilege may be exercised only in
11
<PAGE> 15
those states where the class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $10 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
systematic withdrawal plan. Investors who own shares held of record by a
financial institution should contact that institution for information on how to
redeem shares.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent or wired to an address different from that of record, DST may require
that the signature on the written redemption request be guaranteed. You should
be able to obtain a signature guarantee from a bank, broker, dealer, credit
union, securities exchange or association, clearing agency or savings
association. Notaries public cannot guarantee signatures. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption is for not more than $5,000 worth of shares, (2) the
redemption check is payable to the shareholder(s) of record, and (3) the
redemption check is mailed to the shareholder(s) at his or her address of
record.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $10 charge for
wiring redemption proceeds.
You may request a wire redemption by calling the Fund at 1-800-6INVENT
(1-800-646-8368), who will deduct a wire charge of $10 from the amount of the
redemption. Shares cannot be redeemed by Federal Reserve wire on Federal
holidays restricting wire transfers.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and Transfer Agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or Transfer Agent may be liable for losses due to
unauthorized or fraudulent instructions if it does not employ these procedures.
Such procedures may include taping of telephone conversations.
ELECTRONIC FUNDS TRANSFER SERVICE
Electronic Funds Transfer Service lets you authorize electronic transfers of
money to buy or sell shares of a Fund or move money between your bank account
and your Fund account with one phone call. Allow two to three business days
after the call for the transfer to take place. For money recently invested,
allow normal check-clearing time (up to seven days) before redemption proceeds
are sent to your bank. If you redeem by telephone and specifically request this
service, you will not be charged the $10 wire fee applicable to same day wire
redemptions.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $1,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by contacting the Fund at 1-800-6INVENT (1-800-646-8368).
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed
12
<PAGE> 16
income dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m., Eastern time) for the Funds on any Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a shareholder may submit another
request for redemption.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount ($500; $250 for individual retirement accounts and $100
for directors, officers or employees or retirees of the Adviser or its
affiliates). Accordingly, if you purchase shares of any Fund in only the minimum
investment amount, you may be subject to involuntary redemption if you redeem
any shares. Before any Fund exercises its right to redeem such shares, you will
be given notice that the value of the shares in your account is less than the
minimum amount and will be allowed 60 days to make an additional investment in
such Fund in an amount which will increase the value of the account to at least
the minimum amount.
If market conditions are extraordinarily active or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail or other means.
PERFORMANCE
From time to time, each of the Intermediate Government, GNMA Securities and
Equity Growth Funds may advertise yield and total return. These figures are
based on historical earnings and are not intended to indicate future
performance. No representation can be made concerning actual future yields or
returns.
The "yield" of a Fund refers to the income generated by a hypothetical
investment, net of any sales charge imposed in such Fund over a thirty day
period. This income is then "annualized," i.e., the income over thirty days is
assumed to be generated over one year and is shown as a percentage of the
investment.
The "total return" of a Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods, assuming that the entire
investment is redeemed at the end of each period and assuming the reinvestment
of all dividend and capital gain distributions.
For any Fund, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares.
Each Fund may periodically compare its performance to that of: other mutual
funds tracked by mutual funds rating services (such as Lipper Analytical);
financial and business publications and periodicals; broad groups of comparable
mutual funds; unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs; or
other investment alternatives. The Funds may quote Morningstar, Inc., a service
that ranks mutual funds on the basis of risk-adjusted performance. The Funds may
use long-term performance of these capital market indices to demonstrate general
long-term risk versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. The Funds may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical
13
<PAGE> 17
share price fluctuations or total returns to a benchmark while measures of
benchmark correlation indicate how valid a comparative benchmark might be.
Measures of volatility and correlation are calculated using averages of
historical data and cannot be calculated precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the Fund may differ from the federal income tax consequences
described below. Additional information concerning taxes is set forth in the
Statement of Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Corporation's other portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on net investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income (including
net short-term capital gains) and net capital gains to Shareholders. Dividends
from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Dividends paid by a
Fund to corporate Shareholders will qualify for the deduction for dividends
received by corporations to the extent attributable to dividends received by the
Fund from domestic corporations. A portion of such dividends received may be
subject to the alternative minimum tax. Distributions of net capital gains do
not qualify for the dividends received deduction and are taxable to Shareholders
as long-term capital gains, regardless of how long Shareholders have held their
shares and regardless of whether the distributions are received in cash or in
additional shares. The Fund will provide annual reports to Shareholders of the
federal income tax status of all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of the
calendar year to avoid liability for the federal excise tax.
With respect to investments which are sold at original issue discount and thus
do not make periodic cash interest payments, each Fund will be required to
include as part of its current income the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes all of its net investment
income to its Shareholders, a Fund may have to sell portfolio securities to
distribute such imputed income which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Shareholders should consult their tax advisers to determine whether any portion
of the income dividends received from a Fund is considered tax exempt in their
particular state. Each Fund will inform Shareholders annually of the percentage
of income and distributions derived from direct U.S.
Treasury obligations.
Sale, exchange or redemption of Fund Shares is generally a taxable transaction
to the Shareholder; however; an exchange of Class A shares for Class B shares of
the same Fund is not a taxable transaction.
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Pennsylvania Tax-Exempt Money Market Fund and Pennsylvania Municipal
Bond Fund. All consideration received by the
14
<PAGE> 18
Corporation for shares of any Fund and all assets of such Fund belong to that
Fund and would be subject to the liabilities related thereto.
The Corporation pays its expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under federal securities laws, pricing, insurance
expenses, litigation and other extraordinary expenses, brokerage costs, interest
charges, taxes and organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of the State of Maryland. The Directors have approved contracts
under which, as described above, certain companies provide essential management
services to the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings of Shareholders but approval will be
sought for certain changes in the operation of the Corporation and for the
election of Directors under certain circumstances.
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders
of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to Inventor Funds, Inc., P.O. Box 419320,
Kansas City, Missouri 64141-6320 or by calling 1-800-6INVENT (1-800-646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Fund is declared daily and paid monthly for each of the Intermediate
Government and GNMA Securities Fund and is declared and paid monthly for the
Equity Growth Fund. Shareholders of record on the last Business Day of each
month will be entitled to receive the monthly dividend distribution, which is
generally paid on the first Business Day of the following month. If any net
capital gains are realized, they will be distributed by each Fund at least
annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A Shares of the Funds will normally be lower than those
on Class B Shares because of the distribution expenses charged to Class A
Shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Corporation. Coopers &
Lybrand L.L.P. serves as the independent accountants of the Corporation.
CUSTODIAN
National City Bank, 4100 West 150th Street, P.O. Box 5756, Cleveland, Ohio
44135-5756 (the "Custodian"), acts as custodian of the Corporation's assets. The
Custodian holds cash, securities and other assets of the Corporation as required
by the 1940 Act.
15
<PAGE> 19
DESCRIPTION OF PERMITTED INVESTMENTS
AND RISK FACTORS
The following is a description of the permitted investments for the various
Funds and the various risk factors associated therewith:
AMERICAN DEPOSITARY RECEIPTS ("ADRs")- ADRs are typically issued by a U.S.
financial institution that evidence ownership of underlying securities issued by
a foreign issuer. While the Funds expect to invest primarily in sponsored ADRs,
a joint arrangement between the foreign issuer and the depositary, some ADRs may
be unsponsored. Unlike sponsored ADRs the holders of unsponsored ADRs bear all
expenses and the depositary may not be obligated to distribute Shareholder
communications or to pass-through the voting rights on the deposited securities.
There may be less information available about a foreign issuer underlying an
unsponsored ADR than a foreign issuer underlying a sponsored ADR.
BANKERS' ACCEPTANCES-bills of exchange or time drafts drawn on and accepted by a
commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-interest bearing instruments with a specific maturity.
Certificates of deposit are issued by banks and savings and loan institutions in
exchange for the deposit of funds and normally can be traded in the secondary
market prior to maturity. Certificates of deposit have penalties for early
withdrawal.
COMMERCIAL PAPER-the term used to designate unsecured short-term promissory
notes issued by municipalities, corporations and other entities. Maturities on
these issues vary, generally from a few days to nine months.
CONVERTIBLE SECURITIES-are debt securities and preferred stock convertible into
common stock. Convertible Securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value of
the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provisions.
COMMON STOCKS-Investments in common stocks are subject to market risks which may
cause their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these securities
but will affect a Fund's net asset.
DOLLAR ROLLS-Dollar Rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into Dollar Rolls include the risk
that the value of the security may change adversely over the term of the Dollar
Roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held.
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
FIXED INCOME SECURITIES-The market value of fixed income investments will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
FUTURES CONTRACTS AND OPTIONS ON
FUTURE CONTRACTS-Futures contracts provide
16
<PAGE> 20
for the future sale by one party purchase by another party of a specified amount
of a specific security at a specified future time and at a specified price. An
option on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. A Fund may use futures contracts and
related options for bona fide hedging purposes, to offset changes in the value
of securities held or expected to be acquired, to minimize fluctuations in
foreign currencies, or to gain exposure to a particular market or instrument. A
Fund will minimize the risk that it will be unable to close out a futures
contract by only entering into futures contracts which are traded on national
futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on registered securities exchanges. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock Index at the close of the last trading day of the contract and
the price at which the agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
INTEREST RATE SWAP TRANSACTIONS-Interest rate swaps are designed to permit the
purchaser to preserve a return or spread on a particular investment or portion
of its portfolio, and to protect against any increase in the price of securities
a Fund anticipates purchasing at a later date. In a typical interest rate swap,
one party agrees to make regular payments equal to a floating interest rate
times a "notional principal amount," in return for payments equal to a fixed
rate times the same amount for a specified period of time.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on a Fund's
performance. Swap Agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. A Fund will enter into swaps only with counterparties believed to
be creditworthy and any such obligation a Fund may have under such an
arrangement will be covered by setting aside liquid high grade securities in a
segregated account.
MORTGAGE-BACKED SECURITIES-Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible
to predict accurately the average life or realized yield of a particular
issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCs)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
17
<PAGE> 21
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs") that are rated in one of the top two rating
categories. While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
Collateralized Mortgage Obligations ("CMOs"): CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICS, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
REITS: REITs are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by the
value of the property owned or the quality of the mortgages held by the trust.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
prin cipal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
OPTIONS-Under a call option the purchaser of the option has the right to
purchase, and the writer the obligation to sell, the underlying security at the
exercise price during the option period. Options written on individual
securities are written solely as covered call options (options on securities
owned by a Fund) and will not be engaged for speculative purposes. Such options
will be listed on a national securities exchange. In order to close out an
option
18
<PAGE> 22
position, a Fund may enter into a "closing purchase transaction" - the purchase
of an option on the same security with the same exercise price and expiration
date as the option previously written on any particular security. If the Fund is
unable to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. There are risks associated with options investments,
including the following: (1) the success of a hedging strategy may depend on an
ability to predict movements in the prices of individual securities,
fluctuations in markets and movements in interest rates; (2) there may be an
imperfect correlation between the movement in prices of securities held by the
Fund and the price of options; (3) there may not be liquid secondary market for
options; and (4) while the Fund will receive a premium when it writes covered
call options, it may not participate fully in any rise in the market value of
the underlying security.
RECEIPTS-Separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury obligations into a special account at a custodian
bank. The custodian holds the interest and principal payments for the benefit of
the registered owners of the certificates of receipts. The custodian arranges
for the issuance of the certificates or receipts evidencing ownership and
maintains the register. Receipts include "Treasury Receipts" ("TRs"), "Treasury
Investment Growth Receipts" ("TIGRs"), "Liquid Yield Option Notes" ("LYONs"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TIGRs, LYONs and
CATS are interests in private proprietary accounts while TR's are interests in
accounts sponsored by the U.S.
Treasury.
Securities denominated as TR's, TIGR's, LYON's and CATS are sold as zero coupon
securities which means that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash payments of interest
or principal. This discount is accreted over the life of the security, and such
accretion will constitute the income earned on the security for both accounting
and tax purposes. Because of these features, such securities may be subject to
greater interest rate volatility than interest paying Permitted Investments.
REPURCHASE AGREEMENTS-agreements by which a financial institution agrees to sell
a security to a Fund and commits to repurchase the security at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The securities purchased by a Fund will be
held as collateral by the Custodian and will be equal to at least 102% of the
repurchase price. Repurchase agreements are considered to be loans by a Fund.
The Corporation bears a risk of loss in the event the other party defaults on
its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. A Sub-Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors. Repurchase
agreements are considered loans under the Investment Company Act of 1940, as
amended.
RESTRICTED AND ILLIQUID SECURITIES- Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
Securities are securities that may not be sold within 7 days or less for
approximately their carrying value. Restricted securities eligible for resale
pursuant to Rule 144A under the Act and privately placed commercial paper that
have a readily available market are not considered illiquid for the purposes of
this limitation. The Sub-Adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors of the Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The absence
of a secondary market may affect the value of Rule 144A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
SECURITIES LENDING-A Fund may lend the securities in which it is invested, in
order to generate additional income, pursuant to agreements requiring that the
loan be continuously secured by cash, securities of the U.S. Government or its
agencies or any combination of cash and
19
<PAGE> 23
such securities as collateral equal to 100% of the market value at all times of
the securities lent. The Fund will continue to receive interest on the
securities lent while simultaneously earning interest on the investment of cash
collateral in U.S. Government securities. Collateral is marked to market daily
to provide a level of collateral at least equal to the value of the securities
lent. There may be risks of delay in receiving additional collateral or risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially.
SECURITIES LENDING-A Fund may lend the securities in which it is invested, in
order to generate additional income, pursuant to agreements requiring that the
loan be continuously secured by cash, securities of the U.S. Government or its
agencies or any combination of cash and such securities as collateral equal to
100% of the market value at all times of the securities lent. The Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of cash collateral in U.S. Government securities.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value the securities lent. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the securities or even
loss of rights in the collateral should the borrower of the securities fail
financially.
SHORT SALES-Selling securities short involves selling securities the seller does
not own (but has borrowed) in anticipation of a decline in the market price of
such securities. To deliver the securities to the buyer, the seller must arrange
through a broker to borrow the securities and, in so doing, the seller becomes
obligated to replace the securities borrowed at their market price at the time
of replacement. In a short sale, the proceeds the seller receives from the sale
are retained by a broker until the seller replaces the borrowed securities. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
A Fund may only sell securities short "against the box." A short sale is
"against the box" if, at all times during which the short position is open, the
Fund owns at least an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issuer as the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange
transactions, which involve the Fund's agreeing to exchange currency that it
does not own at the time of such agreement for another currency at a future date
and specified price in anticipation of a decline in the value of the currency
sold short relative to the currency that the Fund has contracted to receive in
the exchange. To ensure that any short position of a Fund is not used to achieve
leverage, a Fund establishes with its custodian a segregated account consisting
of cash or liquid, high grade debt securities equal to the fluctuating market
value of the currency as to which any short position is being maintained.
U.S. GOVERNMENT AGENCY OBLIGATIONS- certain federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA) or supported by the issuing
agencies' right to borrow from the Treasury. The issues of other agencies are
supported by the credit of the instrumentality (e.g., Federal National Mortgage
Association).
U.S. TREASURY OBLIGATIONS-bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES-When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement
20
<PAGE> 24
if it deems appropriate. One form of when-issued or delayed delivery security
that the GNMA Fund may purchase is a "to be announced" ("TBA") mortgage-backed
security. A TBA transaction arises when a mortgage-backed security, such as a
GNMA pass-through security, is purchased or sold with the specific pools that
will constitute that GNMA pass-through security to be announced on a future
settlement date.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS-Investments by money market
funds are subject to limitations imposed under regulations adopted by the SEC.
These regulations generally require money market funds to acquire only U.S.
dollar obligations maturing in 397 days or less and to maintain a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
funds may acquire only obligations that present minimal credit risks and that
are "eligible securities" which means they are (I) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term-rating. In determining
whether obligations are eligible securities, the rating of the issuer's
commercial paper, if any, is used for the above tests. In addition, investments
in second tier securities are subject to further constraints that (I) no more
than 5% of a fund's assets may be invested in such securities in the aggregate,
and (ii) any investment in such securities of one issuer is limited to the
greater of 1% of each fund's total assets or $1 million. Each fund may invest up
to 25% of its total assets in first tier securities of a single issuer for three
business days.
21
<PAGE> 25
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SUMMARY........................................................................................2
EXPENSE SUMMARY................................................................................3
FINANCIAL HIGHLIGHTS...........................................................................5
THE CORPORATION................................................................................6
INVESTMENT OBJECTIVES AND POLICIES.............................................................6
GENERAL INVESTMENT POLICIES....................................................................6
PORTFOLIO TURNOVER.............................................................................7
INVESTMENT LIMITATIONS.........................................................................7
FUNDAMENTAL POLICIES...........................................................................7
THE ADVISER....................................................................................7
THE SUB-ADVISERS...............................................................................8
THE ADMINISTRATOR..............................................................................8
THE TRANSFER AGENT.............................................................................9
THE DISTRIBUTOR................................................................................9
HOW TO PURCHASE SHARES.........................................................................9
EXCHANGES.....................................................................................11
REDEMPTION OF SHARES..........................................................................12
PERFORMANCE...................................................................................13
TAXES.........................................................................................14
GENERAL INFORMATION...........................................................................14
DESCRIPTION OF PERMITTED INVESTMENTS
AND RISK FACTORS..............................................................................16
</TABLE>
22
<PAGE> 26
PROSPECTUS INVENTOR FUNDS, INC.
Investment Adviser:
NATIONAL CITY BANK
INVENTOR FUNDS, INC. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL BOND FUND
CLASS A
Class A Shares of the Funds are offered to individuals and institutional
investors, including customers of affiliates and correspondents of National City
Corporation. Class A shares are sold with a front-end sales load that will be
reduced or waived in certain circumstances. National City Bank, the Funds'
investment adviser, is an affiliate of National City Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING NATIONAL CITY BANK, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED.
AS WITH ANY MUTUAL FUND, AN INVESTMENT IN THE PENNSYLVANIA TAX-EXEMPT MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1996 has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658 or by calling 1-800-6INVENT (1-
800-646-8368). The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
August 28, 1996
<PAGE> 27
2
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class A shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund
and Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
What are the Investment Objectives and Policies of each of Fund? The
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND seeks to provide current income exempt
from regular federal income and Pennsylvania personal income taxes, consistent
with stability of principal by investing in high quality debt obligations issued
by or on behalf of the Commonwealth of Pennsylvania and its political
subdivisions and financing authorities ("Pennsylvania Municipal Securities").
The PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income taxes while
preserving capital by investing in investment grade Pennsylvania Municipal
Securities. See "Investment Objectives and Policies" and "Description of
Permitted Investments and Risk Factors." There is no assurance that a Fund will
meet its investment objective.
What are the Risks Involved with an Investment in the Funds ? The PENNSYLVANIA
TAX-EXEMPT MONEY MARKET FUND seeks to maintain a net asset value of $1.00 per
share. There can be no assurance that the Fund will be able to maintain a net
asset value of $1.00 per share on a continuous basis. Shares of the PENNSYLVANIA
MUNICIPAL BOND FUND will fluctuate in value with the value of its underlying
portfolio securities. Values of fixed income securities in which the
Pennsylvania Municipal Bond Fund invests tend to vary inversely with interest
rates and be affected by other market and economic factors as well. Both Funds
are non-diversified portfolios which invest in Pennsylvania Municipal
Securities, which entail certain risks involved in investing in municipal
securities.
Who is the Adviser? National City Bank serves as the Adviser of the Corporation.
See "Expense Summary" and "The Adviser."
Who is the Sub-Adviser? Weiss, Peck & Greer, L.L.C. acts as Sub-Adviser to the
Funds. See "The Sub-Adviser."
Who is the Administrator? SEI Fund Resources serves as the Administrator and
shareholder servicing agent of the Corporation. See "Expense Summary" and "The
Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and the Federal
Reserve wire systems are open for business ("Business Days"). A purchase order
for shares will be executed at a per share price equal to the net asset value
per share next determined after the receipt of the purchase order plus any
applicable sales charges. The minimum initial investment is $500 ($100 for
officers, directors, employees, or retirees of National City Corporation, and
its affiliates). Net asset value is determined as of the close of business of
the New York Stock Exchange (currently 4:00 p.m., Eastern Time) for the
Pennsylvania Municipal Bond Fund on any Business Day and 2:00 p.m., Eastern Time
for the Pennsylvania Tax-Exempt Money Market Fund, on any Business Day.
Redemption orders must be placed prior to 4:00 p.m., Eastern Time, for the
Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund,
<PAGE> 28
3
on any Business Day for the order to be effective that day. See "Purchase of
Shares" and "Redemption of Shares."
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
<PAGE> 29
4
EXPENSE SUMMARY
CLASS A
<TABLE>
<CAPTION>
PENNSYLVANIA
TAX-EXEMPT PENNSYLVANIA
MONEY MARKET MUNICIPAL BOND
FUND FUND
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) None 4.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None
Maximum Contingent Deferred Sales Charge None None
Exchange Fee None None
Wire Redemption Fee $10 $10
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees
(after fee waivers) (1) .29% .58%
Rule 12b-1 Fees (after fee waivers) (2) .00% .00%
Other Expenses .26% .27%
Total Operating Expenses
(after fee waivers)(3) .55% .85%
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser
reserves the right to terminate the waiver at any time in its sole
discretion. Absent such fee waivers, advisory fees would be .45% for
the Pennsylvania Tax-Exempt Money Market Fund, and .70% for the
Pennsylvania Municipal Bond Fund.
(2) The Class A Plan provides that Class A shares will bear the costs of
distribution expenses and related service fees at the annual rate of
.25% of each Fund's average daily net assets. The Distributor has
agreed to voluntarily waive any fees payable pursuant to the Plan. The
Distributor reserves the right to terminate this waiver at anytime in
its sole discretion.
(3) Absent the Adviser's voluntary fee waivers and the Distributor's waiver
of 12b-1 fees, total operating expenses would be .96% for the
Pennsylvania Tax-Exempt Money Market Fund, and 1.24% for the
Pennsylvania Municipal Bond Fund.
<PAGE> 30
5
EXAMPLE
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
<S> <C> <C> <C> <C>
An investor in a Fund would pay the
following expenses on a $1,000
investment assuming (1) 5% annual
return and (2) redemption at the
end of each time period:
Pennsylvania Tax-Exempt Money Market Fund $ 6 $18 $31 $ 69
Pennsylvania Municipal Bond Fund $48 $66 $85 $141
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class A shares. The Funds also offer
Class B shares, which are subject to the same expenses as Class A shares except
that Class B shares bear no distribution costs or sales loads. Class B shares
are currently not being offered for any Fund.
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares."
Long-term investors may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers, Inc. ("NASD").
<PAGE> 31
6
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Corporation's independent accountants, as indicated in their reports dated June
14, 1996 and July 26, 1996, on the Corporation's financial statements as of
April 30, 1996 and May 31, 1996, respectively, included in the Corporation's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Corporation's financial statements and
notes thereto. Additional information is set forth in the 1996 Annual Report to
Shareholders and is available without charge by calling 1-800-6INVENT.
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Distributions
-------------
Net Net Net Ratio-of
Net Realized Asset Assets Ratio of Net
Asset Net and from Value End of Expenses Invest-
Value Invest- Unrealized from Realiz- End Total Period to ment
Begin- ment Gains Net ed of Return (000) Average income to
ning of Income on Investment Capital Period Net Average
Period Securities income Gains Assets Net
Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pennsylvania Tax-Exempt Money Market
Fund
Class A
May 31, 1996* $1.00 $ -- $-- $ -- $-- $1.00 0.28%+ $68,472 0.55% 3.24%
April 30, 1996 1.00 0.03 -- (0.03) -- 1.00 3.36% 70,422 0.55 3.29
April 30, 1995 (2) 1.00 0.02 -- (0.02) -- 1.00 2.32+ 56,668 0.55 3.21
</TABLE>
Pennsylvania Municipal Bond Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A(3)
May 31, 1996* $10.12 $0.04 $(0.04) $(0.04) $-- $10.08 (0.03)%+ $38,733 0.85% 4.32%
April 30, 1995 10.04 0.43 $ 0.08 (0.43) -- 10.12 5.06% 38,809 0.85 4.16
April 30, 1995 (1) 10.00 0.29 0.04 (0.29) -- 10.01 3.38+ 34,638 0.85 4.05
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Expenses Investment
to Income
Average to Average Port-
Net Net folio
Assets Assets Turn-
(Excluding (Excluding over
Waivers) Waivers) Rate
<S> <C> <C> <C>
Pennsylvania Tax-Exempt Money Market
Fund
Class A
May 31, 1996* 0.97% 2.82% --%
April 30, 1996 0.96 2.88 --
April 30, 1995 (2) 1.04 2.72 --
Pennsylvania Municipal Bond Fund
Class A(3)
May 31, 1996* 1.31% 3.86% --%
April 30, 1995 1.24% 3.77% 22
April 30, 1995 (1) 1.36 3.54 4
</TABLE>
+ Returns are for the period indicated and have not been annualized.
* The period May 1, 1996 through May 31, 1996. All ratios for the period
have been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have
been annual
(3) Total Return does not reflect the sales charge.
<PAGE> 32
7
THE CORPORATION
INVENTOR FUNDS, INC. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class A
shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund and
Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
Additional information pertaining to the Corporation may be obtained in writing
from SEI Financial Services Company, 680 East Swedesford Road, Wayne, PA
19087-1658 or by calling 1-800-6INVENT (1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objectives and policies. There is no assurance
that the investment objective of a Fund will be met.
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
The investment objective of the Fund is to provide current income exempt from
regular federal income tax and Pennsylvania personal income taxes, consistent
with stability of principal. It is a fundamental policy of the Fund to use its
best efforts to maintain a constant net asset value of $1.00 per share.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund.
The Fund invests primarily in Pennsylvania Municipal Securities (as defined
below) with remaining maturities of 397 days or less. As a matter of fundamental
policy, the Fund invests its assets so that at least 80% of its annual interest
income is not only exempt from regular federal income tax and Pennsylvania
personal income taxes but is not considered a preference item for purposes of
the alternative minimum tax. Pennsylvania Municipal Securities are debt
obligations issued by or on behalf of the Commonwealth of Pennsylvania and its
political subdivisions and financing authorities, and obligations of the United
States, including territories and possessions of the United States, the income
from which is, in the opinion of qualified legal counsel, exempt from federal
regular income tax and Pennsylvania state income tax imposed upon non-corporate
taxpayers.
Pennsylvania Municipal Securities in which the Fund invests must either be rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of comparable
quality as determined by the Sub-Adviser to securities having such rating.
Certain of the Fund's acceptable investments may have been credit enhanced by a
guaranty, letter of credit or insurance. The Fund typically evaluates the credit
quality and ratings of credit enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. The bankruptcy, receivership or default of
the credit enhancer will adversely affect the quality and marketability of the
underlying security.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis and reserves the right to engage in
transactions involving standby commitments and repurchase agreements. The Fund
may invest up to 10% of its assets in illiquid securities.
For temporary defensive purposes when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities are not readily available, the Fund can invest
up to 100% of its assets in securities which pay interest exempt only from
federal income taxes
and in taxable securities.
PENNSYLVANIA MUNICIPAL BOND FUND
The Pennsylvania Municipal Bond Fund seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income tax while
preserving capital. The Pennsylvania Municipal Bond Fund invests primarily in
investment grade Pennsylvania Municipal Securities that are bonds and municipal
lease obligations. For these purposes, bonds include bonds, notes and
debentures. The Fund has a fundamental policy to
<PAGE> 33
8
be fully invested under normal conditions in Pennsylvania Municipal Securities
that produce interest exempt from both regular federal and Pennsylvania personal
income tax. The Fund may invest up to 10% of its assets in Pennsylvania
Municipal Securities the interest on which is a preference item for purposes of
the alternative minimum tax.
Pennsylvania Municipal Securities in which the Funds invests either have the
rating set forth below or, if not rated, are of comparable quality as determined
by the Sub-Adviser : (i) bonds rated BBB or better by S&P or Baa or better by
Moody's; (ii) notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by Moody's;
and (iii) tax-exempt commercial paper rated at least A-1 by S&P or Baa by
Moody's. Pennsylvania Municipal Securities owned by the Fund which become less
than the prescribed investment quality shall be sold at a time when, in the
Adviser's judgment, it does not substantially impact the market value of the
Fund.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when issued" basis, and reserves the right to engage in
transactions involving standby commitments and repurchase agreements. The Fund
may invest up to 15% of its assets in illiquid securities.
The Fund will maintain a dollar-weighted average portfolio maturity of seven
years or less. Each security purchased will have a maximum maturity of fifteen
years.
For temporary defensive purposes when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities of sufficient quality are not readily
available, the Fund can invest up to 100% of its assets in securities which pay
interest exempt only from federal income taxes and in taxable securities.
RISK FACTORS
Since each Fund invests primarily in Pennsylvania Municipal Securities, the
value of its shares may be especially affected by factors pertaining to the
Pennsylvania economy and other factors specifically affecting the ability of
issuers of Pennsylvania Municipal Securities to meet their obligations. As a
result, the value of each Fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county and local governments to meet the
obligations will depend primarily on the availability of tax and other revenues
to those governments and on their fiscal conditions generally. The amounts of
tax and other revenues available to governmental issuers of Pennsylvania
Municipal Securities may be affected from time to time by economic, political
and demographic conditions within the state. In addition, constitutional or
statutory restrictions may limit government's power to raise revenues or
increase taxes. Further, payments of principal and interest on limited
obligation securities will depend on the economic condition of the facility or
specific revenue source from whose revenues the payments will be made, which in
turn could be affected by economic, political and demographic conditions in the
state. Moreover, each Fund is classified as "non-diversified" because it may
invest in obligations of a relatively limited number of issuers.
For additional information regarding permitted investments see "Description of
Permitted Investment and Risk Factors" in this Prospectus and Statement of
Additional Information.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the United States Government or its agencies and instrumentalities and
securities issued by state and local governments.
<PAGE> 34
9
The foregoing percentage limitations will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding voting
securities.
THE ADVISER
On May 2, 1996, Integra Financial Corporation, the parent corporation of Integra
Trust Company National Association ("Integra"), the prior investment adviser to
the Inventor Funds, merged with National City Corporation ("National City").
Consummation of the merger resulted in the automatic termination of the
investment advisory agreement under which Integra provided services to the
Funds. In anticipation of a merger and to provide continuity in investment
advisory services to the Funds, the Board of Directors voted on February 12,
1996 to recommend that the shareholders of the Funds approve an investment
advisory agreement with National City Bank (the "Adviser) a wholly-owned
subsidiary of National City. Shareholders of the Funds approved the new advisory
agreement with the Adviser on May 2, 1996. On August 1, 1996, shareholders
approved a reorganization of the Funds wherein each fund would transfer its
assets and liabilities to a fund with similar objectives and policies within the
Armada Funds which are advised by affiliates of National City and the Adviser.
The Adviser sets investment policies, and continuously reviews, supervises and
administers each Fund's investment program. The Adviser discharges its
responsibilities subject to the supervision of, and policies set by, the
Directors of the Corporation.
National City Bank, 1900 East Ninth Street, Cleveland, Ohio 44114, is a
wholly-owned subsidiary of National City Corporation.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .45% and .70% of the Pennsylvania Tax-Exempt Money Market Fund
and the Pennsylvania Municipal Bond Funds, respectively. The Adviser may from
time to time waive all or a portion of its fee in order to limit the operating
expenses of a Fund. Any such waiver is voluntary and may be terminated at any
time in the Adviser's sole discretion. For the fiscal year ended April 30, 1996,
Integra, the Funds' prior adviser, received an advisory fee of .29% and .58%
from the Pennsylvania Tax-Exempt Money Market and the Pennsylvania Municipal
Bond Funds, respectively, based on each Fund's average net assets.
The Glass-Steagall Act restricts the securities activities of banks such as the
National City Bank, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might have to make other investment advisory arrangements.
THE SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WPG" or the "Sub-Adviser") acts as the
Pennsylvania Tax-Exempt Money Market and the Pennsylvania Municipal Bond Funds'
investment sub-adviser under a sub-advisory agreement (the "Sub-Advisory
Agreement") with the Adviser. Under the Sub-Advisory Agreement, WPG makes the
investment decisions for the assets of the Funds, and continuously reviews,
supervises and administers the Funds' investment program. WPG is independent of
the Adviser and discharges its responsibilities subject to the supervision of,
and policies set by, the Adviser and the Directors of the Corporation.
For its services, WPG is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .05% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund and .18% of the average daily net
assets of the Pennsylvania Municipal Bond Fund. The Sub-Adviser may from time
to time waive all or a portion of its fee from the Adviser. For the fiscal year
ended April 30, 1996, WPG received a fee from Integra of .05% for the
Pennsylvania Tax-Exempt Money Market Fund and, .18% for the Pennsylvania
Municipal Bond Fund based on each Fund's average daily net assets.
<PAGE> 35
10
WPG is a limited liability company founded in 1970, and engages in investment
management, venture capital management and management buyouts. WPG has been
active since its founding in managing portfolios of tax exempt securities. At
September 30, 1995, total assets under management were approximately $12.5
billion. The principal business address of WPG is One New York Plaza,
New York, NY 10004.
Janet A. Fiorenza has served as the portfolio manager for the Pennsylvania
Tax-Exempt Money Market Fund since its inception. Ms. Fiorenza, Principal and
Senior Portfolio Manager, has been a member of WPC or its predecesor since 1980.
S. Blake Miller, CFA, has served as portfolio manager to the Pennsylvania
Municipal Bond Fund. Mr. Miller is an Associate Principal of the Tax-Exempt
Fixed Income Management Department for the Sub-Adviser and has been a portfolio
manager with the Sub-Adviser or its predecessor since 1986.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") provides the Corporation with
administrative services, including all fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also serves as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, calculated daily and paid monthly, at a
maximum annual rate of .18% of the average daily net assets of the Pennsylvania
Municipal Bond Fund, and .15% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund. The Administrator may from time to
time waive all or a portion of its fee in order to limit the operating expenses
of the Pennsylvania Municipal Bond Fund.
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or "Transfer Agent"), 210 W. 10th Street, Kansas City,
Missouri 64105, serves as transfer agent and dividend disbursing agent for the
Corporation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. Class A shares of the Corporation have a Rule 12b-1
Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to .25%
of their average daily net assets. Financial institutions that are the record
owner of shares for the account of their customers may impose separate fees for
account services to their customers.
The Funds may execute brokerage or other agency transactions through the
Distributor for which the affiliate or the Distributor receives compensation.
HOW TO PURCHASE SHARES
Class A shares of the Funds may be purchased by mail, by wire or through an
automatic investment plan ("AIP"). Shares may also be purchased through
broker-dealers, including Integra Brokerage Company and Personal Investment
Services, Inc., that have established a dealer agreement with the Distributor.
HOW TO PURCHASE BY MAIL
You may purchase Class A shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Inventor Funds (Fund Name)," P.O. Box
419320, Kansas City, Missouri 64141-6320. You may purchase more shares at any
time by mailing payment to DST at the above address. Orders placed by mail will
be executed on receipt of your payment. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees
incurred. You may obtain Account Application forms by calling the Fund at 1-
800-6INVENT (1-800-646-8368).
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call the Fund at
1-800-
<PAGE> 36
11
6INVENT (1-800-646-8368) before wiring any funds. An order to purchase shares by
Federal funds wire will be deemed to have been received by the Fund on the
Business Day (defined below) of the wire; provided that the Federal funds wire
is received by DST prior to 4:00 p.m., Eastern Time for the Pennsylvania
Tax-Exempt Money Market Fund. If DST does not receive notice by 4:00 p.m.,
Easter Time for the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time
for the Pennsylvania Tax-Exempt Money Market Fund, on the Business Day of the
Wire, the order will be executed on the next Business Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC
INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking account
by completing an AIP Application Form. The minimum pre-authorized investment
amount is $25 per month. An AIP Application Form may be obtained by contacting
the Fund at 1-800-6INVENT (1-800-646-8368). The AIP is available only for
additional investments for an existing account.
GENERAL INFORMATION
You may purchase Class A shares of the Funds on any day on which both the New
York Stock Exchange and Federal Reserve wire systems are open for business
("Business Days"). The minimum initial investment in any Fund is $500 ($100 for
officers, directors, employees, or retirees of Integra Trust Company, or its
affiliates). The Distributor may waive the minimum investment at its discretion.
Subsequent purchases of shares must be at least $25.
A purchase order for shares will be effective as of the Business Day received by
the Transfer Agent if the Transfer Agent receives the order and payment before
4:00 p.m., Eastern time for the Pennsylvania Municipal Bond Fund and 2:00 p.m.,
Eastern time for the Pennsylvania Tax-Exempt Money Market Fund. The purchase
price (the "Offering Price") of Class A shares is the net asset value next
determined after the purchase order is effective plus any applicable sales
charge.
The net asset value per share is determined as of the close of business of the
New York Stock Exchange (currently 4:00 p.m., Eastern time) for the Pennsylvania
Municipal Bond Fund and 2:00 p.m., Eastern Time for the Pennsylvania Tax-Exempt
Money Market Fund on each Business Day by dividing the total market value of
that Fund's investments and other assets, less any liabilities, by the total
outstanding shares of the Fund. Purchases will be made in full and fractional
shares calculated to three decimal places. Pursuant to guidelines adopted and
monitored by the Directors of the Corporation, each Fund may use a pricing
service to provide market quotations or fair market valuations. A pricing
service may derive such valuations through the use of a matrix system to value
fixed income securities which considers factors such as securities prices, yield
features, ratings, and developments related to a specific security. Although the
methodology and procedures for determining net asset value are identical for
both classes of a Fund, the net asset value per share of such classes may differ
because of the distribution expenses charged to Class A shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor determines that it is not in the best interest of the
Corporation and/or its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record by
the financial institution. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. Customers should contact their financial institution for
information as to that institution's procedures for
<PAGE> 37
12
transmitting purchase, exchange or redemption orders to the Corporation.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
SALES LOAD
The following table shows the regular sales charge on Class A shares of the
Pennsylvania Municipal Bond Fund to a "single purchaser" (defined below)
together with the sales charge that is reallowed to certain financial
intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES SALES
CHARGE CHARGE REALLOWANCE
AS A AS A AS
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OFFERING OF NET OF OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
<S> <C> <C> <C>
Less than
$100,000 4.00% 4.17% 3.60%
$100,000 but
less than
$250,000 3.00% 3.09% 2.70%
$250,000 but
less than
$500,000 2.00% 2.04% 1.80%
$500,000 but
less than
$1,000,000 1.00% 1.01% .90%
$1,000,000
and above none none none
</TABLE>
The sales charge shown in the table is the maximum sales charge that applies to
sales of Class A shares of the Funds. Under certain circumstances, the
Distributor may use its own funds to compensate financial institutions and
intermediaries in amounts additional to the commissions shown above. In
addition, the Distributor may, from time to time in its sole discretion,
institute one or more promotional incentive programs, which will be paid by the
Distributor from the sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide promotional
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to all dealers selling shares of
the Funds. Ordinarily, such promotional incentives will be offered uniformly to
all dealers and will be predicated upon the amount of shares of the Funds sold
by the dealer. Under certain circumstances, reallowances of up to the entire
sales charge may be paid to certain financial institutions, who might then be
deemed to be "underwriters" under the Securities Act of 1933.
Reduced Sales Charge: Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current market value of previously purchased Class A shares of the Funds sold
subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
Reduced Sales Charge: Letter of Intent
<PAGE> 38
13
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive credit for such prior purchases
and later purchases benefitting from the Letter, you must notify the Transfer
Agent at the time the Letter is submitted that there are prior purchases that
may apply, and notify the Transfer Agent again at the time of later purchases
that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors, employees, or
retirees of the Corporation, National City Corporation and its subsidiaries and
affiliates; (iv) sold to certain accounts for which the Adviser or subsidiaries,
affiliates and correspondents of National City Bank, serve in a fiduciary,
agency or custodial capacity; (v) issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers, to which the Corporation is a
party; (vi) purchased with the proceeds of distributions from employee benefit
plans for which the Adviser or its affiliates act in a custodial or fiduciary
capacity; (vii) purchased within thirty days of a redemption of Class A shares
of such Funds (only up to the amount of such redemption) or (viii) sold to
tax-exempt organizations enumerated in Section 501(c) of the Code, or qualified
employee benefit plans created under Sections 401, 403(b)(7) or 457 of the Code
(but not IRAs or SEPs). Reduced sales charges are available on shares of the
Funds sold to certain eligible customers. Please see the Statement of Additional
Information for further information on reduced sales charges. You must notify
the Transfer Agent at the time of your purchase if you are eligible for a waiver
of the sales load.
An investor relying upon any of the categories of waivers of the sales charge
must qualify such waiver in advance of the purchase with the Distributor or the
financial institution or intermediary through which share are purchased by the
investor.
EXCHANGES
You may exchange Class A shares of any Fund for Class A shares of any other Fund
at net asset value, plus any applicable sales charge. Shareholders that meet the
investment criteria established for Class B shares may exchange Class A shares
of any Fund for Class B shares of that Fund once Class B shares are made
available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m. Eastern time for
the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern time for the
Pennsylvania Tax-Exempt Money Market Fund, on any Business Day, the exchange
will occur on that day. The exchange privilege may be exercised only in those
states where the class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $10 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
systematic withdrawal plan. Investors who own shares held of record by a
financial institution should contact that institution for information on how to
redeem shares.
<PAGE> 39
14
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent or wired to an address different from that of record, DST may require
that the signature on the written redemption request be guaranteed. You should
be able to obtain a signature guarantee from a bank, broker, dealer, credit
union, securities exchange or association, clearing agency or savings
association. Notaries public cannot guarantee signatures. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption is for not more than $5,000 worth of shares, (2) the
redemption check is payable to the shareholder(s) of record, and (3) the
redemption check is mailed to the shareholder(s) at his or her address of
record.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $10 charge for
wiring redemption proceeds.
You may request a wire redemption by calling the Fund at 1-800-6INVENT
(1-800-646-8368), who will deduct a wire charge of $10 from the amount of the
wire redemption. Shares cannot be redeemed by Federal Reserve wire on Federal
holidays
restricting wire transfers.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and Transfer Agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or the Transfer Agent may be liable for losses due
to unauthorized or fraudulent instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations.
ELECTRONIC FUNDS TRANSFER SERVICE
Electronic Funds Transfer Service lets you authorize electronic transfers of
money to buy or sell shares of a Fund or move money between your bank account
and your Fund account with one phone call. Allow two to three business days
after the call for the transfer to take place. For money recently invested,
allow normal check-clearing time (up to seven days) before redemption proceeds
are sent to your bank. If you redeem by telephone and specifically request this
service, you will not be charged the $10 wire fee applicable to same day wire
redemptions.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $1,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by contacting the Fund at 1-800-6INVENT (1-800-646-8368).
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases.
<PAGE> 40
15
CHECKWRITING SERVICE
You may redeem Shares by writing checks on your Money Market Fund account for
$500 or more per check. Once you have signed and returned the signature card,
you will receive a supply of checks. The check may be made payable to any
person, and your account will continue to earn dividends until the checks
clears. Because of the difficulty of determining in advance the exact value of a
Fund account, you may not use a check to close your account. These checks are
free, but your account will be charged a fee of $10 on stopping payment of a
check upon your request or if the check cannot be honored because of
insufficient funds or other valid reasons.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m. Eastern time), for the Pennsylvania Municipal Bond Fund and
2:00 p.m., Eastern time for the Pennsylvania Tax-Exempt Money Market Fund on any
Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a shareholder may submit another
request for redemption.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount (normally $500; $100 for directors, officers, employees
or retirees of the Adviser or its affiliates). Accordingly, if you purchase
shares of any Fund in only the minimum investment amount, you may be subject to
involuntary redemption if you redeem any shares. Before any Fund exercises its
right to redeem such shares, you will be given notice that the value of the
shares in your account is less than the minimum amount and will be allowed 60
days to make an additional investment in such Fund in an amount which will
increase the value of the account to at least the minimum amount.
If market conditions are extraordinarily active or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail or other means.
PERFORMANCE
From time to time, the Pennsylvania Municipal Bond Fund may advertise yield and
total return. The Pennsylvania Tax-Exempt Money Market Fund may advertise its
current yield and effective yield. Both Funds may advertise a tax-equivalent
yield. These figures are based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns.
The "current yield" of the Pennsylvania Tax-Exempt Money Market Fund refers to
the income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also called "effective
compound yield") is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the current yield because of the compounding effect
of this assumed reinvestment.
The "yield" of the Pennsylvania Municipal Bond Fund refers to the income
generated by a hypothetical investment, net of any sales charge imposed in the
Fund over a thirty day period. This income is then "annualized," i.e., the
income over thirty days is assumed to be generated over one year and is shown as
a percentage of the investment.
<PAGE> 41
16
"Tax-equivalent yield" is calculated by determining the rate of return that
would have to be achieved on a fully taxable investment to produce the after-tax
equivalent of a Fund's yield assuming certain tax brackets for the shareholder.
The "total return" of the Pennsylvania Municipal Bond Fund refers to the average
compounded rate of return on a hypothetical investment for designated time
periods, assuming that the entire investment is redeemed at the end of each
period and assuming the reinvestment of all dividend and capital gain
distributions.
For the Funds, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares.
Each Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual funds rating services (such as Lipper
Analytical); financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. The Funds may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Funds may use long-term performance of these
capital market indices to demonstrate general long-term risk versus reward
scenarios and may include the value of a hypothetical investment in any of the
capital markets. The Funds may also quote financial and business publications
and periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the Fund may differ from the federal income tax consequences
described below. Accordingly , Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Corporation's other portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on net investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including net
short-term capital gain) to its respective Shareholders. If, at the close of
each quarter of its taxable year, at least 50% of the value of a Fund's assets
consist of obligations the interest on which is excludable from gross income,
the Fund may pay "exempt-interest dividends" to its Shareholders. Those
dividends constitute the portion of the aggregate dividends as designated by the
Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for Federal income tax purposes, but may have certain
collateral Federal income tax consequences, including alternative minimum tax.
See the Statement of Additional Information.
<PAGE> 42
17
Dividends from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Distributions of net
capital gains are taxable to Shareholders as long-term capital gains, regardless
of how long Shareholders have held their shares and regardless of whether the
distributions are received in cash or in additional shares. Neither of these
distributions qualify for the dividends-received deduction. Each Fund provide
annual reports to Shareholders of the federal income tax status of all
distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions to avoid liability for the
federal excise tax.
Sale, exchange or redemption of Fund Shares is a taxable transaction to the
Shareholder; however, an exchange of Class A shares for Class B shares share in
the same Fund is not a taxable transaction.
ADDITIONAL CONSIDERATIONS
The Funds may not be appropriate investments for persons (including corporations
and other business entities) who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development private
activity bonds. Such persons should consult their tax advisers before purchasing
shares. A "substantial user" is defined generally to include "certain persons"
who regularly use in their trade or business a part of a facility financed from
the proceeds of such bonds.
Shares of the Funds are not taxable for purposes of the Philadelphia School
District Investment Net Income Tax (Philadelphia School District Tax) or the
personal property tax imposed by Pennsylvania Counties, to the extent that the
Funds' investments consist of obligations which are themselves exempt from
taxation in Pennsylvania. See the Statement of Additional Information. While the
Funds intend to invest primarily in obligations which produce interest exempt
from Federal and Pennsylvania taxes, if a Fund invests in obligations that are
not exempt for Pennsylvania purposes, a portion of the Fund's distributions will
be subject to Pennsylvania personal income tax.
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Intermediate Government Securities Fund, GNMA Securities Fund, and
Equity Growth Fund. All consideration received by the Corporation for shares of
any Fund and all assets of such Fund belong to that Fund and would be subject to
the liabilities related thereto.
The Corporation pays its expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under federal securities laws, pricing, insurance
expenses, litigation and other extraordinary expenses, brokerage costs, interest
charges, taxes and organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of Maryland. The Directors have approved contracts under which,
as described above, certain companies provide essential management services
to the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings
<PAGE> 43
18
of Shareholders but approval will be sought for certain changes in the operation
of the Corporation and for the election of Directors under certain
circumstances.
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders
of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to the Inventor Funds, Inc. P.O.Box 419320,
Kansas City, Missouri 64141-6320 or by calling 1-800-6INVENT (1-800-
646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Fund is distributed in the form of monthly dividends. Shareholders of
record on the last Business Day of each month will be entitled to receive the
monthly dividend distribution, which is generally paid on the first Business Day
of the following month. If any net capital gains are realized, they will be
distributed by each Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A shares of the Fund will normally be lower than those on
Class B shares because of the distribution expenses charged to Class A shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to
the Corporation. Coopers & Lybrand L.L.P. serves
as the independent accountants of the Corporation.
CUSTODIAN
National City Bank, 4100 West 150th Street, P.O. Box 5756, Cleveland, Ohio
44135-5756 (the "Custodian"), acts as custodian of the Corporation's assets. The
Custodian holds cash, securities and other assets of the Corporation as required
by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments for the Funds and
the various risks associated therewith:
BANKERS' ACCEPTANCES-bills of exchange or time drafts drawn on and accepted by a
commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-negotiable interest bearing instruments with a specific
maturity. Certificates of deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit have penalties
for early withdrawal.
COMMERCIAL PAPER-unsecured short-term promissory notes issued by municipalities,
corporations and other entities. Maturities on these
<PAGE> 44
19
issues vary, generally from a few days to nine
months.
DEMAND FEATURES-The Funds may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
FIXED INCOME SECURITIES-The market value of fixed income investments will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
MUNICIPAL LEASES-Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If funds
are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and significant
loss to the Fund. Under guidelines established by the Board of Directors, the
credit quality of municipal leases will be determined on an ongoing basis,
including an assessment of the likelihood that a lease will be canceled.
MUNICIPAL SECURITIES-Municipal Securities are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
PARTICIPATION INTERESTS-Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations
<PAGE> 45
20
and insurance companies. These interests may take the form of participations,
beneficial interests in a trust, partnership interests or any other form of
indirect ownership that allows the Fund to treat the income from the investment
as exempt from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that would
not be available through direct ownership of the underlying Municipal
Securities.
REPURCHASE AGREEMENTS-agreements by which a financial institution agrees to sell
a security to a Fund and commits to repurchase the security at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The securities purchased by a Fund will be
held as collateral by the Custodian and will be equal to at least 102% of the
repurchase price. Repurchase agreements are considered to be loans by a Fund.
The Corporation bears a risk of loss in the event the other party defaults on
its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors or dealers
recognized by the Federal Reserve. Repurchase agreements are considered loans
under the Investment Company Act of 1940, as amended.
RESTRICTED AND ILLIQUID SECURITIES -- Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
securities are securities that may not be sold within 7 days or less for
approximately their carrying value. Restricted securities eligible for resale
pursuant to Rule 144 A under the Act and privately placed commercial paper that
have readily available market are not considered illiquid for the purposes of
this limitation. The Sub-Adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors of the Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The absence
of a secondary market may affect the value of Rule 144 A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
STANDBY COMMITMENTS-Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Pennsylvania Municipal
Securities accompanied by these "standby" commitments could be greater than the
cost of Municipal Securities without such commitments. Standby commitments are
not marketable or otherwise assignable and have value only to the Fund. The
default or bankruptcy of a securities dealer giving such a commitment would not
affect the quality of the Pennsylvania Municipal Securities purchased. However,
without a standby commitment, these securities could be more difficult to sell.
The Fund enters into standby commitments only with those dealers whose credit
the investment adviser believes to be of high quality.
VARIABLE AND FLOATING RATE SECURITIES- Certain of the obligations purchased by a
Fund may carry variable or floating rates of interest, may involve a conditional
or unconditional demand feature and may include variable amount master demand
notes. The interest rates on these securities may be reset daily, weekly,
quarterly or some other reset period, and may have a floor or ceiling on
interest rate charges. There is a risk that the current interest rate on such
obligations may
<PAGE> 46
21
not accurately reflect existing market interest rates. A demand instrument with
a demand notice period exceeding seven days may be considered illiquid if there
is no secondary market for such securities.
<PAGE> 47
22
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS-Investments money market funds
are subject to limitations imposed under regulations adopted by the SEC. These
regulations generally require money market funds
to acquire only U.S. dollar obligations maturing in 397 days or less and to
maintain a dollar-weighted average portfolio maturity of 90 days or less. In
addition, the funds may acquire only obligations that present minimal credit
risks and that are "eligible securities" which means they are (i) rated, at the
time of investment, by at least two nationally recognized security rating
organizations (one if it is the only organization rating such obligation) in the
highest short-term rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest short-term rating category or, if
unrated, determined to be of comparable quality ("second tier security"). A
security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term-rating.
<PAGE> 48
23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY......................................................................................................... 2
EXPENSE SUMMARY................................................................................................. 4
THE CORPORATION................................................................................................. 7
INVESTMENT OBJECTIVES AND POLICIES.............................................................................. 7
RISK FACTORS.................................................................................................... 8
INVESTMENT LIMITATIONS.......................................................................................... 8
FUNDAMENTAL POLICIES............................................................................................ 9
THE ADVISER..................................................................................................... 9
THE SUB-ADVISER................................................................................................. 9
THE ADMINISTRATOR.............................................................................................. 10
THE TRANSFER AGENT............................................................................................. 10
THE DISTRIBUTOR................................................................................................ 10
HOW TO PURCHASE SHARES......................................................................................... 10
EXCHANGES....................................................................................................... 13
REDEMPTION OF SHARES............................................................................................ 13
PERFORMANCE..................................................................................................... 15
TAXES........................................................................................................... 16
GENERAL INFORMATION............................................................................................. 17
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS........................................................... 18
</TABLE>
<PAGE> 49
PROSPECTUS INVENTOR FUNDS, INC.
Investment Adviser:
NATIONAL CITY BANK
INVENTOR FUNDS, INC. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
INTERMEDIATE GOVERNMENT SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
CLASS B
Class B Shares of the Funds are offered without distribution fees (I) to
institutional investors (including National City Bank, its affiliates and
correspondent banks) for the investment of their own funds, and (ii) to any
investor (including National City Bank, its affiliates and correspondent banks)
for the investment of funds held by such investor in a fiduciary, agency,
custodial or other representative capacity ("Shareholders"). National City Bank,
the Funds' investment adviser, is a wholly-owned subsidiary of National City
Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING NATIONAL CITY BANK, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1996, has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658, or by calling 1-800-6INVENT (1-
800-646-8368). The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
August 28, 1996
<PAGE> 50
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class B shares of the Corporation's Intermediate Government Securities Fund,
GNMA Securities Fund and Equity Growth Fund (each a "Fund" and, together, the
"Funds").
What are the Investment Objectives and Policies of the Fund? The INTERMEDIATE
GOVERNMENT SECURITIES FUND seeks preservation of capital and a high degree of
liquidity while providing current income by investing primarily in obligations
issued or guaranteed as to principal and interest by the U.S. Government and its
agencies and instrumentalities. The GNMA SECURITIES FUND seeks the highest level
of current income consistent with preservation of capital and a high degree of
liquidity by investing primarily in mortgage pass-through securities guaranteed
by the Government National Mortgage Corporation. The EQUITY GROWTH FUND seeks
capital appreciation by investing primarily in common stocks and securities
convertible into common stocks. There is no assurance that any Fund will meet
its investment objective. See "Investment Objectives and Policies" and
"Description of Permitted Investments and Risk Factors."
What are the Risks involved with an Investment in the Funds? Shares of the
INTERMEDIATE GOVERNMENT SECURITIES, GNMA SECURITIES AND EQUITY GROWTH FUNDS will
fluctuate in value with the value of their underlying portfolio securities.
Values of fixed income securities and, correspondingly, share prices of Funds
invested in such securities tend to vary inversely with interest rates and may
be affected by other market and economic factors as well. Common stocks in which
the Equity Growth Fund may invest may be more volatile and may fluctuate in
value more than other types of investments.
Who is the Adviser? National City Bank serves as the Adviser of the Funds. See
"Expense Summary" and "The Adviser."
Who are the Sub-Advisers? Wellington Management Company serves as Sub-Adviser to
the Intermediate Government Securities Fund and GNMA Securities Fund. STI
Capital Management, N.A. serves as Sub-Adviser to the Equity Growth Fund. See
"The Sub-Advisers."
Who is the Administrator? SEI Fund Resources serves as the Administrator and
shareholder servicing agent of the Corporation. See "Expense Summary" and "The
Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and Federal Reserve
wire system are open ("Business Days"). A purchase order for shares will be
executed at a per share price equal to the net asset value per share next
determined after the receipt of the purchase order. The minimum initial
investment is $100,000 for Class B shares. Net asset value for the Intermediate
Government Securities, GNMA Securities and Equity Growth Funds is determined as
of the close of the close of business of the New York Stock Exchange (currently
4:00 p.m., Eastern Time) on any Business Day. Redemption orders for the
Intermediate Government Securities, GNMA Securities and Equity Growth Funds must
be placed prior to 4:00 p.m., Eastern Time on any Business Day for the order to
be effective that day. See "Purchase of Shares" and "Redemption of Shares."
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
2
<PAGE> 51
EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS B SHARES
INTERMEDIATE
GOVERNMENT GNMA EQUITY
SECURITIES SECURITIES GROWTH
FUND FUND FUND
- ---------------------------------------------------------------------------- ---------------------- ------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after fee waivers)1 .55% .51% .62%
Other Expenses .30% .34% .33%
Total Operating Expenses (after fee waivers)2 .85% .85% .95%
- ---------------------------------------------------------------------------- ---------------------- ------------------
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser
reserves the right to terminate the waiver at any time in its sole
discretion. Absent such fee waivers, advisory fees would be .70% for
the Intermediate Government Securities Fund, .70% for the GNMA
Securities Fund, and .85% for the Equity Growth Fund.
(2) Absent the Adviser's voluntary fee waivers, total operating expenses
would be 1.00% for the Intermediate Government Securities Fund,
1.04% for the GNMA Securities Fund, and 1.18% for the Equity Growth
Fund.
<TABLE>
<CAPTION>
Example 1 Yr. 3Yrs. 5Yrs. 10Yrs.
An investor in a Fund would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<S> <C> <C> <C> <C>
Intermediate Government Securities Fund $9 $27 $47 $105
GNMA Securities Fund $9 $27 $47 $105
Equity Growth Fund $10 $30 $53 $117
================================================================== ================= ============== =================
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class B shares. The Funds also offer
Class A shares, which are subject to the same expenses as Class B shares except
that Class A shares have different distribution costs and bear sales loads.
Additional information may be found under "The Distributor."
3
<PAGE> 52
THE CORPORATION
INVENTOR FUNDS, INC. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class B
shares of the Corporation's Intermediate Government Securities Fund
("Intermediate Government Fund"), GNMA Securities Fund and Equity Growth Fund
(each a "Fund" and, together, the "Funds"). Additional information pertaining to
the Corporation may be obtained in writing from SEI Financial Services Company,
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, or by calling
1-800-6INVENT (1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objectives and policies. There is no assurance
that the investment objective of a Fund will be met.
INTERMEDIATE GOVERNMENT SECURITIES FUND
The investment objective of the Fund is to preserve capital and maintain a high
degree of liquidity while providing current income.
The Fund invests in U.S. Treasury obligations, futures on U.S. Treasury
obligations and obligations issued or guaranteed as to principal and interest by
agencies and instrumentalities of the U.S. Government. The Fund's
dollar-weighted average maturity will ordinarily be approximately five years;
however, the Sub-Adviser may vary this average maturity substantially in
anticipation of a change in the interest rate environment. Nevertheless, under
normal circumstances, the Fund will maintain a dollar-weighted average maturity
of between three and ten years.
GNMA SECURITIES FUND
The investment objective of the Fund is to provide the highest level of current
income consistent with preservation of capital and a high degree of liquidity.
The Fund invests primarily (at least 65% of its total assets under normal
conditions) in mortgage pass-through securities guaranteed by the Government
National Mortgage Association ("GNMA"). Any remaining assets may consist of: (i)
obligations of the U.S. Treasury; (ii) obligations issued or guaranteed as to
principal and interest by agencies and instrumentalities of the U.S. Government;
(iii) mortgage-backed securities issued by other government agencies and
privately issued mortgage-backed securities rated at least A by an NRSRO; (iv)
repurchase agreements involving any of such obligations; (v) shares of money
market investment companies investing exclusively in such obligations; and (vi)
futures on U.S. Treasury obligations. The Fund intends to maintain a position in
Money Market Instruments sufficient to provide a high degree of liquidity. The
Fund may also engage in dollar rolls, short sales and interest rate swaps.
Under normal market conditions, the estimated average life of the Fund's
holdings of mortgage pass-through and mortgage-backed securities will range
between 4 and 10 years.
EQUITY GROWTH FUND
The investment objective of the Equity Growth Fund is capital appreciation.
The Fund invests primarily in a diversified portfolio of common stocks and
convertible securities which are deemed to be undervalued in the marketplace at
the time of purchase. Dividend income is an incidental consideration compared to
growth of capital. In selecting securities for the Fund, factors that are likely
to affect long-term capital appreciation will be evaluated. Such factors will
include the issuer's background, industry position, historical returns on equity
and the experience and qualifications of the management team. Holdings will be
rotated between various market sectors based on economic analysis of the overall
business cycle. The Fund invests primarily (normally at least 65% of its total
assets under normal market conditions) in common stocks and convertible
securities. The Fund may also invest in American Depositary Receipts ("ADRs")
the underlying foreign issuers of which are located in developed countries and
may buy and sell options and futures and options on futures.
GENERAL INVESTMENT POLICIES
In order to meet liquidity needs and for temporary defensive purposes, each of
the Intermediate Government Securities, GNMA Securities and Equity Growth Funds
may hold cash reserves, and may invest up to 100% of its assets in Money
Market Instruments.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate
4
<PAGE> 53
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well.
Each Fund may purchase securities on a when-issued basis.
The Intermediate Government, GNMA Securities and Equity Growth Funds may invest
up to 15% of their assets in illiquid securities.
Each Fund reserves the right to engage in securities lending, although no Fund
has the present intent of doing so. Each such Fund may also borrow money in
amounts up to 33 1/3% of its net assets.
For additional information regarding permitted investments see, "Description of
Permitted Investments and Risk Factors," in this Prospectus and the Statement of
Additional Information.
PORTFOLIO TURNOVER RATE
The Portfolio turnover rates for the fiscal year ended April 30, 1996, for the
GNMA Securities Fund and the Equity Fund were 149% and 168%, respectively. Such
turnover rates will likely result in higher brokerage commissions and higher
levels of realized capital gains than if the turnover rates were lower.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities, and repurchase
agreements involving such securities) if, as a result, more than 5% of the total
assets of the Fund would be invested in the securities of such issuer. With
respect to the Intermediate Government, GNMA Securities and Equity Growth Funds,
this restriction applies to 75% of each Fund's assets.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities, and repurchase
agreements involving such securities.
The foregoing percentage limitations will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding voting
securities.
THE ADVISER
On May 2, 1996, Integra Financial Corporation, the parent corporation of Integra
Trust Company National Association ("Integra"), the prior investment adviser to
the Inventor Funds, merged with National City Corporation ("National City").
Consummation of the merger resulted in the automatic termination of the
investment advisory agreement under which Integra provided services to the
Funds. In anticipation of a merger and to provide continuity in investment
advisory services to the Funds, the Board of Directors voted on February 12,
1996 to recommend that the shareholders of the Funds approve an investment
advisory agreement with National City Bank (the "Adviser") a wholly-owned
subsidiary of National City. Shareholders of the Funds approved the new
investment advisory agreement with the Adviser on May 2, 1996. On August 1,
1996, the shareholders approved a reorganization of the Funds wherein each fund
would transfer its assets and liabilities to a fund with similar objectives and
policies within the Armada Funds which are advised by affiliates of National
City and the Adviser. The Adviser sets investment policies, and continuously
reviews, supervises and administers each Fund's investment program. The Adviser
discharges its responsibilities subject to the supervision of, and policies set
by, the Directors of the Corporation.
National City Bank, 1900 East Ninth Street, Cleveland, Ohio 44114, is a wholly
owned subsidiary of National City Corporation.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of.70% for the Intermediate Government and GNMA Securities Funds,
and .85% for the Equity Growth Fund based on each Fund's average net assets. The
Adviser may from time to time waive all or a portion of its fee in order to
limit the operating
5
<PAGE> 54
expenses of a Fund. Any such waiver is voluntary and may be terminated at any
time in the Adviser's sole discretion. For the fiscal year ended April 30, 1996,
Integra, the Funds' prior adviser, received an advisory fee of .55%, .51%, and
.62% for the Intermediate Government, GNMA Securities, and Equity Growth Funds,
respectively, based on each Fund's average net assets.
The Glass-Steagall Act restricts the securities activities of banks such as
National City Bank, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might have to make other investment advisory arrangements.
SUB-ADVISERS
The Intermediate Government and GNMA Securities Funds are managed on a
day-to-day basis by Wellington Management Company ("WMC"). STI Capital
Management, N.A. ("STI", and together with WMC, the "Sub-Advisers") manages the
Equity Growth Fund on a day-to-day basis.
The Sub-Advisers make investment decisions for these Funds and continuously
review, supervise and administer the Funds' investment program, subject to the
supervision of, and policies set by, the Adviser and the Directors.
WMC is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. As of May 31, 1996, WMC had
discretionary management authority with respect to approximately $118 billion of
assets. WMC and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960. Wellington Management Company, 75 State Street, Boston,
Massachusetts 02109, is a Massachusetts general partnership, of which the
following persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John B. Neff.
As Sub-Adviser, WMC is entitled to a fee, calculated daily and paid monthly, at
an annual rate of.18% on the first $50 million for each of the Intermediate
Government and GNMA Securities Funds, .15% on the next $50 million, .10% on the
next $400 million and .075% on the excess of $500 million of the average daily
net assets of each Fund. WMC may from time to time waive all or a portion of its
fee from the Adviser. For the fiscal year ended April 30, 1996, WMC received a
fee from Integra of .147% for the Intermediate Government and GNMA Securities
Funds, respectively, based on each Fund's average net assets.
INTERMEDIATE GOVERNMENT SECURITIES FUND AND
GNMA SECURITIES FUND
Thomas L. Pappas, Vice President of Wellington Management Company, has served as
portfolio manager to the Intermediate Government and GNMA Securities Funds since
their inception. Mr. Pappas has been an investment professional with Wellington
Management Company since 1987.
EQUITY GROWTH FUND
As of June 30, 1996, STI had discretionary management authority with respect to
approximately $11 billion of assets. The principal business address of STI is
200 S. Orange Avenue, Orlando, Florida 32802. STI is entitled to a fee,
calculated daily and paid monthly, at an annual rate of .30% of the average
daily net assets of the Equity Growth Fund. STI may from time to time waive all
or a portion of its fee from the Adviser. For the fiscal year ended April 30,
1996, STI received from Integra an advisory fee of .30% for the Equity Growth
Fund based on the Fund's average daily net assets.
Anthony Gray, Chief Investment Officer of STI, has served as portfolio manager
to the Equity Growth Fund since its inception. Mr. Gray has been with STI since
1979.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") provides the Corporation with
administrative services, including all fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also serves as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at a maximum annual rate of 0.18% of the average daily net assets of
the Intermediate Government, GNMA Securities and Equity Growth Funds.
6
<PAGE> 55
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or the "Transfer Agent"), 210 W. 10th Street, Kansas
City, Missouri 64105, serves as the transfer agent and dividend disbursing agent
and for the Corporation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. No compensation is paid to the Distributor for
distribution services for the Class B shares of any Fund. Financial institutions
that are the record owner of shares for the account of their customers may
impose separate fees for account services to their customers.
The Funds may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business
Days"). The minimum initial investment in Class B shares of any Fund is
$100,000.
A purchase order for shares will be effective as of the Business Day received by
the Distributor if the Distributor receives the order and payment before 4:00
p.m., Eastern Time for the Funds. The purchase price (the "Offering Price") of
Class B shares is the net asset value next determined after the purchase order
is effective.
The net asset value of the Funds is determined as of the close of business of
the New York Stock Exchange (currently 4:00 p.m., Eastern Time) on each Business
Day by dividing the total market value of that Fund's investments and other
assets, less any liabilities, by the total outstanding shares of the Fund.
Purchases will be made in full and fractional shares calculated to three decimal
places. Pursuant to guidelines adopted and monitored by the Directors of the
Corporation, each Fund may use a pricing service to provide market quotations or
fair market valuations. A pricing service may derive such valuations through the
use of a matrix system to value fixed income securities which considers factors
such as securities prices, yield features, ratings, and developments related to
a specific security. Although the methodology and procedures for determining net
asset value are identical for both classes of a Fund, the net asset value per
share of such classes may differ because of distribution expenses charged to
Class A shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor determines that it is not in the best interest of the
Corporation and/or its shareholders to accept such order.
EXCHANGES
You may exchange Class B shares of any Fund for Class B shares of any other Fund
at net asset value. Shareholders that meet the investment criteria established
for Class B shares may exchange Class A shares of any Fund for Class B shares of
that Fund once Class B shares are made available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m., Eastern Time for
the Funds on any Business Day, the exchange will occur on that day. The exchange
privilege may be exercised only in those states where the class or shares of the
"new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
Shares may be redeemed without charge on any Business Day. Investors who own
shares held of record by a financial institution should contact that institution
for information on how to redeem shares.
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m., Eastern Time) for the Funds on any Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received
7
<PAGE> 56
good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a shareholder may submit another
request.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount. Accordingly, if you purchase shares of any Fund in only
the minimum investment amount, you may be subject to involuntary redemption if
you redeem any shares. Before any Fund exercises its right to redeem such
shares, you will be given notice that the value of the shares in your account is
less than the minimum amount and will be allowed 60 days to make an additional
investment in such Fund in an amount which will increase the value of the
account to at least the minimum amount.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and the Transfer Agent
will each employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or the Transfer Agent may be liable for losses due
to unauthorized or fraudulent instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may consider placing your order by mail or other means.
PERFORMANCE
From time to time, each of the Intermediate Government, GNMA Securities and
Equity Growth Funds may advertise yield and total return. These figures are
based on historical earnings and are not intended to indicate future
performance. No representation can be made concerning actual future yields or
returns.
The "yield" of a Fund refers to the income generated by a hypothetical
investment. This income is then "annualized," i.e., the income over thirty days
is assumed to be generated over one year and is shown as a percentage of the
investment.
The "total return" of a Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods, assuming that the entire
investment is redeemed at the end of each period and assuming the reinvestment
of all dividend and capital gain distributions.
For any Fund, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares.
Each Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual funds rating services (such as Lipper
Analytical); financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. The Funds may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The Funds may use long-term performance of these
capital market indices to demonstrate general long-term risk versus reward
scenarios and could include the value of a hypothetical investment in any of the
capital markets. The Funds may also quote financial and business publications
and periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the
8
<PAGE> 57
Fund may differ from the federal income tax consequences described below.
Accordingly, Shareholders are urged to consult their tax advisers regarding
specific questions as to federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Corporation's other portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on net investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income (including
net short-term capital gains) and net capital gains to Shareholders. Dividends
from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Dividends paid by a
Fund to corporate Shareholders will qualify for the deduction for dividends
received by corporations to the extent attributable to dividends received by the
Fund from domestic corporations. A portion of such dividends received may be
subject to the alternative minimum tax. Distributions of net capital gains do
not qualify for the dividends-received deduction and are taxable to Shareholders
as long-term capital gains, regardless of how long Shareholders have held their
shares and regardless of whether the distributions are received in cash or in
additional shares. Each Fund will provide annual reports to Shareholders of the
federal income tax status of all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of the
calendar year to avoid liability for federal excise tax.
With respect to investments which are sold at original issue discount and thus
do not make periodic cash interest payments, each Fund will be required to
include as part of its current income the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes all of its net investment
income to its Shareholders, a Fund may have to sell portfolio securities to
distribute such imputed income which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Shareholders should consult their tax advisers to determine whether any portion
of the income dividends received from a Fund is considered tax exempt in their
particular state. Each Fund will inform Shareholders annually of the percentage
of income and distributions derived from direct U.S.
Treasury obligations.
A sale, exchange or redemption of Fund Shares is generally a taxable transaction
to the Shareholder; however, an exchange of Class A shares for Class B shares in
the same Fund is not a taxable transaction.
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Pennsylvania Tax-Exempt Money Market Fund and Pennsylvania Municipal
Bond Fund. All consideration received by the Corporation for shares of any Fund
and all assets of such Fund belong to that Fund and would be subject to the
liabilities related thereto.
The Corporation pays its expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under federal and state securities laws, pricing,
insurance expenses, litigation and other
9
<PAGE> 58
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of the State of Maryland. The Directors have approved contracts
under which, as described above, certain companies provide essential management
services to the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings of Shareholders but approval will be
sought for certain changes in the operation of the Corporation and for the
election of Directors under certain circumstances.
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders
of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to The Inventor Funds, Inc., P.O. Box
419320, Kansas City, Missouri 64141-6320, or by calling 1-800-
6INVENT (1-800-646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Fund is declared daily and paid monthly for each of the Intermediate
Government Fund and GNMA Securities Fund and is declared and paid monthly for
the Equity Growth Fund. Shareholders of record on the last Business Day of each
month will be entitled to receive the monthly dividend distribution, which is
generally paid on the first Business Day of the following month. If any net
capital gains are realized, they will be distributed by each Fund at least
annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A Shares of the Fund will normally be lower than those on
Class B Shares because of distribution expenses charged to Class A Shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP, serves as counsel to the Corporation. Coopers &
Lybrand L.L.P. serves as the independent accountants of the Corporation.
CUSTODIAN
National City Bank, 4100 West 150th Street, P.O. Box 5756, Cleveland, Ohio
44135-5756 (the "Custodian"), acts as custodian of the Corporation's assets. The
Custodian holds cash, securities and other assets of the Corporation as required
by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS
AND RISK FACTORS
The following is a description of the permitted investments for the various
Funds and the various risk factors associated therewith:
AMERICAN DEPOSITARY RECEIPTS ("ADRs")- ADRs are typically issued by a U.S.
financial institution that evidence ownership of underlying securities issued by
a foreign issuer. While the Funds expect to invest primarily in sponsored ADRs,
a joint arrangement between the foreign
10
<PAGE> 59
issuer and the depositary, some ADRs may be unsponsored. Unlike sponsored ADRs
the holders of unsponsored ADRs bear all expenses and the depositary may not be
obligated to distribute Shareholder communications or to pass-through the voting
rights on the deposited securities. There may be less information available
about a foreign issuer underlying an unsponsored ADR than a foreign issuer
underlying a sponsored ADR.
BANKERS' ACCEPTANCES-bills of exchange or time drafts drawn on and accepted by a
commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-interest bearing instruments with a specific maturity.
Certificates of deposit are issued by banks and savings and loan institutions in
exchange for the deposit of funds and normally can be traded in the secondary
market prior to maturity. Certificates of deposit have penalties for early
withdrawal.
COMMERCIAL PAPER-the term used to designate unsecured short-term promissory
notes issued by municipalities, corporations and other entities. Maturities on
these issues vary, generally from a few days to nine months.
CONVERTIBLE SECURITIES-are debt securities and preferred stock convertible into
common stock. Convertible securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market value of
the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provisions.
COMMON STOCKS-Investments in common stocks are subject to market risks which may
cause their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these securities
but will affect a Fund's net asset value.
DOLLAR ROLLS-Dollar Rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering in Dollar Rolls include the risk
that the value of the security may change adversely over the term of the Dollar
Roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held.
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
FIXED INCOME SECURITIES-The market value of fixed income investments will change
in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. Changes by recognized agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal will also affect the value of these
investments. Changes in the value of portfolio securities will not affect cash
income derived from these securities but will affect a Fund's net asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS-Futures contracts provide for
the future sale by one party and purchase by another party of a specified amount
of a specific security at a specified future time and at a specified price. An
option on a futures contract gives the purchaser the right, in exchange for a
premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. A Fund may use futures contracts and
related options for bona fide hedging purposes, to offset changes in the value
of securities held or expected to be acquired, to minimize fluctuations in
foreign currencies, or to gain exposure to a particular market or instrument. A
Fund will
11
<PAGE> 60
minimize the risk that it will be unable to close out a futures contract by only
entering into futures contracts which are traded on national futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on registered securities exchanges. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
INTEREST RATE SWAP TRANSACTIONS-Interest rate swaps are designed to permit the
purchaser to preserve a return or spread on a particular investment or portion
of its portfolio, and to protect against any increase in the price of securities
a Fund anticipates purchasing at a later date. In a typical interest rate swap,
one party agrees to make regular payments equal to a floating interest rate
times a "notional principal amount," in return for payments equal to a fixed
rate times the same amount for a specified period of time.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on a Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. A Fund will enter into swaps only with counterparties believed to
be creditworthy and any such obligation a Fund may have under such an
arrangement will be covered by setting aside liquid high grade securities in a
segregated account.
MORTGAGE-BACKED SECURITIES-Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie securities
purchased at a premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital gains. Because of
these unpredictable prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of the underlying mortgage
loan; however, FHLMC now issues mortgage-backed securities (FHLMC Gold PCS)
which also guarantee timely payment of monthly principal reductions. Government
and private guarantees do not extend to the securities' value, which is likely
to vary inversely with fluctuations in interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
12
<PAGE> 61
Collateralized Mortgage Obligations ("CMOs"): CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICS are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
REITs: REITs are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by the
value of the property owned or the quality of the mortgages held by the trust.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
OPTIONS-Under a call option the purchaser of the option has the right to
purchase, and the writer the obligation to sell, the underlying security at the
exercise price during the option period. Options written on individual
securities are written solely as covered call options (options on securities
owned by a Fund) and will not be engaged for speculative purposes. Such options
will be listed on a national securities exchange. In order to close out an
option position, a Fund may enter into a "closing purchase transaction" - the
purchase of an option on the same security with the same exercise price and
expiration date as the option previously written on any particular security. If
the Fund is unable to effect a closing purchase transaction, it will not be able
to sell the underlying security until the option expires or the Fund delivers
the underlying security upon exercise. There are risks associated with options
investments, including the following: (1) the success of a hedging strategy may
depend on an ability to predict movements in the prices of individual
securities, fluctuations in markets and
13
<PAGE> 62
movements in interest rates; (2) there may be an imperfect correlation between
the movement in prices of securities held by the Fund and the price of options;
(3) there may not be liquid secondary market for options; and (4) while the Fund
will receive a premium when it writes covered call options, it may not
participate fully in any rise in the market value of the underlying security.
RECEIPTS-Separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury obligations into a special account at a custodian
bank. The custodian holds the interest and principal payments for the benefit of
the registered owners of the certificates of receipts. The custodian arranges
for the issuance of the certificates or receipts evidencing ownership and
maintains the register. Receipts include "Treasury Receipts" ("TR's"), "Treasury
Investment Growth Receipts" ("TIGR's"), "Liquid Yield Option Notes" ("LYON's"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TIGR's, LYON's
and CATS are interests in private proprietary accounts while TR's are interests
in accounts sponsored by the U.S.
Treasury.
Securities denominated as TR's, TIGR's, LYON's and CATS are sold as zero coupon
securities which means that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash payments of interest
or principal. This discount is accredited over the life of the security, and
such accretion will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest paying Permitted
Investments.
REPURCHASE AGREEMENTS-Agreements by which a financial institution agrees to sell
a security to a Fund and commits to repurchase the security at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The securities purchased by a Fund will be
held as collateral by the Custodian and will be equal to at least 102% of the
repurchase price. Repurchase agreements are considered to be loans by a Fund.
The Corporation bears a risk of loss in the event the other party defaults on
its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. A Sub-Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors. Repurchase
agreements are considered loans under the Investment Company Act of 1940, as
amended.
RESTRICTED AND ILLIQUID SECURITIES- Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
Securities are securities that may not be sold within 7 days or less for
approximately their carrying value. Restricted securities eligible for resale
pursuant to Rule 144A under the Act and privately placed commercial paper that
have a readily available market are not considered illiquid for the purposes of
this limitation. The Sub-Adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors of the Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The absence
of a secondary market may affect the value of Rule 144A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
SECURITIES LENDING-A Fund may lend the securities in which it is invested, in
order to generate additional income, pursuant to agreements requiring that the
loan be continuously secured by cash, securities of the U.S. Government or its
agencies or any combination of cash and such securities as collateral equal to
100% of the market value at all times of the securities lent. The Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of cash collateral in U.S. Government securities.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value of the securities lent. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially.
14
<PAGE> 63
SHORT SALES-Selling securities short involves selling securities the seller does
not own (but has borrowed) in anticipation of a decline in the market price of
such securities. To deliver the securities to the buyer, the seller must arrange
through a broker to borrow the securities and, in so doing, the seller becomes
obligated to replace the securities borrowed at their market price at the time
of replacement. In a short sale, the proceeds the seller receives from the sale
are retained by a broker until the seller replaces the borrowed securities. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
A Fund may only sell securities short "against the box." A short sale is
"against the box" if, at all times during which the short position is open, the
Fund owns at least an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issuer as the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange
transactions, which involve the Fund's agreeing to exchange currency that it
does not own at that time for another currency at a future date and specified
price in anticipation of a decline in the value of the currency sold short
relative to the currency that the Fund has contracted to receive in the
exchange. To ensure that any short position of a Fund is not used to achieve
leverage, a Fund establishes with its custodian a segregated account consisting
of cash or liquid, high grade debt securities equal to the fluctuating market
value of the currency as to which any short position is being maintained.
U.S. GOVERNMENT AGENCY OBLIGATIONS- Certain federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA Securities) or supported by the
issuing agencies' right to borrow from the Treasury. The issues of other
agencies are supported by the credit of the instrumentality (e.g., Federal
National Mortgage Association).
U.S. TREASURY OBLIGATIONS-Bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES-When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
One form of when-issued or delayed delivery security that the GNMA Fund may
purchase is a "to be announced" ("TBA") mortgage-backed security. A TBA
transaction arises when a mortgage-backed security, such as a GNMA pass-through
security, is purchased or sold with the specific pools that will constitute that
GNMA pass-through security to be announced on a future settlement date.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS-Investments by money market
funds are subject to limitations imposed under regulations adopted by the SEC.
These regulations generally require money market funds to acquire only U.S.
dollar obligations maturing in 397 days or less and to maintain a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
funds may acquire only obligations that present minimal credit risks and that
are "eligible securities" which means they are (I) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A
15
<PAGE> 64
security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term-rating.
In determining whether obligations are eligible securities, the rating of the
issuer's commercial paper, if any, is used for the above tests. In addition,
investments in second tier securities are subject to further constraints that
(I) no more than 5% of a fund's assets may be invested in such securities in the
aggregate, and (ii) any investment in such securities of one issuer is limited
to the greater of 1% of each fund's total assets or $1 million. Each fund may
invest up to 25% of its total assets in first tier securities of a single issuer
for three business days.
16
<PAGE> 65
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SUMMARY ............................................................ 2
EXPENSE SUMMARY......................................................... 4
THE CORPORATION......................................................... 4
INVESTMENT OBJECTIVES AND POLICIES...................................... 4
GENERAL INVESTMENT POLICIES............................................. 4
INVESTMENT LIMITATIONS................................................. 5
FUNDAMENTAL POLICIES................................................... 5
THE ADVISER ............................................................ 5
SUB-ADVISERS............................................................ 6
THE ADMINISTRATOR....................................................... 6
THE TRANSFER AGENT...................................................... 7
THE DISTRIBUTOR......................................................... 7
HOW TO PURCHASE SHARES.................................................. 7
EXCHANGES ............................................................ 7
REDEMPTION OF SHARES.................................................... 7
PERFORMANCE ............................................................ 8
TAXES ............................................................ 8
GENERAL INFORMATION..................................................... 9
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS...................10
</TABLE>
17
<PAGE> 66
PROSPECTUS INVENTOR FUNDS, INC.
Investment Adviser:
NATIONAL CITY BANK
INVENTOR FUNDS, INC. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL BOND FUND
CLASS B
The Corporation's Class B Shares are offered without distribution fees (i) to
institutional investors (including National City Bank, its affiliates and
correspondent banks) for the investment of their own funds, and (ii) to any
investor (including National City Bank, its affiliates and correspondent banks)
for the investment of funds held by such investor in a fiduciary, agency,
custodial or other representative capacity ("Shareholders"). National City Bank,
the Funds' investment adviser, is a wholly-owned subsidiary of National City
Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING NATIONAL CITY BANK, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
AS WITH ANY MUTUAL FUND, AN INVESTMENT IN THE PENNSYLVANIA TAX-EXEMPT MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1996, has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658, or by calling 1-800-6INVENT (1-
800-646-8368). The Statement of Additional Information is incorporated into this
Prospectus by reference.
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.
August 28, 1996
<PAGE> 67
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class B shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund
and Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
What are the Investment Objectives and Policies of each Fund? The PENNSYLVANIA
TAX-EXEMPT MONEY MARKET FUND seeks to provide current income exempt from regular
federal income and Pennsylvania personal income taxes, consistent with stability
of principal by investing primarily in high quality debt obligations issued by
or on behalf of the Commonwealth of Pennsylvania and its political subdivisions
and financing authorities ("Pennsylvania Municipal Securities"). The
PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income taxes while
preserving capital by investing primarily in investment grade Pennsylvania
Municipal Securities. See "Investment Objectives and Policies" and "Description
of Permitted Investments and Risk Factors." There is no assurance that a Fund
will meet its investment objective.
What are the Risk Involved with an Investment in the Funds? The PENNSYLVANIA
TAX-EXEMPT MONEY MARKET FUND seeks to maintain a net asset value of $1.00 per
share. There can be no assurance that the Fund will be able to maintain a net
asset value of $1.00 per share on a continuous basis. Shares of the PENNSYLVANIA
MUNICIPAL BOND FUND will fluctuate in value with the value of its underlying
portfolio securities. Values of fixed income securities in which the
Pennsylvania Municipal Bond Fund invests tend to vary inversely with interest
rates and be affected by other market and economic factors as well. Both Funds
are non-diversified portfolios that invest in Pennsylvania Municipal Securities,
which entail certain risks involved in investing in municipal securities.
Who is the Adviser? National City Bank, serves as the Adviser of the
Corporation. See "Expense Summary" and "The Adviser."
Who is the Sub-Adviser? Weiss, Peck & Greer, L.L.C. serves as Sub-Adviser to the
Funds. See "The Sub-Adviser."
Who is the Administrator? SEI Fund Resources serves as the Administrator and
shareholder servicing agent of the Corporation. See "Expense Summary" and "The
Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and Federal Reserve
wire systems are open for business ("Business Days"). A purchase order for
shares will be executed at a per share price equal to the net asset value per
share next determined after the receipt of the purchase order. The minimum
initial investment is $100,000 for Class B Shares. Net asset value is determined
as of the close of business of the New York Stock Exchange (currently 4:00 p.m.,
Eastern Time) for the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern
Time for the Pennsylvania Tax-Exempt Money Market Fund, on any Business Day.
Redemption orders must be placed prior to 4:00 p.m., Eastern Time for the
Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund, on any Business Day for the order to
be effective that day. See "Purchase of Shares" and "Redemption of Shares."
2
<PAGE> 68
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
3
<PAGE> 69
<TABLE>
<CAPTION>
EXPENSE SUMMARY CLASS B SHARES
PENNSYLVANIA Pennsylvania
TAX-EXEMPT Municipal
MONEY MARKET Bond
FUND Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees (after fee waivers)(1) 0.29% 0.58%
Other Expenses 0.26% 0.27%
Total Operating Expenses (after fee waivers)(2) 0.55% 0.85%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser
reserves the right to terminate the waiver at any time in its sole
discretion. Absent such fee waivers, advisory fees would be 0.45%
for the Pennsylvania Tax-Exempt Money Market Fund, and 0.70% for the
Pennsylvania Municipal Bond Fund.
(2) Absent the Adviser's voluntary fee waivers described above, total
operating expenses would be 0.71% for the Pennsylvania Tax-Exempt
Money Market Fund, and .99% for the Pennsylvania Municipal Bond
Fund.
<TABLE>
<CAPTION>
EXAMPLE 1 Yrs. 3Yrs. 5Yrs. 10 Yrs.
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in a Fund would pay the following
expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
Pennsylvania Tax-Exempt Money Market Fund $6 $18 $31 $69
Pennsylvania Municipal Bond Fund $9 $27 $47 $105
- -----------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class B shares. The Funds also offer
Class A shares, which are subject to the same expenses as Class B shares except
that Class A shares have distribution costs and bear sales loads.
Additional information may be found under "The Distributor."
4
<PAGE> 70
THE CORPORATION
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class B
shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund and
Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
Additional information pertaining to the Corporation may be obtained in writing
from SEI Financial Services Company, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, or by calling 1-800-6INVENT (1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objectives and policies. There is no assurance
that the investment objective of a Fund will be met.
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
The investment objective of the Fund is to provide current income exempt from
regular federal income tax and Pennsylvania personal income taxes, consistent
with stability of principal. It is a fundamental policy of the Fund to use its
best efforts to maintain a constant net asset value of $1.00 per share.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund.
The Fund invests primarily in Pennsylvania Municipal Securities (as defined
below) with remaining maturities of 397 days or less. As a matter of fundamental
policy, the Fund invests its assets so that at least 80% of its annual interest
income is not only exempt from regular federal income tax and Pennsylvania
personal income taxes, but is not considered a preference item for purposes of
the alternative minimum tax. Pennsylvania Municipal Securities are debt
obligations issued by or on behalf of the Commonwealth of Pennsylvania and its
political subdivisions and financing authorities, and obligations of the United
States, including territories and possessions of the United States, the income
from which is, in the opinion of qualified legal counsel, exempt from federal
regular income tax and Pennsylvania state income tax imposed upon non-corporate
taxpayers.
Pennsylvania Municipal Securities in which the Fund invests must either be rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of comparable
quality as determined by the Sub-Adviser to securities having such rating.
Certain of the Fund's acceptable investments may have been credit enhanced by a
guaranty, letter of credit or insurance. The Fund typically evaluates the credit
quality and ratings of credit enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. The bankruptcy, receivership or default of
the credit enhancer will adversely affect the quality and marketability of the
underlying security.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis and reserves the right to engage in
transactions involving standby commitments and repurchase agreements. The Fund
may invest up to 10% of its assets in illiquid securities.
For temporary defensive purposes or when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities of sufficient quality are not readily
available, the Fund can invest up to 100% of its assets in securities which pay
interest exempt only from federal income taxes and in taxable securities.
PENNSYLVANIA MUNICIPAL BOND FUND
The Pennsylvania Municipal Bond Fund seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income tax while
preserving capital.
The Pennsylvania Municipal Bond Fund invests primarily in investment grade
Pennsylvania Municipal Securities that are bonds and municipal lease
obligations. For these purposes, bonds include bonds, notes and debentures. The
Fund has a fundamental policy to be fully invested under normal conditions in
Pennsylvania Municipal Securities that produce interest exempt from both
5
<PAGE> 71
regular federal and Pennsylvania personal income tax. The Fund may invest up to
10% of its assets in Pennsylvania Municipal Securities the interest on which is
a preference item for purposes of the alternative minimum tax.
Pennsylvania Municipal Securities in which the Fund invests either have the
rating set forth below or, if not rated, are of comparable quality as determined
by the Sub-Adviser: (i) bonds rated BBB or better by S&P or Baa or better by
Moody's; (ii) notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by Moody's;
and (iii) tax-exempt commercial paper rated at least A-1 by S&P or Baa by
Moody's. Pennsylvania Municipal Securities owned by the Fund which become less
than the prescribed investment quality shall be sold at a time when, in the
Adviser's judgment, it does not substantially impact the market value of the
Fund.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis, and reserves the right to engage in
transactions involving standby commitments and repurchase agreements. The Fund
may invest up to 15% of its assets in illiquid securities.
The Fund will maintain a dollar-weighted average portfolio maturity of seven
years or less. Each security purchased will have a maximum maturity of fifteen
years.
For temporary defensive purposes or when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities of sufficient quality are not readily
available, the Fund can invest up to 100% of its assets in securities which pay
interest exempt only from federal income taxes and in taxable securities.
RISK FACTORS
Since each Fund invests primarily in Pennsylvania Municipal Securities, the
value of its shares may be especially affected by factors pertaining to the
Pennsylvania economy and other factors specifically affecting the ability of
issuers of Pennsylvania Municipal Securities to meet their obligations. As a
result, the value of each Fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county and local governments to meet
their obligations will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions generally. The
amounts of tax and other revenues available to governmental issuers of
Pennsylvania Municipal Securities may be affected from time to time by economic,
political and demographic conditions within the state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. Further, payments of principal and interest on
limited obligation securities will depend on the economic condition of the
facility or specific revenue source from whose revenues the payments will be
made, which in turn could be affected by economic, political and demographic
conditions in the state. Moreover, each Fund is classified as "non-diversified"
because it may invest in obligations of a relatively limited number of issuers.
For additional information regarding permitted investments see "Description of
Permitted Investments and Risk Factors" in this Prospectus and the Statement of
Additional Information.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the United States Government or its agencies and instrumentalities and
securities issued by state and local governments.
The foregoing percentage limitation will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information
6
<PAGE> 72
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding voting
securities.
THE ADVISER
On May 2, 1996, Integra Financial Corporation, the parent corporation of Integra
Trust Company National Association ("Integra"), the prior investment adviser to
the Inventor Funds, merged with National City Corporation ("National City").
Consummation of the merger resulted in the automatic termination of the
investment advisory agreement under which Integra provided services to the
Funds. In anticipation of a merger and to provide continuity in investment
advisory services to the Funds, the Board of Directors voted on February 12,
1996 to recommend that the shareholders of the Funds approve an investment
advisory agreement with National City Bank (the "Adviser") a wholly-owned
subsidiary of National City. Shareholders of the Funds approved the new advisory
agreement with the Adviser on May 2, 1996. On August 1, 1996, shareholders
approved a reorganization of the Funds wherein each fund would transfer its
assets and liabilities to a fund with similar objectives and policies within the
Armada funds which are advised by affiliates of National City and the Adviser.
The Adviser sets investment policies, and continuously reviews, supervises and
administers each Fund's investment program. The Adviser discharges its
responsibilities subject to the supervision of, and policies set by, the
Directors of the Corporation.
National City Bank, 1900 East Ninth Street, Cleveland, Ohio 44114, is a
wholly-owned subsidiary of National City Corporation.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .45% and .70% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market and the Pennsylvania Municipal Bond Funds,
respectively. The Adviser may from time to time waive all or a portion of its
fee in order to limit the operating expenses of a Fund. Any such waiver is
voluntary and may be terminated at any time at the Adviser's sole discretion.
For the fiscal year ended April 30, 1996, Integra, the Funds' prior adviser,
received an advisory fee of .29% and .58% from the Pennsylvania Tax-Exempt Money
Market and the Pennsylvania Municipal Bond Funds, respectively, based on each
Fund's average net assets.
The Glass-Steagall Act restricts the securities activities of banks such as
National City Bank, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might have to make other investment advisory arrangements.
THE SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WPG" or the "Sub-Adviser") serves as the
Pennsylvania Tax-Exempt Money Market and the Pennsylvania Municipal Bond Funds'
investment sub-adviser under a sub-advisory agreement (the "Sub-Advisory
Agreement") with the Adviser. Under the Sub-Advisory Agreement, WPG makes the
investment decisions for the assets of the Funds, and continuously reviews,
supervises and administers the Funds' investment program. WPG is independent of
the Adviser and discharges its responsibilities subject to the supervision of,
and policies set by, the Adviser and the Directors of the Corporation.
For its services, WPG is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .05% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund and .18% of the average daily net
assets of the Pennsylvania Municipal Bond Fund. The Sub-Adviser may from time
to time waive all or a portion of its fee from the Adviser. For the fiscal year
ended April 30, 1996, WPG received a fee from Integra of .05% and .18% for the
Pennsylvania Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond
Fund, respectively, based on each Fund's average daily net assets.
WPG is a limited liability company founded in 1970, and engages in investment
management, venture capital management and management buyouts. WPG has been
active since its founding in managing portfolios of tax exempt securities. At
September 30, 1995, total assets under management were approximately $12.5
billion. The principal business address of
7
<PAGE> 73
WPG is One New York Plaza, New York, NY 10004.
Janet A. Fiorenza has served as the portfolio manager for the Pennsylvania
Tax-Exempt Money Market Fund since its inception. Ms. Fiorenza, Principal and
Senior Portfolio Manager, has been a member of WPG or its predecessor since
1980.
S. Blake Miller, CFA, of the Sub-Adviser, has served as portfolio manager to the
Pennsylvania Municipal Bond Fund since its inception. Mr. Miller is an Associate
Principal of the Tax-Exempt Fixed Income Management Department for the Sub-
Adviser and has been a portfolio manager with the Sub-Adviser or its predecessor
since 1986.
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator") provides the Corporation with
administrative services, including fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also serves as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at a maximum annual rate of .18% of the average daily net assets of the
Pennsylvania Municipal Bond Fund, and .15% of the average daily net assets of
the Pennsylvania Tax-Exempt Money Market Fund. The Administrator may from time
to time waive all or a portion of its fee in order to limit the total operating
expenses of the Pennsylvania Municipal Bond Fund.
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or "Transfer Agent"), 210 W. 10th Street, Kansas City,
Missouri 64105, serves as transfer agent and dividend disbursing agent for the
Corporation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. No compensation is paid to the Distributor for
distribution services for the Class B shares of any Fund. Financial institutions
that are the record owner of shares for the account of their customers may
impose separate fees for account services to their customers.
The Funds may execute brokerage or other agency transactions through the
Distributor for which the Distributor receives compensation.
HOW TO PURCHASE SHARES
Class B shares of the Funds may be purchased on any day on which both the New
York Stock Exchange and Federal Reserve wire system are open for business
("Business Days"). The minimum initial investment in any Fund is $100,000.
A purchase order for shares will be effective as of the Business Day received by
the Distributor if the Distributor receives the order and payment before 4:00
p.m., Eastern Time for the Pennsylvania Municipal Bond Fund and 2:00 p.m.,
Eastern Time for the Pennsylvania Tax-Exempt Money Market Fund. The purchase
price (the "Offering Price") of Class B shares is the net asset value next
determined after the purchase order is effective.
The net asset value per share of the Pennsylvania Municipal Bond Fund is
determined as of the close of business of the New York Stock Exchange (currently
4:00 p.m., Eastern Time) and as of 2:00 p.m., Eastern Time for the Pennsylvania
Tax-Exempt Money Market Fund on each Business Day by dividing the total market
value of that Fund's investments and other assets, less any liabilities, by the
total outstanding shares of the Fund. Purchases will be made in full and
fractional shares calculated to three decimal places. The Pennsylvania
Tax-Exempt Money Market Fund values its portfolio securities using the amortized
cost method of valuation, which approximates market value. Pursuant to
guidelines adopted and monitored by the Directors of the Corporation, each Fund
may use a pricing service to provide market quotations or fair market
valuations. A pricing service may derive such valuations through the use of a
matrix system to value fixed income securities which considers factors such as
securities prices, yield features, ratings, and developments related to a
specific security. Although the methodology and procedures for determining net
asset value are identical for both classes of a Fund, the net asset value per
share of such classes may differ because of the distribution expenses charged to
Class A shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor
8
<PAGE> 74
determines that it is not in the best interest of the Corporation and/or its
shareholders to accept such order.
EXCHANGES
You may exchange Class B shares of any Fund for Class B shares of any other Fund
at net asset value. Shareholders that meet the investment criteria established
for Class B shares may exchange Class A shares of any Fund for Class B shares of
that Fund once Class B shares are made available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m., Eastern Time for
the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund on any Business Day, the exchange will
occur on that day. The exchange privilege may be exercised only in those states
where the class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
Shares may be redeemed without charge on any Business Day. Investors who own
shares held of record by a financial institution should contact that institution
for information on how to redeem shares.
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m., Eastern Time) for the Pennsylvania Municipal Bond Fund and
2:00 p.m., Eastern Time for the Pennsylvania Tax-Exempt Money Market Fund on any
Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a Shareholder may submit another
request for redemption.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount (normally $100,000). Accordingly, if you purchase shares
of any Fund in only the minimum investment amount, you may be subject to
involuntary redemption if you redeem any shares. Before any Fund exercises its
right to redeem such shares, you will be given notice that the value of the
shares in your account is less than the minimum amount and will be allowed 60
days to make an additional investment in such Fund in an amount which will
increase the value of the account to at least the minimum amount.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and the Transfer Agent
will each employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or the Transfer Agent may be liable for losses due
to unauthorized or fraudulent instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail or other means.
9
<PAGE> 75
PERFORMANCE
From time to time, the Pennsylvania Municipal Bond Fund may advertise yield and
total return. The Pennsylvania Tax-Exempt Money Market Fund may advertise its
current yield and effective yield. Both Funds may advertise a tax-equivalent
yield. These figures are based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns.
The "current yield" of the Pennsylvania Tax-Exempt Money Market Fund refers to
the income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also called "effective
compound yield") is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the current yield because of the compounding effect
of this assumed reinvestment.
The "yield" of the Pennsylvania Municipal Bond Fund refers to the income
generated by a hypothetical investment. This income is then "annualized," i.e.,
the income over thirty days is assumed to be generated over one year and is
shown as a percentage of the investment.
"Tax-equivalent yield" is calculated by determining the rate of return that
would have to be achieved on a fully taxable investment to produce the after-tax
equivalent of a Fund's yield assuming certain tax brackets for the shareholder.
The "total return" of the Pennsylvania Municipal Bond Fund refers to the average
compounded rate of return on a hypothetical investment for designated time
periods, assuming that the entire investment is redeemed at the end of each
period and assuming the reinvestment of all dividend and capital gain
distributions.
For the Funds, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares. Each Fund may periodically
compare its performance to the performance of: other mutual funds tracked by
mutual funds rating services (such as Lipper Analytical); financial and business
publications and periodicals; broad groups of comparable mutual funds; unmanaged
indices which may assume investment of dividends but generally do not reflect
deductions for administrative and management costs; or other investment
alternatives. The Funds may quote Morningstar, Inc., a service that ranks mutual
funds on the basis of risk-adjusted performance. The Funds may use long-term
performance of these capital market indices to demonstrate general long-term
risk versus reward scenarios and may include the value of a hypothetical
investment in any of the capital markets. The Funds may also quote financial and
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the Fund may differ from the federal income tax consequences
described below. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined
10
<PAGE> 76
with the Corporation's other portfolios. Each Fund intends to continue to
qualify for the special tax treatment afforded regulated investment companies
("RICs") under Subchapter M of the Internal Revenue Code of 1986, as amended, so
as to be relieved of federal income tax on net investment company taxable income
and net capital gains (the excess of net long-term capital gains over net
short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including net
short-term capital gain) to its respective Shareholders. If, at the close of
each quarter of its taxable year, at least 50% of the value of a Fund's assets
consist of obligations the interest on which is excludable from gross income,
the Fund may pay "exempt-interest dividends" to its Shareholders. Those
dividends constitute the portion of the aggregate dividends as designated by the
Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for Federal income tax purposes, but may have certain
collateral federal income tax consequences, including alternative minimum tax.
See the Statement of Additional Information.
Dividends from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Distributions of net
capital gains, if any, are taxable to Shareholders as long-term capital gains,
regardless of how long Shareholders have held their shares and regardless of
whether the distributions are received in cash or in additional shares. Neither
of these distributions qualify for the dividends-received deduction. Each Fund
will provide annual reports to Shareholders of the federal income tax status of
all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions to avoid liability for the
federal excise tax.
A sale, exchange or redemption of Fund Shares is generally a taxable transaction
to the Shareholder; however, an exchange of Class A shares for Class B shares in
the same Fund is not a taxable transaction.
ADDITIONAL CONSIDERATIONS
The Funds may not be appropriate investments for persons (including corporations
and other business entities) who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development private
activity bonds. Such persons should consult their tax advisers before purchasing
shares. A "substantial user" is defined generally to include "certain persons"
who regularly use in their trade or business a part of a facility financed from
the proceeds of such bonds.
Shares of the Funds are not taxable for purposes of the Philadelphia School
District Investment Net Income Tax (Philadelphia School District Tax) or the
personal property tax imposed by Pennsylvania Counties, to the extent that the
Funds' investments consist of obligations which are themselves exempt from
taxation in Pennsylvania. See the Statement of Additional Information.
While the Funds intend to invest primarily in obligations which produce interest
exempt from Federal and Pennsylvania taxes, if a Fund invests in obligations
that are not exempt for Federal and/or Pennsylvania purposes, a portion of the
Fund's distributions will be subject to Pennsylvania personal income tax.
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Intermediate Government Securities Fund, GNMA Securities Fund, and
Equity Growth Fund. All consideration received by the Corporation for shares of
any Fund and all assets
11
<PAGE> 77
of such Fund belong to that Fund and would be subject to the liabilities related
thereto.
The Corporation pays its expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under federal and state securities laws, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of Maryland. The Directors have approved contracts under which,
as described above, certain companies provide essential management services
to the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings of Shareholders but approval will be
sought for certain changes in the operation of the Corporation and for the
election of Directors under certain circumstances.
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to The Inventor Funds, Inc., P.O. Box
419320, Kansas City, Missouri 64141-6320, or by calling 1-800-6INVENT
(1-800-646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) is
declared daily and paid monthly for each Fund. Shareholders of record on the
last Business Day of each month will be entitled to receive the monthly dividend
distribution, which is generally paid on the first Business Day of the following
month. If any net capital gains are realized, they will be distributed by each
Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A shares of the Fund will normally be lower than those on
Class B shares because of the distribution expenses charged to Class A shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Corporation. Coopers &
Lybrand L.L.P. serves as the independent accountants of the Corporation.
CUSTODIAN
National City Bank, 4100 West 150th Street, P.O. Box 5756, Cleveland, Ohio
44135-5756 (the "Custodian"), acts as custodian of the Corporation's assets. The
Custodian holds cash, securities and
12
<PAGE> 78
other assets of the Corporation as required by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS
AND RISK FACTORS
The following is a description of the permitted investments for the Funds and
the various risks associated therewith:
BANKERS' ACCEPTANCES-bills of exchange or time drafts drawn on and accepted by a
commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT-negotiable interest bearing instruments with a specific
maturity. Certificates of deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit have penalties
for early withdrawal.
COMMERCIAL PAPER-unsecured short-term promissory notes issued by municipalities,
corporations and other entities. Maturities on these issues vary, generally from
a few days to nine months.
DEMAND FEATURES-The Funds may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
FIXED INCOME SECURITIES-The market value of fixed income investments will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
MUNICIPAL LEASES- Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If funds
are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and significant
loss to the Fund. Under guidelines established by the Board of Directors, the
credit quality of municipal leases will be determined on an ongoing basis,
including an assessment of the likelihood that a lease will be canceled.
MUNICIPAL SECURITIES-Municipal Securities are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned
13
<PAGE> 79
corporations. The availability of this financing encourages these corporations
to locate within the sponsoring communities and thereby increases local
employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
PARTICIPATION INTERESTS-Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.
REPURCHASE AGREEMENTS-agreements by which a financial institution agrees to sell
a security to a Fund and commits to repurchase the security at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The securities purchased by a Fund will be
held as collateral by the Custodian and will be equal to at least 102% of the
repurchase price. Repurchase agreements are considered to be loans by a Fund.
The Corporation bears a risk of loss in the event the other party defaults on
its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors or dealers
recognized by the Federal Reserve. Repurchase agreements are considered loans
under the Investment Company Act of 1940, as amended.
RESTRICTED AND ILLIQUID SECURITIES-Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
Securities are securities that may not be sold within 7 days or less for
approximately their carrying value. Restricted securities eligible for resale
pursuant to Rule 144A under the Act and privately placed commercial paper that
have a readily available market are not considered illiquid for the purposes of
this limitation. The Sub-Adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors of the Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The absence
of a secondary market may affect the value of Rule 144A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
STANDBY COMMITMENTS-Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Pennsylvania Municipal
Securities accompanied by these "standby" commitments could be greater than the
cost of Municipal Securities without such commitments. Standby commitments are
not marketable or otherwise assignable and have value
14
<PAGE> 80
only to the Fund. The default or bankruptcy of a securities dealer giving such a
commitment would not affect the quality of the Pennsylvania Municipal Securities
purchased. However, without a standby commitment, these securities could be more
difficult to sell. The Fund enters into standby commitments only with those
dealers whose credit the investment adviser believes to be of high quality.
VARIABLE AND FLOATING RATE SECURITIES-Certain of the obligations purchased by a
Fund may carry variable or floating rates of interest, may involve a conditional
or unconditional demand feature and may include variable amount master demand
notes. The interest rates on these securities may be reset daily, weekly,
quarterly or some other reset period, and may have a floor or ceiling on
interest rate charges. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES-When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
RESTRAINTS ON MONEY MARKET FUNDS-Investments money market funds are subject to
limitations imposed under regulations adopted by the SEC. These regulations
generally require money market funds to acquire only U.S. dollar obligations
maturing in 397 days or less and to maintain a dollar-weighted average portfolio
maturity of 90 days or less. In addition, the funds may acquire only obligations
that present minimal credit risks and that are "eligible securities" which means
they are (i) rated, at the time of investment, by at least two nationally
recognized security rating organizations (one if it is the only organization
rating such obligation) in the highest short-term rating category or, if
unrated, determined to be of comparable quality (a "first tier security"), or
(ii) rated according to the foregoing criteria in the second highest short-term
rating category or, if unrated, determined to be of comparable quality ("second
tier security"). A security is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security that have a
short-term-rating.
15
<PAGE> 81
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SUMMARY ............................................................. 2
EXPENSE SUMMARY.......................................................... 4
THE CORPORATION.......................................................... 5
INVESTMENT OBJECTIVES AND POLICIES....................................... 5
RISK FACTORS............................................................. 6
INVESTMENT LIMITATIONS................................................... 6
FUNDAMENTAL POLICIES..................................................... 7
THE ADVISER ............................................................. 7
THE SUB-ADVISER.......................................................... 7
THE ADMINISTRATOR........................................................ 8
THE TRANSFER AGENT....................................................... 8
THE DISTRIBUTOR.......................................................... 8
HOW TO PURCHASE SHARES................................................... 8
EXCHANGES ............................................................. 9
REDEMPTION OF SHARES.................................................... 9
PERFORMANCE ............................................................. 10
TAXES ............................................................. 10
GENERAL INFORMATION...................................................... 11
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS.................... 13
</TABLE>
16
<PAGE> 82
INVENTOR FUNDS, INC.
A Family of Mutual Funds
Investment Adviser:
National City Bank
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Corporation and should be read in conjunction with the Corporation's
prospectuses dated August 28, 1996. Prospectuses may be obtained through the
Distributor, SEI Financial Services Company, 680 E. Swedesford Road, Wayne, PA
19087-1658.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CORPORATION.................................................................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS............................................................................S-2
INVESTMENT LIMITATIONS.........................................................................................S-14
THE ADVISER....................................................................................................S-16
THE SUB-ADVISERS...............................................................................................S-17
THE ADMINISTRATOR..............................................................................................S-17
THE DISTRIBUTOR................................................................................................S-18
DIRECTORS AND OFFICERS OF THE CORPORATION......................................................................S-19
REPORTING......................................................................................................S-21
PERFORMANCE....................................................................................................S-21
PURCHASE AND REDEMPTION OF SHARES..............................................................................S-25
DETERMINATION OF NET ASSET VALUE..............................................................................S-26
TAXES ......................................................................................................S-27
FUND TRANSACTIONS..............................................................................................S-30
DESCRIPTION OF SHARES..........................................................................................S-31
SHAREHOLDER LIABILITY..........................................................................................S-31
5% SHAREHOLDERS................................................................................................S-31
EXPERTS ......................................................................................................S-33
FINANCIAL STATEMENTS..........................................................................................S-33
APPENDIX .......................................................................................................A-1
</TABLE>
<PAGE> 83
THE CORPORATION
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company organized under Maryland law as a Maryland Corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate series of shares of beneficial interest ("shares")
and different classes of shares of each Fund. Shareholders may purchase shares
through two separate classes (Class A and Class B) which provide for variations
in distribution costs, voting rights and dividends. Except for these differences
between Class A and Class B shares, each share of each Fund represents an equal
proportionate interest in that Fund. See "Description of Shares." This Statement
of Additional Information relates to the Class A and Class B shares of the
Corporation's Pennsylvania Tax-Exempt Money Market Fund (the "Money Market
Fund") Intermediate Government Securities Fund, GNMA Securities Fund, Equity
Growth Fund, and Pennsylvania Municipal Bond Fund (collectively the "Non-Money
Market Funds") and, together with the Money Market Fund (the "Funds"). The Prime
Obligations Money Market Fund and Treasury Securities Money Market Fund were
liquidated on May 31, 1996.
DESCRIPTION OF PERMITTED INVESTMENTS
The following information supplements the information about permitted
investments set forth in the Prospectus for the relevant Fund.
Variable amount master demand notes. Certain of the Funds may purchase VARIABLE
AMOUNT MASTER DEMAND NOTES which may or may not be backed by bank letters of
credit. These notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the
Corporation, as lender, and the borrower. Such notes provide that the interest
rate on the amount outstanding varies on a daily, weekly or monthly basis
depending upon a stated short-term interest rate index. Both the lender and the
borrower have the right to reduce the amount of outstanding indebtedness at any
time. There is no secondary market for the notes. It is not generally
contemplated that such instruments will be traded.
GNMA securities. The GNMA Securities and Intermediate Government Securities
Funds may invest in SECURITIES THE TIMELY PAYMENT OF PRINCIPAL AND INTEREST ON
WHICH ARE GUARANTEED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA"), a
wholly-owned U.S. Government corporation. The market value and interest yield of
these instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable
30-year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. The scheduled monthly
interest and principal payments relating to mortgages in the pool are "passed
through" to investors. In addition, there may be unscheduled principal payments
representing prepayments on the underlying mortgages. Although GNMA certificates
may offer yields higher than those available from other types of U.S. Government
securities, GNMA certificates may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of a
GNMA certificate likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a GNMA certificate originally purchased at a premium to decline in price to its
par value, which may result in a loss.
Mortgage-backed securities. The GNMA Securities and Intermediate Government
Securities Funds may invest in MORTGAGE-BACKED SECURITIES. Two principal types
of mortgage-backed securities are collateralized mortgage obligations ("CMOs")
and real estate mortgage investment conduits ("REMICS"). CMOs are securities
collateralized by mortgages, mortgage pass-through certificates, mortgage pay-
through bonds (bonds representing an interest in a pool of mortgages where the
cash flow generated from
S-2
<PAGE> 84
the mortgage collateral pool is dedicated to bond repayment), and
mortgage-backed bonds (general obligations of issuers payable out of the
issuers' general funds and additionally secured by a first lien on a pool of
single family properties).
Many CMOs are issued with a number of classes or series which have different
maturities and are retired in sequence. Investors purchasing CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, CMOs in
longer maturity series are less likely than other mortgage pass-throughs to be
prepaid prior to their stated maturity. Although some of the mortgages
underlying CMOs may be supported by various types of insurance, and while some
CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued
or guaranteed by U.S. Government agencies or instrumentalities, CMOs themselves
are not generally guaranteed by the U.S. Government or any other entity.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
Repurchase Agreements. REPURCHASE AGREEMENTS are agreements by which a person
(e.g., a Fund) obtains a security and simultaneously commits to return the
security to the seller (a member bank of the Federal Reserve System or
recognized securities dealer) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity date of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by the participating Fund for
purposes of its investment limitations. Repurchase agreements entered into by
the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement (the
Sub-Adviser monitors compliance with this requirement). Under all repurchase
agreements entered into by the Funds, the Custodian or its agent must take
possession of the underlying collateral. However, if the seller defaults, the
Funds could realize a loss on the sale of the underlying security to the extent
that the proceeds of sale including accrued interest are less than the resale
price provided in the agreement including interest. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the Funds may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Funds are treated as an unsecured creditor and
required to return the underlying security to the seller's estate.
Municipal Securities. MUNICIPAL NOTES in which the Pennsylvania Tax-Exempt Money
Market and Pennsylvania Municipal Bond Funds may invest include, but are not
limited to, general obligation notes, tax anticipation notes (notes sold to
finance working capital needs of the issuer in anticipation of receiving taxes
on a future date), revenue anticipation notes (notes sold to provide needed cash
prior to receipt of expected non-tax revenues from a specific source), bond
anticipation notes, certificates of indebtedness, demand notes and construction
loan notes. Pennsylvania Tax-Exempt Money Market Fund's investments in any of
the notes described above will be limited to those obligations (i) where both
principal and interest are backed by the full faith and credit of the United
States, (ii) which are rated MIG-2 or V-MIG-2 or better at the time of
investment by Moody's Investors Service ("Moody's"), (iii) which are rated SP-2
or better at the time of investment by Standard and Poor's Corporation ("S&P"),
(iv) which are rated F-1 at the time of investment by Fitch Investors Service,
Inc. ("Fitch") or (v) which, if not rated, are of equivalent quality in the
Adviser's or Sub-Adviser's judgment.
S-3
<PAGE> 85
MUNICIPAL BONDS in which the Pennsylvania Tax-Exempt Money Market and
Pennsylvania Municipal Bond Funds may invest, must be rated AA or better by S&P
or Fitch or Aa or better by Moody's at the time of investment for the
Pennsylvania Tax-Exempt Money Market Fund or, if purchased for the Pennsylvania
Municipal Bond Fund, rated BBB or better by S&P or Fitch or Baa or better by
Moody's, or, if unrated must be deemed by the Adviser to have essentially the
same characteristics and quality as bonds having the above ratings. The
Sub-Adviser may purchase private activity bonds if the interest paid is
excludable from Federal income tax. Private activity bonds are issued by or on
behalf of States or political subdivisions thereof to finance privately owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking and low income housing.
The payment of the principal and interest on private activity bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and may be secured by a pledge of real and personal property so financed.
Pennsylvania Municipal Securities which are payable only from the revenues
derived from a particular facility may be adversely affected by Pennsylvania
laws or regulations which make it more difficult for the particular facility to
generate revenues sufficient to pay such interest and principal, including,
among others, laws and regulations which limit the amount of fees, rates or
other charges which may be imposed for use of the facility or which increase
competition among facilities of that type or which limit or otherwise have the
effect of reducing the use of such facilities generally, thereby reducing the
revenues generated by the particular facility. Pennsylvania Municipal
Securities, the payment of interest and principal on which is insured in whole
or in part by a Pennsylvania governmentally created fund, may be adversely
affected by Pennsylvania laws or regulations which restrict the aggregate
proceeds available for payment of principal and interest in the event of a
default on such municipal securities. Similarly, Pennsylvania Municipal
Securities, the payment of interest and principal on which is secured, in whole
or in part, by an interest in real property may be adversely affected by
Pennsylvania laws which limit the availability of remedies or the scope of
remedies available in the event of a default on such municipal securities.
Because of the diverse nature of such laws and regulations and the impossibility
of either predicting in which specific Pennsylvania Municipal Securities the
Funds will invest from time to time or predicting the nature or extent of future
changes in existing laws or regulations or the future enactment or adoption of
additional laws or regulations, it is not presently possible to determine the
impact of such laws and regulations on the securities in which the Funds may
invest and, therefore, on the shares of the Funds.
TAX-EXEMPT COMMERCIAL PAPER will be limited to investments in obligations which
are rated at least A-2 by S&P, F-2 by Fitch or Prime-2 by Moody's at the time of
investment or which are of equivalent quality as determined by the Sub-Adviser.
Other types of TAX-EXEMPT INSTRUMENTS which are permissible investments for the
Pennsylvania Tax-Exempt Money Market and Pennsylvania Municipal Bond Funds
include floating rate notes. Investments in such floating rate instruments will
normally involve industrial development or revenue bonds which provide that the
rate of interest is set as a specific percentage of a designated base rate (such
as the prime rate) at a major commercial bank, and that a Fund can demand
payment of the obligation at all times or at stipulated dates on short notice
(not to exceed 30 days) at par plus accrued interest. The Funds must use the
shorter of the period required before a Fund is entitled to prepayment under
such obligations or the period remaining until the next interest rate adjustment
date for purposes of determining the maturity. Such obligations are frequently
secured by letters of credit or other credit support arrangements provided by
banks. The quality of the underlying credit or of the bank, as the case may be,
must, in the Sub-Adviser's opinion be equivalent to the long-term bond or
commercial paper ratings stated above. The Adviser will monitor the earning
power, cash flow and liquidity ratios of the issuers of such instruments and the
ability of an issuer of a demand instrument to pay principal and interest on
demand. The Sub-Adviser may purchase other types of tax-exempt instruments as
long as they are of a quality equivalent to the bond or commercial paper ratings
stated above.
S-4
<PAGE> 86
The Sub-Adviser has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the Pennsylvania Tax-Exempt Money Market and Pennsylvania
Municipal Bond Funds to meet redemptions and remain as fully invested as
possible in municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Funds limit their
put transactions to those with institutions which the Sub-Adviser believes
present minimum credit risks, and the Sub-Adviser uses its best efforts to
initially determine and continue to monitor the financial strength of the
sellers of the options by evaluating their financial statements and such other
information as is available in the marketplace. It may, however, be difficult to
monitor the financial strength of the writers where adequate current financial
information is not available. In the event that any writer is unable to honor a
put for financial reasons, the affected Fund would be a general creditor (i.e.,
on a parity with all other unsecured creditors) of the writer. Furthermore,
particular provisions of the contract between a Fund and the writer may excuse
the writer from repurchasing the securities; for example, a change in the
published rating of the underlying municipal securities or any similar event
that has an adverse effect on the issuer's credit or a provision in the contract
that the put will not be exercised except in certain special cases, for example,
to maintain portfolio liquidity. A Fund could, however, at any time sell the
underlying portfolio security in the open market or wait until the portfolio
security matures, at which time it should realize the full par value of the
security.
Municipal Securities purchased subject to a put may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to a Fund. Sale
of the securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, a Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to a Fund,
such Fund could, of course, sell the portfolio security. The maturity of the
underlying security will generally be different from that of the put. There will
be no limit to the percentage of portfolio securities that the Funds may
purchase subject to a put. For the purpose of determining the "maturity" of
securities purchased subject to an option to put, and for the purpose of
determining the dollar-weighted average maturity of the Funds including such
securities, the Corporation will consider "maturity" to be the first date on
which it has the right to demand payment from the writer of the put although the
final maturity of the security is later than such date.
SPECIAL CONSIDERATIONS RELATING TO PENNSYLVANIA MUNICIPAL SECURITIES
The concentration of investments in Pennsylvania Municipal Securities
by the Pennsylvania Money Market Fund and the Pennsylvania Tax-Exempt Bond Fund
raises special investment considerations. In particular, changes in the economic
condition and governmental policies of the Commonwealth of Pennsylvania and its
municipalities could adversely affect the value of the Funds and the portfolio
securities held by them. This section briefly describes current economic trends
in Pennsylvania.
General. Pennsylvania has historically been dependent on heavy industry although
recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-fourth of the Commonwealth's total land area devoted to cropland, pasture
and farm woodlands.
Pennsylvania has a high proportion of persons 65 or older. The
Commonwealth is highly urbanized, with almost 85% of the 1990 census population
residing in metropolitan statistical areas. The
S-5
<PAGE> 87
cities of Philadelphia and Pittsburgh, the Commonwealth's largest metropolitan
statistical areas, together comprise approximately 50% of the Commonwealth's
total population.
Financial Accounting. Pennsylvania utilizes the fund method of accounting and
over 150 funds have been established for the purpose of recording receipts and
disbursements, of which the General Fund is the largest. Most of the operating
and administrative expenses are payable from the General Fund. The Motor License
Fund is a special revenue fund that receives tax and fee revenues relating to
motor fuels and vehicles (except one-half cent per gallon of the liquid fuels
tax which is deposited in the Liquid Fuels Tax Fund for distribution to local
municipalities) and all such revenues are required to be used for highway
purposes. Other special revenue funds have been established to receive specified
revenues appropriated to specific departments, boards and/or commissions. Such
funds include the Game, Fish, Boat, Banking Department, Milk Marketing, State
Farm Products Show, State Racing and State Lottery Funds. The General Fund, all
special revenue funds, the Debt Service Funds and the Capital Project Funds
combine to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor within
Pennsylvania is a government enterprise.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting principles
("GAAP"). The GAAP statements have been audited jointly by the Auditor General
of the Commonwealth and an independent public accounting firm. The Budgetary
information is adjusted at fiscal year end to reflect appropriate accruals for
financial reporting in conformity with GAAP. The Commonwealth maintains a
June 30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets are
enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.
Commonwealth Debt. Current constitutional provisions permit Pennsylvania to
issue the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster, (ii) electorate approved debt, (iii)
debt for capital projects subject to an aggregate debt limit of 1.75 times the
annual average tax revenues of the preceding five fiscal years, (iv) tax
anticipation notes payable in the fiscal year of issuance. All debt except tax
anticipation notes must be amortized in substantial and regular amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be funded within the succeeding fiscal year's
budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years.
State-related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of, or revenues derived from, the various
projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations.
S-6
<PAGE> 88
Litigation. Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations.
Philadelphia. The City of Philadelphia is the largest city in the Commonwealth,
with an estimated population of 1,585,577 people according to the 1990 Census.
Philadelphia functions both as a city of the first class and a county for the
purpose of administering various governmental programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt and to make factual findings and recommendations to
Philadelphia concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City Council
and the PICA Board and signed by the Mayor in January 1992.
The foregoing information as to certain Pennsylvania risk factors has
been provided in view of the Funds' policy of concentrating in Pennsylvania
Municipal Securities. This information constitutes only a brief summary, does
not purport to be a complete description of Pennsylvania risk factors and is
principally drawn from official statements relating to securities offerings of
the Commonwealth of Pennsylvania that have come to the Fund's attention and were
available as of the date of this Statement of Additional Information.
OPTIONS. The Equity Growth Fund may write CALL OPTIONS on a covered basis only,
and will not engage in option writing strategies for speculative purposes.
Covered Call Writing. The Equity Growth Fund may write COVERED CALL OPTIONS from
time to time on such portion of its assets, without limit, as the Sub-Adviser
determines is appropriate in seeking to obtain the Fund's investment objective.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) has the obligation to sell, the underlying security at the
exercise price during the option period. The advantage to the Fund of writing
covered calls is that the Fund receives a premium which is additional income.
However, if the security rises in value, the Fund may not fully participate in
the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written. A closing purchase
transaction cannot be effected with respect to an option once the option writer
has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
S-7
<PAGE> 89
If a call option expires unexercised, the Fund will realize a short term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, the
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date. The Fund will write
call options only on a covered basis, which means that the Fund will own the
underlying security subject to a call option at all times during the option
period. Unless a closing purchase transaction is effected the Fund would be
required to continue to hold a security which it might otherwise wish to sell,
or deliver a security it would want to hold. Options written by the Fund will
normally have expiration dates between one and nine months from the date
written. The exercise price of a call option may be below, equal to or above the
current market value of the underlying security at the time the option is
written.
The Equity Growth Fund may purchase OPTIONS ON STOCK INDICES. A stock index
assigns relative values to the common stocks included in the index with the
index fluctuating with changes in the market values of the underlying common
stock.
Options on stock indices are similar to options on stocks but have different
delivery requirements. Stock options provide the right to take or make delivery
of the underlying stock at a specified price. A stock index option gives the
holder the right to receive a cash "exercise settlement amount" equal to (i) the
amount by which the fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (ii) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than (in the case of a call)
or less than (in the case of a put) the exercise price of the option. The amount
of cash received will be equal to such difference between the closing price of
the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to the Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing transaction on an Exchange or it
may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock so
included. Some stock index options are based on a broad market index such as the
Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indices are currently
traded on the following Exchanges among others: The Chicago Board Options
Exchange, New York Stock Exchange and American Stock Exchange.
The Fund's ability to hedge effectively all or a portion of its securities
through transactions in options on stock indices depends on the degree to which
price movements in the underlying index correlate with price movements in the
Fund's portfolio securities. Since the Fund's portfolio will not duplicate the
components of an index, the correlation will not be exact. Consequently, the
Fund bears the risk that the prices of the securities being hedged will not move
in the same amount as the hedging instrument. It is also possible that there may
be a negative correlation between the index or other securities underlying the
hedging instrument and the hedged securities which would result in a loss on
both such securities and the hedging instrument.
S-8
<PAGE> 90
Positions in stock index options may be closed out only on an Exchange which
provides a secondary market. There can be no assurance that a liquid secondary
market will exist for any particular stock index option. Thus, it may not be
possible to close such an option. The inability to close options positions could
have an adverse impact on the Fund's ability to hedge effectively its
securities. The Fund will enter into an option position only if there appears to
be a liquid secondary market for such options.
The Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets. The aggregate premium paid on all options on stock indices will not
exceed 5% of the Fund's total assets.
Purchasing Put Options. The Equity Growth Fund may purchase PUT OPTIONS to
protect its portfolio holdings in an underlying security against a decline in
market value. Such hedge protection is provided during the life of the put
option since the Fund, as holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any decline in the
underlying security's market price. For a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put options
in this manner, the Fund will reduce any profit it might otherwise have realized
from appreciation of the underlying security by the premium paid for the put
option and by transaction costs.
Purchasing Call Options. The Equity Growth Fund may purchase CALL OPTIONS to
hedge against an increase in the price of securities that the Fund wants
ultimately to buy. Such hedge protection is provided during the life of the call
option since the Fund, as holder of the call option, is able to buy the
underlying security at the exercise price regardless of any increase in the
underlying security's market price. In order for a call option to be profitable,
the market price of the underlying security must rise sufficiently above the
exercise price to cover the premium and transaction costs. These costs will
reduce any profit the Fund might have realized had it bought the underlying
security at the time it purchased the call option.
Risk Factors in Options Transactions. The successful use of options strategies
depends on the ability of the Sub-Adviser to forecast interest rate and market
movements correctly.
When it purchases an option, the Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, a Fund
will lose part or all of its investment in the option. This contrasts with an
investment by a Fund in the underlying securities, since the Fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when the Sub-Adviser, deems it desirable to do so.
Although a Fund will take an option position only if its Sub-Adviser believes
there is a liquid secondary market for the option, there is no assurance that a
Fund will be able to effect closing transactions at any particular time or at an
acceptable price.
If a secondary trading market in options were to become unavailable, a Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events, such as volume in excess of trading or clearing capability, were to
interrupt normal market operations. A marketplace may at times find it necessary
to impose restrictions on particular types of options transactions, which may
limit a Fund's ability to realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by a Fund could result in losses on the options. If trading is interrupted
in an underlying security, trading of options on that security is
S-9
<PAGE> 91
normally halted as well. As a result, a Fund as purchaser or writer of an option
will be unable to close out its positions until options trading resumes, and it
may be faced with losses if trading in the security reopens at a substantially
different price. In addition, the Options Clearing Corporation (OCC) or other
options markets may impose exercise restrictions. If a prohibition on exercise
is imposed at the time when trading in the option has also been halted, a Fund
as purchaser or writer of an option will be locked into its position until one
of the two restrictions has been lifted. If a prohibition on exercise remains in
effect until an option owned by a Fund has expired, the Fund could lose the
entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and the various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.
Futures Contracts on Securities and Related Options
Futures Contracts on Securities. The Equity Growth, Intermediate Government
Securities, and GNMA Securities Funds will enter into FUTURES CONTRACTS ON
SECURITIES only when, in compliance with the SEC's requirements, cash or
equivalents equal in value to the securities' value (less any applicable margin
deposits) have been deposited in a segregated account of the Fund's custodian.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the purchaser
to take delivery of the type of instrument called for in the contract in a
specified delivery month at a stated price. The specific instruments delivered
or taken at settlement date are not determined until on or near that date. The
determination is made in accordance with the rules of the exchanges on which the
futures contract was made. Futures contracts are traded in the United States
only on commodity exchange or boards of trade, known as "contract markets,"
approved for such trading by the Commodity Futures Trading Commission (CFTC),
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Closing out a futures contract sale is
effected by purchasing a futures contract for the same aggregate amount of the
specific type of financial instrument with the same delivery date. If the price
of the initial sale of the futures contract exceeds the price of the offsetting
purchase, the seller is paid the difference and realizes a gain. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.
Unlike when the Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract, although the Fund
is required to deposit with the custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. Government securities. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the Fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin," to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security
fluctuates, making the long and short positions in the futures contract more or
less valuable, a process known as "marking to market."
S-10
<PAGE> 92
Each Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the Fund. Each Fund may
close its positions by taking opposite positions which will operate to terminate
the Fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on Securities' Futures Contracts. A Fund will enter into written
OPTIONS ON SECURITIES' FUTURES CONTRACTS only when, in compliance with the SEC's
requirements, cash or equivalents equal in value to the securities' value (less
any applicable margin deposits) have been deposited in a segregated account of
the custodian. The Fund may purchase and write call and put options on the
futures contracts it may buy or sell and enter into closing transactions with
respect to such options to terminate existing positions. The Fund may use such
options on futures contracts in lieu of writing options directly on the
underlying securities or purchasing and selling the underlying futures
contracts. Such options generally operate in the same manner as options
purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Aggregate initial margin deposits for futures contracts (including futures
contracts on securities, indices and currency) and premiums paid for related
options, may not exceed 5% of a Fund's total assets.
Risk of Transactions in Futures Contracts and Related Options. Successful use
of securities' futures contracts by a Fund is subject to the ability of the
Sub-Adviser, to predict correctly movements in the direction of interest rates
and other factors affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of a call or put
option on a futures contract would result in a loss to the Fund when the
purchase or sale of a futures contract would not, such as when there is no
movement in the price of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events will not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution by exchanges of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund, the Fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options on the
S-11
<PAGE> 93
exchange that had been issued by a clearing corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.
Futures Contracts Indices and Related Options
Index Futures Contracts. The Equity Growth Fund may enter into stock index
futures contracts, debt index futures contracts, or other index futures
contracts appropriate to its objective, and may purchase and sell options on
such index futures contracts. The Fund will not enter into any index futures
contract for the purpose of speculation, and will only enter into contracts
traded on national securities exchanges with standardized maturity dates.
An index futures contract is a bilateral agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value at the close of trading of
the contracts and the price at which the futures contract is originally struck.
No physical delivery of the securities comprising the index is made; generally
contracts are closed out prior to the expiration date of the contract. No price
is paid upon entering into index futures contracts. When the Fund purchases or
sells an index futures contract, it is required to make an initial margin
deposit in the name of the futures broker and to make variation margin deposits
as the value of the contract fluctuates, similar to the deposits made with
respect to futures contracts on securities. Positions in index futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such index futures contracts. The value of the contract usually will vary in
direct proportion to the total face value.
The Fund's ability to effectively utilize index futures contracts depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the index futures contracts and their underlying index.
Second, it is possible that a lack of liquidity for index futures contracts
could exist in the secondary market, resulting in the Fund's inability to close
a futures position prior to its maturity date. Third, the purchase of an index
futures contract involves the risk that the Fund could lose more than the
original margin deposit required to initiate a futures transaction. In order to
avoid leveraging and related risks, when the Fund purchases an index futures
contract, it will collateralize its position by depositing an amount of cash or
cash equivalents, equal to the market value of the index futures positions held,
less margin deposits, in a segregated account with the Fund's custodian.
Collateral equal to the current market value of the index futures position will
be maintained on a daily basis.
The extent to which the Fund may enter into transactions involving index futures
contracts may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such.
Options on Index Futures Contracts. OPTIONS ON INDEX FUTURES contracts are
similar to options on securities except that options on index futures contracts
gives the purchaser the right, in return for the premium paid, to assume a
position in an index futures contract (a long position if the option is a call
and a short position if the option is a put), at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option will be accompanied by delivery of the accumulated balance in the
writer's futures margin account which represents the amount by which the market
price of the index futures contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option on
the index futures contract. If an option is exercised on the last trading day
prior to the expiration date of the option, the settlement will be made entirely
in cash equal to the difference between the exercise price of the option and the
closing level of the index on which the future is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
FOREIGN SECURITIES. The Equity Growth Fund may invest in American Depositary
Receipts. These instruments may subject the Fund to investment risks that differ
in some respects from those related to investments in obligations of U.S.
domestic issuers. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
income, possible
S-12
<PAGE> 94
seizure, nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
WHEN-ISSUED SECURITIES. Certain of the Funds may invest in WHEN-ISSUED
SECURITIES. These securities involve the purchase of debt obligations on a
when-issued basis, in which case delivery and payment normally take place at a
future date. The Funds will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues on the security to the purchaser
during this period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment. Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market when
the delivery takes place may actually be higher than those obtained in the
transaction itself. In that case there could be an unrealized loss at the time
of delivery.
Segregated accounts will be established with the Custodian, and the Funds will
maintain liquid assets in an amount at least equal in value to the Funds'
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
RESTRICTED SECURITIES. RESTRICTED SECURITIES are securities that may not be sold
to the public without registration under the Securities Act of 1933 (the "1933
Act") absent an exemption from registration. All of the Funds may invest in
restricted securities and may be invested up to 15% (10% in the case of the
Money Market Fund) of the total assets of a Fund in restricted securities,
provided that at the time of investment such securities are not illiquid
(generally, an illiquid security cannot be disposed of within seven days in the
ordinary course of business or near the current valuation on the Portfolio's
books) based on guidelines established by the Board of Directors. Under these
guidelines, the following will be considered: the frequency of trades and quotes
for the security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. Such restricted securities, will
be purchased in reliance upon the exemption from registration provided by Rule
144A and Section 4(2) of the 1933 Act. Although not a matter controlled by their
fundamental investment policies and restrictions (and therefore subject to
change without Shareholder approval), none of the Funds may invest more than 15%
of its total assets in such restricted securities as long as their shares are
registered for sale under the securities laws in the State of Ohio.
LENDING OF PORTFOLIO SECURITIES. Each of the Funds except the Pennsylvania
Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond Fund may LEND
SECURITIES pursuant to agreements requiring that the loans be continuously
secured by cash, securities of the U.S. government or its agencies, or any
combination of cash and such securities, as collateral equal to 100% of the
market value at all times of the securities lent. Such loans will not be made
if, as a result, the aggregate amount of all outstanding securities loans for a
Fund exceed one-third of the value of its total assets taken at fair market
value. A Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of the cash collateral in U.S.
government securities. However, a Fund will normally pay lending fees to such
broker-dealers and related expenses from the interest earned on invested
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Sub-Adviser to be of good
standing and when, in the judgment of the Sub-Adviser, the consideration which
can be earned currently from such securities loans justifies the attendant risk.
Any loan may be terminated by either party upon reasonable notice to the other
party.
S-13
<PAGE> 95
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS"). The Equity Growth Fund may
invest in SPDRs. SPDRs are interests in a unit investment trust ("UIT") that may
be obtained from the UIT or purchased in the secondary market (SPDRs are listed
on the American Stock Exchange).
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P Index"), (b) a cash
payment equal to a pro rata portion of the dividends accrued on the UIT's
portfolio securities since the last dividend payment by the UIT, net of expenses
and liabilities, and (c) a cash payment or credit ("Balancing Amount") designed
to equalize the net asset value of the S&P Index and the net asset value of a
Portfolio Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, the Portfolio must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the
Portfolio will receive Index Securities and cash identical to the Portfolio
Deposit required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived from and based upon the securities held by the
UIT. Accordingly, the level of risk involved in the purchase or sale of a SPDR
is similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying SPDRs
purchased or sold by the Funds could result in losses on SPDRs. Trading in SPDRs
involves risks similar to those risks, described above under "Options," involved
in the writing of options on securities.
OTHER INVESTMENTS
The Corporation is not prohibited from investing in obligations of banks which
are clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Corporation by them or by their customers will not be a consideration in
determining which bank obligations the Corporation will purchase. The
Corporation will not purchase obligations of the Adviser or a Sub-Adviser.
The Funds may purchase securities of funds as permitted by the Investment
Company Act of 1940. Under these rules and regulations, the Funds are prohibited
from acquiring the securities of other investment companies if, as a result of
such acquisition, the Funds own more than 3% of the total voting stock of the
company; securities issued by any one investment company represent more than 5%
of the total Funds' assets; or securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets of the
Funds. These investment companies typically incur fees that are separate from
those fees incurred directly by the Fund. A Fund's purchase of such investment
company securities results in the layering of expenses, such that Shareholders
would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
It is the position of the Securities and Exchange Commission's Staff that
certain nongovernmental issuers of CMOS and REMICs constitute investment
companies pursuant to the Investment Company Act of 1940 and either (a)
investments in such instruments are subject to the limitations set forth above
or (b) the issuers of such instruments have received orders from the Securities
and Exchange Commission exempting such instruments from the definition of
investment company.
INVESTMENT LIMITATIONS
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer,
provided that this limitation shall apply only as to 75% of the Fund's
net assets.
S-14
<PAGE> 96
2. Invest in companies for the purpose of exercising control.
3. Borrow money except that (1) a fund may borrow money from anyone for
temporary purposes and then only in an amount not exceeding 5% of the
value of its total assets, or (2) a Fund may borrow money from a bank,
for non-temporary purposes, provided that the borrowing does not exceed
33 1/3% of the Fund's net assets. To the extent that a bank borrowing
exceeds 5% of the borrowing funds assets, asset coverage of at least
300% is required. No investments will be made by a Fund where
borrowings equal or exceed 5%.
4. Make loans, except that (a) each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies;
(b) each Fund may enter into repurchase agreements, and (c) each Fund,
except the Pennsylvania Tax-Exempt Money Market Fund and Pennsylvania
Municipal Bond Fund, may engage in securities lending.
5. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by (3) above in aggregate amounts not to exceed 33 1/3% of
total assets taken at current value at the time of the incurrence of
such loan.
6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts. However, the Funds may
invest in companies which invest in real estate, and in financial
commodities contracts.
7. Make short sales of securities or purchase securities on margin, except
that the Corporation may obtain short-term credits as necessary for the
clearance of security transactions, except GNMA Securities Fund may
make short sales "against the box" as described in the Prospectus.
8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies, except as permitted
by the Investment Company Act of 1940 and the rules and regulations
thereunder.
10. Issue senior securities (as defined in the Investment Company Act of
1940) except in connection with permitted borrowings as described above
or as permitted by rule, regulation or order of the Securities and
Exchange Commission.
11. Invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
NON-FUNDAMENTAL POLICIES
The following limitations are considered non-fundamental and therefore may be
changed without a shareholder vote.
No Fund may write or purchase puts, calls, options or combinations thereof,
except that the Equity Growth Fund may write covered call options with respect
to any or all parts of its securities, and may purchase call and purchase and
sell put options listed on national exchanges. The Pennsylvania Tax-Exempt Money
Market Fund and Pennsylvania Municipal Bond Fund may purchase puts as described
in the Prospectus. The Equity Growth Fund may sell options previously purchased
and enter into closing transactions with respect to covered call options. In
addition, the Equity Growth Fund may engage in options on stock indices to
invest cash on an interim basis.
S-15
<PAGE> 97
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of its net assets, except that the Pennsylvania Tax-Exempt Money
Market Fund may not invest more than 10% of its net assets in illiquid
securities.
No Fund may purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations, if, as a result, more
than 5% of the total assets of the Fund (taken at current value) would be
invested in such securities.
The foregoing percentages will apply at the time of the purchase of a security.
THE ADVISER
The Corporation and National City Bank (the "Adviser") have entered into an
advisory agreement (the "Advisory Agreement") dated May 2, 1996. Prior to May 2,
1996, Integra Trust Company, National Association ("Integra Trust Company")
served as the adviser for the Funds. The Advisory Agreement provides that the
Adviser shall not be protected against any liability to the Corporation or its
Shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state, the Adviser will bear the amount
of such excess. The Adviser will not be required to bear expenses of the
Corporation to an extent which would result in a Fund's inability to qualify as
a regulated investment company under provisions of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of a majority of the
Directors who are not parties to the Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the vote of the Directors or a majority of
outstanding shares of the Funds, as defined in the 1940 Act. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Directors of the Corporation or,
with respect to the Funds by a majority of the outstanding shares of the Funds,
on not less than 30 days' nor more than 60 days' written notice to the Adviser,
or by the Adviser on 90 days' written notice to the Corporation.
The Adviser is entitled to a fee which is calculated daily and paid monthly at
an annual rate of .45% of the daily average net assets of the Pennsylvania
Tax-Exempt Money Market Fund, .70% of the daily average net assets of the
Intermediate Government Securities Fund, the GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund, and .85% of the daily average net assets of
the Equity Growth Fund.
For the fiscal year ended April 30, 1995, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and the Pennsylvania Municipal Bond Fund paid $395,956, $84,917,
$178,282, $132,372, $193,246, $76,582, and $128,093, respectively in advisory
fees, and the Adviser waived advisory fees in the amount of $355,644, $108,649,
$76,919, $72,352, $85,038, $84,075, and $39,805, respectively.
For the fiscal year ended April 30, 1996, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and the Pennsylvania Municipal Bond Fund paid $946,359, $363,664,
$472,231, $278,124, $338,542, $200,641, and $220,710, respectively in advisory
fees, and Integra Trust Company waived advisory fees in the amount of $358,503,
$245,164, $130,371, $107,340, $123,688, $110,272, and $44,126, respectively.
S-16
<PAGE> 98
For the period of May 1, 1996 through May 31, 1996, the Intermediate Government
Securities Fund, GNMA Securities Fund, Pennsylvania Tax Exempt Money Market Fund
and the Pennsylvania Municipal Bond Fund paid $42,190, $27,388, $17,039 and
$16,265, respectively in advisory fees, and Integra Trust Company waived
advisory fees in the amount of $11,464, $9,583, $9,868 and $6,792, respectively.
THE SUB-ADVISERS
The Adviser has entered into sub-advisory agreements with Weiss, Peck & Greer,
L.L.C. ("WPG") relating to the Pennsylvania Tax-Exempt Money Market and
Pennsylvania Municipal Bond Funds, with Wellington Management Company ("WMC")
relating to the Prime Obligations Money Market, Treasury Securities Money
Market, Intermediate Government Securities and GNMA Securities Funds, and with
STI Capital Management, N.A. ("STI") relating to the Equity Growth Fund
(collectively, the "Sub-Advisers"). Under these agreements, the Sub-Advisers are
entitled to fees which are calculated daily and paid monthly at an annual rate
of .20% on the first $50 million of the Intermediate Government Securities and
GNMA Securities Funds' aggregate net assets, .15% on the next $50 million, .10%
on the next $400 million and .075% on such Fund's aggregate net assets in excess
of $500 million, prorated between each such Fund based on their respective net
assets, .30% of the average daily net assets of the Equity Growth Fund, .05% of
the average daily net assets of the Pennsylvania Tax-Exempt Money Market Fund
and .18% of the average daily net assets of the Pennsylvania Municipal Bond
Fund. Such fees are paid by the Adviser and the Sub-Advisers receive no fees
directly from the Funds.
For the fiscal year ended April 30, 1995, Integra Trust Company paid
sub-advisory fees in the amounts of $125,267, $32,261, $54,686, $43,869,
$98,218, $17,747 and $43,174, respectively, for the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund, Intermediate Government
Securities Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania
Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond Fund,
respectively.
For the fiscal year ended April 30, 1996, Integra Trust Company paid
sub-advisory fees in the amounts of $217,476, $101,473, $126,649, $81,073,
$163,140, $34,545 and $68,101, respectively, for the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund, Intermediate Government
Securities Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania
Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond Fund,
respectively.
For the period of May 1, 1996 through May 31, 1996, the Adviser paid
sub-advisory fees in the amounts of $11,435, $7,881, $2,990 and $5,929,
respectively, for the Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsylvania Tax-Exempt Money Market Fund and the Pennsylvania Municipal
Bond Fund, respectively.
THE ADMINISTRATOR
SEI Fund Resources serves as the administrator (the "Administrator") to the
Corporation pursuant to an administration agreement (the "Administration
Agreement"). The Administration Agreement provides that the Administrator shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Corporation in connection with the matters to which the
Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder.
The Administrator, a Delaware business trust, has its principal business offices
at 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. SEI Financial
Management Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation
("SEI"), is the owner of all beneficial interest in the Administrator. SEI and
its subsidiaries and affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and brokerage
and information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
S-17
<PAGE> 99
to the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, CoreFunds,
Inc., CrestFunds, Inc., CUFUND, FMB Funds, Inc., First American Funds, Inc.,
First American Investment Funds, Inc., Marquis Funds(R), Monitor Funds, Morgan
Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Rembrandt
Funds(R), 1784 Funds(R), SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust,
Stepstone Funds, STI Classic Funds, STI Classic Variable Trust, and Turner
Funds.
The Administrator is entitled to a fee which is calculated daily and paid
monthly at an annual rate of .18% of average daily net assets of each of the
Non-Money Market Funds and .15% of average daily net assets of of the Money
Market Fund.
For the fiscal year ended April 30, 1995, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and the Pennsylvania Municipal Bond Fund paid $250,553, $64,522,
$65,623, $52,643, $58,931,$53,552, and $23,985, respectively, in administration
fees. For the fiscal year ended April 30, 1995, the Administrator waived
administration fees for the Pennsylvania Municipal Bond Fund in the amount of
$19,188.
For the fiscal year ended April 30, 1996, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and the Pennsylvania Municipal Bond Fund paid $434,954, $202,943,
$154,955, $99,119, $97,884, $103,634 and $58,419, respectively, in
administration fees. For the fiscal year ended April 30, 1996, the Administrator
waived administration fees for the Pennsylvania Municipal Bond Fund in the
amount of $9,681.
For the period of May 1, 1996 through May 31, 1996, the Intermediate Government
Securities Fund, GNMA Securities Fund, Pennsylvania Tax Exempt Money Market Fund
and the Pennsylvania Municipal Bond Fund paid $13,797, $9,507, $8,969 and
$5,929, respectively, in administration fees.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Corporation are parties to a distribution agreement ("Distribution
Agreement") dated August 1, 1994 which applies to both Class A and Class B
shares of the Funds. The Distributor receives no compensation for distribution
of Class B shares. Class A has a distribution plan dated August 1, 1994 ("Class
A Distribution Plan").
CLASS A DISTRIBUTION PLAN
The Class A Distribution Plan adopted by the Class A Shareholders provides that
each Class A Fund will bear the cost of its distribution expenses as provided in
a budget approved annually and reviewed quarterly by the Directors of the
Corporation who are not interested persons and have no financial interest in the
Plan or any related agreement ("Qualified Directors"). The budget includes (1)
the cost of prospectuses, reports to Shareholders, sales literature and other
materials for potential investors; (2) advertising; (3) expenses incurred in
connection with the promotion and sale of the Corporation's shares including the
Distributor's expenses for travel, communication, and compensation and benefits
for sales personnel; (4) any other expenses reasonably incurred in connection
with the distribution and marketing of the Class A shares subject to approval of
a majority of the Qualified Directors. The Corporation is not obligated to
reimburse the Distributor for any expenditures in excess of the approved budget.
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Directors, or by a majority vote of the outstanding
securities of the Corporation upon not more than 60 days' written notice by
either party.
S-18
<PAGE> 100
The Corporation has adopted the Class A Distribution Plan in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940 which
regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares. Continuance
of the Class A Distribution Plan must be approved annually by a majority of the
Directors of the Corporation and by a majority of the Qualified Directors. The
Class A Distribution Plan requires that quarterly written reports of amounts
spent under the Class A Distribution Plan and the purposes of such expenditures
be furnished to and reviewed by the Directors. The Class A Distribution Plan may
not be amended to increase materially the amount which may be spent thereunder
without approval by a majority of the outstanding shares of the Corporation. All
material amendments of the Plan will require approval by a majority of the
Directors of the Corporation and of the Qualified Directors.
For the fiscal years ended April 30, 1995 and April 30, 1996 and for the period
of May 1, 1996 through May 31, 1996, no distribution fees were paid.
REDUCED SALES CHARGES
Persons maintaining the following accounts with the Adviser or its affiliates
may be eligible for reduced sales charges: Classic Choice(SM), Integra Max(SM)
and Benefit Banking. Please contact the Distributor for further details.
DIRECTORS AND OFFICERS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws governing Maryland corporations. The Directors and executive
officers of the Corporation and their principal occupations for the last five
years are set forth below.
Certain officers of the Trust also serve as Trustees and/or officers of the
Achievement Funds Trust; The Advisors' Inner Circle Fund; The Arbor Fund; ARK
Funds;, Bishop Street Funds; CoreFunds, Inc.; CrestFunds, Inc.; CUFUND, FMB
Funds, Inc.; First American Funds, Inc.; First American Investment Funds; Inc.;
Marquis Funds(R); Monitor Funds; Morgan Grenfell Investment Trust; The PBHG
Funds, Inc.; The Pillar Funds; Rembrandt Funds(R); 1784 Funds(R); SEI Asset
Allocation Trust; SEI Daily Income Trust; SEI Index Funds; SEI Institutional
Investments Trust; SEI Institutional Managed Trust; SEI International Trust; SEI
Liquid Asset Trust; SEI Tax Exempt Trust; Stepstone Funds; STI Classic Funds;
STI Classic Variable Trust; and Turner Funds, open-end management investment
companies that are managed by the Administrator and distributed by the
Distributor.
ROBERT A. NESHER - Chairman of the Board of Directors* - Date of Birth: 8/17/46.
Retired since 1994. Director, Executive Vice President of SEI 1986-1994.,
Director and Executive Vice President of the Administrator and the Distributor
1981-1994.
JOHN T. COONEY - Director** - Date of Birth: 1/20/27. Retired since 1992.
Formerly Vice Chairman of Ameritrust Texas N.A. (1989-1992), and MTrust Corp.
(1985-1989).
WILLIAM M. DORAN - Director* - Date of Birth: 5/26/40. Partner of Morgan, Lewis
& Bockius LLP (law firm). Counsel to the Trust, Administrator and Distributor
for the past five years. Director and Secretary of SEI.
FRANK E. MORRIS - Director** - Date of Birth: 12/30/23. Retired since 1990.
Peter Drucker Professor of Management, Boston College since 1989. President,
Federal Reserve Bank of Boston (1968-1988).
ROBERT A. PATTERSON - Director** - Date of Birth: 11/5/17. Pennsylvania State
University Senior Vice President, Treasurer (Emeritus). Financial and Investment
Consultant, Professor of Transportation (1984-present). Vice President-
Investments, Treasurer, Senior Vice President (Emeritus) (1982-1984). Director,
Pennsylvania Research Corp. Member and Treasurer, Board of Trustees of Grove
City College.
S-19
<PAGE> 101
GENE PETERS - Director** - Date of Birth: 6/3/29. Private investor from 1987 to
present. Vice President and Chief Financial Officer, Western Company of North
America (petroleum service company) (1980-1986). President of Gene Peters and
Associates (import company) (1978-1980). President and Chief Executive Officer
of Jos. Schlitz Brewing Company before 1978.
JAMES M. STOREY - Director** - Date of Birth: 4/12/31. Retired since 1993.
Formerly Partner of Dechert Price & Rhoads (law firm).
DAVID G. LEE - President, Chief Executive Officer - Date of Birth: 4/16/52.
Senior Vice President of the Administrator and Distributor since 1993. Vice
President of the Administrator and Distributor (1991-1993). President, GW Sierra
Trust Funds before 1991.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Date of Birth: 10/18/53.
Vice President and Assistant Secretary of the Administrator and Distributor
since 1983.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Date of Birth: 4/15/61.
Senior Vice President & General Counsel of the Administrator and the Distributor
since 1994. Vice President and Assistant Secretary of the Administrator and the
Distributor 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm) prior
to 1992.
KATHRYN L. STANTON - Vice President, Assistant Secretary - Date of Birth:
11/19/58. Vice President, Assistant Secretary of the Administrator and
Distributor since 1994. Associate, Morgan, Lewis & Bockius LLP (law firm)
1989-1994.
TODD CIPPERMAN - Vice President, Assistant Secretary - Date of Birth: 2/14/66.
Vice President and Assistant Secretary of the Administrator and Distributor
since May, 1995, Associate, Dewey Ballantine (law firm) 1994-1995, Associate,
Winston & Strawn (law firm) 1991-1995.
JOSEPH LYDON - Vice President, Assistant Secretary - Date of Birth: 9/27/59.
Director of Business Administration, SEI Corporation since April, 1995; Vice
President of Fund Group, Vice President of the Advisor - Dreman Value
Management, LP, President of Dreman Financial Services, Inc. from 1989 to 1995.
BARBARA A. NUGENT - Vice President, Assistant Secretary - Date of Birth: 6/18/56
- - Vice President and Assistant Secretary of SEI Corporation, the Distributor and
Administrator. Associate, Drinker Biddle & Reath (law firm), 1994-1996.
Assistant Vice President/Administration, Delaware Service Company, Inc.,
1981-1994.
MARC H. CAHN - Vice President, Assistant Secretary - Date of Birth: 6/19/57 -
Vice President and Assistant Secretary of SEI, the Distributor and
Administrator. Associate General Counsel, Barclays Bank PLC, 1995-1995. Counsel
for First Fidelity Bancorporation prior to 1995.
JEFFREY A. COHEN - Controller, Chief Accounting Officer - CPA, Director,
International and Domestic Funds Accounting - SEI Corporation from 1991 to
present; Price Waterhouse, Audit Manager - before 1991.
RICHARD W. GRANT - Secretary - Partner of Morgan, Lewis & Bockius LLP, (law
firm), Counsel to the Trust, Administrator and the Distributor.
*Messrs. Nesher and Doran are Directors who may be deemed to be "interested"
persons of the Corporation as the term is defined in the Investment Company Act
of 1940.
**Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of the
Audit Committee of the Corporation.
S-20
<PAGE> 102
The Directors and officers of the Corporation own less than 1% of the
outstanding shares of the Corporation.
<TABLE>
<CAPTION>
Total
Aggregate Pension or Compensation
Compensation Retirement Estimated Annual From Registrant
Name of Person From Registrant Benefits Accrued Benefits Upon and Fund
and Position for FYE 4/30/96 as Part of the Retirement Complex Paid to
Fund Expenses Directors for FYE
4/30/96
<S> <C> <C> <C> <C>
Robert A. Nesher* $0 N/A N/A $0 for services
on 1 Board
John T. Cooney $5,900 N/A N/A $5,900 for
services on 1
Board
William M. Doran* $0 N/A N/A $0 for services
on 1 Board
Frank E. Morris $5,900 N/A N/A $5,900 for
services on 1
Board
Robert A. Patterson $5,900 N/A N/A $5,900 for
services on 1
Board
Gene Peters $5,900 N/A N/A $5,900 for
services on 1
Board
James M. Storey $5,900 N/A N/A $5,900 for
services on 1
Board
</TABLE>
*Messrs. Nesher and Doran are Directors who may be deemed to be "interested"
persons of the Corporation as the term is defined in the Investment Company Act
of 1940.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other Shareholder reports to Shareholders of record.
PERFORMANCE
Yields. Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth below and differences in the
methods used in valuing portfolio instruments.
The yield of the money market fund fluctuates, and the annualization of a week's
dividend is not a representation by the Corporation as to what an investment in
a money market fund will actually yield in the future. Actual yields will depend
on such variables as asset quality, average asset maturity, the type of
S-21
<PAGE> 103
instruments the Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors.
Money Market Fund Yields. From time to time the Pennsylvania Tax-Exempt Money
Market Fund (the "Money Market Fund") advertises its "current yield" and
"effective compound yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "current yield" of the
Money Market Fund refers to the income generated by an investment in the Fund
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "current yield" because of the compounding effect of this
assumed reinvestment.
The current yield of the Money Market Fund will be calculated daily based upon
the seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change by
the value of the account at the beginning of the same period to obtain the base
period return and multiplying the result by (365/7). Realized and unrealized
gains and losses are not included in the calculation of the yield. The effective
compound yield of the Fund is determined by computing the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield = (Base
Period Return + 1) 365/7) - 1. The current and the effective yields reflect the
reinvestment of net income earned daily on portfolio assets.
The Pennsylvania Tax Exempt Money Market Fund may also calculate tax-equivalent
yields. Tax equivalent yields are computed by dividing that portion of the
Fund's yield which is tax-exempt by one minus a stated federal and state income
tax rate and adding the product to that portion, if any, of the Fund's yield
that is not tax-exempt. (Tax equivalent yields assume the payment of Federal
income taxes at a rate of 31% and Pennsylvania income taxes at a rate of 3%.)
For the 7-day period ended April 30, 1996, the money market funds' current,
effective and tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
7-Day
7-Day Tax-
7-Day Tax- Equivalent
Effective Yield Equivalent Effective
Portfolio 7-Day Yield Yield Yield
<S> <C> <C> <C> <C>
Pennsylvania Tax Exempt Money 3.37% 3.38% 5.11% 5.12%
Market Fund
Prime Obligations Money Market 4.81% 4.93% N/A N/A
Fund
Treasury Securities Money 4.76% 4.83% N/A N/A
Market Fund
</TABLE>
S-22
<PAGE> 104
For the 7-day period ended May 31, 1996, the Money Market Fund's current,
effective and tax-equivalent yields were as follows:
<TABLE>
<CAPTION>
7-Day
7-Day Tax-
7-Day Tax- Equivalent
Effective Yield Equivalent Effective
Portfolio 7-Day Yield Yield Yield
<S> <C> <C> <C> <C>
Pennsylvania Tax Exempt Money 3.16% 3.21% 4.79% 4.86%
Market Fund
</TABLE>
Other Yields. From time to time, GNMA Securities and Intermediate Government
Securities Funds may advertise a 30-day yield, and the Pennsylvania Municipal
Bond Fund may advertise a 30-day yield and a 30-day tax equivalent yield. These
figures will be based on historical earnings and are not intended to indicate
future performance. The 30-day yield of these Funds refers to the annualized
income generated by an investment in the Funds over a specified 30-day period.
The yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = (2 (a-b/cd + 1)(6) - 1) where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
Tax equivalent yields are computed by dividing that portion of a Fund's yield
which is tax-exempt by one minus a stated federal and/or state income tax rate
and adding the product to that portion, if any, of the Fund's yield that is not
tax-exempt. (Tax equivalent yields assume the payment of Federal income taxes at
a rate of 31% and Pennsylvania income taxes at a rate of 3%.)
For the 30 day period ended April 30, 1996, the yields on the Funds, other than
the money market funds, were as follows:
<TABLE>
<CAPTION>
30-day
Portfolio 30-day Tax-Equivalent
Yield Yield
<S> <C> <C>
Pennsylvania Municipal Bond Fund: 4.10% 6.21%
Intermediate Government Securities 5.56% N/A
Fund
GNMA Securities Fund 6.23% N/A
Equity Growth Fund 1.04% N/A
</TABLE>
S-23
<PAGE> 105
For the 30 day period ended May 31, 1996, the yields on the Funds, other than
the money market funds, were as follows:
<TABLE>
<CAPTION>
30-day
Portfolio 30-day Tax-Equivalent
Yield Yield
<S> <C> <C>
Pennsylvania Municipal Bond Fund: 4.16% 6.30%
Intermediate Government Securities 5.62% N/A
Fund
GNMA Securities Fund 6.05% N/A
</TABLE>
Total Return. From time to time, the non-Money Market Funds may advertise total
return on an "average annual total return" basis and on an "aggregate total
return" basis for various periods. Average annual total return reflects the
average annual percentage change in the value of an investment in a Fund over a
particular measuring period. Aggregate total return reflects the cumulative
percentage change in value over the measuring period. Aggregate total return is
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows: P (1 + T)(n) = ERV, where P = a hypothetical initial
payment of $1,000; T = average annual total return; n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated time period as of the end of such period or the
life of the fund. The formula for calculating aggregate total return can be
expressed as (ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends and
capital gain distribution on the reinvestment dates during the period and that
the entire investment is redeemed at the end of the period. In addition the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges. Based
on the foregoing, the aggregate total returns for the Funds from inception
through April 30, 1996, were as follows:
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Class/Without Load
Portfolio With Load One Year Since
Inception
<S> <C> <C> <C>
Pennsylvania Without Load 5.06% 4.92%
Municipal Bond Fund With Load 0.84% 2.44%
Intermediate Without Load 7.09% 6.91%
Government With Load 2.78% 4.38%
Securities Fund
GNMA Securities Without Load 7.97% 8.52%
Fund With Load 3.68% 5.95%
Equity Growth Fund Without Load 29.95% 21.99%
With Load 24.70% 19.11%
</TABLE>
S-24
<PAGE> 106
The aggregate total returns for the Funds from May 1, 1996 through May 31, 1996,
were as follows:
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Class/Without Load
Portfolio With Load One Month Since
Inception
<S> <C> <C> <C>
Pennsylvania Without Load (0.03)% 4.66%
Municipal Bond Fund With Load (4.01)% 2.31%
Intermediate Without Load (0.19)% 6.46%
Government With Load (4.20)% 4.06%
Securities Fund
GNMA Securities Without Load (0.35)% 7.89%
Fund With Load (4.32)% 5.46%
</TABLE>
The Funds' performance may from time to time be compared to other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services),
financial and business publications and periodicals, to broad groups of
comparable mutual funds or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs. The Funds may quote Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance. The Funds may quote
Ibbotson Associates of Chicago, Illinois, which provides historical returns of
the capitals markets in the U.S. The Funds may use long term performance of
these capital markets to demonstrate general long-term risk vs. reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange and the Federal Reserve wire system are open for business.
Currently, the following holidays are observed by the Corporation: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day.
It is the Corporation's policy to pay for redemptions in cash. The Corporation
retains the right, however, to provide for redemptions in whole or in part by a
distribution in-kind of securities held by the Funds in lieu of cash.
Shareholders may incur brokerage charges on the sale of any such securities so
received in payment of redemptions. A Shareholder will at all times be entitled
to aggregate cash redemptions from all Funds of the Corporation during any
90-day period of up to the lesser of $250,000 or 1% of the Corporation's net
assets.
The Corporation reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or
S-25
<PAGE> 107
during the existence of an emergency (as determined by the Securities and
Exchange Commission by rule or regulation) as a result of disposal or valuation
of the Fund's securities is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission has by order permitted. The
Corporation also reserves the right to suspend sales of shares of the Funds for
any period during which the New York Stock Exchange, the Adviser, the
Sub-Advisers, the Administrator and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Pennsylvania Tax-Exempt Money Market Fund
is calculated by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares. Securities will be
valued by the amortized cost method which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of the
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if the
use of amortized cost by the Fund resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in the Fund would be able to obtain
a somewhat higher yield than would result from investment in a company utilizing
solely market values, and existing investors in the Fund would experience a
lower yield. The converse would apply in a period of rising interest rates.
The Money Market Fund's use of amortized cost and the maintenance of the Fund's
net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7
under the Investment Company Act of 1940, provided that certain conditions are
met. These conditions currently require that the Fund maintains a
dollar-weighted average maturity of 90 days or less, not purchase any instrument
having a remaining maturity of more than 397 days and will limit its investments
to those U.S. dollar-denominated instruments which the Directors determine to
present minimal credit risks and which are of "high quality" as determined by
any major rating service or, if not rated, are determined by the Directors to be
of comparable quality. The regulations also require the Directors to establish
procedures which are reasonably designed to stabilize the net asset value per
share at $1.00 for the Fund. Such procedures include the determination of the
extent of deviation, if any, of the Fund's current net asset value per share
calculated using available market quotations from the Fund's amortized cost
price per share at such intervals as the Directors deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 1/2 of 1%, the Directors are required to consider
promptly what action, if any, should be initiated, and, if the Directors believe
that the extent of any deviation may result in material dilution or other unfair
results to Shareholders, the Directors are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. Such actions may include the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity; withholding dividends; redeeming shares
in kind; or establishing a net asset value per share by using available market
quotations. In addition, if the Fund incurs a significant loss or liability, the
Directors have the authority to reduce pro rata the number of shares of the Fund
in each Shareholder's account and to offset each Shareholder's pro rata portion
of such loss or liability from the Shareholder's accrued but unpaid dividends or
from future dividends while each other Fund must annually distribute at least
90% of its investment company taxable income.
The securities of the non-Money Market Funds are valued by the Administrator
pursuant to prices and valuations provided by an independent pricing service.
The pricing service relies primarily on prices of actual market transactions as
well as trader quotations. However, the service may also use a matrix system to
determine valuations, which system considers such factors as security prices,
yields, maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures
S-26
<PAGE> 108
of the pricing service and its valuations are reviewed by the officers of the
Corporation under the general supervision of the Directors. Although the
methodology and procedures are identical, the net asset value per share of Class
A and Class B shares of Funds other than the Money Market Fund may differ
because of the distribution expenses charged to Class A shares.
TAXES
The following is only a summary of certain income tax considerations generally
affecting a Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
income tax liabilities.
FEDERAL INCOME TAX
ALL FUNDS
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) (the "Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) the Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks, securities or certain other investments held for
less than three months; (iii) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer; and (iv) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer, or of two or more issuers which are engaged in the same, similar or
related trades or businesses if the Fund owns at least 20% of the voting power
of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts.
A dividends received deduction is available to corporations that receive
dividends from domestic corporations. Dividends paid by an equity fund will be
eligible for the dividends received deduction for corporate shareholders to the
extent they are derived from dividends from domestic corporations and to the
extent that the respective security has been held for at least three months.
Equity Growth Fund Shareholders will be advised each year of the portion of
ordinary income dividends eligible for the deduction.
Dividends received from other funds, e.g., money market or fixed income funds,
will not be eligible for the dividends received deduction. Individual
shareholders are not entitled to the dividends received deduction regardless of
which fund paid the dividend.
S-27
<PAGE> 109
ADDITIONAL CONSIDERATION FOR PENNSYLVANIA TAX EXEMPT MONEY MARKET AND MUNICIPAL
BOND FUNDS
As noted in the Prospectuses, exempt interest dividends are generally excludable
from a Shareholder's gross income for regular federal income tax purposes.
Exempt-interest dividends may nevertheless be subject to the alternative minimum
tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code or the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Alternative Minimum Tax is imposed at the rate of 26-28% in the case of
non-corporate taxpayers and at the rate of 20% in the case of corporate
taxpayers, to the extent it exceeds the taxpayer's regular tax liability. The
Environmental Tax is imposed at the rate of 0.12% and applies only to corporate
taxpayers. The Alternative Minimum Tax and the Environmental Tax may be imposed
in two circumstances. First, exempt-interest dividends derived from certain
"private activity bonds" issued after August 7, 1986, will generally be an item
of tax preference (and therefore potentially subject to the Alternative Minimum
Tax for both corporate and non-corporate taxpayers, and the Environmental Tax
for corporate taxpayers only). Second, in the case of exempt-interest dividends
received by corporate Shareholders, all exempt-interest dividends, regardless of
when the bonds from which they are derived were issued or whether they are
derived from private activity bonds, will be included in the corporation's
"adjusted current earnings," as defined in Section 56(g) of the Code, in
calculating the corporation's alternative minimum taxable income for purposes of
determining the Alternative Minimum Tax and the Environmental Tax.
Any gain or loss recognized on a sale or redemption of shares of either Fund by
a Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. Any loss recognized by a Shareholder upon the sale or redemption of shares
of either Fund held for six months or less, however, will be disallowed to the
extent of any exempt-interest dividends received by the Shareholder with respect
to such shares. If shares on which a net capital gain distribution has been
received are subsequently sold or redeemed and such shares have been held for
six months or less, any loss recognized will be treated as a long-term capital
loss to the extent of the long-term capital gain distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry shares of
the fund will not be deductible for federal income tax purposes to the extent
that the Fund distributes exempt-interest dividends during the taxable year. The
deduction otherwise allowable to property and casualty insurance companies for
"losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. [Up to 85 percent of the Social
Security benefits or railroad retirement benefits received by an individual
during any taxable year will be included in the gross income of such individual
if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.]
The Funds may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
bonds or private activity bonds. A "substantial user" is defined generally to
include certain persons who regularly use a facility financed by the proceeds of
such bonds in their trade or business. Such entities or persons should consult
their tax advisors before purchasing shares of either Fund.
Issuers of bonds purchased by the Fund (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds to satisfy certain requirements of the Code that must be satisfied
subsequent to the issuance of such bonds. Investors should be aware that
exempt-interest dividends derived from such bonds may become subject to federal
income taxation retroactively to the date of issuance of the bonds to which such
dividends are attributable if such
S-28
<PAGE> 110
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
If a Fund should fail to qualify as a regulated investment company for any
taxable year, the Fund would pay tax on its taxable investment income and
capital gains at regular corporate rates without any deductions for amounts
distributed to Shareholders. In addition, all of the Fund's distributions to
Shareholders would be taxable as ordinary income and would qualify for the
corporate dividends-received deduction in the case of corporate shareholders.
STATE TAXES
A Fund is generally not liable for any income or franchise tax in Maryland if it
qualifies as a RIC for federal income tax purposes. Depending upon applicable
state and local law, distributions by the Funds to Shareholders and the
ownership of shares may be subject to state and local taxes.
Many states allow income received from certain United States Government
obligations that is tax exempt when received directly to be tax exempt when
received as income dividends from an investment company. Not all states permit
such income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income dividend be derived from state
tax-exempt interest before any portion of the income dividends may be exempt.
The Funds will inform Shareholders annually of the percentage of income that is
derived from direct United States Government obligations. Shareholders should
consult their tax advisors to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in their particular
states.
PENNSYLVANIA TAXATION
Dividends paid by a Fund will not be subject to the Pennsylvania personal income
tax or to the Philadelphia School District investment net income tax to the
extent that the dividends are attributable to interest received by such Fund
from its investments in obligations issued by the Commonwealth of Pennsylvania,
any public authority, commission, board or other agency created by the
Commonwealth, any political subdivision of the Commonwealth or any public
authority created by any such political subdivision (referred to as
"Pennsylvania Municipal Obligations"), and obligations issued by the U.S.
Government, including obligations issued by U.S. possessions (referred to as
"U.S. Obligations"). Dividends or distributions by the Fund to a Pennsylvania
resident that are attributable to other sources may be subject to the
Pennsylvania personal income tax and (for residents of Philadelphia) to the
Philadelphia School District investment net income tax.
Dividends paid by a Fund which are excludable as exempt income for federal tax
purposes are not subject to the Pennsylvania corporate net income tax. An
additional deduction from Pennsylvania taxable income is permitted for the
amount of dividends paid by a Fund attributable to interest received by the Fund
from its investments in Pennsylvania Municipal Obligations and U.S. Obligations
to the extent included in federal taxable income, but such a deduction is
reduced by any interest on indebtedness incurred to carry the securities and
other expenses incurred in the production of such interest income, including
expenses deducted on the federal income tax return that would not have been
allowed under the Internal Revenue Code if the interest were exempt from federal
income tax. Dividends or distributions by a Fund attributable to other sources
may be subject to the Pennsylvania corporate net income tax. It is the current
position of the Pennsylvania Department of Revenue that shares of a Fund are
considered exempt assets (with a pro rata exclusion based on the value of the
Fund attributable to its investments in Pennsylvania Municipal Obligations and
U.S. Obligations) for purposes of determining a corporation's capital stock
value subject to the Pennsylvania capital stock/franchise tax.
Shares of a Fund are exempt from personal property taxes imposed by some
counties in Pennsylvania to the extent that the Fund's portfolio consists of
Pennsylvania Municipal Obligations and U.S. Obligations.
S-29
<PAGE> 111
FUND TRANSACTIONS
Subject to policies established by the Directors, the Adviser and Sub-Advisers
are responsible for placing the orders to execute transactions for the Funds. In
placing orders, it is the policy of the Adviser and Sub-Adviser to seek to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread), the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, and the
firm's risk in positioning the securities involved. While the Adviser and
Sub-Adviser generally seeks reasonably competitive spreads or commissions, the
Corporation will not necessarily be paying the lowest spread or commission
available. The Corporation will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the Securities and Exchange Commission (the "SEC").
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
and Sub-Adviser will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Money market securities are generally traded on a net basis and do
not normally involve either brokerage commissions or transfer taxes. The cost of
executing portfolio securities transactions of the Corporation will primarily
consist of dealer spreads and underwriting commissions.
The Corporation does not expect to use one particular dealer, but subject to the
Corporation's policy of seeking the best net results, dealers who provide
supplemental investment research to the Adviser and Sub-Advisers may receive
orders for transactions by the Corporation. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Adviser and Sub-Advisers under their Advisory Agreements, and the expenses of
the Adviser and Sub-Advisers will not necessarily be reduced as a result of the
receipt of such supplemental information.
It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor which is a registered broker-dealer in conformity with
the 1940 Act, the Securities Exchange Act of 1934 and rules promulgated by the
SEC. Under these provisions, the Distributor (or an affiliate of the Adviser) is
permitted to receive and retain compensation for effecting portfolio
transactions for the Funds on an exchange if a written contract is in effect
between the Distributor and the Corporation expressly permitting the Distributor
to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by the
Corporation for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
renumeration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." In addition, the
Funds may direct commission business to one more designated broker/dealers,
including the Distributor, in connection with such broker/dealer's payment of
certain of the Funds' expenses. The Directors, including those who are not
"interested persons" of the Corporation, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
Since the Corporation does not market its shares through intermediary
broker-dealers, it is not the Corporation's practice to allocate brokerage
business on the basis of sales of its shares which may be made through such
firms. However, the Adviser may place Fund orders with qualified broker-dealers
who recommend the Corporation to clients, and may, when a number of brokers and
dealers can provide best price and execution on a particular transaction,
consider such recommendations by a broker or dealer in selecting among
broker-dealers.
S-30
<PAGE> 112
The Portfolio turnover rate for each Non-Money Market Fund for the fiscal year
ended April 30, 1996, was 22%, 94%, 149% and 168% for the Pennsylvania Municipal
Bond, Intermediate Government Securities, GNMA Securities, and Equity Growth
Funds, respectively.
The Portfolio turnover rate for each Non-Money Market Fund for the period of May
1, 1996 through May 31, 1996, was 0%, 2% and 1% for the Pennsylvania Municipal
Bond, Intermediate Government Securities and GNMA Securities Funds,
respectively.
For the Fiscal Year ended April 30, 1995 the Equity Growth paid $143,000,
$2,557, and $57,200 in total dollar amount of brokerage commissions, total
brokerage commissions paid to SFS in connection with Repurchase Agreement
transactions, and total dollar amount of brokerage commissions paid for
research.
For the Fiscal Year ended April 30, 1996 the Equity Growth paid $161,254,
$2,584, and [$______] in total dollar amount of brokerage commissions, total
brokerage commissions paid to SFS in connection with Repurchase Agreement
transactions, and total dollar amount of brokerage commissions paid for
research. No other Brokerage Transactions or Commissions were paid by this or
any other Fund for the Fiscal Year ended April 30, 1996.
DESCRIPTION OF SHARES
The Articles of Incorporation authorize the issuance of an unlimited number of
shares of each series and of each class of shares thereof. Each Class A and
Class B share of that Fund represents an equal proportionate interest in that
Fund with each other Class A and Class B shares of that Fund. Shareholders are
entitled upon liquidation to a pro rata share in the net assets of the Funds,
Shareholders have no preemptive rights. The Articles of Incorporation provide
that the Directors of the Corporation may create additional series of shares.
All consideration received by the Corporation for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Corporation is a Maryland corporation.
5% SHAREHOLDERS
As of August 1, 1996, the following persons were the only persons who were
record owners (or to the knowledge of the Corporation, beneficial owners) of 5%
or more of the shares of the Portfolios.
Pennsylvania Tax-Exempt Money Market Fund - Class A
<TABLE>
<CAPTION>
Name and Address Percent of Fund
<S> <C>
Integra Trust Co., N.A. 86.74%
300 Fourth Avenue
Pittsburgh PA, 15278-0001
Integra Financial Corporation 9.79%
Omnibus Account for Integra Bank Pittsburgh
300 Fourth Avenue 2-191
Pittsburgh PA, 15278-0001
</TABLE>
S-31
<PAGE> 113
<TABLE>
<CAPTION>
Pennsylvania Tax-Exempt Money Market Fund - Class B
Name and Address Percent of Fund
<S> <C>
SEI Corporation 100%
680 E. Swedesford Road
Wayne, PA 19087-1610
Pennsylvania Municipal Bond Fund - Class A
Name and Address Percent of Fund
Sheldon & Co 99.59%
c/o National City, Attn: TR Mutual Funds
P.O. Box 94777 Loc 5312
Cleveland, OH 44101-4777
Pennsylvania Municipal Bond Fund - Class B
Name and Address Percent of Fund
SEI Coporation 100%
680 E. Swedesford Road
Wayne, PA 19087-1610
Intermediate Government Securities Fund - Class A
Name and Address Percent of Fund
Sheldon & Co 98.03%
c/o National City, Attn: TR Mutual Funds
P.O. Box 94777 Loc 5312
Cleveland, OH 44101-4777
Intermediate Government Securities Fund - Class B
Name and Address Percent of Fund
SEI Coporation 100%
680 E. Swedesford Road
Wayne, PA 19087-1610
GNMA Securities Fund - Class A
Name and Address Percent of Fund
Sheldon & Co 97.43%
c/o National City, Attn: TR Mutual Funds
P.O. Box 94777 Loc 5312
Cleveland, OH 44101-4777
</TABLE>
S-32
<PAGE> 114
<TABLE>
<CAPTION>
GNMA Securities Fund - Class B
Name and Address Percent of Fund
<S> <C>
SEI Coporation 100%
680 E. Swedesford Road
Wayne, PA 19087-1610
Equity Growth Fund - Class A
Name and Address Percent of Fund
Sheldon & Co 94.00%
c/o National City, Attn: TR Mutual Funds
P.O. Box 94777 Loc 5312
Cleveland, OH 44101-4777
Equity Growth Fund - Class B
Name and Address Percent of Fund
SEI Coporation 100%
680 E. Swedesford Road
Wayne, PA 19087-1610
</TABLE>
EXPERTS
The financial statements included in this Statement of Additional Information
and the Selected Per Share Data and Ratios included in the Prospectuses have
been audited by Cooper & Lybrand L.L.P. independent public accountants, as
indicated in their report, with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving the report.
FINANCIAL STATEMENTS
S-33
<PAGE> 115
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- -------------------------------------------------------
<S> <C>
COMMON STOCKS (88.7%)
- -------------------------------------------------------
AEROSPACE & MISCELLANEOUS (5.5%)
Allied Signal 10,700 $ 622
General Dynamics 3,200 202
Lockheed Martin 8,000 645
Tyco International 28,300 1,093
United Technologies 7,100 785
----------------------------------------------------
Total Aerospace & Miscellaneous 3,347
------
AUTOMOTIVE (1.9%)
General Motors 12,000 651
Goodyear Tire & Rubber 3,600 188
Lear Seating* 9,700 320
- -------------------------------------------------------
Total Automotive 1,159
------
BANKS (3.6%)
Bank of Boston 9,600 464
BayBanks 1,000 105
Chase Manhattan 14,400 992
Cullen/Frost Bankers 3,400 167
Signet Banking 3,200 78
U.S. Bancorp 6,400 207
Wells Fargo 799 194
----------------------------------------------------
Total Banks 2,207
------
BUILDING & CONSTRUCTION (1.6%)
American Standard* 16,200 458
Foster Wheeler 8,200 379
Fluor 700 46
Masco 3,400 93
----------------------------------------------------
Total Building & Construction 976
------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (000)
- -------------------------------------------------------
<S> <C> <C>
CHEMICALS (2.5%)
Air Products & Chemicals 5,000 $ 286
E.I. du Pont de Nemours 4,800 386
Hercules 5,600 339
Monsanto 3,300 500
----------------------------------------------------
Total Chemicals 1,511
------
CONTAINERS & PACKAGING (0.7%)
Crown Cork and Seal* 9,570 438
----------------------------------------------------
Total Containers & Packaging 438
------
ELECTRICAL EQUIPMENT (0.1%)
Cooper Industries 1,700 72
----------------------------------------------------
Total Electrical Equipment 72
------
ENERGY (4.8%)
Amoco 9,200 671
Atlantic Richfield 2,400 283
Dresser Industries 5,200 166
Enron 7,400 298
Exxon 3,600 306
Kerr-McGee 2,200 140
Mobil 5,400 621
Schlumberger 3,000 265
Union Texas Petroleum 11,000 213
----------------------------------------------------
Total Energy 2,963
</TABLE>
<PAGE> 116
______
<TABLE>
<S> <C> <C>
ENVIRONMENTAL SERVICES (0.6%)
WMX Technologies 11,400 396
----------------------------------------------------
Total Environmental Services 396
------
FINANCIAL SERVICES (6.0%)
American International Group 7,850 717
Chubb 3,500 331
Dean Witter Discover 600 33
Federal Home Loan Mortgage
Corporation 6,000 500
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 13
<PAGE> 117
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
- -------------------------------------------------------
<S> <C> <C>
Federal National Mortgage
Association 2,200 $ 67
General Re 2,900 414
ITT Hartford Group 6,100 298
MGIC Investment 7,500 407
PMI Group 8,100 344
Travelers 9,300 572
----------------------------------------------------
Total Financial Services 3,683
------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS (9.7%)
Coca Cola 5,800 473
Colgate-Palmolive 2,100 161
CPC International 14,800 1,023
Duracell International 2,400 109
Gillette 3,300 178
Newell 14,100 402
PepsiCo 11,800 749
Philip Morris 10,900 982
Procter & Gamble 12,800 1,082
Ralston-Ralston Purina Group 4,800 280
Sara Lee 7,700 239
Sysco 7,300 235
----------------------------------------------------
Total Food, Beverage, Tobacco &
Household Products 5,913
------
MACHINERY (5.2%)
Deere 10,600 412
Emerson Electric 7,600 636
General Electric 16,800 1,302
General Signal 21,600 821
----------------------------------------------------
Total Machinery 3,171
------
MEDIA & LEISURE (6.3%)
Carnival 34,600 1,003
Marriott 9,500 463
Mattel 10,500 273
Tele-Communications, Cl A* 38,000 727
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (000)
- -------------------------------------------------------
<S> <C> <C>
Viacom, Cl B* 18,100 $ 742
Walt Disney 9,976 618
- -------------------------------------------------------
Total Media & Leisure 3,826
------
MEDICAL PRODUCTS & SERVICES (13.3%)
Abbott Laboratories 8,000 325
Allergan 5,400 191
American Home Products 1,100 116
Amgen* 2,700 155
Boston Scientific* 3,000 129
Bristol-Myers Squibb 5,700 469
Bush Boake Allen* 5,500 149
Columbia/HCA Healthcare 14,120 750
Fisher Scientific International 4,400 164
Healthsouth Rehabilitation* 11,884 441
Johnson & Johnson 14,546 1,346
Medtronic 2,700 143
Merck 14,200 859
Pfizer 11,800 813
Pharmacia Upjohn ADR 8,400 321
Schering-Plough 600 34
SmithKline Beecham PLC 11,000 594
Tenet Healthcare* 18,200 373
Varian Associates 5,700 326
Vencor* 12,000 405
----------------------------------------------------
</TABLE>
<PAGE> 118
<TABLE>
<S> <C>
Total Medical Products & Services 8,103
------
METALS AND MINING (2.0%)
Alumax* 1,200 40
Aluminum Company of America 5,200 324
Molten Metal Technology* 14,000 452
Morton International 2,700 96
Worthington Industries 15,000 306
----------------------------------------------------
Total Metals and Mining 1,218
------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14 APRIL 30, 1996
<PAGE> 119
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
- -------------------------------------------------------
<S> <C> <C>
PAPER & PAPER PRODUCTS (0.4%)
Kimberly-Clark 3,300 $ 240
----------------------------------------------------
Total Paper & Paper Products 240
------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES (1.4%)
Eastman Kodak 3,600 275
Xerox 4,000 586
----------------------------------------------------
Total Photographic Equipment &
Supplies 861
------
RAILROADS (1.6%)
Burlington Northern Santa Fe 3,700 324
Consolidated Rail 1,700 119
Union Pacific 8,300 565
----------------------------------------------------
Total Railroads 1,008
------
RETAIL (7.0%)
Federated Department Stores* 16,700 557
General Nutrition* 7,300 142
Home Depot 27,200 1,289
Intimate Brands 10,500 222
McDonald's 25,000 1,197
Office Depot* 10,200 228
Safeway* 7,700 260
Wal-Mart Stores 17,200 411
----------------------------------------------------
Total Retail 4,306
------
TECHNOLOGY (11.0%)
AMP 2,000 90
Arrow Electronics* 8,900 446
Automatic Data Processing 3,500 136
Bay Networks* 6,100 192
Cisco Systems* 13,000 674
First Data 3,400 258
General Motors, Cl E 11,400 643
</TABLE>
<TABLE>
<CAPTION>
SHARES/FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
Hewlett Packard 4,200 $ 445
IBM 6,200 667
Intel 2,900 196
ITT* 8,100 493
Microsoft* 7,000 794
Motorola 9,600 588
Oracle* 14,050 474
Scientific-Atlanta 32,500 601
----------------------------------------------------
Total Technology 6,697
------
TRANSPORTATION (0.2%)
Southwest Airlines 5,000 149
----------------------------------------------------
Total Transportation 149
------
UTILITIES (3.3%)
Airtouch Communications* 7,100 222
Alltel 3,400 112
AT&T 18,400 1,127
BellSouth 3,000 120
Pacific Telesis Group 1,100 37
Texas Utilities 10,300 415
----------------------------------------------------
Total Utilities 2,033
------
- -------------------------------------------------------
TOTAL COMMON STOCKS
</TABLE>
<PAGE> 120
<TABLE>
<S> <C> <C>
(Cost $48,153) 54,277
- -------------------------------------------------------
REPURCHASE AGREEMENT (10.6%)
- -------------------------------------------------------
Paine Webber
5.320%, dated 04/30/96,
matures 05/01/96,
repurchase price $6,492,777,
(collateralized by FHLMC
REMIC, par value $7,205,000,
7.500%, matures 04/15/26,
market value $6,658,381) $6,463 6,463
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,463) 6,463
- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 15
<PAGE> 121
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) (000)
- -------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS (99.3%)
(Cost $54,616) $60,740
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.7%) 421
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 4,822,286 outstanding
shares of beneficial interest 49,033
Accumulated net realized gain
on investments 6,004
Net unrealized appreciation
on investments 6,124
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $61,161
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 12.68
Maximum sales charge of 4.00% 0.53
-------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $ 13.21
-------
</TABLE>
- -------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
ADR AMERICAN DEPOSITORY RECEIPT
FHLMC FEDERAL HOME LOAN MORTGAGE
PLC PUBLIC LIMITED CORPORATION
REMIC REAL ESTATE MORTGAGE INVESTMENT CONDUIT
<TABLE>
<CAPTION>
FACE MARKET
INTERMEDIATE GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS (54.2%)
- -------------------------------------------------------
FHLMC
5.200%, 11/15/99 $ 370 $ 369
5.750%, 05/15/06 497 484
5.250%, 09/15/06 720 702
5.750%, 03/15/07 298 290
5.750%, 05/15/07 2,308 2,165
7.500%, 08/01/07 6 6
6.000%, 08/15/07 400 381
6.250%, 11/15/07 360 356
7.500%, 12/01/09 TBA 3,000 3,031
6.500%, 11/01/10 968 940
8.500%, 09/01/16 35 37
7.500%, 05/01/17 674 667
8.500%, 06/01/17 213 222
9.000%, 07/15/20 87 89
6.000%, 05/15/21 1,000 953
9.250%, 06/01/23 128 134
7.000%, 05/01/24 1,224 1,183
8.500%, 12/01/24 TBA 1,000 1,031
7.000%, 07/01/25 1,950 1,883
7.000%, 09/01/25 3,886 3,755
7.000%, 10/01/25 1,977 1,910
FHLMC REMIC
8.000%, 11/15/99 2,000 2,064
5.200%, 09/15/05 500 487
4.950%, 01/15/09 100 99
4.750%, 07/25/11 500 493
6.000%, 06/15/19 500 476
8.700%, 02/15/20 500 511
8.500%, 10/15/20 2,000 2,057
</TABLE>
<PAGE> 122
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16 APRIL 30, 1996
<PAGE> 123
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
FNMA
7.610%, 05/01/96 (A) $ 560 $ 577
7.000%, 01/25/99 1,250 1,255
6.500%, 02/25/07 400 390
7.500%, 12/01/07 276 274
7.500%, 03/01/08 245 242
6.500%, 03/01/14 438 411
6.500%, 05/25/15 945 943
6.000%, 11/25/17 400 387
9.500%, 05/01/18 197 211
6.000%, 11/25/19 500 491
FNMA REMIC
6.750%, 01/25/06 500 491
7.500%, 08/25/07 1,000 1,009
8.130%, 01/25/20 1,086 1,105
8.250%, 10/25/20 120 122
GNMA
6.500%, 11/15/08 177 172
9.500%, 06/15/09 62 66
9.500%, 07/15/09 54 58
9.500%, 08/15/09 10 11
9.500%, 09/15/09 33 36
9.500%, 10/15/09 103 110
9.000%, 07/15/16 104 110
9.000%, 08/15/16 166 175
9.000%, 10/15/16 205 216
9.000%, 11/15/16 570 599
9.000%, 03/15/17 593 624
8.000%, 05/15/17 867 880
9.000%, 11/15/17 182 195
9.500%, 06/15/19 360 386
8.500%, 09/15/21 36 38
8.500%, 11/15/21 1,318 1,365
8.500%, 07/15/22 1,144 1,184
7.500%, 08/15/22 24 24
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
8.000%, 08/15/22 $ 29 $ 30
7.500%, 12/15/22 1,262 1,248
8.500%, 08/15/22 178 185
7.500%, 02/15/23 146 145
7.500%, 04/15/23 1,360 1,345
7.500%, 05/15/23 473 468
7.500%, 06/15/23 568 561
7.500%, 07/15/23 400 396
7.000%, 10/15/23 853 823
7.000%, 11/15/23 310 299
7.000%, 12/01/23 359 347
8.000%, 02/15/24 1,921 1,946
8.000%, 11/15/25 30 31
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $49,053) 48,756
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.3%)
- -------------------------------------------------------
FNMA
5.390%, 08/05/98 3,000 2,939
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,958) 2,939
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS (40.9%)
- -------------------------------------------------------
U.S. Treasury Bonds
11.880%, 11/15/03 1,500 1,959
12.000%, 08/15/13 1,100 1,554
U.S. Treasury Notes
8.880%, 11/15/97 (B) 6,200 6,464
</TABLE>
<PAGE> 124
<TABLE>
<S> <C> <C>
7.000%, 04/15/99 10,000 10,202
7.750%, 11/30/99 3,000 3,132
10.750%, 02/15/03 11,000 13,470
- -------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $37,325) 36,781
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 17
<PAGE> 125
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (5.5%)
- -------------------------------------------------------
Lehman Brothers
5.330%, dated 04/30/96,
matures 05/01/96,
repurchase price $4,926,729,
(collateralized by U.S.
Treasury STRIPS, par value
$10,060,000, matures
05/15/06, market value
$5,095,603) $4,926 $ 4,926
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,926) 4,926
- -------------------------------------------------------
TOTAL INVESTMENTS (103.9%)
(Cost $94,262) 93,402
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-3.9%) (3,501)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 8,952,005 outstanding
shares of beneficial interest 90,009
Accumulated net realized gain
on investments 752
Net unrealized depreciation
on investments (860)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $89,901
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $10.04
Maximum sales charge of 4.00% 0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.46
------
- -------------------------------------------------------
- ----------
</TABLE>
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. THE RATE REFLECTED ON
THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON APRIL 30, 1996.
THE DATE SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
(B) SECURITY HELD TO FULLY COLLATERALIZE TBA PURCHASE COMMITMENTS.
FHLMC FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
REMIC REAL ESTATE MORTGAGE INVESTMENT CONDUIT
STRIPS SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
TBA "TO BE ANNOUNCED" MORTGAGE BACKED SECURITY
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS (95.8%)
- -------------------------------------------------------
FHLMC
7.500%, 04/01/00 $ 255 $ 259
7.500%, 10/01/01 65 67
7.000%, 11/01/10 1,101 1,090
7.000%, 06/01/23 425 411
7.000%, 03/01/24 203 197
7.000%, 07/01/25 324 313
7.000%, 09/01/25 499 482
</TABLE>
<PAGE> 126
<TABLE>
<S> <C> <C>
7.000%, 12/01/25 1,195 1,155
GNMA
7.250%, 11/15/04 220 215
7.000%, 10/15/07 307 306
7.000%, 05/15/08 306 304
7.000%, 01/15/09 22 23
7.000%, 02/15/09 163 163
7.000%, 03/15/09 273 272
9.000%, 05/15/09 839 878
6.500%, 06/15/09 46 45
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18 APRIL 30, 1996
<PAGE> 127
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
9.000%, 06/15/09 $ 105 $ 110
9.500%, 07/15/09 169 181
9.500%, 08/15/09 500 534
9.500%, 09/15/09 29 31
9.500%, 10/15/09 6 6
9.500%, 11/15/09 40 44
10.000%, 11/15/09 360 396
10.000%, 12/15/09 31 35
6.500%, 10/15/10 85 83
6.500%, 11/15/10 890 868
7.000%, 12/15/10 1,963 1,952
11.500%, 01/15/13 34 39
11.500%, 02/15/13 70 80
11.500%, 03/15/13 28 32
11.500%, 05/15/13 66 75
7.500%, 06/15/13 310 307
11.500%, 06/15/13 83 97
11.500%, 07/15/13 23 26
11.500%, 08/15/13 5 6
11.250%, 08/15/15 204 231
11.500%, 06/15/15 48 55
11.500%, 10/15/15 42 48
9.500%, 12/15/15 11 12
11.500%, 01/15/16 18 21
9.500%, 03/15/16 133 145
9.000%, 06/15/16 77 81
9.500%, 07/15/16 4 5
9.500%, 08/15/16 164 178
9.000%, 08/20/16 2,070 2,159
10.250%, 08/20/16 30 32
9.500%, 09/15/16 180 194
9.500%, 10/15/16 16 18
9.500%, 11/15/16 39 42
8.500%, 01/15/17 164 170
9.500%, 01/15/17 16 18
8.500%, 02/15/17 199 207
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
8.000%, 03/15/17 $ 16 $ 17
8.500%, 03/15/17 232 241
8.000%, 04/15/17 107 109
8.500%, 04/15/17 1,725 1,784
8.000%, 05/15/17 81 83
8.500%, 05/15/17 86 89
9.500%, 05/15/17 20 22
9.000%, 06/15/17 451 474
8.000%, 07/15/17 105 106
9.500%, 07/15/17 48 53
9.000%, 08/15/17 295 311
9.500%, 08/15/17 177 191
9.500%, 09/15/17 127 138
9.500%, 10/15/17 236 256
8.500%, 11/15/17 580 602
9.500%, 12/15/17 24 26
9.500%, 03/15/18 30 33
10.250%, 03/20/18 133 142
9.500%, 04/15/18 34 38
9.500%, 06/15/18 72 79
9.500%, 07/15/18 14 16
9.500%, 08/15/18 38 41
9.500%, 09/15/18 10 12
10.250%, 09/20/18 148 159
9.500%, 10/15/18 6 7
9.500%, 11/15/18 14 16
9.500%, 12/15/18 70 78
9.500%, 01/15/19 35 38
9.500%, 03/15/19 6 7
9.500%, 05/15/19 31 33
</TABLE>
<PAGE> 128
<TABLE>
<S> <C> <C>
9.500%, 07/15/19 7 8
9.500%, 09/15/19 20 22
9.500%, 10/15/19 37 40
9.500%, 12/15/19 25 27
9.500%, 06/15/20 20 22
9.000%, 07/15/20 229 241
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 19
<PAGE> 129
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
9.500%, 07/15/20 $ 32 $ 35
9.500%, 08/15/20 263 282
9.500%, 10/15/20 51 55
9.500%, 11/15/20 242 260
9.500%, 12/15/20 101 108
8.500%, 04/15/21 411 426
8.500%, 05/15/21 38 40
8.500%, 06/15/21 391 404
9.000%, 06/15/21 471 495
8.500%, 07/15/21 67 70
9.500%, 07/15/21 433 464
8.500%, 09/15/21 627 648
8.500%, 10/15/21 92 96
8.500%, 11/15/21 709 733
8.500%, 12/15/21 1,004 1,038
8.500%, 02/15/22 334 346
8.500%, 03/01/22 188 195
8.500%, 03/15/22 201 208
8.500%, 05/15/22 318 329
8.500%, 08/15/22 358 370
8.500%, 09/15/22 517 536
7.000%, 10/15/22 25 24
8.500%, 11/15/22 310 321
7.000%, 11/15/22 436 421
7.500%, 12/12/22 416 412
7.000%, 01/15/23 342 330
7.500%, 02/15/23 379 375
7.500%, 04/15/23 533 527
7.000%, 04/15/23 28 28
7.000%, 06/15/23 98 95
7.500%, 06/15/23 378 374
7.000%, 07/15/23 1,297 1,249
7.500%, 07/15/23 1,323 1,308
8.000%, 07/15/23 19 20
7.500%, 08/15/23 201 199
7.000%, 08/15/23 2,345 2,261
6.500%, 09/15/23 145 136
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
7.000%, 09/15/23 $ 319 $ 308
6.500%, 10/15/23 1,101 1,032
7.000%, 10/15/23 2,430 2,344
7.500%, 10/15/23 1,753 1,734
7.000%, 11/15/23 448 432
7.000%, 12/15/23 575 555
6.500%, 12/15/23 498 467
6.000%, 12/20/23 446 405
7.000%, 01/15/24 667 644
7.500%, 01/15/24 819 810
7.000%, 02/15/24 1,452 1,401
7.500%, 02/15/24 377 373
8.000%, 02/15/24 21 21
7.000%, 03/15/24 41 40
7.500%, 04/15/24 377 373
8.000%, 04/15/24 1,796 1,820
6.500%, 05/15/24 28 27
7.000%, 05/15/24 615 593
7.500%, 06/15/24 551 545
8.000%, 06/15/24 254 258
8.000%, 08/15/24 92 94
8.000%, 09/15/24 1,328 1,347
8.000%, 06/15/25 63 65
8.000%, 07/15/25 477 484
7.000%, 08/15/25 44 43
8.000%, 08/15/25 1,639 1,663
7.000%, 09/15/25 1,204 1,160
8.000%, 09/15/25 49 50
8.000%, 10/15/25 3,227 3,271
</TABLE>
<PAGE> 130
<TABLE>
<S> <C> <C>
8.000%, 11/15/25 556 565
6.500%, 02/15/26 267 251
8.000%, 02/15/26 84 85
8.000%, 03/15/26 794 806
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $60,147) 59,543
- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20 APRIL 30, 1996
<PAGE> 131
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (4.1%)
- -------------------------------------------------------
Lehman Brothers
5.330%, dated 04/30/96,
matures 05/01/96,
repurchase price $2,562,379,
(collateralized by U.S.Treasury
STRIPS, par value $5,235,000,
matures 05/15/06,
market value $2,657,638) $2,562 $2,562
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,562) 2,562
- -------------------------------------------------------
TOTAL INVESTMENTS (99.9%)
(Cost $62,709) 62,105
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.1%) 56
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 6,142,810 outstanding
shares of beneficial interest 62,127
Accumulated net realized gain
on investments 638
Net unrealized depreciation
on investments (604)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $62,161
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $10.12
Maximum sales charge of 4.00% 0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.54
------
- -------------------------------------------------------
</TABLE>
- ----------
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
FHLMC FEDERAL HOME LOAN MORTGAGE CORPORATION
GNMA GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
STRIPS SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 21
<PAGE> 132
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.3%)
- -------------------------------------------------------
PENNSYLVANIA (99.3%)
Allegheny County, Hospital
Development Authority,
Magee Woman's Hospital
Project, Series O, RB,
Escrowed to Maturity
10.125%, 10/01/02 $ 125 $ 149
Allegheny County, Industrial
Development Authority,
RB
5.250%, 12/01/00 (B) 705 705
Allegheny County, Higher
Education Building Authority,
Duquesne University Project,
AMBAC, RB
6.500%, 06/01/96 (A) 380 423
Allegheny County, Sanitation
Authority, Sewer Revenue,
FGIC, RB
5.728%, 12/01/08 (D) 2,750 1,351
Bradford Area School District,
FGIC, GO
5.250%, 10/01/07 1,000 998
Bucks County, Water & Sewer
Authority , FGIC, RB
6.150%, 12/01/05 455 475
Butler County, Sewer Authority,
RB, Pre-refunded at 100
7.250%, 01/01/04 (C) 120 130
Cumberland County, Messiah
College Project, AMBAC, RB
5.000%, 10/01/07 1,000 965
Dauphin County, General
Authority Health Center, RB
5.150%, 01/01/97 1,000 1,001
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Delaware County, Education
Development Authority,
Villanova University Project, RB,
Pre-refunded at 102
7.750%, 08/01/98 (C) $1,000 $1,093
Delaware River Port Authority,
PA & NJ Bridges, AMBAC, RB
7.375%, 01/01/07 1,500 1,614
Delaware River Port Authority
PA & NJ Bridges, RB,
Escrowed to Maturity
6.000%, 01/15/10 655 665
Erie County, Prison Authority,
MBIA, RB, Pre-refunded
at 100
6.600%, 11/01/01 (C) 1,000 1,091
Greene County, Industrial
Development Authority,
Pollution Control, RB
6.100%, 02/01/07 125 126
Lancaster County,
FGIC, GO
6.100%, 07/01/01 100 100
5.900%, 07/01/99 500 501
Lehigh County,
Series A, AMBAC, GO,
Pre-refunded at 100
6.000%, 10/15/99 (C) 1,250 1,309
Lower Providence Township,
</TABLE>
<PAGE> 133
<TABLE>
<S> <C> <C>
MBIA, GO
5.000%, 05/01/07 215 206
Middletown Township,
Bucks County, SB,
Escrowed to Maturity
6.100%, 10/01/00 380 399
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22 APRIL 30, 1996
<PAGE> 134
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Monroeville, Hospital Authority,
East Suburban Health Center
Project, RB,
Pre-refunded at 100
7.600%, 07/01/04 (C) $ 895 $1,009
Montgomery County, Hospital
Authority, Suburban General
Hospital Project, RB,
Escrowed to Maturity
7.750%, 05/01/02 180 197
Northampton County, Higher
Education Authority,
Lehigh University Project, RB
5.500%, 09/01/98 1,030 1,053
Pennsylvania Housing Finance
Agency, Rental Housing, RB
5.150%, 07/01/03 400 399
5.000%, 01/01/98 450 453
Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series Z, RB
7.000%, 10/01/02 50 53
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subseries B, RB
6.450%, 09/01/04 1,500 1,633
Pennsylvania State
Intergovernmental Co-Op Authority
Special Tax, City of Philadelphia
Funding Project, RB,
Pre-refunded at 100
6.800%, 06/15/02 (C) 1,500 1,657
Pennsylvania State,
Series 1, GO
6.200%, 09/15/04 900 957
Pennsylvania State,
Series 2, GO
4.750%, 06/15/98 565 571
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Pennsylvania State Higher
Education Authority,
Series N, MBIA, RB
5.250%, 06/15/08 $ 405 $ 397
Pennsylvania State Higher
Education Authority, Student
Loan, Series A, FGIC, RB
6.800%, 12/01/00 100 107
Pennsylvania State Higher
Educational Facilities Authority,
University of Pennsylvania
Project, Series A, RB
6.500%, 09/01/04 250 275
5.550%, 09/01/09 1,300 1,293
Pennsylvania State Higher
Educational Facilities Authority,
University of Pennsylvania
Project, Series B, RB
5.250%, 01/01/07 100 99
Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series P, RB
7.200%, 04/01/00 50 53
Pennsylvania State Turnpike
Commission, Series O, FGIC, RB
5.250%, 12/01/01 1,010 1,030
Pennsylvania State Turnpike
Commission, Series D, FGIC, RB,
</TABLE>
<PAGE> 135
<TABLE>
<S> <C> <C>
Escrowed to Maturity
6.700%, 12/01/97 1,100 1,148
Pennsylvania State Turnpike
Commission, Series K, RB,
Escrowed to Maturity
7.250%, 12/01/99 1,230 1,341
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 23
<PAGE> 136
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Philadelphia Gas Works,
Series 13, RB,
Pre-refunded at 102
7.700%, 06/15/01 (C) $ 460 $ 530
Philadelphia Gas Works,
Series 14, FSA, RB
6.250%, 07/01/08 300 321
Philadelphia, Graduate Hospital
Project, RB, Escrowed to Maturity
7.000%, 07/01/10 335 363
Philadelphia, Hospital & Higher
Educational Facilities Authority,
Children's Hospital Project,
Series A, RB, Pre-refunded
at 102
6.500%, 02/15/02 (C) 200 220
Philadelphia School District,
Series A, GO, MBIA
5.800%, 07/01/08 465 476
Philadelphia, Hospital & Higher
Educational Authority, Children's
Hospital Project, Series A, RB
5.100%, 02/15/03 500 501
Philadelphia, Thomas Jefferson
University Hospital, RB,
Escrowed to Maturity
7.000%, 07/01/08 180 198
Philadelphia, Water & Waste
Authority, MBIA, RB
5.500%, 06/15/07 1,500 1,526
Pittsburgh,
Series A, GO, MBIA
5.500%, 09/01/06 955 968
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 800 801
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
Scranton-Lackawanna, Health &
Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 $ 570 $ 603
Seneca Valley School District,
Series A, FGIC, GO
5.700%, 07/01/06 1,000 1,022
Southeastern Pennsylvania
Transportation Authority,
Lease Project, RB
5.750%, 12/01/04 775 776
Swarthmore Borough, College
Authority, RB
6.000%, 09/15/06 855 899
Tyrone School District,
GO, MBIA
5.700%, 09/15/08 1,250 1,258
Union City, Higher Educational
Facilities Financing Authority,
Bucknell University
Project, MBIA, RB
6.200%, 04/01/06 1,000 1,055
- -------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $38,160) 38,543
- -------------------------------------------------------
TOTAL INVESTMENTS (99.3%)
(Cost $38,160) 38,543
- -------------------------------------------------------
</TABLE>
<PAGE> 137
<TABLE>
<S> <C>
OTHER ASSETS AND LIABILITIES, NET (0.7%) 266
- -------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 3,835,561 outstanding
shares of beneficial interest 38,352
Accumulated net realized gain
on investments 74
Net unrealized appreciation
on investments 383
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $38,809
- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
24 APRIL 30, 1996
<PAGE> 138
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA
MUNICIPAL BOND FUND (cont'd)
- -------------------------------------------------------
<S> <C>
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $10.12
Maximum sales charge of 4.00% 0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.54
------
- -------------------------------------------------------
</TABLE>
- ----------
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. RATE REFLECTED ON THE
STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON APRIL 30, 1996. THE
DATE SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
(B) SECURITY IS BACKED BY A LETTER OF CREDIT.
(C) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED
DATE.
(D) THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS REPRESENTS THE
SECURITY'S EFFECTIVE YIELD.
AMBAC AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC FEDERAL GUARANTY INSURANCE CORPORATION
FSA FINANCIAL SECURITY ASSURANCE
GO GENERAL OBLIGATION
MBIA MUNICIPAL BOND INSURANCE ASSOCIATION
RB REVENUE BOND
SB SPECIAL OBLIGATION BOND
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (54.9%)
- -------------------------------------------------------
Associates Corporation of
North America
5.200%, 05/03/96 $10,000 $9,997
Bear Stearns Companies
5.250%, 05/03/96 10,000 9,997
CIESCO
5.220%, 05/03/96 10,000 9,997
Coca-Cola Enterprises
5.150%, 05/06/96 (B) 10,000 9,993
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
Commercial Credit Corporation
5.230%, 05/03/96 $10,000 $ 9,997
Ford Motor Credit
5.330%, 05/02/96 10,000 9,998
General Electric Capital
5.320%, 05/02/96 10,000 9,998
General Motors Acceptance
5.400%, 05/02/96 4,000 3,999
Goldman Sachs
5.280%, 05/06/96 10,000 9,993
IBM Credit
5.230%, 05/06/96 10,000 9,993
John Deere Capital
5.190%, 05/06/96 10,000 9,993
McKenna Triangle
5.230%, 05/06/96 (B) 10,000 9,993
Merrill Lynch
5.250%, 05/02/96 10,000 9,999
Norwest Financial Corporation
5.230%, 05/03/96 10,000 9,997
Prudential Funding
5.270%, 05/02/96 10,000 9,999
Smith Barney
5.250%, 05/06/96 10,000 9,993
</TABLE>
<PAGE> 139
<TABLE>
<S> <C>
Travelers
5.320%, 05/06/96 10,000 9,993
- -------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $163,929) 163,929
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (30.3%)
- -------------------------------------------------------
FFCB
5.256%, 05/06/96 12,000 11,991
FHLB
5.270%, 05/01/96 9,350 9,350
FHLMC 5.247%, 05/06/96 10,000 9,993
5.256%, 05/06/96 18,904 18,890
5.267%, 05/06/96 40,000 39,971
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 25
<PAGE> 140
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $90,195) $90,195
- -------------------------------------------------------
CERTIFICATES OF DEPOSIT (3.7%)
- -------------------------------------------------------
First Bank of South Dakota
5.468%, 05/06/96 (A) $6,000 6,000
FNB Maryland
5.750%, 05/01/96 5,000 5,000
- -------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $11,000) 11,000
- -------------------------------------------------------
REPURCHASE AGREEMENTS (11.5%)
- -------------------------------------------------------
Lehman Brothers
5.330%, dated 04/30/96,
matures 05/01/96,
repurchase price $15,002,221,
(collateralized by U.S. Treasury
STRIPS, par value $30,630,000,
matures 05/15/06, market
value $15,514,743) 15,000 15,000
J.P. Morgan
5.310%, dated 04/30/96,
matures 05/01/96, repurchase
price $19,148,824,
(collateralized by U.S. Treasury
Bond, par value $15,408,000,
9.125%, matures 05/15/18,
market value $19,548,741) 19,146 19,146
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $34,146) 34,146
- -------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $299,270) 299,270
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.4%) (1,118)
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
- -------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 298,151,867 outstanding
shares of beneficial interest $298,152
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $298,152
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A $1.00
- -------------------------------------------------------
</TABLE>
- ----------
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. THE RATE REFLECTED ON THE
STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON APRIL 30, 1996. THE DATE
SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
(B) SECURITY SOLD WITHIN THE TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXEMPT
FROM REGISTRATION UNDER SECTIONS 4-2 OR 144A OF THE SECURITIES ACT OF 1993,
AS AMENDED, AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER
"ACCREDITED INVESTORS."
FFCB FEDERAL FARM CREDIT BANK
FHLB FEDERAL HOME LOAN BANK
FHLMC FEDERAL HOME LOAN MORTGAGE ASSOCIATION
STRIPS SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
<PAGE> 141
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26 APRIL 30, 1996
<PAGE> 142
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS (67.6%)
- -------------------------------------------------------
U.S. Treasury Bills
5.290%, 05/02/96 $80,000 $79,989
5.876%, 05/30/96 19,000 18,915
U.S. Treasury Note
4.375%, 08/15/96 5,000 4,981
- -------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $103,885) 103,885
- -------------------------------------------------------
REPURCHASE AGREEMENTS (32.8%)
- -------------------------------------------------------
Aubrey G. Lanston
5.320%, dated 04/30/96,
matures 05/01/96,
repurchase price $10,410,538,
(collateralized by U.S.Treasury
Note, par value $9,935,000,
matures 07/15/98, market
value $10,608,342) 10,409 10,409
Chase Manhattan Bank
5.330%, dated 04/30/96,
matures 05/01/96,
repurchase price $15,002,221,
(collateralized by U.S. Treasury
Note, par value $15,825,000,
5.750%, matures 08/15/03,
market value $15,300,362) (A) 15,000 15,000
Lehman Brothers
5.350%, dated 04/30/96,
matures 05/01/96,
repurchase price $25,003,715,
(collateralized by various
U.S. Treasury Notes, total par
value $24,448,000, 6.875%-
8.000%, 07/31/99-08/31/99,
total market value
$25,495,358) (A) 25,000 25,000
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
- -------------------------------------------------------
<S> <C>
TOTAL REPURCHASE AGREEMENTS
(Cost $50,409) $50,409
TOTAL INVESTMENTS (100.4%)
(Cost $154,294) 154,294
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.4%) (591)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 153,691,730 outstanding
shares of beneficial interest 153,692
Accumulated net realized gain
on investments 11
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $153,703
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A $1.00
- -------------------------------------------------------
</TABLE>
- ----------
(A) TRI-PARTY REPURCHASE AGREEMENT.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 27
<PAGE> 143
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (101.4%)
- -------------------------------------------------------
PENNSYLVANIA (101.4%)
Allegheny County, Higher
Education Authority,
Duquesne University
Project, AMBAC, RB
3.350%, 03/01/97 $ 640 $ 640
Allegheny County, Higher
Education Building Authority,
University of Pittsburgh
Project, Series 85B
4.000%, 05/02/96 (A) (C) 100 100
Allegheny County, Hospital
Development Authority,
Series D, RB
4.050%, 05/01/96 (A) (C) 200 200
Allegheny County,
Series C-41, GO
4.100%, 05/02/96 (A) 900 900
Allegheny County,
Series C-44, FGIC, GO
4.000%, 06/01/96 685 685
Beaver County, Industrial
Development Authority,
Duquesne Light and Power
Project, Series C, TECP
3.400%, 09/10/96 (C) 1,500 1,500
3.800%, 05/01/96 (C) 1,300 1,300
Berks County, Industrial
Development Authority,
Rilsaw Industrial Project
4.225%, 05/02/96 (A) (C) 2,050 2,050
Bucks County, Industrial
Development Authority,
CPC International Project,
Series 85, RB
3.880%, 05/01/96 (A) 2,000 2,000
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Bucks County, Industrial
Development Authority,
USX Corporation Project
3.700%, 05/01/96 (A) (C) $ 390 $ 390
Chartiers Valley, Commercial
Development Authority,
Sycamore Creek Project, RB
3.150%, 09/01/96 (A) (C) 1,805 1,805
Chester County, Hospital
Authority, Paoli Memorial
Hospital Project, RB,
Pre-refunded at 102
7.625%, 10/01/96 (B) 950 985
Clarks Summit-South Abington,
Sewer Authority, AMBAC, RB,
Pre-refunded at 100
8.125%, 01/01/97 (B) 500 515
Cumberland County, Municipal
Authority, United Methodist
Homes Aging Project, RB
3.950%, 07/03/96 (A) (C) 1,500 1,500
Danville, School District Authority,
MBIA, GO, Pre-refunded at 100
6.650%, 05/01/96 (B) 100 100
Delaware County, Industrial
Development Authority,
British Petroleum Project, RB
4.100%, 05/01/96 (A) 300 300
</TABLE>
<PAGE> 144
<TABLE>
<S> <C> <C>
Delaware County, Industrial
Development Authority,
Henderson/Radnor Joint Venture
Project, RB
4.350%, 05/02/96 (A) (C) 1,150 1,150
Delaware County, PECO
Energy Project, FGIC, TECP
3.450%, 05/06/96 1,100 1,100
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28 APRIL 30, 1996
<PAGE> 145
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
Delaware Valley, Regional
Finance Authority,
Series D, RB
4.250%, 05/07/96 (A) (C) $ 800 $ 800
Delaware Valley, Regional
Finance Authority
4.250%, 05/07/96 (A) (C) 2,200 2,200
Dover Township, Sewer
Authority, MBIA, RB
3.500%, 11/01/96 285 285
East Penn, School District
Authority, Series A, FGIC, GO
3.500%, 09/01/96 400 400
Easton,
Series A, FGIC, GO
4.500%, 12/01/96 300 302
Elizabeth Forward, School District
Authortiy, GO, MBIA
Pre-refunded at 100
8.000%, 05/01/96 (B) 500 500
Erie County, Hospital Authority,
Union City Memorial Hospital
Project, RB
4.200%, 05/02/96 (A) (C) 1,200 1,200
Greater Johnstown, School District
Authority, GO, MBIA,
Escrowed to Maturity
6.350%, 02/01/97 100 102
Hempfield Township, Sewer
Authority, Westmoreland County
Project, FGIC, RB
4.300%, 09/01/96 530 532
Lackawanna, River Basin
Authority, AMBAC, RB
3.500%, 09/01/96 910 910
Lancaster, Higher Education
Authority, Franklin and
Marshall Project, RB
3.850%, 05/01/96 (A) 1,550 1,550
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
Lehigh County, Water and
Sewer Authority,
Series B, FGIC, RB
4.100%, 05/01/96 (A) $ 430 $ 430
Lehigh County, Water
Authority, FGIC, RB
4.100%, 05/01/96 (A) (C) 835 835
Millcreek Township, School
District Authority,
Series B, FGIC, GO,
Pre-refunded at 100
7.100%, 08/15/96 (B) 175 177
Montgomery County, Higher
Education & Health Authority,
Frankford Hospital Project,
RB, Pre-refunded at 102
7.875%, 01/01/97 (B) 1,000 1,047
Montgomery County, Hospital
Authority, Abington Memorial
Hospital Project, RB,
Pre-refunded at 103
8.000%, 06/01/96 (B) 2,800 2,893
Montgomery County, Industrial
Development Authority,
Ikea Property Project, RB
4.150%, 05/02/96 (A) 1,500 1,500
Montgomery County, Industrial
</TABLE>
<PAGE> 146
<TABLE>
<S> <C>
Development Authority, Merck & Co.
Nashville
4.600%, 05/02/96 (A) 1,000 1,000
Montgomery County, Industrial
Development Authority, PECO
Energy Project, TECP
3.400%, 07/24/96 (C) 300 300
Montgomery County, Industrial
Development Authority, Plymouth
Woods Project, RB
4.150%, 05/02/96 (A) (C) 500 500
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 29
<PAGE> 147
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
Montgomery County, Industrial
Development Authority,
Valley Square Project
4.200%, 05/01/96 (A) (C) $1,000 $1,000
Montgomery County, Industrial
Development Authority, Valley
Square Project, RB
4.250%, 05/01/96 (A) (C) 1,400 1,400
Moon Township, Industrial
Development Authority,
Executive Office Association
Project, RB (A) (C)
4.150%, 05/02/96 (A) (C) 1,500 1,500
North Umberland County,
Industrial Development
Authority, Atlas Development
Association (A) (C)
4.150%, 05/02/96 (A) (C) 840 840
Pennsylvania Intergovernment
Co-op Authority, Special Tax
Revenue, City of Philadelphia
Funding Project, FGIC, RB
5.200%, 06/15/96 (C) 300 300
Pennsylvania State, Higher
Education Facilities Authority,
Thomas Jefferson University
Project, Series B, RB
3.300%, 08/26/96 3,500 3,500
Pennsylvania State, Infrastructure
Investment Authority, Penvest
Loan Pool Program, RB
4.050%, 05/01/96 (A) 100 100
Pennsylvania State,
Intergovernment Co-op Authority,
Special Tax Revenue,
City of Philadelphia Funding
Project, FGIC, RB
3.750%, 06/15/96 600 600
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Pennsylvania State,
Series 2, GO,
Pre-refunded at 101.5
7.250%, 05/01/96 (B) $ 250 $ 254
Philadelphia,
Series A, GO, TRAN
4.500%, 06/27/96 1,000 1,001
Philadelphia, Gas Works
Authority, Eleventh Project,
Series C, AMBAC, RB
6.700%, 01/01/97 100 102
Philadelphia, Gas Works
Authority, Tenth Series, RB,
Pre-refunded at 102
7.200%, 07/01/96 (B) 2,100 2,155
Philadelphia, Hospital & Higher
Education Authority, MR Project,
RB, Pre-refunded at 102
8.625%, 08/01/96 (B) 1,500 1,547
Philadelphia, Industrial
Development Authority,
Multi-Family Housing For
Harbor View Towers
Project, RB
4.400%, 05/02/96 (A) (C) 2,650 2,650
Philadelphia, Redevelopment
Authority, Pennsylvania School
For Deaf Project, RB
4.000%, 05/07/96 (A) (C) 2,405 2,405
Philadelphia, Redevelopment
Authority, Rivers Edge Project, RB
</TABLE>
<PAGE> 148
<TABLE>
<S> <C> <C>
4.700%, 05/01/96 (A) (C) 1,000 1,000
Philadelphia, School District
Authority, GO, TRAN
4.500%, 06/28/96 2,000 2,002
Philadelphia, School District
Authority, Series A, GO, MBIA
4.000%, 07/01/96 1,500 1,502
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
30 APRIL 30, 1996
<PAGE> 149
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
Philadelphia, Water & Sewer
Authority, Series 12, RB,
Pre-refunded at 101
7.250%, 07/01/96 (B) $ 200 $ 203
Pittsburgh, Equipment Leasing
Authority, AMBAC, RB
5.950%, 07/01/96 300 301
Pittsburgh, Water & Sewer
Authority, Series A, FGIC, RB
3.500%, 09/01/96 550 550
Sayre, Health Care Facilities
Authority, VHR, Capital Finance
Project, Series F, AMBAC, RB
4.000%, 05/01/96 (A) 1,100 1,100
Schuylkill County, Industrial
Development Authority, Gilberton
Power Project, RB
4.250%, 05/01/96 (A) (C) 2,900 2,900
Schuylkill County, Industrial
Development Authority,
Northeastern Power Company
Project, RB
4.200%, 05/01/96 (A) (C) 1,500 1,500
Schuylkill County, Industrial
Development Authority,
Westwood Energy Project, RB
4.300%, 05/01/96 (A) (C) 1,940 1,940
Scranton - Lackawana, Health
and Welfare Authority,
University of Scranton
Project, RB
3.650%, 11/01/96 (C) 1,500 1,500
Shaler Township, TRAN
3.810%, 12/31/96 1,200 1,202
Warren County, Hospital
Authority, Warren General
Hospital Project, RB
4.150%, 05/02/96 (A) (C) 1,000 1,000
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Whitehall Township, TRAN
3.930%, 12/31/96 $ 700 $ 701
- -------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $71,438) 71,438
- -------------------------------------------------------
TOTAL INVESTMENTS (101.4%)
(Cost $71,438) 71,438
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-1.4%) (1,016)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 70,421,774 outstanding
shares of beneficial interest 70,422
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $70,422
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A $1.00
- -------------------------------------------------------
</TABLE>
- ----------
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. THE RATE REFLECTED ON
THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON APRIL 30, 1996.
THE DATE SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
(B) PRE-REFUNDED SECURITY THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
<PAGE> 150
(C) SECURITY IS BACKED BY A LETTER OF CREDIT.
AMBAC AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC FEDERAL GUARANTY INSURANCE CORPORATION
GO GENERAL OBLIGATION
MBIA MUNICIPAL BOND INSURANCE ASSOCIATION
RB REVENUE BOND
TECP TAX EXEMPT COMMERCIAL PAPER
TRAN TAX AND REVENUE ANTICIPATION NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
APRIL 30, 1996 31
<PAGE> 151
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA
GROWTH GOVERNMENT SECURITIES
FUND SECURITIES FUND FUND
(000) (000) (000)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................ $ 885 $ -- $ --
Interest.............................................. 295 6,072 3,937
------- ------- -------
Total investment income ............................ 1,180 6,072 3,937
------- ------- -------
EXPENSES:
Investment advisory fees.............................. 462 603 385
12b-1 fees............................................ 136 215 138
Administrative fees................................... 98 155 99
Transfer agent fees & expenses........................ 22 27 22
Registration & filing fees............................ 3 15 8
Custody fees.......................................... 26 18 30
Trustee fees.......................................... 3 4 3
Miscellaneous fees.................................... 27 40 28
------- ------- -------
Total expenses...................................... 777 1,077 713
Less: Expenses waived............................... (260) (345) (245)
------- ------- -------
Total net expenses.................................. 517 732 468
------- ------- -------
NET INVESTMENT INCOME.................................... 663 5,340 3,469
------- ------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments............... 9,920 1,517 1,611
Net change in unrealized appreciation (depreciation)
on investments...................................... 3,376 (1,492) (1,242)
------- ------- -------
Net realized and unrealized gain (loss)
on investments.................................... 13,296 25 369
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $13,959 $ 5,365 $ 3,838
======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32 APRIL 30, 1996
<PAGE> 152
INVENTOR FUNDS
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............................................ $ -- $ -- $ -- $ --
Interest.............................................. 1,894 16,896 7,778 2,651
------- ------- ------- -------
Total investment income ............................ 1,894 16,896 7,778 2,651
------- ------- ------- -------
EXPENSES:
Investment advisory fees.............................. 265 1,305 609 311
12b-1 fees............................................ 95 725 338 173
Administrative fees................................... 68 435 203 104
Transfer agent fees & expenses........................ 17 65 36 24
Registration & filing fees............................ 2 5 31 6
Custody fees.......................................... 3 20 32 10
Trustee fees.......................................... 2 17 6 3
Miscellaneous fees.................................... 18 107 72 32
------- ------- ------- -------
Total expenses...................................... 470 2,679 1,327 663
Less: Expenses waived............................... (149) (1,084) (583) (283)
------- ------- ------- -------
Total net expenses.................................. 321 1,595 744 380
------- ------- ------- -------
NET INVESTMENT INCOME.................................... 1,573 15,301 7,034 2,271
------- ------- ------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments............... 74 -- (3) --
Net change in unrealized appreciation (depreciation)
on investments...................................... 179 -- -- --
------- ------- ------- -------
Net realized and unrealized gain (loss)
on investments.................................... 253 -- (3) --
------- ------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 1,826 $15,301 $ 7,031 $ 2,271
======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
33 APRIL 30, 1996
<PAGE> 153
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
EQUITY GROWTH FUND SECURITIES FUND
5/1/95 8/10/94(1) 5/1/95 8/10/94(1)
TO 4/30/96 TO 4/30/95 TO 4/30/96 TO 4/30/95
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 663 $ 513 $ 5,340 $ 2,251
Net realized gain (loss) on investments................. 9,920 556 1,517 (362)
Net change in unrealized appreciation (depreciation)
on investments. 3,376 2,748 (1,492) 632
------- ------- ------- -------
Net increase resulting from operations................ 13,959 3,817 5,365 2,521
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income................................... (663) (513) (5,340) (2,251)
Net realized gains...................................... (4,387) (85) (403) --
------- ------- ------- -------
Total dividends distributed........................... (5,050) (598) (5,743) (2,251)
------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................. 10,851 55,864 47,044 66,686
Reinvestment of cash distributions...................... 198 1 64 2
Cost of shares repurchased.............................. (5,454) (12,427) (10,145) (13,642)
------- ------- ------- -------
Increase in net assets derived from capital
share transactions.... 5,595 43,438 36,963 53,046
------- ------- ------- -------
Net increase in net assets................................. 14,504 46,657 36,585 53,316
------- ------- ------- -------
NET ASSETS:
Beginning of period..................................... 46,657 -- 53,316 --
------- ------- ------- -------
End of period........................................... $61,161 $46,657 $89,901 $53,316
======= ======= ======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period.......... 4,363 -- 5,319 --
Shares issued........................................... 903 5,577 4,610 6,685
Shares issued in lieu of cash distributions............. 17 -- 6 --
Shares repurchased...................................... (461) (1,214) (983) (1,366)
------- ------- ------- -------
Increase derived from capital share transactions...... 459 4,363 3,633 5,319
------- ------- ------- -------
Capital shares outstanding at end of period................ 4,822 4,363 8,952 5,319
======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
34 APRIL 30, 1996
<PAGE> 154
INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA MUNICIPAL
GNMA SECURITIES FUND BOND FUND
5/1/95 8/10/94(1) 5/1/95 8/10/94(1)
TO 4/30/96 TO 4/30/95 TO 4/30/96 TO 4/30/95
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................................... $ 3,469 $ 1,954 $ 1,573 $ 972
Net realized gain (loss) on investments................. 1,611 80 74 --
Net change in unrealized appreciation (depreciation)
on investments. (1,242) 638 179 204
------- ------- ------- -------
Net increase resulting from operations................ 3,838 2,672 1,826 1,176
------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income................................... (3,469) (1,954) (1,573) (972)
Net realized gains...................................... (1,053) -- -- --
------- ------- ------- -------
Total dividends distributed........................... (4,522) (1,954) (1,573) (972)
------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued............................. 24,292 48,509 6,604 38,051
Reinvestment of cash distributions...................... 83 1 2 --
Cost of shares repurchased.............................. (3,742) (7,016) (2,688) (3,617)
------- ------- ------- -------
Increase in net assets derived from capital
share transactions.... 20,633 41,494 3,918 34,434
------- ------- ------- -------
Net increase in net assets................................. 19,949 42,212 4,171 34,638
------- ------- ------- -------
NET ASSETS:
Beginning of period..................................... 42,212 -- 34,638 --
------- ------- ------- -------
End of period........................................... $62,161 $42,212 $38,809 $34,638
======= ======= ======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period.......... 4,154 -- 3,451 --
Shares issued........................................... 2,341 4,855 647 3,816
Shares issued in lieu of cash distributions............. 8 -- -- --
Shares repurchased...................................... (360) (701) (262) (365)
------- ------- ------- -------
Increase derived from capital share transactions...... 1,989 4,154 385 3,451
------- ------- ------- -------
Capital shares outstanding at end of period................ 6,143 4,154 3,836 3,451
======= ======= ======= =======
</TABLE>
- ----------
1 COMMENCED OPERATIONS ON AUGUST 10, 1994.
- --------------------------------------------------------------------------------
APRIL 30, 1996 35
<PAGE> 155
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIME OBLIGATIONS
MONEY MARKET FUND
5/1/95 8/8/94(1)
TO 4/30/96 TO 4/30/95
(000) (000)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................... $ 15,301 $ 8,619
Net realized gain (loss) on investments.................. -- --
-------- --------
Net increase resulting from operations................. 15,301 8,619
-------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income.................................... (15,301) (8,619)
Net realized gains....................................... -- --
-------- --------
Total dividends distributed............................ (15,301) (8,619)
-------- --------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued.............................. 696,813 647,086
Reinvestment of cash distributions....................... 413 52
Cost of shares repurchased............................... (689,132) (357,179)
-------- --------
Increase in net assets derived
from capital share transactions..................... 8,094 289,959
-------- --------
Net increase in net assets............................... 8,094 289,959
-------- --------
NET ASSETS:
Beginning of period...................................... 290,058 99
-------- --------
End of period............................................ $298,152 $290,058
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
36 APRIL 30, 1996
<PAGE> 156
INVENTOR FUNDS
<TABLE>
<CAPTION>
TREASURY SECURITIES PENNSYLVANIA TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
5/1/95 8/8/94(1) 5/1/95 8/8/94(1)
TO 4/30/96 TO 4/30/95 TO 4/30/96 TO 4/30/95
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................... $ 7,034 $ 2,151 $ 2,271 $ 1,145
Net realized gain (loss) on investments.................. (3) 14 -- --
-------- -------- -------- --------
Net increase resulting from operations................. 7,031 2,165 2,271 1,145
-------- -------- -------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income.................................... (7,034) (2,151) (2,271) (1,145)
Net realized gains....................................... -- -- -- --
-------- -------- -------- --------
Total dividends distributed............................ (7,034) (2,151) (2,271) (1,145)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued.............................. 752,257 330,496 148,939 119,764
Reinvestment of cash distributions....................... 216 71 51 11
Cost of shares repurchased............................... (679,258) (250,090) (135,236) (63,107)
-------- -------- -------- --------
Increase in net assets derived
from capital share transactions..................... 73,215 80,477 13,754 56,668
-------- -------- -------- --------
Net increase in net assets............................... 73,212 80,491 13,754 56,668
-------- -------- -------- --------
NET ASSETS:
Beginning of period...................................... 80,491 -- 56,668 --
-------- -------- -------- --------
End of period............................................ $153,703 $80,491 $70,422 $56,668
======== ======== ======== ========
</TABLE>
- ----------
1 COMMENCED OPERATIONS ON AUGUST 8, 1994.
- --------------------------------------------------------------------------------
APRIL 30, 1996 37
<PAGE> 157
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM NET ASSET
VALUE NET UNREALIZED FROM NET REALIZED VALUE
FOR A SHARE OUTSTANDING BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL END TOTAL
THROUGHOUT THE PERIOD OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A (3)
1996 ........................... $10.69 $0.15 $2.95 $(0.15) $(0.96) $12.68 29.95%
1995(1)......................... 10.00 0.12 0.71 (0.12) (0.02) 10.69 8.33(DAGGER)
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A (3)
1996 ........................... $10.02 $0.64 $0.07 $(0.64) $(0.05) $10.04 7.09%
1995(1)......................... 10.00 0.44 0.02 (0.44) -- 10.02 4.75(DAGGER)
- ---------------
GNMA SECURITIES
- ---------------
Class A (3)
1996 ........................... $10.16 $0.66 $0.14 $(0.66) $(0.18) $10.12 7.97%
1995(1)......................... 10.00 0.48 0.16 (0.48) -- 10.16 6.61(DAGGER)
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A (3)
1996 ........................... $10.04 $0.43 $0.08 $(0.43) $ -- $10.12 5.06%
1995(1)......................... 10.00 0.29 0.04 (0.29) -- 10.04 3.38(DAGGER)
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996 ........................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00 5.41%
1995(2)......................... 1.00 0.04 -- (0.04) -- 1.00 3.76(DAGGER)
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996 ........................... $ 1.00 $0.05 $ -- $(0.05) $ -- $1.00 5.36%
1995(2)......................... 1.00 0.04 -- (0.04) -- 1.00 3.60(DAGGER)
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996 ........................... $ 1.00 $0.03 $ -- $(0.03) $ -- $1.00 3.36%
1995(2)......................... 1.00 0.02 -- (0.02) -- 1.00 2.32(DAGGER)
- ----------
</TABLE>
(DAGGER) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
1 COMMENCED OPERATIONS ON AUGUST 10, 1994. ALL RATIOS FOR THE PERIOD
HAVE BEEN ANNUALIZED.
2 COMMENCED OPERATIONS ON AUGUST 8, 1994. ALL RATIOS FOR THE PERIOD HAVE
BEEN ANNUALIZED.
3 TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38 APRIL 30, 1996
<PAGE> 158
INVENTOR FUNDS
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME TO
NET ASSETS RATIO OF INVESTMENT TO AVERAGE AVERAGE
END EXPENSES INCOME TO NET ASSETS NET ASSETS PORTFOLIO AVERAGE
FOR A SHARE OUTSTANDING OF PERIOD TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING TURNOVER COMMISSION
THROUGHOUT THE PERIOD (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE RATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A (3)
1996 ........................... $ 61,161 0.95% 1.22% 1.43% 0.74% 168% $0.0508
1995(1)......................... 46,657 0.95 1.57 1.48 1.04% 110 --
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A (3)
1996 ........................... $ 89,901 0.85% 6.20% 1.25% 5.80% 94% $ --
1995(1)......................... 53,316 0.85 6.17 1.33 5.69 172 --
- ---------------
GNMA SECURITIES
- ---------------
Class A (3)
1996 ........................... $ 62,161 0.85% 6.30% 1.29% 5.86% 149% $ --
1995(1)......................... 42,212 0.85 6.68 1.40 6.13 226 --
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A (3)
1996 ........................... $ 38,809 0.85% 4.16% 1.24% 3.77% 22% $ --
1995(1)......................... 34,638 0.85 4.05 1.36 3.54 4 --
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996 ........................... $298,152 0.55% 5.28% 0.92% 4.91% --% $ --
1995(2)......................... 290,058 0.55 5.16 1.01 4.70 -- --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996 ........................... $153,703 0.55% 5.20% 0.98% 4.77% --% $ --
1995(2)......................... 80,491 0.55 5.00 1.05 4.50 -- --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996 ........................... $ 70,422 0.55% 3.29% 0.96% 2.88% --% $ --
1995(2)......................... 56,668 0.55 3.21 1.04 2.72 -- --
</TABLE>
- --------------------------------------------------------------------------------
APRIL 30, 1996 39
<PAGE> 159
NOTES TO FINANCIAL STATEMENTS INVENTOR
FUNDS
APRIL 30, 1996
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsyslvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund" or collectively as the "Funds"). The Funds'
prospectus provides a description of each Fund's investment objectives,
policies and strategies. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds.
SECURITY VALUATION -- Investment securities of the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund and the Pennsylvania
Tax-Exempt Money Market Fund (the "Money Market Funds") are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income. Investment securities of the Equity Growth Fund,
Intermediate Government Securities Fund, GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund (the "Non-Money Market Funds") which are
listed on a securities exchange for which market quotations are available are
valued by an independent pricing service at the last quoted sales price for
such securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex-dividend
date. Gains and losses from pay-downs of mortgage-backed securities are
included in net investment income.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until maturity of the Repurchase
Agreements. Provisions of the Agreements and procedures adopted by Integra
Trust Company (the "Adviser") ensure that the market value of the collateral,
including interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited. The Funds also invest in
tri-party repurchase agreements. Securities held as collateral for tri-party
repurchase agreements are maintained by the broker's custodian bank in a
segregated account until maturity of the repurchase agreement. Provisions of
the agreements ensure that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default. If the
counterparty defaults and the value of the collateral declines or if the
counterparty enters into an insolvency proceeding, realization of the
collateral by the Funds may be delayed or limited.
TBA PURCHASE COMMITMENTS -- The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of the funds' other assets.
Unsettled TBA purchase commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Security Valuation" above.
TBA SALE COMMITMENTS -- The Intermediate Government Securities Fund and the
GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
<PAGE> 160
agreements. Proceeds of TBA sale commitments are not received until the
contract settlement date. Unsettled TBA sale commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation"
- --------------------------------------------------------------------------------
40 APRIL 30, 1996
<PAGE> 161
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR
FUNDS
APRIL 30, 1996
above. The contract is "marked to market" daily and the change in value is
recorded by the Fund as unrealized gain or loss. If the TBA sale commitment is
closed through the accquisition of an offsetting purchase commitment the Fund
realizes a gain or loss without regard to any unrealized gain or loss on the
underlying security. If securities are delivered under the commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the unit
price at the date the commitment was entered into.
EXPENSES -- Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- The Equity Growth Fund declares and pays
dividends from net investment income on a monthly basis. The Intermediate
Government Securities Fund, GNMA Securities Fund, Pennsyslvania Municipal Bond
Fund, Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, and Pennsylvania Tax-Exempt Money Market Fund distributions from net
investment income are declared on a daily basis and are payable monthly. Any
net realized capital gains on sales of securities are distributed to
shareholders at least annually.
FEDERAL INCOME TAXES -- It is each Fund's intention to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
ORGANIZATION COSTS -- Organizational costs have been capitalized by the
Funds and are being amortized over sixty months commencing with operations. In
the event any of the initial shares of the Funds are redeemed by any holder
thereof during the period that the Funds are amortizing their organizational
costs, the redemption proceeds payable to the holder thereof by the Funds will
be reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption. These costs include legal fees of
approximately $53,415 for organizational work performed by a law firm of which
an officer and trustee of the Funds is a partner.
OTHER -- Certain officers of the Funds are also officers of the
Administrator and/or Distributor. Such officers are paid no fees by the Funds
for serving as officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory
agreement, dated August 1, 1994, under which the Adviser will receive an annual
fee equal to 0.85% of the average daily net assets of the Equity Growth Fund;
0.70% of the average daily net assets of the Intermediate Government
Securities, GNMA Securities and Pennsylvania Municipal Bond Funds; and 0.45% of
the average daily net assets of the Prime Obligations Money Market, Treasury
Securities Money Market and Pennsylvania Tax-Exempt Money Market Funds.
Sub-Advisory services are provided to the Adviser for the Equity Growth Fund
by STI Capital Management, N.A. (formerly Sun Bank Capital Management, N.A.);
for the Intermediate Government Securities, GNMA Securities, Prime Obligations
Money Market and Treasury Securities Money Market Funds by Wellington
Management Company; and for the Pennsylvania Municipal Bond and Pennsylvania
Tax-Exempt Money Market Funds by Weiss, Peck & Greer L.L.C. (the
"Sub-Advisers") pursuant to sub-advisory agreements dated August 1, 1994. Under
the terms of such agreements, the Sub-Advisers are entitled to receive a fee
from the Adviser. Such a fee is computed daily and paid monthly. The Adviser
is responsible for the supervision of, and payment of fees to, the Sub-Advisers
in connection with their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), became the Fund's Distributor pursuant
to an agreement dated August 1, 1994. The Class A shares of the Funds have a
Rule 12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to
0.25% of their average daily net assets.
Pursuant to an administration agreement dated August 1, 1994 SEI Financial
Management Company (the "Administrator"), a wholly-owned subsidiary of SEI,
acts as the Fund's Administrator. Under the terms of the administration
agreement, the Administrator will receive an annual fee which is calculated
daily and paid monthly at a maximum annual rate of 0.18% of the average daily
net assets of the
<PAGE> 162
Equity Growth, Intermediate Government Securities, GNMA Securities, and
Pennsylvania Municipal
- --------------------------------------------------------------------------------
APRIL 30, 1996 41
<PAGE> 163
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR
FUNDS
APRIL 30, 1996
Bond Funds, and 0.15% of the average daily net assets of the Prime Obligations
Money Market, Treasury Securities Money Market and Pennsylvania Tax-Exempt
Money Market Funds.
During the period ended April 30, 1996, the Adviser and other parties waived
a portion of their contractual fees in order to assist the Funds in maintaining
competitive expense ratios. Expenses were waived as follows (in thousands):
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
OBLIGATIONS SECURITIES TAX-EXEMPT
EQUITY INTERMEDIATE GNMA PENNSYLVANIA MONEY MONEY MONEY
GROWTH GOVERNMENT SECURITIES MUNICIPAL MARKET MARKET MARKET
FUND SECURITIES FUND FUND BOND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Waiver of investment
advisory fees ............. $124 $130 $107 $ 44 $ 359 $245 $110
Waiver of administrative fee . -- -- -- 10 -- -- --
Waiver of 12b-1 fees ......... 136 215 138 95 725 338 173
- -------------------------------------------------------------------------------------------------------------------------
Total Waivers ................ $260 $345 $245 $149 $1,084 $583 $283
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended April 30, 1996, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
U.S. Government .................................... $ -- $109,205 $99,225 $ --
Other............................................... 82,934 -- -- 14,531
SALES
U.S. Government .................................... $ -- $ 71,514 $80,639 $ --
Other............................................... 83,126 -- -- 7,274
</TABLE>
At April 30, 1996, the total cost of securities for federal income tax
purposes was not materially different from amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and
depreciation for securities held at April 30, 1996 is as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation ............... $6,753 $ 363 $ 322 $ 541
Aggregate gross unrealized depreciation ............... (629) (1,223) (926) (158)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)............. $6,124 $ (860) $(604) $ 383
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
5. SUBSEQUENT EVENTS
At a shareholder meeting on May 2, 1996, shareholders approved National City
Bank ("NCC") as investment adviser to the Funds in conjunction with the merger
between Integra Financial Corporation, the parent to the Fund's investment
adviser, Integra Trust Company and National City Corporation. NCC is National
City Corporations banking group and has served as investment adviser to the
<PAGE> 164
Armada Funds since 1986. Terms of the investment advisory agreement remained
the same as described in Footnote 3.
The company's Board of Directors approved the dissolution of the Prime
Obligations and Treasury Securities Funds at the May 13, 1996 board meeting.
These Funds were dissolved on May 31, 1996.
- --------------------------------------------------------------------------------
42 APRIL 30, 1996
<PAGE> 165
REPORT OF INDEPENDENT ACCOUNTANTS INVENTOR
FUNDS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE INVENTOR FUNDS, INC.
We have audited the accompanying statements of net assets of the Inventor
Funds, Inc. comprising, respectively, Equity Growth, Pennsylvania Municipal
Bond, Intermediate Government Securities, GNMA Securities, Prime Obligations
Money Market, Treasury Securities Money Market and Pennsylvania Tax-Exempt
Money Market Funds as of April 30, 1996, and the related statements of
operations for the year ended, and the statements of changes in net assets and
the financial highlights for each of the respective periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios comprising the Inventor Funds,
Inc. as of April 30, 1996, the results of their operations for the year then
ended, the changes in their net assets and their financial highlights for each
of the respective periods presented, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June, 14, 1996
- --------------------------------------------------------------------------------
APRIL 30, 1996 43
<PAGE> 166
NOTICE TO SHAREHOLDERS (UNAUDITED) INVENTOR
FUNDS
FOR TAX-PAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATION
PURPOSES ONLY.
Dear Inventor Fund Shareholders:
For the fiscal year ended April 30, 1996, each portfolio is designating
long term capital gains and exempt income with regard to distributions paid
during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST
---- ------------- ------------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Prime Obligations 0% 100% 100% 0% 0%
Treasury Securities 0% 100% 100% 0% 0%
Pennsylvania Tax-Exempt 0% 100% 100% 0% 100%
Pennsylvania Municipal Bond 0% 100% 100% 0% 100%
Intermediate Government Securities 1% 99% 100% 0% 0%
GNMA Securities 1% 99% 100% 0% 0%
Equity Growth 6% 94% 100% 14% 0%
</TABLE>
* Items (A) and (B) are based on a percentage of the portfolio's total
distributions
** Items (D) and (E) are based on a percentage of ordinary income distribution
of the portfolio.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
- --------------------------------------------------------------------------------
44 APRIL 30, 1996
<PAGE> 167
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS (54.0%)
- -------------------------------------------------------
FHLMC
5.200%, 11/15/99 $ 305 $ 305
5.750%, 05/15/06 500 483
5.250%, 09/15/06 705 685
5.750%, 03/15/07 300 290
5.750%, 05/15/07 2,319 2,160
7.500%, 08/01/07 6 6
6.000%, 08/15/07 400 378
6.250%, 11/15/07 355 349
7.500%, 07/01/10 76 77
7.500%, 09/01/10 250 251
6.500%, 11/01/10 963 925
7.500%, 11/01/10 365 366
7.500%, 05/01/11 2,293 2,297
8.500%, 09/01/16 31 32
7.500%, 05/01/17 673 660
8.500%, 06/01/17 214 219
9.000%, 07/15/20 85 87
6.000%, 05/15/21 1,000 942
9.250%, 06/01/23 127 132
7.000%, 05/01/24 1,217 1,161
7.000%, 07/01/25 1,945 1,856
7.000%, 09/01/25 3,878 3,700
7.000%, 10/01/25 1,976 1,885
8.500%, 05/01/26 1,005 1,027
FHLMC REMIC
8.000%, 11/15/99 2,000 2,053
5.200%, 09/15/05 500 486
4.950%, 01/15/09 100 99
4.750%, 07/25/11 500 492
6.000%, 06/15/19 500 473
8.700%, 02/15/20 488 499
8.500%, 10/15/20 2,000 2,053
FNMA
7.606%, 06/01/96 (A) 559 576
7.000%, 01/25/99 1,250 1,251
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C> <C>
6.500%, 02/25/07 $ 400 $ 387
7.500%, 12/01/07 274 269
7.500%, 03/01/08 243 239
6.500%, 03/01/14 434 403
6.500%, 05/25/15 945 939
6.000%, 11/25/17 400 385
9.500%, 05/01/18 197 209
6.000%, 11/25/19 500 488
FNMA REMIC
6.750%, 01/25/06 500 487
7.500%, 08/25/07 1,000 1,015
8.125%, 01/25/20 1,086 1,100
8.250%, 10/25/20 110 112
GNMA
6.500%, 11/15/08 175 169
9.500%, 06/15/09 62 66
9.500%, 07/15/09 55 58
9.500%, 08/15/09 10 11
9.500%, 09/15/09 33 35
9.500%, 10/15/09 103 110
9.000%, 07/15/16 96 101
9.000%, 08/15/16 162 169
9.000%, 10/15/16 205 214
9.000%, 11/15/16 555 580
9.000%, 03/15/17 584 610
8.000%, 05/15/17 836 840
</TABLE>
<PAGE> 168
<TABLE>
<S> <C> <C> <C>
9.000%, 11/15/17 178 189
9.500%, 06/15/19 338 361
8.500%, 09/15/21 36 37
8.500%, 11/15/21 1,243 1,274
8.500%, 07/15/22 1,121 1,148
7.500%, 08/15/22 24 23
8.000%, 08/15/22 30 30
8.500%, 08/15/22 166 170
7.500%, 12/15/22 1,261 1,235
7.500%, 02/15/23 145 142
7.500%, 04/15/23 1,344 1,316
7.500%, 05/15/23 473 463
7.500%, 06/15/23 567 556
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6 MAY 31, 1996
<PAGE> 169
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
7.500%, 07/15/23 $ 386 $ 378
7.000%, 10/15/23 849 809
7.000%, 11/15/23 307 292
7.000%, 12/01/23 357 341
8.000%, 02/15/24 1,901 1,910
8.000%, 11/15/25 31 31
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS
(Cost $48,609) 47,956
- -------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATION (3.3%)
- -------------------------------------------------------
FNMA
5.390%, 08/05/98 3,000 2,937
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATION
(Cost $2,971) 2,937
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS (42.2%)
- -------------------------------------------------------
U.S. Treasury Notes
8.875%, 11/15/97 6,200 6,434
7.000%, 04/15/99 10,000 10,146
7.750%, 11/30/99 3,000 3,109
U.S. Treasury Bonds
10.750%, 02/15/03 12,500 15,134
11.875%, 11/15/03 1,500 1,935
12.000%, 08/15/13 500 698
- -------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $38,253) 37,456
- -------------------------------------------------------
REPURCHASE AGREEMENT (1.7%)
- -------------------------------------------------------
J.P. Morgan
5.320%, dated 05/31/96,
matures 06/03/96, repurchase
price $1,494,662,
(collateralized by U.S. Treasury
Note, par value $1,553,000,
matures 08/31/98, market
value $1,521,455) 1,494 1,494
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
- -------------------------------------------------------
<S> <C>
TOTAL REPURCHASE AGREEMENT
(Cost $1,494) $ 1,494
- -------------------------------------------------------
TOTAL INVESTMENTS (101.2%)
(Cost $91,327) 89,843
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-1.2%) (1,014)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001 par
value - 2 billion authorized) based on
8,908,905 outstanding shares of
beneficial interest $89,585
Accumulated net realized gain on investments 733
Net unrealized depreciation on investments (1,484)
Distributions in excess of net investment income (5)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $88,829
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE
</TABLE>
<PAGE> 170
<TABLE>
<S> <C>
PER SHARE - CLASS A $ 9.97
Maximum sales charge of 4.00% 0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.39
------
- -------------------------------------------------------
</TABLE>
- ------------
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. THE RATE REFLECTED ON
THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON MAY 31, 1996. THE
DATE SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
FHLMC FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
REMIC REAL ESTATE MORTGAGE INVESTMENT CONDUIT
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 7
<PAGE> 171
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- -------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS (100.9%)
- -------------------------------------------------------
FHLMC
7.500%, 04/01/00 $ 194 $ 196
7.500%, 10/01/01 66 66
7.000%, 11/01/10 1,084 1,065
7.000%, 06/01/23 425 406
7.000%, 03/01/24 204 194
7.000%, 07/01/25 324 309
7.000%, 09/01/25 499 476
7.000%, 12/01/25 1,195 1,140
6.500%, 04/01/26 498 462
FNMA
6.500%, 11/01/25 91 85
6.500%, 03/01/26 408 379
6.500%, 05/01/26 495 460
GNMA
7.250%, 11/15/04 217 210
7.000%, 10/15/07 306 301
7.000%, 05/15/08 300 295
7.500%, 07/15/08 45 45
7.000%, 01/15/09 22 22
7.000%, 02/15/09 161 158
7.000%, 03/15/09 268 264
9.000%, 05/15/09 832 865
6.500%, 06/15/09 44 42
9.000%, 06/15/09 105 109
9.500%, 07/15/09 171 181
9.500%, 08/15/09 491 522
9.500%, 09/15/09 29 31
9.500%, 10/15/09 6 6
9.500%, 11/15/09 41 43
10.000%, 11/15/09 362 395
10.000%, 12/15/09 32 35
6.500%, 10/15/10 85 82
6.500%, 11/15/10 888 855
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C> <C>
7.000%, 12/15/10 $1,957 $1,929
11.500%, 01/15/13 34 39
11.500%, 02/15/13 57 64
11.500%, 03/15/13 29 32
11.500%, 05/15/13 66 75
7.500%, 06/15/13 310 303
11.500%, 06/15/13 86 97
11.500%, 07/15/13 23 26
11.500%, 06/15/15 48 55
11.250%, 08/15/15 205 229
11.500%, 10/15/15 42 48
9.500%, 12/15/15 12 12
11.500%, 01/15/16 18 21
9.500%, 03/15/16 128 137
9.000%, 06/15/16 72 76
9.500%, 07/15/16 4 5
9.500%, 08/15/16 166 177
9.000%, 08/20/16 2,004 2,080
10.250%, 08/20/16 30 32
9.500%, 09/15/16 175 187
9.500%, 10/15/16 17 18
9.500%, 11/15/16 39 42
8.500%, 01/15/17 164 168
9.500%, 01/15/17 17 18
8.500%, 02/15/17 200 205
8.000%, 03/15/17 16 17
8.500%, 03/15/17 230 235
8.000%, 04/15/17 108 108
8.500%, 04/15/17 1,708 1,750
8.000%, 05/15/17 81 81
</TABLE>
<PAGE> 172
<TABLE>
<S> <C> <C> <C>
8.500%, 05/15/17 86 88
9.500%, 05/15/17 20 22
9.000%, 06/15/17 451 471
8.000%, 07/15/17 97 97
9.500%, 07/15/17 45 49
9.000%, 08/15/17 295 309
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8 MAY 31, 1996
<PAGE> 173
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C> <C>
9.500%, 08/15/17 $166 $177
9.500%, 09/15/17 129 138
9.500%, 10/15/17 232 248
8.500%, 11/15/17 567 583
9.500%, 12/15/17 24 26
9.500%, 03/15/18 31 33
10.250%, 03/20/18 134 141
9.500%, 04/15/18 34 36
9.500%, 06/15/18 71 76
9.500%, 07/15/18 15 15
9.500%, 08/15/18 39 41
9.500%, 09/15/18 10 10
10.250%, 09/20/18 149 157
9.500%, 10/15/18 7 7
9.500%, 11/15/18 13 13
9.500%, 12/15/18 69 74
9.500%, 01/15/19 36 38
9.500%, 03/15/19 6 7
9.500%, 05/15/19 31 33
9.500%, 07/15/19 7 8
9.500%, 09/15/19 20 22
9.500%, 10/15/19 37 39
9.500%, 12/15/19 26 27
9.500%, 06/15/20 21 22
9.000%, 07/15/20 229 239
9.500%, 07/15/20 22 23
9.500%, 08/15/20 245 263
9.500%, 10/15/20 49 52
9.500%, 11/15/20 233 249
9.500%, 12/15/20 99 106
8.500%, 04/15/21 411 422
8.500%, 05/15/21 39 40
8.500%, 06/15/21 391 401
9.000%, 06/15/21 451 471
8.500%, 07/15/21 67 69
9.500%, 07/15/21 433 463
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C> <C>
8.500%, 09/15/21 $ 627 $ 643
8.500%, 10/15/21 92 94
8.500%, 11/15/21 709 726
8.500%, 12/15/21 913 936
8.500%, 02/15/22 327 335
8.500%, 03/15/22 374 383
7.500%, 05/15/22 50 49
8.500%, 05/15/22 308 315
8.500%, 08/15/22 358 367
7.500%, 09/15/22 106 104
8.500%, 09/15/22 510 522
7.000%, 10/15/22 25 24
7.500%, 10/15/22 584 572
7.000%, 11/15/22 436 416
8.500%, 11/15/22 310 318
7.500%, 12/12/22 416 408
7.000%, 01/15/23 335 319
7.500%, 02/15/23 374 366
7.000%, 04/15/23 29 27
7.500%, 04/15/23 508 497
7.000%, 05/15/23 34 33
7.500%, 05/15/23 99 98
7.000%, 06/15/23 98 94
7.500%, 06/15/23 373 365
7.000%, 07/15/23 1,285 1,225
7.500%, 07/15/23 1,431 1,402
8.000%, 07/15/23 19 19
7.000%, 08/15/23 2,332 2,222
7.500%, 08/15/23 201 197
6.500%, 09/15/23 146 135
7.000%, 09/15/23 320 305
</TABLE>
<PAGE> 174
<TABLE>
<S> <C> <C> <C>
6.500%, 10/15/23 1,090 1,007
7.000%, 10/15/23 2,791 2,661
7.500%, 10/15/23 1,733 1,697
7.000%, 11/15/23 527 502
6.500%, 12/15/23 495 458
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 9
<PAGE> 175
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
7.000%, 12/15/23 $ 574 $ 547
6.000%, 12/20/23 443 397
7.000%, 01/15/24 665 633
7.500%, 01/15/24 813 796
7.000%, 02/15/24 1,447 1,378
7.500%, 02/15/24 366 359
8.000%, 02/15/24 21 21
7.000%, 03/15/24 41 39
7.500%, 04/15/24 364 356
8.000%, 04/15/24 1,787 1,795
6.500%, 05/15/24 29 27
7.000%, 05/15/24 610 581
7.500%, 06/15/24 547 536
8.000%, 06/15/24 254 255
8.000%, 08/15/24 85 85
8.000%, 09/15/24 1,329 1,335
8.000%, 06/15/25 63 64
8.000%, 07/15/25 472 474
7.000%, 08/15/25 44 42
8.000%, 08/15/25 1,633 1,641
7.000%, 09/15/25 1,204 1,146
8.000%, 09/15/25 47 48
8.000%, 10/15/25 3,221 3,236
8.000%, 11/15/25 557 560
6.500%, 02/15/26 268 247
8.000%, 02/15/26 84 84
8.000%, 03/15/26 795 799
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost $62,225) 61,092
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (1.3%)
- -------------------------------------------------------
J.P. Morgan
5.320%, dated 05/31/96,
matures 06/03/96, repurchase
price $771,342, (collateralized
by U.S. Treasury Note, par value
$802,000, matures 08/31/98,
market value $785,709) $771 $771
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $771) 771
- -------------------------------------------------------
TOTAL INVESTMENTS (102.2%)
(Cost $62,996) 61,863
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-2.2%) (1,331)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001 par
value - 2 billion authorized) based on
6,033,136 outstanding shares of
beneficial interest 61,028
Accumulated net realized gain on investments 638
Net unrealized depreciation on investments (1,133)
Distributions in excess of net investment income (1)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $60,532
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE - CLASS A $10.03
Maximum sales charge of 4.00% 0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.45
======
</TABLE>
<PAGE> 176
(DAGGER) THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
FHLMC FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10 MAY 31, 1996
<PAGE> 177
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
- -------------------------------------------------------
<S> <C>
MUNICIPAL BONDS (98.2%)
- -------------------------------------------------------
PENNSYLVANIA (98.2%)
Allegheny County, Higher
Education Building Authority,
Duquesne University Project,
AMBAC, RB
6.500%, 03/01/10 $ 380 $ 421
Allegheny County, Hospital
Development Authority, Magee
Woman's Hospital Project,
Series O, RB, Escrowed
to Maturity
10.125%, 10/01/02 140 167
Allegheny County, Industrial
Development Authority, RB
5.250%, 06/01/96 (A) (B) 705 705
Allegheny County, Sanitation
Authority, Sewer Revenue,
FGIC, RB
5.725%, 12/01/08 (C) 2,750 1,358
Bradford Area School District,
FGIC GO
5.250%, 10/01/07 1,000 989
Bucks County, Water & Sewer
Authority , FGIC, RB
6.150%, 12/01/05 455 473
Butler County, Sewer Authority,
RB, Prerefunded at 100
7.250%, 01/01/04 (D) 120 130
Cumberland County, Messiah
College Project, AMBAC, RB
5.000%, 10/01/07 1,000 953
Dauphin County, General Authority
Health Center, RB
5.150%, 01/01/97 1,000 1,001
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Delaware County, Education
Development Authority,
Villanova University Project,
RB, Prerefunded at 102
7.750%, 08/01/98 (D) $1,000 $ 1,089
Delaware River Port Authority
PA & NJ Bridges, RB, Escrowed
to Maturity
6.000%, 01/15/10 655 665
Delaware River Port Authority,
PA & NJ Bridges, AMBAC, RB
7.375%, 01/01/07 1,500 1,607
Erie County, Prison Authority,
MBIA, RB, Prerefunded
at 100
6.600%, 11/01/01 (D) 1,000 1,085
Greene County, Industrial
Development Authority, Pollution
Control, RB
6.100%, 02/01/07 125 125
Lancaster County, FGIC, GO
6.100%, 07/01/01 100 100
5.900%, 07/01/99 500 501
Lehigh County, Series A, AMBAC,
GO, Prerefunded at 100
6.000%, 10/15/99 (D) 1,250 1,303
Lower Providence Township,
MBIA, GO
5.000%, 05/01/07 215 204
Middletown Township, Bucks
</TABLE>
<PAGE> 178
<TABLE>
<S> <C> <C>
County, SB, Escrowed to Maturity
6.100%, 10/01/00 380 399
Monroeville, Hospital Authority,
East Suburban Health Center
Project, RB, Prerefunded
at 100
7.600%, 07/01/04 (D) 895 1,008
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 11
<PAGE> 179
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Montgomery County, Hospital
Authority, Suburban General
Hospital Project, RB, Escrowed
to Maturity
7.750%, 05/01/02 $ 155 $ 169
Northampton County, Higher
Education Authority, Lehigh
University Project, RB
5.500%, 09/01/98 1,030 1,051
Pennsylvania Housing Finance
Agency, Rental Housing, RB
5.150%, 07/01/03 400 399
5.000%, 01/01/98 450 453
Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series P, RB
7.200%, 04/01/00 50 53
Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series Z, RB
7.000%, 10/01/02 50 53
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subseries B, RB
6.450%, 09/01/04 1,500 1,622
Pennsylvania State Higher
Education Authority, Series N,
MBIA, RB
5.250%, 06/15/08 405 393
Pennsylvania State Higher
Education Authority, Student
Loan, Series A, FGIC, RB
6.800%, 12/01/00 100 107
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Pennsylvania State Higher
Educational Facilities Authority,
University of Pennsylvania
Project, Series A, RB
6.500%, 09/01/04 $ 250 $ 272
5.550%, 09/01/09 1,300 1,280
Pennsylvania State Higher
Educational Facilities Authority,
University of Pennsylvania
Project, Series B, RB
5.250%, 01/01/07 100 98
Pennsylvania State
Intergovernmental Co-op
Authority Special Tax, City of
Philadelphia Funding Project,
RB, Prerefunded at 100
6.800%, 06/15/02 (D) 1,500 1,646
Pennsylvania State Turnpike
Commission, Series K, RB,
Escrowed to Maturity
7.250%, 12/01/99 1,230 1,335
Pennsylvania State Turnpike
Commission, Series O,
FGIC, RB
5.250%, 12/01/01 1,010 1,025
Pennsylvania State, Series 1, GO
6.200%, 09/15/04 900 952
Pennsylvania State, Series 2, GO
4.750%, 06/15/98 565 569
Philadelphia Gas Works,
Series 13, RB, Prerefunded
at 102
7.700%, 06/15/01 (D) 460 526
Philadelphia Gas Works,
</TABLE>
<PAGE> 180
<TABLE>
<S> <C> <C>
Series 14, FSA, RB
6.250%, 07/01/08 300 319
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12 MAY 31, 1996
<PAGE> 181
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Philadelphia School District,
Series A, GO, MBIA
5.800%, 07/01/08 $ 465 $ 472
Philadelphia, Graduate Hospital
Project, RB, Escrowed to Maturity
7.000%, 07/01/10 335 363
Philadelphia, Hospital & Higher
Educational Authority Children's
Hospital Project, Series A, RB
5.100%, 02/15/03 500 499
Philadelphia, Hospital & Higher
Educational Facilities Authority,
Children's Hospital Project,
Series A, RB, Prerefunded
at 102
6.500%, 02/15/02 (D) 200 219
Philadelphia, Thomas Jefferson
University Hospital, RB,
Escrowed to Maturity
7.000%, 07/01/08 180 198
Philadelphia, Water & Waste
Authority, MBIA, RB
5.500%, 06/15/07 1,500 1,513
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 800 805
Pittsburgh, Series A, GO, MBIA
5.500%, 09/01/06 955 961
Schuylkill County, Industrial
Development Authority,
Westwood Energy Project, RB
3.950%, 06/01/96 (A) (B) 800 800
Scranton-Lackawanna, Health &
Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 570 603
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Seneca Valley School District,
Series A, FGIC, GO
5.700%, 07/01/06 $1,000 $1,017
Southeastern Pennsylvania,
Transportation Authority,
Lease Project, RB
5.750%, 12/01/04 775 782
Swarthmore Borough, College
Authority, RB
6.000%, 09/15/06 855 892
Tyrone School District, GO, MBIA
5.700%, 09/15/08 1,250 1,252
Union City, Higher Educational
Facilities Financing Authority
Bucknell University Project,
MBIA, RB
6.200%, 04/01/06 1,000 1,047
- -------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $37,804) 38,028
- -------------------------------------------------------
TOTAL INVESTMENTS (98.2%)
(Cost $37,804) 38,028
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.8%) 705
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001 par
value - 2 billion authorized) based on
</TABLE>
<PAGE> 182
<TABLE>
<S> <C>
3,843,129 outstanding shares of
beneficial interest 38,427
Accumulated net realized gain on investments 82
Net unrealized appreciation on investments 224
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $38,733
- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 13
<PAGE> 183
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<S> <C>
PENNSYLVANIA
MUNICIPAL BOND FUND (cont'd)
- -------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE - CLASS A $10.08
Maximum sales charge of 4.00% $0.42
------
OFFERING PRICE PER SHARE - CLASS A(DAGGER) $10.50
======
</TABLE>
- ---------------
(DAGGER)THE OFFERING PRICE IS CALCULATED BY DIVIDING THE NET ASSET VALUE BY 1
MINUS THE MAXIMUM SALES CHARGE OF 4.00%.
(A) FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. RATE REFLECTED ON THE
STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON MAY 31, 1996. THE DATE
SHOWN IS THE LONGER OF THE RESET DATE OR THE DEMAND DATE.
(B) SECURITY IS BACKED BY A LETTER OF CREDIT.
(C) ZERO COUPON BOND - THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
REPRESENTS THE SECURITY'S EFFECTIVE YIELD IN EFFECT ON MAY 31, 1996.
(D PREREFUNDED SECURITY - THE MATURITY DATE SHOWN IS THE PREREFUNDED DATE.
AMBAC AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC FEDERAL GUARANTY INSURANCE CORPORATION
FSA FINANCIAL SECURITY ASSURANCE
GO GENERAL OBLIGATION
MBIA MUNICIPAL BOND INSURANCE ASSOCIATION
RB REVENUE BOND
SB SPECIAL OBLIGATION BOND
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
<S> <C>
MUNICIPAL BONDS (99.1%)
- -------------------------------------------------------
PENNSYLVANIA (99.1%)
Allegheny County, Higher
Education Authority, Duquesne
University Project, AMBAC, RB
3.350%, 03/01/97 $ 640 $ 640
Allegheny County, Higher
Education Building Authority,
University of Pittsburgh Project,
Series 85B
3.400%, 06/06/96 (A) (C) 100 100
Allegheny County, Series C-41,
GO
3.750%, 06/06/96 (A) (C) 400 400
Allegheny County, Series C-44,
FGIC, GO
4.000%, 06/01/96 685 685
Beaver County, Industrial
Development Authority,
Duquesne Light and Power
Project, TECP (C)
3.600%, 07/11/96 1,000 1,000
Beaver County, Industrial
Development Authority,
Duquesne Light and Power
Project, Series C, TECP
3.400%, 09/10/96 (C) 1,500 1,500
Berks County, Industrial
Development Authority,
Rilsaw Industrial Elf
Aquitaine Project
3.825%, 06/06/96 (A) (C) 1,700 1,700
Bucks County, Industrial
Development Authority, CPC
International Project,
Series 85, RB
4.125%, 06/01/96 (A) 2,000 2,000
</TABLE>
<PAGE> 184
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14 MAY 31, 1996
<PAGE> 185
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
Chester County, Hospital
Authority, Paoli Memorial
Hospital Project, RB,
Prerefunded at 102
7.625%, 10/01/96 (B) $ 950 $ 982
Clarks Summit-South Abington,
Sewer Authority, AMBAC, RB,
Prerefunded at 100
8.125%, 01/01/97 (B) 500 513
Cumberland County, Municipal
Authority, United Methodist
Homes Aging Project, RB
3.950%, 06/01/96 (A) (C) 1,500 1,500
Delaware County, Industrial
Development Authority, British
Petroleum Project, RB
3.650%, 06/01/96 (A) 300 300
Delaware County, Industrial
Development Authority,
Henderson/Radnor Joint
Venture Project, RB
3.750%, 06/06/96 (A) (C) 1,150 1,150
Delaware County, Industrial
Development Authority,
Philadelphia Electric Project,
FGIC, RB
3.600%, 07/11/96 1,100 1,100
Delaware Valley, Regional
Finance Authority
3.650%, 06/06/96 (A) (C) 2,200 2,200
Delaware Valley, Regional
Finance Authority,
Series D, RB
3.650%, 06/06/96 (A) (C) 800 800
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Dover Township, Sewer Authority,
MBIA, RB
3.500%, 11/01/96 $ 285 $ 285
East Penn, School District
Authority, Series A, FGIC, GO
3.500%, 09/01/96 400 400
Easton, Series A, FGIC, GO
4.500%, 12/01/96 300 302
Erie County, Hospital Authority,
Union City Memorial Hospital
Project, RB
3.850%, 06/06/96 (A) (C) 1,200 1,200
Greater Johnstown, School District
Authority, GO, MBIA, Escrowed
to Maturity
6.350%, 02/01/97 100 102
Hempfield Township, Sewer
Authority, Westmoreland County
Project, FGIC, RB
4.300%, 09/01/96 530 531
Lackawanna, River Basin
Authority, AMBAC, RB
3.500%, 09/01/96 910 910
Lancaster, Higher Education
Authority, Franklin and Marshall
Project, RB
3.900%, 06/05/96 (A) 1,550 1,550
Langhorne, Hospital Revenue
Authority, Franciscan Health
Systems Project, Series C
3.600%, 06/03/96 (A) (C) 300 300
Lehigh County, Water and Sewer
Authority, Series B, FGIC, RB
</TABLE>
<PAGE> 186
<TABLE>
<S> <C> <C> <C>
3.500%, 06/05/96 (A) (C) 430 430
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 15
<PAGE> 187
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Lehigh County, Water Authority,
FGIC, RB
3.500%, 06/06/96 (A) (C) $ 835 $ 835
Millcreek Township, School
District Authority, Series B,
FGIC, GO, Prerefunded at 100
7.100%, 08/15/96 (B) 175 176
Montgomery County, Higher
Education & Health Authority,
Frankford Hospital Project, RB,
Prerefunded at 102
7.875%, 01/01/97 (B) 1,000 1,044
Montgomery County, Hospital
Authority, Abington Memorial
Hospital Project, RB,
Prerefunded at 103
8.000%, 06/01/96 (B) 2,800 2,884
Montgomery County, Industrial
Development Authority
3.600%, 06/05/96 (A) 1,000 1,000
Montgomery County, Industrial
Development Authority, Ikea
Property Project, RB
3.800%, 06/06/96 (A) (C) 1,500 1,500
Montgomery County, Industrial
Development Authority, Merck
Industrial Development Nashville
4.000%, 06/06/96 (A) 1,000 1,000
Montgomery County, Industrial
Development Authority, PECO
Energy Project, TECP (C)
3.400%, 07/24/96 300 300
Montgomery County, Industrial
Development Authority,
Plymouth Woods Project, RB
3.800%, 06/06/96 (A) (C) 500 500
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Montgomery County, Industrial
Development Authority, Valley
Square Project, RB
3.650%, 06/06/96 (A) (C) $1,400 $1,400
Moon Township, Industrial
Development Authority,
Executive Office Association
Project, RB
3.800%, 06/06/96 (A) (C) 1,500 1,500
North Umberland County,
Industrial Development Authority,
Atlas Development Association
3.800%, 06/06/96 (A) (C) 840 840
Pennsylvania Intergovernment
Co-op Authority, Special Tax
Revenue, City of Philadelphia
Funding Project, FGIC, RB
5.200%, 06/15/96 300 300
Pennsylvania State, Higher
Education Facilities Authority,
Thomas Jefferson University
Project, Series B, RB
3.300%, 08/26/96 (C) 3,500 3,500
Pennsylvania State, Infrastructure
Investment Authority, Penvest
Loan Pool Program, RB
3.850%, 06/05/96 (A) (C) 100 100
Pennsylvania State,
Intergovernment Co-op Authority,
Special Tax Revenue, City of
Philadelphia Funding Project,
</TABLE>
<PAGE> 188
<TABLE>
<S> <C>
FGIC, RB
3.750%, 06/15/96 600 600
Philadelphia, Gas Works Authority,
Tenth Series, RB,
Prerefunded at 102
7.200%, 07/01/96 (B) 2,100 2,148
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
16 MAY 31, 1996
<PAGE> 189
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C>
Philadelphia, Gas Works
Authority, Eleventh Project,
Series C, AMBAC, RB
6.700%, 01/01/97 $ 100 $ 102
Philadelphia, Hospital & Higher
Education Authority, MR Project,
RB, Prerefunded at 102
8.625%, 08/01/96 (B) 1,500 1,541
Philadelphia, Industrial
Development Authority,
Multi-Family Housing For
Harbor View Towers Project, RB
3.950%, 06/06/96 (A) (C) 2,650 2,650
Philadelphia, Redevelopment
Authority, Pennsylvania School
For Deaf Project, RB
3.850%, 06/06/96 (A) (C) 2,405 2,405
Philadelphia, Redevelopment
Authority, Rivers Edge Project, RB
4.150%, 06/06/96 (A) (C) 1,000 1,000
Philadelphia, School District
Authority, GO, TRAN
4.500%, 06/28/96 2,000 2,001
Philadelphia, School District
Authority, Series A, MBIA, GO
4.000%, 07/01/96 1,500 1,501
Philadelphia, Series A, GO, TRAN
4.500%, 06/27/96 1,000 1,000
Philadelphia, Water & Sewer
Authority, Series 12, RB,
Prerefunded at 101
7.250%, 07/01/96 (B) 200 203
Pittsburgh, Equipment Leasing
Authority, AMBAC, RB
5.950%, 07/01/96 300 301
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------
<S> <C>
Pittsburgh, Water & Sewer
Authority, Series A, FGIC, RB
3.500%, 09/01/96 $ 550 $ 550
Sayre, Health Care Facilities
Authority, Capital Finance
Project, Series F, AMBAC, RB
3.500%, 06/06/96 (A) 1,100 1,100
Schuylkill County, Industrial
Development Authority,
Gilberton Power Project, RB
3.650%, 06/06/96 (A) (C) 1,900 1,900
Schuylkill County, Industrial
Development Authority,
Westwood Energy Project, RB
3.950%, 06/03/96 (A) (C) 1,440 1,440
Scranton - Lackawana, Health and
Welfare Authority, University
of Scranton Project, RB
3.650%, 11/01/96 (C) 1,800 1,800
Shaler Township, TRAN
3.810%, 12/31/96 1,200 1,201
Temple University, University
Funding, Series 96, RB
4.625%, 05/20/97 2,500 2,522
Warren County, Hospital Authority,
Warren General Hospital
Project, RB
3.800%, 06/06/96 (A) (C) 1,000 1,000
Westmoreland County, Industrial
Development Authority,
Series D, RB
3.850%, 06/06/96 (A) (C) 755 755
</TABLE>
<PAGE> 190
<TABLE>
<S> <C> <C>
Whitehall Township, TRAN
3.930%, 12/31/96 700 701
- -------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $67,880) 67,880
- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 17
<PAGE> 191
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA TAX-EXEMPT VALUE
MONEY MARKET FUND (cont'd) (000)
- -------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS (99.1%)
(Cost $67,880) $67,880
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.9%) 592
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001 par
value - 2 billion authorized) based on
68,475,317 outstanding shares of
beneficial interest 68,475
Accumulated net realized loss on investments (3)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $68,472
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A $ 1.00
- -------------------------------------------------------
</TABLE>
(A)FLOATING RATE INSTRUMENT WITH DEMAND FEATURES. THE RATE REFLECTED ON THE
STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON MAY 31, 1996. THE DATE
SHOWN IS THE LONGER OF THE RESET DATE OR DEMAND DATE.
(B)PREREFUNDED SECURITY - THE MATURITY DATE SHOWN IS THE PREREFUNDED DATE.
(C)SECURITY IS BACKED BY A LETTER OF CREDIT.
AMBAC AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC FEDERAL GUARANTY INSURANCE CORPORATION
GO GENERAL OBLIGATION
MBIA MUNICIPAL BOND INSURANCE ASSOCIATION
RB REVENUE BOND
TECP TAX EXEMPT COMMERCIAL PAPER
TRAN TAX AND REVENUE ANTICIPATION NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
18 MAY 31, 1996
<PAGE> 192
STATEMENTS OF OPERATIONS INVENTOR FUNDS
FOR THE PERIOD MAY 1, 1996 TO MAY 31, 1996
<TABLE>
<CAPTION>
PENNSYLVANIA
INTERMEDIATE GNMA PENNSYLVANIA TAX-EXEMPT
GOVERNMENT SECURITIES MUNICIPAL BOND MONEY MARKET
SECURITIES FUND FUND FUND FUND
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME: $ 516 $ 379 $ 170 $226
----- ----- ----- ----
EXPENSES:
Investment advisory fees........................ 54 37 23 27
12b-1 fees...................................... 19 13 8 15
Administrative fees............................. 14 10 6 9
Transfer agent fees & expenses.................. 3 2 2 2
Custody fees.................................... 1 3 1 1
Trustee fees.................................... 1 -- -- --
Miscellaneous fees.............................. 4 3 3 4
----- ----- ----- ----
Total expenses................................ 96 68 43 58
Less: Expenses waived......................... (31) (23) (15) (25)
----- ----- ----- ----
Total net expenses............................ 65 45 28 33
----- ----- ----- ----
NET INVESTMENT INCOME.............................. 451 334 142 193
----- ----- ----- ----
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gain (loss) on investments......... (19) -- 8 (3)
Net change in unrealized depreciation
on investments................................ (624) (529) (159) --
----- ----- ----- ----
Net realized and unrealized loss
on investments............................. (643) (529) (151) (3)
----- ----- ----- ----
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................... $(192) $(195) $ (9) $190
===== ===== ===== ====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
MAY 31, 1996 19
<PAGE> 193
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
SECURITIES FUND
5/1/96 5/1/95
TO 5/31/96 TO 4/30/96
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 451 $ 5,340
Net realized gain (loss) on investments........... (19) 1,517
Net change in unrealized appreciation
(depreciation) on investments................... (624) (1,492)
------- -------
Net increase (decrease) resulting
from operations.............................. (192) 5,365
------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income............................. (456) (5,340)
Net realized gains................................ -- (403)
------- -------
Total dividends distributed..................... (456) (5,743)
------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued....................... 1,260 47,044
Reinvestment of cash distributions................ 8 64
Cost of shares repurchased........................ (1,692) (10,145)
------- -------
Increase (decrease) in net assets
derived from capital share transactions....... (424) 36,963
------- -------
Net increase (decrease) in net assets................ (1,072) 36,585
------- -------
NET ASSETS:
Beginning of period............................... 89,901 53,316
------- -------
End of period..................................... $88,829 $89,901
======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period.... 8,952 5,319
Shares issued..................................... 126 4,610
Shares issued in lieu of cash distributions....... 1 6
Shares repurchased................................ (170) (983)
------- -------
Increase (decrease) derived from capital
share transactions........................... (43) 3,633
------- -------
Capital shares outstanding at end of period.......... 8,909 8,952
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20 MAY 31, 1996
<PAGE> 194
<TABLE>
<CAPTION>
PENNSYLVANIA MUNICIPAL PENNSYLVANIA TAX-EXEMPT
GNMA SECURITIES FUND BOND FUND MONEY MARKET FUND
5/1/96 5/1/95 5/1/96 5/1/95 5/01/96 5/1/95
TO 5/31/96 TO 4/30/96 TO 5/31/96 TO 4/30/96 TO 5/31/96 TO 4/30/96
(000) (000) (000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income............................. $ 334 $ 3,469 $ 142 $ 1,573 $ 193 $ 2,271
Net realized gain (loss) on investments........... -- 1,611 8 74 (3) --
Net change in unrealized appreciation
(depreciation) on investments................... (529) (1,242) (159) 179 -- --
------- ------- ------- ------- ------- --------
Net increase (decrease) resulting
from operations.............................. (195) 3,838 (9) 1,826 190 2,271
------- ------- ------- ------- ------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income............................. (335) (3,469) (142) (1,573) (193) (2,271)
Net realized gains................................ -- (1,053) -- -- -- --
------- ------- ------- ------- ------- --------
Total dividends distributed..................... (335) (4,522) (142) (1,573) (193) (2,271)
------- ------- ------- ------- ------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued....................... 524 24,292 316 6,604 6,078 148,939
Reinvestment of cash distributions................ 8 83 -- 2 4 51
Cost of shares repurchased........................ (1,631) (3,742) (241) (2,688) (8,029) (135,236)
------- ------- ------- ------- ------- --------
Increase (decrease) in net assets
derived from capital share transactions....... (1,099) 20,633 75 3,918 (1,947) 13,754
------- ------- ------- ------- ------- --------
Net increase (decrease) in net assets................ (1,629) 19,949 (76) 4,171 (1,950) 13,754
------- ------- ------- ------- ------- --------
NET ASSETS:
Beginning of period............................... 62,161 42,212 38,809 34,638 70,422 56,668
------- ------- ------- ------- ------- --------
End of period..................................... $60,532 $62,161 $38,733 $38,809 $68,472 $ 70,422
======= ======= ======= ======= ======= ========
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period.... 6,143 4,154 3,836 3,451 70,422 56,668
Shares issued..................................... 52 2,341 31 647 6,078 148,939
Shares issued in lieu of cash distributions....... 1 8 -- -- 4 51
Shares repurchased................................ (163) (360) (24) (262) (8,029) (135,236)
-------- -------- -------- -------- -------- --------
Increase (decrease) derived from capital
share transactions........................... (110) 1,989 7 385 (1,947) 13,754
-------- -------- -------- -------- -------- --------
Capital shares outstanding at end of period.......... 6,033 6,143 3,843 3,836 68,475 70,422
======== ======== ======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
MAY 31, 1996 21
<PAGE> 195
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
FOR THE YEAR OR PERIOD ENDED
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM
VALUE NET UNREALIZED FROM NET REALIZED
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD OF PERIOD INCOME ON SECURITIES INCOME GAINS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A (3)
May 31, 1996* .............................. $10.04 $0.05 $(0.07) $(0.05) $ --
April 30, 1996 ............................. 10.02 0.64 0.07 (0.64) (0.05)
April 30, 1995(1)........................... 10.00 0.44 0.02 (0.44) --
- ---------------
GNMA SECURITIES
- ---------------
Class A (3)
May 31, 1996* .............................. $10.12 $0.05 $(0.09) $(0.05) $ --
April 30, 1996 ............................. 10.16 0.66 0.14 (0.66) (0.18)
April 30, 1995(1)........................... 10.00 0.48 0.16 (0.48) --
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A (3)
May 31, 1996* .............................. $10.12 $0.04 $(0.04) $(0.04) $ --
April 30, 1996 ............................. 10.04 0.43 0.08 (0.43) --
April 30, 1995(1)........................... 10.00 0.29 0.04 (0.29) --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
May 31, 1996* .............................. $ 1.00 $ -- $ -- $ -- $ --
April 30, 1996 ............................. 1.00 0.03 -- (0.03) --
April 30, 1995(2)........................... 1.00 0.02 -- (0.02) --
- -----------------------
</TABLE>
(DAGGER) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
* ALL RATIOS ARE FOR THE PERIOD OF MAY 1, 1996 THROUGH MAY 31, 1996 AND HAVE
BEEN ANNUALIZED.
1 COMMENCED OPERATIONS ON AUGUST 10, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
2 COMMENCED OPERATIONS ON AUGUST 8, 1994. ALL RATIOS FOR THE PERIOD HAVE BEEN
ANNUALIZED.
3 TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
22 MAY 31, 1996
<PAGE> 196
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
FOR THE YEAR OR PERIOD ENDED
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME TO
NET ASSET NET ASSETS RATIO OF INVESTMENT TO AVERAGE AVERAGE
VALUE END EXPENSES INCOME TO NET ASSETS NET ASSETS PORTFOLIO
FOR A SHARE OUTSTANDING END TOTAL OF PERIOD TO AVERAGE AVERAGE (EXCLUDING (EXCLUDING TURNOVER
THROUGHOUT THE PERIOD OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A (3)
May 31, 1996* ............... $ 9.97 (0.19)%(DAGGER) $ 88,829 0.85% 5.88% 1.25% 5.48% 2%
April 30, 1996 .............. 10.04 7.09 89,901 0.85 6.20 1.25 5.80 94
April 30, 1995(1)............ 10.02 4.75(DAGGER) 53,316 0.85 6.17 1.33 5.69 172
- ---------------
GNMA SECURITIES
- ---------------
Class A (3)
May 31, 1996* ............... $10.03 (0.35)%(DAGGER) $ 60,532 0.85% 6.33% 1.28% 5.90% 1%
April 30, 1996 .............. 10.12 7.97 62,161 0.85 6.30 1.29 5.86 149
April 30, 1995(1)............ 10.16 6.61(DAGGER) 42,212 0.85 6.68 1.40 6.13 226
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A (3)
May 31, 1996* ............... $10.08 (0.03)%(DAGGER) $ 38,733 0.85% 4.32% 1.31% 3.86% --
April 30, 1996 .............. 10.12 5.06 38,809 0.85 4.16 1.24 3.77 22%
April 30, 1995(1)............ 10.04 3.38(DAGGER) 34,638 0.85 4.05 1.36 3.54 4
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
May 31, 1996* ............... $ 1.00 0.28%(DAGGER) $ 68,472 0.55% 3.24% 0.97% 2.82% --
April 30, 1996 .............. 1.00 3.36 70,422 0.55 3.29 0.96 2.88 --
April 30, 1995(2)............ 1.00 2.32(DAGGER) 56,668 0.55 3.21 1.04 2.72 --
</TABLE>
- --------------------------------------------------------------------------------
MAY 31, 1996 23
<PAGE> 197
NOTES TO FINANCIAL STATEMENTS INVENTOR FUNDS
MAY 31, 1996
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsyslvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund" or collectively as the "Funds"). The Funds'
prospectus provides a description of each Fund's investment objectives,
policies and strategies. The financial statements of the Equity Growth, Prime
Obligations Money Market, and Treasury Securities Money Market Funds are not
presented herein. The assets of each Fund are segregated, and a shareholder's
interest is limited to the Fund in which shares are held.
At a shareholder meeting on May 2, 1996, shareholders approved National City
Bank as investment adviser to the Funds in conjunction with the merger between
Integra Financial Corporation, the parent to the Fund's investment adviser,
Integra Trust Company and National City Corporation. National City Bank is
National City Corporation's banking group and has served as investment adviser
to the ARMADA FUNDS since 1986. Terms of the investment advisory agreement
remained the same as described in Footnote 3.
The Corporation's Board of Directors approved the dissolution of the Prime
Obligations Money Market and Treasury Securities Money Market Funds at the May
13, 1996 board meeting. These Funds were dissolved on May 31, 1996.
Upon shareholder approval, the GNMA Securities, Intermediate Government
Securities, Pennsylvania Municipal Bond and the Pennsylvania Tax-Exempt Money
Market Funds will be merged intact to the ARMADA FUNDS. As a result, the fiscal
year for these Funds has been changed to coincide with the ARMADA FUNDS fiscal
year which ends on May 31. The Equity Growth Fund will be merged into the
existing Armada Equity Fund. The expected date of the Funds' merger is in the
fall of 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds.
SECURITY VALUATION -- Investment securities of the Pennsylvania Tax-Exempt
Money Market Fund (the "Money Market Fund") are stated at amortized cost which
approximates market value. Under this valuation method, purchase discounts and
premiums are accreted and amortized ratably to maturity and are included in
interest income. Investment securities of the Intermediate Government
Securities Fund, GNMA Securities Fund and the Pennsylvania Municipal Bond Fund
(the "Non-Money Market Funds") which are listed on a securities exchange for
which market quotations are available are valued by an independent pricing
service at the last quoted sales price for such securities on each business
day. If there is no such reported sale, these securities and unlisted
securities for which market quotations are readily available are valued at the
most recent quoted bid price.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Gains and losses from pay-downs of
mortgage-backed securities are included in net investment income.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until maturity of the Repurchase
Agreements. Provisions of the Agreements and procedures adopted by National
City Bank (the "Adviser") ensure that the market value of the collateral,
including interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
TBA PURCHASE COMMITMENTS -- The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of the funds'
- --------------------------------------------------------------------------------
24 MAY 31, 1996
<PAGE> 198
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
MAY 31, 1996
other assets. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, generally according to the
procedures described under "Security Valuation" above.
TBA SALE COMMITMENTS -- The Intermediate Government Securities Fund and the
GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
agreements. Proceeds of TBA sale commitments are not received until the
contract settlement date. Unsettled TBA sale commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation" above. The contract is "marked
to market" daily and the change in value is recorded by the Fund as unrealized
gain or loss. If the TBA sale commitment is closed through the acquisition of
an offsetting purchase commitment the Fund realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security. If securities
are delivered under the commitment, the Fund realizes a gain or loss from the
sale of the securities based upon the unit price at the date the commitment was
entered into.
EXPENSES -- Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- The Intermediate Government Securities
Fund, GNMA Securities Fund, Pennsylvania Municipal Bond Fund, and Pennsylvania
Tax-Exempt Money Market Fund distributions from net investment income are
declared on a daily basis and are payable monthly. Any net realized capital
gains on sales of securities are distributed to shareholders at least annually.
FEDERAL INCOME TAXES -- It is each Fund's intention to continue to qualify
as a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
ORGANIZATION COSTS -- Organization costs have been capitalized by the Funds
and are being amortized over sixty months commencing with operations. In the
event any of the initial shares of the Funds are redeemed by any holder thereof
during the period that the Funds are amortizing their organizational costs, the
redemption proceeds payable to the holder thereof by the Funds will be reduced
by the unamortized organizational costs in the same ratio as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption. These costs include legal fees of approximately
$53,415 for organizational work performed by a law firm of which an officer and
trustee of the Funds is a partner.
OTHER -- Certain officers of the Funds are also officers of the
Administrator and/or Distributor. Such officers are paid no fees by the Funds
for serving as officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory
agreement, dated May 2, 1996, under which the Adviser will receive an annual
fee equal to 0.70% of the average daily net assets of the Intermediate
Government Securities, GNMA Securities, and Pennsylvania Municipal Bond Funds;
and 0.45% of the average daily net assets of the Pennsylvania Tax-Exempt Money
Market Fund.
Sub-Advisory services are provided to the Adviser for the Intermediate
Government Securities and GNMA Securities Funds by Wellington Management
Company; and for the Pennsylvania Municipal Bond, and Pennsylvania Tax-Exempt
Money Market Funds by Weiss, Peck & Greer L.L.C. (the "Sub-Advisers") pursuant
to sub-advisory agreements dated May 2, 1996. Under the terms of such
agreements, the Sub-Advisers are entitled to receive a fee from the Adviser.
Such a fee is computed daily and paid monthly. The Adviser is responsible for
the supervision of, and payment of fees to, the Sub-Advisers in connection with
their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), became the Fund's Distributor pursuant
to an agreement dated August 1, 1994. The Class A shares of the Funds have a
Rule 12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to
0.25% of their average daily net assets.
Pursuant to an administration agreement dated August 1, 1994, SEI Financial
Management Company (the "Administrator"), a wholly-owned subsidiary of SEI,
acts as the Fund's Administrator. Under the terms of the administration
agreement, the Administrator will receive an annual fee which is calculated
daily and paid monthly at a maximum annual rate of 0.18% of the
- --------------------------------------------------------------------------------
MAY 31, 1996 25
<PAGE> 199
NOTES TO FINANCIAL STATEMENTS CONCLUDED INVENTOR FUNDS
MAY 31, 1996
average daily net assets of the Intermediate Government Securities, GNMA
Securities, and Pennsylvania Municipal Bond Funds, and 0.15% of the average
daily net assets of the Pennsylvania Tax-Exempt Money Market Fund.
During the period ended May 31, 1996, the Adviser and other parties waived a
portion of their contractual fees in order to assist the Funds in maintaining
competitive expense ratios. Expenses were waived as follows (in thousands):
<TABLE>
<CAPTION>
PENNSYLVANIA
TAX-EXEMPT
INTERMEDIATE GNMA PENNSYLVANIA MONEY
GOVERNMENT SECURITIES MUNICIPAL MARKET
SECURITIES FUND FUND BOND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Waiver of investment
advisory fees .................................... $12 $10 $ 7 $10
Waiver of 12b-1 fees ................................ 19 13 8 15
- ----------------------------------------------------------------------------------------------------------------------
Total Waivers ....................................... $31 $23 $15 $25
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended May 31, 1996, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were as follows (000):
<TABLE>
<CAPTION>
INTERMEDIATE GNMA PENNSYLVANIA
GOVERNMENT SECURITIES MUNICIPAL
SECURITIES FUND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASES
U.S. Government ................................................ $ 1,845 $2,890 $ --
Other........................................................... -- -- 17
SALES
U.S. Government ................................................ $ 1,279 $ 800 $ --
Other........................................................... -- -- $1,169
</TABLE>
At May 31, 1996, the total cost of securities for federal income tax
purposes was not materially different from amounts reported for financial
reporting purposes. The aggregate gross unrealized appreciation and
depreciation for securities held at May 31, 1996 is as follows (000):
<TABLE>
<CAPTION>
INTERMEDIATE GNMA PENNSYLVANIA
GOVERNMENT SECURITIES MUNICIPAL
SECURITIES FUND FUND BOND FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation ........................ $ 291 $ 244 $ 421
Aggregate gross unrealized depreciation ........................ (1,775) (1,377) (197)
Net unrealized appreciation (depreciation)...................... $(1,484) $(1,133) $ 224
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
26 MAY 31, 1996
<PAGE> 200
REPORT OF INDEPENDENT ACCOUNTANTS INVENTOR FUNDS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE INVENTOR FUNDS, INC.
We have audited the accompanying statements of net assets of the Inventor
Funds, Inc. comprising, respectively, Intermediate Government Securities, GNMA
Securities, Pennsylvania Municipal Bond and Pennsylvania Tax-Exempt Money
Market Funds as of May 31, 1996, and the related statements of operations for
the period May 1, 1996 to May 31, 1996, and the statements of changes in net
assets and the financial highlights for each of the respective years (or
periods) presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios comprising the Inventor Funds,
Inc. as of May 31, 1996, the results of their operations for the period May 1,
1996 to May 31, 1996, the changes in their net assets and their financial
highlights for each of the respective years (or periods) presented, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
- --------------------------------------------------------------------------------
MAY 31, 1996 27
<PAGE> 201
NOTICE TO SHAREHOLDERS (UNAUDITED) INVENTOR
FUNDS
FOR TAX-PAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IS FOR INFORMATION
PURPOSES ONLY.
Dear Inventor Fund Shareholders:
For the fiscal year ended May 31, 1996, each portfolio is designating long
term capital gains and exempt income with regard to distributions paid during
the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C) (E)
CAPITAL GAINS INCOME TOTAL (D) TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING EXEMPT
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) INTEREST
---- ------------- ------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Intermediate Government Securities 0% 100% 100% 0% 0%
GNMA Securities 0% 100% 100% 0% 0%
Pennsylvania Municipal Bond 0% 100% 100% 0% 100%
Pennsylvania Tax-Exempt Money Market 0% 100% 100% 0% 100%
</TABLE>
* Items (A) and (B) are based on a percentage of the portfolio's total
distributions
** Items (D) and (E) are based on a percentage of ordinary income distribution
of the portfolio.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
- --------------------------------------------------------------------------------
28 MAY 31, 1996
<PAGE> 202
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality respectively on the
basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Ratings of Duff-1 are further
refined by the gradations of "1+" and "1-." Issues rated Duff-1+ have the
highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors. Paper
rated Duff-2 is regarded as having good certainty of timely payment, good access
to capital markets and sound liquidity factors and company fundamentals. Risk
factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by S&P,
Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P 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. Debt rated A by S&P has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P 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
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
A-1
<PAGE> 203
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or 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. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's 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.
Debt rated Baa by Moody's is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type market. Bonds
rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB by
Fitch are considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by Duff
are judged by Duff to have average but adequate protection factors. However,
risk factors are more variable and greater in periods of economic stress. Bonds
rated BBB by Duff are judged by Duff as having below average protection factors
but still considered sufficient for prudent investment, with considerable
variability in risk during economic cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly. Obligations for which there is a low expectation on investment
risk are rated A by IBCA. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk. Obligations for which there is
currently a low expectation of investment risk are rated BBB by IBCA. Capacity
for timely repayment of principal and interest is adequate, although adverse
changes in business, economic or
A-2
<PAGE> 204
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
A-3
<PAGE> 205
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 3
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Audited financial statements
Statement of Net Assets as of April 30, 1996
Schedule of Investments as of April 30, 1996
Statements of Assets and Liabilities as of April 30, 1996
Statements of Operations as of April 30, 1996
Statements of Changes in Net Assets as of April 30, 1996
Financial Highlights as of April 30, 1996
Notes to Financial Statements as of April 30, 1996
Report of Independent Accountants
Statement of Net Assets as of May 31, 1996
Schedule of Investments as of May 31, 1996
Statement of Assets and Liabilities as of May 31, 1996
Statement of Operations as of May 31, 1996
Statement of Changes in Net Assets as of May 31, 1996
Financial Highlights as of May 31, 1996
Notes to Financial Statements as of May 31, 1996
Report of Independent Accountants
(b) Additional Exhibits
1 Articles of Incorporation of the Registrant, are
incorporated herein by reference to Exhibit 1 to
Registrant's Registration Statement on Form N-1A
(File No. 33-78078) filed with the Securities and
Exchange Commission on April 22, 1994.
2 By-Laws of the Registrant, are incorporated herein by
reference to Exhibit 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-78078) filed with
the Securities and Exchange Commission on April 22,
1994.
5(a) Form of Investment Advisory Agreement between the
Registrant and Integra Trust Company, National
Association(1)
5(b) Form of Investment Sub-Advisory Agreement between
Weiss, Peck & Greer and Integra Trust Company,
National Association(1)
5(c) Form of Investment Sub-Advisory Agreement between
Wellington Management Company and Integra Trust
Company, National Association(1)
5(d) Form of Investment Sub-Advisory Agreement between
SunBank Capital Management and Integra Trust Company,
National Association(1)
6 Form of Distribution Agreement between the Registrant
and SEI Financial Services Company(1)
8 Form of Custodian Agreement(1)
9(a) Form of Administration Agreement between the
Registrant and SEI Financial Management
Corporation(1)
9(b) Form of Transfer Agent Agreement between the
Registrant and Supervised Service Company(1)
10 Opinion and Consent of Counsel(1)
11 Consent of Independent Public Accountants*
13 Form of initial Subscription Agreement
15 Form of 12b-1 Plan(1)
16 Performance Calculations(1)
18 Rule 18f-3 Plan(2)
Powers of Attorney for William M. Doran, David G. Lee, Robert
A. Patterson, John T. Cooney, Gene Peters, James M. Storey,
Robert A. Nesher, Carmen V. Romeo and Frank E. Morris(2)
* Filed herewith
(1) Incorporated herein by reference to Pre-Effective
Amendment No. 1 (File No. 33-78078) filed with the
Securities and Exchange Commission on June 27, 1994.
(2) Incorporated herein by reference to Post-Effective
Amendment No. 2 (File No. 33-78078) filed with the
Securities and Exchange Commission on August 28, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant:
<PAGE> 206
See the Prospectus and the Statement of Additional Information
regarding the Registrant's control relationships. The Administrator is a
subsidiary of SEI Corporation, which also controls the distributor of the
Registrant, SEI Financial Services Company, other corporations engaged in
providing various financial and record keeping services, primarily to bank trust
departments, pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities:
The number of record holders of each class as of August 1, 1996:
Number of
Title of Class Record Holders
-------------- --------------
CLASS A
Pennsylvania Tax-Exempt Money Market Fund 5
Pennsylvania Municipal Bond Fund 32
Intermediate Government Securities Fund 28
GNMA Securities Fund 62
Equity Growth Fund 236
CLASS B
Pennsylvania Tax-Exempt Money Market Fund 5
Pennsylvania Municipal Bond Fund 5
Intermediate Government Securities Fund 5
GNMA Securities Fund 5
Equity Growth Fund 5
Item 27. Indemnification:
The Articles of Incorporation of the Registrant include the following:
ARTICLE VIII
Section 1. To the fullest extent that limitations on the liability
of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation shall
have any liability to the Corporation or its shareholders for
damages. This limitation on liability applies to events occurring
at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at
the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as to its
directors and to such further extent as is consistent with law. The
Board of Directors of the Corporation may make further provision
for indemnification of directors, officers, employees and agents in
the By-Laws of the Corporation or by resolution or agreement to the
fullest extent permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article VIII shall be effective to
protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders 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.
<PAGE> 207
Section 4. References to the Maryland General Corporation Law in
this Article VIII are to such law as from time to time amended. No
further amendment to the Charter of the Corporation shall decrease,
but may expand, any right of any person under this Article VIII
based on any event, omission or proceeding prior to such amendment.
The By-Laws of the Registrant include the following:
ARTICLE XIII
Indemnification of Directors and Officers
Section 1. Indemnification. The Corporation shall indemnify its
Directors to the fullest extent that indemnification of Directors
is permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same extent as its
Directors and to such further extent as is consistent with law. The
Corporation shall indemnify its Directors and officers who while
serving as Directors or officers also serve at the request of the
Corporation as a Director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
fullest extent consistent with law. This Article XIII shall not
protect any such person against any liability to the Corporation or
any shareholder thereof to which such person 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.
Section 2. Advances. Any current or former Director or officer of
the Corporation claiming indemnification within the scope of this
Article XIII shall be entitled to advances from the Corporation for
payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the
full extent permissible under the Maryland General Corporation Law,
the Securities Act of 1933 (the "1933 Act") and the 1940 Act, as
such statutes are now or hereafter in force.
Section 3. Procedure. On the request of any current or former
Director or officer requesting indemnification or an advance under
this Article XIII, the Board of Directors shall determine, or cause
to be determined, in a manner consistent with the Maryland General
Corporation Law, the 1933 Act and the 1940 Act, as such statutes
are now or hereafter in force, whether the standards required by
this Article XIII have been met.
Section 4. Other Rights. The indemnification provided by this
Article XIII shall not be deemed exclusive of any other right, in
respect of indemnification or otherwise, to which those seeking
such indemnification may be entitled under any insurance or other
agreement, vote of shareholders or disinterested Directors or
otherwise, both as to action by a Director or officer of the
Corporation in his official capacity and as to action by such
person in another capacity while holding such office or position,
and shall continue as to a person who has ceased to be a Director
or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 5. Maryland Law. References to the Maryland General
Corporation Law in this Article XIII are to such law as from time
to time amended.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, 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 the 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 action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
<PAGE> 208
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 the Act and will be governed by the final
adjudication of such issue.
To the extent that the Articles of Incorporation, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnifies any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment adviser or
principal underwriter to the Registrant, any such provision protecting or
purporting to protect such persons against any liability to the Registrant or
its security holders to which he would otherwise by subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties, or
by reason of his reckless disregard of his duties pursuant to the conduct of his
office or obligations pursuant to such contract or agreement, will be
interpreted and enforced in a manner consistent with the provisions of Sections
17(h) and (i) of the Investment Company Act or 1940, as amended, and Release No.
IC-11330 issued thereunder.
Item 28. Business and Other Connections of Investment Adviser and Investment
Sub-Adviser(s):
ADVISER
Other business, profession, vocation, or employment of a substantial
nature in which each director or principal executive officer of the Adviser is
or has been, at any time during the last two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or trustee
are as follows:
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
Edward B. Brandon National City Corporation Retired Chairman
Director The Standard Products Company Director
RPM, Inc. Director
John G. Breen The Sherwin Williams Company Chairman and Chief Executive Officer
Director
Steve D. Bullock American Red Cross Chief Executive Officer and Chapter Manager
Director
Werner F. Bush Ferro Corp. Executive Vice President and Chief Operating
Director Officer
Duane E. Collins Parker Hannifin Corp. President and Chief Executive Officer
Director
David A. Daberko National City Corporation Chairman and Chief Executive Officer
Director, Vice Chairman of National City Bank of Columbus Director
Executive Committee National City Bank, Northeast Director
National City Bank of Dayton Director
National City Bank, Northwest Director
National City Bank of Indiana Director
National City Bank of Kentucky Director
Hudson Tractor Sales, Inc. Officer and Director
Student Loan Marketing Assoc. Director
Robert J. Farling Centerior Energy Corporation Chairman, President and Chief Executive
Officer
Director
</TABLE>
<PAGE> 209
<TABLE>
<S> <C> <C>
Russell R. Gifford CNG Energy Services Corporation President
Director
Henry J. Goodman H. Goodman, Inc. Chairman and Chief Executive Officer
Director
Gordon D. Harnett Brush Wellman, Inc. President, Chairman and Chief Executive
Officer
Director
Preston B. Heller, Jr. Pioneer-Standard Electronics, Inc. Retired Chairman and Chief Executive Officer
Director
Leon J. Hendrix, Jr. Clayton, Dubilier & Rice, Inc. Partner
Director
J. Peter Kelly LTV Steel Company President and Chief Operating Officer
Director
William E. MacDonald III National City Corporation Director and Executive Vice President
Chairman, President, Chief
Executive Officer and Director
William P. Madar Nordson Corporation Vice Chairman and Chief Executive Officer
Director
H. Gene Nau Premier Travel Partners President and Chief Executive Officer
Director
William F. Patient The Geon Company Chairman, President and Chief Executive
Officer
Director
William R. Robertson National City Corporation President
Director, Chairman of
Trust Committee,
Member of Executive Committee
Shelley B. Roth Pierre's French Ice Cream Company President
Director
Thomas C. Sullivan RPM, Inc. Chairman of the Board and Chief Executive
Director Officer
Dr. Jerry Sue Thornton Cuyahoga Community College President
Director
Morry Weiss American Greetings Corporation Chairman and Chief Executive Officer
Director
Theodore K. Zampetis The Standard Products Co. President and Chief Operating Officer
Director
W. Douglas Bannerman National City Corporation Senior Vice President
Executive Vice President,
</TABLE>
<PAGE> 210
<TABLE>
<S> <C> <C>
Corporate Banking
Jeffrey M. Biggar National City Corporation Senior Vice President
Executive Vice President,
Private Client Group
Jane Grebenc __ __
Executive Vice President,
Retail Banking
Jeffrey D. Kelly National City Corporation Executive Vice President
Executive Vice President,
Investments
Bruce T. Muddell __ __
Executive Vice President,
Credit Administration
Harold B. Todd, Jr. National City Corporation Executive Vice President
Executive Vice President,
Institutional Trust & Asset
Management
</TABLE>
The principal business address of National City Bank is 1900 East Ninth Street,
Cleveland, Ohio 44114.
SUB-ADVISER(S)
Weiss, Peck & Greer, L.L.C. ("WPG") serves as Sub-Adviser to the Pennsylvania
Tax Exempt Money Market and Pennsylvania Municipal Bond Funds. WPG is a limited
partnership which engages in investment management, venture capital management
and management buyouts for individuals, mutual funds, corporations and other
institutional clients. As of September 30, 1995, WPG had discretionary
management authority with respect to approximately $12.5 billion of assets. The
business address of each officer is One New York Plaza, New York, NY 10004.
The list required by Item 28 of officers and directors of WPG together with
information as to any other business, professional, vocation or employment of a
substantial nature engaged in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and D of Form ADV, filed by
WPG pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-6604).
Wellington Management Company ("Wellington Management") serves as sub-adviser to
the Intermediate Government Securities and GNMA Securities Funds. Wellington
Management, a registered investment adviser, is a Massachusetts general
partnership of which the following are managing partners: Robert W. Doran,
Duncan M. McFarland, and John B. Neff. Wellington Management is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowments, foundations, and other
institutions and individuals. Wellington Management's predecessor organizations
have provided investment advisory services to investment companies since 1933
and to investment counseling clients since 1960. As of May 31, 1996, Wellington
Management had discretionary management authority with respect to approximately
$118 billion of assets. Wellington Management has its principal place of
business at 75 State Street, Boston, Massachusetts 02109.
The list required by this Item 28 of officers and directors of Wellington
Management, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV, filed by Wellington Management pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-15908).
<PAGE> 211
STI Capital Management N.A. ("STI") serves as Sub-Adviser to the Equity Growth
Fund. As of June 30, 1996, STI had discretionary management authority with
respect to approximately $11 billion of assets. The principal business address
of STI is 2005 Orange Avenue, Orlando, Florida 32802.
Other business, profession, vocation or employment of a substantial nature in
which each director or principal officer of the Sub-Adviser is or has been, at
any time during the last two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee are as follows:
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Investment Sub-Adviser Other Company Other Company
- --------------------------- ------------- ---------------
<S> <C> <C>
Anthony R. Gray -- --
Chairman, President & Chief
Investment Officer
Elliott A. Perny -- --
Executive Vice President
& Chief Portfolio Manager
Stuart F. Van Arsdale -- --
Senior Vice President
Jonathan D. Rich -- --
Director
Robert Buhrmann -- --
Senior Vice President
Larry M. Cole -- --
Senior Vice President
L. Earl Denney -- --
Senior Vice President
Thomas A. Edgar -- --
Senior Vice President
Daniel G. Shannon -- --
Senior Vice President
Ronald Schwartz -- --
Vice President
Ryan R. Burrow Catalina Lighting Director/25% owner
Vice President
Mills A. Riddick -- --
Senior Vice President
Christopher A. Jones -- --
Vice President
Michael R. Scoffone -- --
Vice President
</TABLE>
<PAGE> 212
<TABLE>
<S> <C> <C>
David E. West -- --
Vice President
Item 29. Principal Underwriters:
</TABLE>
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts
as distributor for:
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
Turner Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
</TABLE>
SFS provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting
services ("Funds Evaluation") and automated execution, clearing and
settlement of securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named
in the answer to Item 21 of Part B. Unless otherwise noted, the
business address of each director or officer is 680 East Swedesford
Road, Wayne, PA 19087.
<TABLE>
<S> <C>
Position and Office Positions and Offices
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President-Investment Services Division --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Steven Kramer Senior Vice President --
David G. Lee Senior Vice President President,
Chief Executive Officer
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Vice President,
Secretary Assistant Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Kathryn L. Stanton Deputy General Counsel, Vice President & Vice President,
Assistant Secretary Assistant Secretary
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President,
Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President,
Assistant Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President and Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President and Team Leader --
Vicki Malloy Vice President and Team Leader --
Jack May Vice President --
Carolyn McLaurin Vice President & Managing Director --
Barbara Moore Vice President & Managing Director --
W. Kelso Morrill Vice President
Barbara A. Nugent Vice President & Assistant Secretary Vice President,
Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President,
Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated
thereunder, are maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
National City Bank
4100 West 150th Street
Cleveland, OH 44135-5756
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and
(D); (4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required
books and records are maintained at the offices of Registrant's
Administrator:
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices
of the Registrant's Adviser and Sub-Advisers:
National City Bank
1900 East Ninth Street
Cleveland, OH 44114
Weiss, Peck & Greer, L.L.C.
One New York Plaza
New York, NY 10004
(Sub-Adviser of the Pennsylvania Tax-Exempt Money Market Fund
and Pennsylvania Municipal Bond Fund)
Wellington Management Company
75 State Street
Boston, Massachusetts 02109
(Sub-Adviser of the Intermediate Government Securities Fund
and GNMA Securities Fund)
STI Capital Management, N.A.
200 S. Orange Avenue
Orlando, FL 32802
(Sub-Adviser of the Equity Growth Fund)
Item 31. Management Services: None.
Item 32. Undertakings:
<PAGE> 215
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Directors of their desire to communicate with Shareholders of the
Corporation, the Directors will inform such Shareholders as to the approximate
number of Shareholders of record and the approximate costs of mailing or afford
said Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director(s) when requested
in writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to Shareholder
communications.
Registrant undertakes to furnish each person to whom a prospectus for
any series of the Registrant is delivered with a copy of the Registrant's latest
annual report to shareholders for such series, when such annual report is issued
containing information called for by Item 5A of Form N-1A, upon request and
without charge.
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Securities
Act") and the Investment Company Act of 1940, as amended, 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 Post-Effective Amendment to the Registration Statement
No. 33-78078 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wayne, Commonwealth of Pennsylvania on the 27 th day
of August, 1996.
INVENTOR FUNDS, INC.
By: /s/ David G. Lee
-----------------------
David G. Lee, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.
<TABLE>
<S> <C> <C>
* Trustee August 27, 1996
- -------------------------------------------
John Cooney
* Trustee August 27, 1996
- -------------------------------------------
William M. Doran
* Trustee August 27, 1996
- -------------------------------------------
Frank E. Morris
* Trustee August 27, 1996
- -------------------------------------------
Robert A. Nesher
* Trustee August 27, 1996
- -------------------------------------------
Robert A. Patterson
* Trustee August 27, 1996
- -------------------------------------------
Gene Peters
* Trustee August 27, 1996
- -------------------------------------------
James M. Storey
/s/ David G. Lee President & Chief August 27, 1996
- ------------------------------------------- Executive Officer
David G. Lee
/s/ Jeffrey A. Cohen Controller & Chief August 27, 1996
- ------------------------------------------- Financial Officer
Jeffrey A. Cohen
</TABLE>
*By: /s/ David G. Lee
-------------------------------------------
David G. Lee
Attorney-in-Fact
<PAGE> 217
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit Page
- ---- ------- ----
<S> <C>
Articles of Incorporation of the Registrant, are incorporated herein by
reference to Exhibit 1 to Registrant's Registration Statement on Form N-1A (File
No. 33-78078) filed with the Securities and Exchange Commission on April 22, 1994. 1
By-Laws of the Registrant, are incorporated herein by reference to Exhibit 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-78078) filed with
the Securities and Exchange Commission on April 22, 1994. 2
Form of Investment Advisory Agreement between the Registrant and
Integra Trust Company, National Association(1) 5(a)
Form of Investment Sub-Advisory Agreement between Weiss, Peck
& Greer and Integra Trust Company, National Association(1) 5(b)
Form of Investment Sub-Advisory Agreement between Wellington
Management Company and Integra Trust Company, National Association(1) 5(c)
Form of Investment Sub-Advisory Agreement between SunBank Capital
Management and Integra Trust Company, National Association(1) 5(d)
Form of Distribution Agreement between the Registrant and SEI
Financial Services Company(1) 6
Form of Custodian Agreement(1) 8
Form of Administration Agreement between the Registrant and
SEI Financial Management Corporation(1) 9(a)
Form of Transfer Agent Agreement between the Registrant and
Supervised Service Company(1) 9(b)
Opinion and Consent of Counsel(1) 10
Consent of Independent Public Accountants* 11
Form of initial Subscription Agreement 13
Form of 12b-1 Plan(1) 15
Performance Calculations(1) 16
Rule 18f-3 Plan(2) 18
Powers of Attorney for William M. Doran, David G. Lee,
Robert A. Patterson, John T. Cooney, Gene Peters, James M. Storey,
Robert A. Nesher, Carmen V. Romeo and Frank E. Morris(2)
</TABLE>
* Filed herewith
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 (File
No. 33-78078) filed with the Securities and Exchange Commission on June
27, 1994.
(2) Incorporated herein by reference to Post-Effective Amendment No. 2
(File No. 33-78078) filed with the Securities and Exchange Commission
on August 28, 1995.
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to this Post-Effective Amendment No. 3
under the Securities Act of 1933 to the Registration Statement on Form N-1A
(File No. 33-78078) of the Inventor Funds, Inc.:
- The incorporation by reference to our reports dated June 14,
1996 and July 26, 1996 into the applicable Prospectuses of the
Inventor Funds, Inc.
- The inclusion of our reports dated June 14, 1996 and July 26,
1996 into the Statement of Additional Information.
- The references to our Firm under the captions "Financial
Highlights" and "Counsel and Independent Accountants" in the
applicable Prospectuses and "Experts" in the Statement of
Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 28, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 011
<NAME> PRIME OBLIGATIONS CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 299,270
<INVESTMENTS-AT-VALUE> 299,270
<RECEIVABLES> 162
<ASSETS-OTHER> 36
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 299,468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,316
<TOTAL-LIABILITIES> 1,316
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 298,152
<SHARES-COMMON-STOCK> 298,152
<SHARES-COMMON-PRIOR> 290,058
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 298,152
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,896
<OTHER-INCOME> 0
<EXPENSES-NET> (1,595)
<NET-INVESTMENT-INCOME> 15,301
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,301
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,301
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 696,813
<NUMBER-OF-SHARES-REDEEMED> 689,132
<SHARES-REINVESTED> 413
<NET-CHANGE-IN-ASSETS> 8,094
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,305
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,679
<AVERAGE-NET-ASSETS> 289,969
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 021
<NAME> TREASURY SECURITIES CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 154,294
<INVESTMENTS-AT-VALUE> 154,294
<RECEIVABLES> 53
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,372
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 669
<TOTAL-LIABILITIES> 669
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 153,692
<SHARES-COMMON-STOCK> 153,692
<SHARES-COMMON-PRIOR> 80,477
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 153,703
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,778
<OTHER-INCOME> 0
<EXPENSES-NET> (744)
<NET-INVESTMENT-INCOME> 7,034
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,031
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,034
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 752,257
<NUMBER-OF-SHARES-REDEEMED> 679,258
<SHARES-REINVESTED> 216
<NET-CHANGE-IN-ASSETS> 73,212
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 609
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,327
<AVERAGE-NET-ASSETS> 135,294
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .00
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> .00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 031
<NAME> PA TAX EXEMPT MONEY MARKET CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 71,438
<INVESTMENTS-AT-VALUE> 71,438
<RECEIVABLES> 674
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 72,146
<PAYABLE-FOR-SECURITIES> 1,500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224
<TOTAL-LIABILITIES> 1,724
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,422
<SHARES-COMMON-STOCK> 70,422
<SHARES-COMMON-PRIOR> 56,668
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 70,422
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,651
<OTHER-INCOME> 0
<EXPENSES-NET> (380)
<NET-INVESTMENT-INCOME> 2,271
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,271
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 148,939
<NUMBER-OF-SHARES-REDEEMED> 135,236
<SHARES-REINVESTED> 51
<NET-CHANGE-IN-ASSETS> 13,754
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663
<AVERAGE-NET-ASSETS> 69,089
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 041
<NAME> PA MUNICIPAL BOND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 38,160
<INVESTMENTS-AT-VALUE> 38,543
<RECEIVABLES> 434
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,977
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168
<TOTAL-LIABILITIES> 168
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,352
<SHARES-COMMON-STOCK> 3,836
<SHARES-COMMON-PRIOR> 3,451
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 74
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 383
<NET-ASSETS> 38,809
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,894
<OTHER-INCOME> 0
<EXPENSES-NET> (321)
<NET-INVESTMENT-INCOME> 1,573
<REALIZED-GAINS-CURRENT> 74
<APPREC-INCREASE-CURRENT> 179
<NET-CHANGE-FROM-OPS> 1,826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,573
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 647
<NUMBER-OF-SHARES-REDEEMED> 262
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,171
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 265
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470
<AVERAGE-NET-ASSETS> 37,780
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> .43
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 051
<NAME> INTERMEDIATE GOVERNMENT SECURITIES CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 94,262
<INVESTMENTS-AT-VALUE> 93,402
<RECEIVABLES> 1,075
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,492
<PAYABLE-FOR-SECURITIES> 4,061
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 530
<TOTAL-LIABILITIES> 4,591
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,009
<SHARES-COMMON-STOCK> 8,952
<SHARES-COMMON-PRIOR> 5,319
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 752
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (860)
<NET-ASSETS> 89,901
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,072
<OTHER-INCOME> 0
<EXPENSES-NET> (732)
<NET-INVESTMENT-INCOME> 5,340
<REALIZED-GAINS-CURRENT> 1,517
<APPREC-INCREASE-CURRENT> (1,492)
<NET-CHANGE-FROM-OPS> 5,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,340
<DISTRIBUTIONS-OF-GAINS> 403
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,610
<NUMBER-OF-SHARES-REDEEMED> 983
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 36,585
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (362)
<GROSS-ADVISORY-FEES> 603
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,077
<AVERAGE-NET-ASSETS> 85,106
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .64
<PER-SHARE-GAIN-APPREC> .07
<PER-SHARE-DIVIDEND> .64
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 061
<NAME> GNMA SECURITIES CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 62,709
<INVESTMENTS-AT-VALUE> 62,105
<RECEIVABLES> 391
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,514
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 353
<TOTAL-LIABILITIES> 353
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,127
<SHARES-COMMON-STOCK> 6,143
<SHARES-COMMON-PRIOR> 4,154
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 638
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (604)
<NET-ASSETS> 62,161
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,937
<OTHER-INCOME> 0
<EXPENSES-NET> (468)
<NET-INVESTMENT-INCOME> 3,469
<REALIZED-GAINS-CURRENT> 1,611
<APPREC-INCREASE-CURRENT> (1,242)
<NET-CHANGE-FROM-OPS> 3,838
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,469
<DISTRIBUTIONS-OF-GAINS> 1,053
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,341
<NUMBER-OF-SHARES-REDEEMED> 360
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 19,949
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 80
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 385
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 713
<AVERAGE-NET-ASSETS> 54,852
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .66
<PER-SHARE-GAIN-APPREC> .14
<PER-SHARE-DIVIDEND> .66
<PER-SHARE-DISTRIBUTIONS> .18
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 071
<NAME> EQUITY GROWTH CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 54,616
<INVESTMENTS-AT-VALUE> 60,740
<RECEIVABLES> 994
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61,734
<PAYABLE-FOR-SECURITIES> 493
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 573
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,033
<SHARES-COMMON-STOCK> 4,822
<SHARES-COMMON-PRIOR> 4,363
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,124
<NET-ASSETS> 61,161
<DIVIDEND-INCOME> 885
<INTEREST-INCOME> 295
<OTHER-INCOME> 0
<EXPENSES-NET> (517)
<NET-INVESTMENT-INCOME> 663
<REALIZED-GAINS-CURRENT> 9,920
<APPREC-INCREASE-CURRENT> 3,376
<NET-CHANGE-FROM-OPS> 13,959
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 663
<DISTRIBUTIONS-OF-GAINS> 4,387
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 903
<NUMBER-OF-SHARES-REDEEMED> 461
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 14,504
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 471
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 462
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 777
<AVERAGE-NET-ASSETS> 54,221
<PER-SHARE-NAV-BEGIN> 10.69
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> 2.95
<PER-SHARE-DIVIDEND> .15
<PER-SHARE-DISTRIBUTIONS> .96
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.68
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 031
<NAME> PA TAX EXEMPT MONEY MARKET CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 67,880
<INVESTMENTS-AT-VALUE> 67,880
<RECEIVABLES> 776
<ASSETS-OTHER> 46
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,702
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 68,475
<SHARES-COMMON-STOCK> 68,475
<SHARES-COMMON-PRIOR> 70,422
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 68,472
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 226
<OTHER-INCOME> 0
<EXPENSES-NET> (33)
<NET-INVESTMENT-INCOME> 193
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 190
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 193
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,078
<NUMBER-OF-SHARES-REDEEMED> 8,029
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (1,950)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58
<AVERAGE-NET-ASSETS> 70,401
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 041
<NAME> PA MUNICIPAL BOND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 37,804
<INVESTMENTS-AT-VALUE> 38,028
<RECEIVABLES> 708
<ASSETS-OTHER> 165
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,901
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168
<TOTAL-LIABILITIES> 168
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,427
<SHARES-COMMON-STOCK> 3,843
<SHARES-COMMON-PRIOR> 3,836
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 82
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 224
<NET-ASSETS> 38,733
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 170
<OTHER-INCOME> 0
<EXPENSES-NET> (28)
<NET-INVESTMENT-INCOME> 142
<REALIZED-GAINS-CURRENT> 8
<APPREC-INCREASE-CURRENT> (159)
<NET-CHANGE-FROM-OPS> (9)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 142
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31
<NUMBER-OF-SHARES-REDEEMED> 24
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (76)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 74
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 43
<AVERAGE-NET-ASSETS> 38,709
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 051
<NAME> INTERMEDIATE GOVERNMENT SECURITIES CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 91,327
<INVESTMENTS-AT-VALUE> 89,843
<RECEIVABLES> 890
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,742
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,913
<TOTAL-LIABILITIES> 1,913
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,585
<SHARES-COMMON-STOCK> 8,909
<SHARES-COMMON-PRIOR> 8,952
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5
<ACCUMULATED-NET-GAINS> 733
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,484)
<NET-ASSETS> 88,829
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 516
<OTHER-INCOME> 0
<EXPENSES-NET> (65)
<NET-INVESTMENT-INCOME> 451
<REALIZED-GAINS-CURRENT> (19)
<APPREC-INCREASE-CURRENT> (624)
<NET-CHANGE-FROM-OPS> (192)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 456
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 126
<NUMBER-OF-SHARES-REDEEMED> 170
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (1,072)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 752
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 96
<AVERAGE-NET-ASSETS> 90,049
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000922281
<NAME> INVENTOR FUNDS
<SERIES>
<NUMBER> 061
<NAME> GNMA SECURITIES CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 62,996
<INVESTMENTS-AT-VALUE> 61,863
<RECEIVABLES> 399
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,262
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1730
<TOTAL-LIABILITIES> 1730
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,028
<SHARES-COMMON-STOCK> 6,033
<SHARES-COMMON-PRIOR> 6,143
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1)
<ACCUMULATED-NET-GAINS> 638
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,133)
<NET-ASSETS> 60,532
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 379
<OTHER-INCOME> 0
<EXPENSES-NET> (45)
<NET-INVESTMENT-INCOME> 334
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (529)
<NET-CHANGE-FROM-OPS> (195)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 335
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52
<NUMBER-OF-SHARES-REDEEMED> 163
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (1,629)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 638
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 68
<AVERAGE-NET-ASSETS> 62,129
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> (.09)
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
