<PAGE>
MAGNA FUNDS
LETTER TO SHAREHOLDERS
We are pleased to provide you with the 1996 annual report for the Magna Funds,
consisting of Magna Growth & Income Fund and Magna Intermediate Government
Bond Fund. Net assets under management have grown to over $96,700,000 during
the second fiscal year, which ended August 31, 1996. The increase in net
assets this past year was approximately $10 million for the Growth & Income
Fund and $5 million for the Magna Intermediate Government Bond Fund.
In our second year of operation, we managed the portfolios through several
periods of fluctuation in the securities markets. Volatility had increased
from fiscal 1995. As the fiscal year 1996 ended, the large capitalization
stock market indices, such as the Dow Industrial and S&P 500 Composite were
near all time highs. Market highs had been set earlier in the year. At the
same time, the bond market had drifted lower as many investors were watching
the Federal Reserve to see if interest rates would be increased in September.
During fiscal 1996 the management of both funds strove to provide an above
average return for our shareholders, consistent with stated fund objectives
while controlling risk. Risk and fund share price volatility were contained in
Magna Intermediate Government Bond Fund by investing in high quality bonds,
maintaining an average coupon at 7.4% and keeping the average life of the
portfolio less than six years. The Magna Growth & Income Fund conservatively
maintained reserve funds, currently 15% of total assets, as a cushion against
market downturns. This cautious approach was designed to control volatility
and to establish a base from which to continue growth in the future.
For the year, your investment in Magna Intermediate Government Bond Fund grew
3.5% if you reinvested dividends paid since last September. Magna Growth &
Income Fund returned 18.8% on your investment with dividends reinvested. These
fund results, which were computed without a sales charge, were slightly higher
than the comparable Lehman 6-10 Year Government/Corporate Bond Index which
increased 3.4% and the S&P 500 Composite Index which was up 18.7%. The Lipper
Growth and Income Fund Index reflected a total return of 15.4% for the twelve
months ended August 31, 1996.
Since January 1, 1996, the returns, assuming reinvestment of dividends and
excluding sales charges, were down (0.2)% for the Magna Intermediate
Government Bond Fund and up 7.8% for the Magna Growth & Income Fund. The
Lehman 6-10 Year Government/Corporate Bond Index declined (2.5)% and the S&P
500 Composite Index rose 7.5% during this eight month period.
We continue to look forward to the future. The changing domestic and
international demographics and economic dynamics should afford the
opportunistic investor the potential for excellent returns. We believe
interest rates will fluctuate, but stay within a reasonable range. This
forecast is in part due to the apparent evidence that, in the foreseeable
future, inflation will not return to the wild ride of the 70's. This
environment should present an excellent opportunity for the well managed
domestic corporations to profit. The Magna Intermediate Government Bond Fund
will continue to stress preservation of capital with reasonable income by
concentrating investments in high quality bonds. The Magna Growth & Income
Fund will continue to invest in those companies which demonstrate the
potential for growth of shareholder value.
Sincerely,
/s/ Barry Hartstone
Barry Hartstone
President
October 15, 1996
1
<PAGE>
MAGNA GROWTH & INCOME FUND
PORTFOLIO MANAGER REPORT
COMMENTS FROM DISCUSSIONS WITH GARY J. GUTHRIE, PORTFOLIO MANAGER.
HOW HAS THE FUND The Fund has outperformed both the broad market
PERFORMED OVER THE index and its fund peer group index for the fiscal
TRAILING ONE YEAR year ended August 31, 1996. The Fund returned
PERIOD AND SO FAR IN 18.8%, excluding sales charges, versus the S&P 500
1996? Index return of 18.7% and the Lipper Growth &
Income Fund Index return of 15.4%.
For the year to date period, the Fund's return was
7.8%, excluding sales charges, as compared to the
S&P 500 Index and Lipper Growth & Income Fund Index
of 7.5% and 7.2%, respectively.
WHAT CONTRIBUTED TO THE The market favored a return to high quality, large
FUND'S PERFORMANCE? capitalization companies in 1996, as small stocks
lagged the broader market. The slight correction we
experienced in July was remarkably short in
duration. Overall, technology stocks were the
hardest hit, with the tech-heavy NASDAQ Composite
remaining well off its high. The flight to quality
large companies in the NASDAQ was evident here too,
as these issues recovered quickly.
The Fund's reserve position provided stability as
the Fund fell only half as much as the overall
market. As the market recovered, the Fund
outperformed on the rebound.
WHAT IS THE COMPOSITION
OF THE PORTFOLIO AT THIS The Fund is broadly diversified, with the single
TIME? largest holding at 2.6% of the portfolio and the
ten largest positions comprising 22.5%. A total of
63 companies in 27 industries is represented.
WHAT'S YOUR OUTLOOK OVER With the election looming in November and the
THE COMING YEAR? Federal Reserve unlikely to change rates soon, we
remain cautiously optimistic. The latest expansion
is long by historical standards, but little
evidence of inflation is present. Wage pressures
could develop as the economy reaches what may be
full employment. Long-term demographics favor
financial assets as the baby boomers reach their
peak savings years.
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
MAGNA GROWTH & INCOME FUND, THE S&P 500 INDEX
AND THE LIPPER GROWTH & INCOME FUND INDEX
[LINE CHART APPEARS HERE]
Magna Fund S&P 500 Lipper Growth & Income
---------- ------- ----------------------
8/31/94 $ 9,600 $10,000 10,000
8/31/95 $10,977 $12,145 11,691
8/31/96 $13,040 $14,415 13,493
Past performance is not predictive of future results. Investment returns and
principal value of shares of the Fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost.
The Fund's total return figures reflect the maximum sales charge of 4%, fund
expenses and portfolio transactions costs, and assume the reinvestment of
income and capital gains distributions. The S&P 500 Index is a broad-based,
widely recognized unmanaged index of 500 common stocks. The Lipper Growth &
Income Fund Index is composed of thirty funds. The total return figures for the
indices do not reflect any commissions or expenses that would be incurred if an
investor individually purchased or sold the securities represented in these
indices. It is generally not possible to invest in an index.
COMPARATIVE TOTAL RETURN
FOR THE PERIODS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
1996 YTD ONE YEAR (ANNUALIZED)
-------- -------- ---------------
<S> <C> <C> <C>
Magna Growth & Income Fund:
Without sales charge........................ 7.7% 18.8% 16.5%
With 4% sales charge........................ 3.4 14.0 14.2
Lipper Growth & Income Fund Index............. 7.2 15.4 16.2
S&P 500 Index................................. 7.5 18.7 20.1
Consumer Price Index (CPI-U).................. 2.2 2.9 2.7
</TABLE>
3
<PAGE>
MAGNA GROWTH & INCOME FUND
AUGUST 31, 1996
<TABLE>
<CAPTION>
LARGEST STOCK HOLDINGS SECTOR WEIGHTINGS
PORTFOLIO PORTFOLIO
% %
--------- ---------
<S> <C> <C> <C>
Intel................... 2.6 Basic Industries............................. 10.1
Procter & Gamble........ 2.5 Capital Goods................................ 4.1
Monsanto................ 2.4 Consumer..................................... 20.2
Hewlett Packard......... 2.2 Energy....................................... 6.1
Microsoft............... 2.2 Finance...................................... 8.1
DuPont.................. 2.2 General Business............................. 1.3
Mobil................... 2.2 Services..................................... 2.4
General Electric........ 2.2 Technology................................... 19.0
Sun Microsystems........ 2.1 Transportation............................... 2.7
Coca Cola............... 2.0 Utilities.................................... 10.5
</TABLE>
4
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
PORTFOLIO MANAGER REPORT
COMMENTS FROM DISCUSSIONS WITH L. CLARK ZEDRIC, PORTFOLIO MANAGER.
HOW HAS THE FUND The Fund provided a total return of 3.5%, exclusive
PERFORMED DURING THE of sales loads, for the twelve month period ended
PAST TWELVE MONTHS? August 31, 1996, compared to 3.4% for the Lehman
Brothers 6-10 Year Government/Corporate Bond Index
and 3.4% for the Lipper Intermediate Government
Bond Fund Index.
WHAT HAS BEEN THE The rise in interest rates resulted in a general
PERFORMANCE IN THE FIRST deterioration of the bond market. This environment
EIGHT MONTHS OF 1996? made it difficult to generate positive returns. The
Fund experienced a decline of (0.2)% in the eight
months ended August 31, 1996. This compares
favorably with the Lehman 6-10 Year
Government/Corporate Bond Index which declined
(2.5)%. The Lipper Intermediate Government Bond
Fund Index was down (1.1)% in the same time frame.
HOW DID THIS FISCAL YEAR
DIFFER FROM THE FIRST? In some ways it was a reversal of our first year.
The Fund commenced operations in 1995 during a poor
bond market environment. After a few months the
market improved dramatically as interest rates
declined. The bull market for bonds continued for a
few months into fiscal year 1996. Interest rates
have ratcheted higher since January causing the
bond market to decline.
HOW HAVE YOU POSITIONED The Fund has stayed with the original bias toward
THE FUND FOR THE COMING quality. As in the past, the average life will be
YEAR? either slightly increased or shortened depending on
the development in the markets and the interest
rate outlook. As the third fiscal year begins we
have a quality bond portfolio with average life
under 6 years and an average portfolio coupon rate
of 7.4%. We expect that this portfolio structure
may reduce the impact of rising interest rates on
the overall portfolio value. The Fund is positioned
to benefit from falling or stable interest rates.
5
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
THE LEHMAN BROTHERS 1-5 YEAR GOVERNMENT/CORPORATE
BOND INDEX, AND THE LEHMAN BROTHERS 6-10 YEAR
GOVERNMENT/CORPORATE BOND INDEX
[LINE GRAPH APPEARS HERE]
Magna Fund 1-5 Year Bond Index 6-10 Year Bond Index
---------- ------------------- --------------------
8/31/94 $ 9,600 $10,000 $10,000
8/31/95 $10,398 $10,833 $11,243
8/31/96 $10,760 $11,368 $11,623
Past performance is not predictive of future results. Investment returns and
principal value of shares of the fund will fluctuate with market conditions so
that shares of the Fund, when redeemed, may be worth more or less than their
original cost.
The Fund's total return figure reflects the maximum sales charge of 4%, fund
expenses and portfolio transaction costs, and assumes the reinvestment of
income and capital gains distributions. The Lehman Brothers Index is a widely
recognized unmanaged index of government and corporate bonds. The Index's
total return does not reflect any commissions or expenses that would be
incurred if an investor individually purchased or sold the securities
represented in the Index. It is generally not possible to invest in an Index.
COMPARATIVE TOTAL RETURN
FOR THE PERIODS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
SINCE INCEPTION
1996 YTD ONE YEAR (ANNUALIZED)
-------- -------- ---------------
<S> <C> <C> <C>
Magna Intermediate Government Bond Fund:
Without sales charge...................... (0.2)% 3.5% 5.9%
With 4% sales charge...................... (4.2) (0.6) 3.7
Lipper Intermediate Government Bond Fund
Index...................................... (1.1) 3.4 6.2
Lehman Brothers Government/Corporate Bond
Index:
1-5 Years................................. 1.4 4.9 6.6
6-10 Years................................ (2.5) 3.4 7.8
</TABLE>
6
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
ASSET ALLOCATION AT AUGUST 31, 1996
[PIE CHART OF ASSETS APPEARS HERE]
US Treasury Federal Agency Corporate Temporary
Notes Bonds Bonds Investments
10% 60% 28% 2%
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
QUALITY RATING OF ASSETS HELD
(EXCLUDING TEMPORARY INVESTMENTS)
AUGUST 31, 1996
[BAR GRAPH OF MOODY'S BOND RATING APPEARS HERE]
Percentage of Portfolio
AAA AA A Baa Ba B
73.3% 11.8% 14.9% 0% 0% 0%
7
<PAGE>
MAGNA GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (84.5%)
AEROSPACE - (1.8%)
Lockheed Martin Corporation........................... 8,400 $ 706,650
-----------
AIR TRAVEL - (0.9%)
Southwest Airlines Company............................ 15,000 343,125
-----------
ALUMINUM - (1.1%)
Aluminum Company of America........................... 7,000 434,875
-----------
APPAREL & TEXTILES - (0.8%)
Nike Incorporated..................................... 3,000 324,000
-----------
AUTOMOBILES - (2.0%)
Chrysler Corporation.................................. 11,000 320,375
Ford Motor Company.................................... 14,800 495,800
-----------
816,175
-----------
BANKS - (6.1%)
Banc One Corporation.................................. 11,000 422,125
Bank of Boston Corporation............................ 6,000 316,500
Chase Manhattan Corporation New....................... 5,000 371,875
First Union Corporation............................... 7,000 447,125
Mellon Bank Corporation............................... 9,150 506,681
Norwest Corporation................................... 10,000 376,250
-----------
2,440,556
-----------
BUSINESS SERVICES - (1.3%)
Humana Incorporated*.................................. 26,800 502,500
-----------
CHEMICALS - (6.2%)
duPont (EI) de Nemours & Company...................... 10,500 862,312
Monsanto Company...................................... 30,000 963,750
Olin Corporation...................................... 8,500 673,625
-----------
2,499,687
-----------
COMPUTERS & BUSINESS EQUIPMENT - (8.1%)
Cisco Systems Incorporated*........................... 6,000 316,500
Compaq Computer Corporation*.......................... 10,000 566,250
Dell Computer Corporation*............................ 10,000 671,250
Hewlett Packard Company............................... 20,000 875,000
Sun Microsystems Incorporated*........................ 15,000 815,625
-----------
3,244,625
-----------
</TABLE>
See notes to financial statements.
8
<PAGE>
MAGNA GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
CONSTRUCTION & MINING EQUIPMENT - (1.5%)
Caterpillar Incorporated.............................. 8,800 $ 606,100
-----------
DOMESTIC OIL - (1.5%)
Atlantic Richfield Company............................ 5,000 583,750
-----------
DRUGS & HEALTH CARE - (9.2%)
American Home Products Corporation.................... 10,000 592,500
Amgen Incorporated*................................... 6,000 349,500
Bristol Myers Squibb Company.......................... 7,000 614,250
Johnson & Johnson..................................... 10,000 492,500
Lilly Eli & Company................................... 8,000 458,000
Medtronic Incorporated................................ 10,000 520,000
Merck & Company Incorporated.......................... 10,100 662,812
-----------
3,689,562
-----------
ELECTRICAL EQUIPMENT - (2.6%)
Emerson Electric Company.............................. 2,000 167,500
General Electric Company.............................. 10,300 856,188
-----------
1,023,688
-----------
ELECTRONICS - (5.0%)
Intel Corporation..................................... 12,800 1,021,600
Motorola Incorporated................................. 11,000 587,125
Xilinx Incorporated*.................................. 11,000 385,000
-----------
1,993,725
-----------
ENTERTAINMENT - (0.7%)
Walt Disney Company................................... 5,000 285,000
-----------
FOOD & BEVERAGES - (3.5%)
Coca Cola Company..................................... 16,000 800,000
Pepsico Incorporated.................................. 10,600 304,750
Sara Lee Corporation.................................. 9,000 283,500
-----------
1,388,250
-----------
HOTELS & RESTAURANTS - (1.7%)
McDonald's Corporation................................ 14,700 681,713
-----------
HOUSEHOLD PRODUCTS - (2.4%)
Procter & Gamble Company.............................. 11,000 977,625
-----------
</TABLE>
See notes to financial statements.
9
<PAGE>
MAGNA GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
INSURANCE - (1.9%)
Allstate Corporation.................................. 10,000 $ 446,250
ITT Hartford Group Incorporated....................... 5,800 305,950
-----------
752,200
-----------
INTERNATIONAL OIL - (4.5%)
Exxon Corporation..................................... 2,000 162,750
Mobil Corporation..................................... 7,600 856,900
Texaco Incorporated................................... 8,900 789,875
-----------
1,809,525
-----------
LIQUOR - (0.9%)
Anheuser Busch Companies, Incorporated................ 5,000 378,750
-----------
PAPER - (2.7%)
International Paper Company........................... 5,600 224,000
Kimberly Clark Corporation............................ 6,100 478,088
Mead Corporation...................................... 6,600 377,850
-----------
1,079,938
-----------
RAILROADS & EQUIPMENT - (1.8%)
Burlington Northern Incorporated...................... 4,600 368,000
CSX Corporation....................................... 7,000 354,375
-----------
722,375
-----------
SOFTWARE - (3.9%)
Microsoft Corporation*................................ 7,100 869,750
Oracle Systems Corporation*........................... 20,000 705,000
-----------
1,574,750
-----------
TELEPHONE - (3.2%)
AT & T Corporation.................................... 8,000 420,000
GTE Corporation....................................... 13,500 531,562
SBC Communications Incorporated....................... 7,100 331,038
-----------
1,282,600
-----------
TOBACCO - (2.0%)
Philip Morris Companies, Incorporated................. 8,800 789,800
-----------
</TABLE>
See notes to financial statements.
10
<PAGE>
MAGNA GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
UTILITIES - (7.2%)
Central & South West Corporation...................... 20,000 $ 527,500
Entergy Corporation................................... 20,000 507,500
GPU Incorporated...................................... 20,000 630,000
P P & L Resources Incorporated........................ 22,000 495,000
Public Service Company Colorado....................... 20,000 712,500
-----------
2,872,500
-----------
TOTAL COMMON STOCKS - (Cost $26,248,102)................ 33,804,044
-----------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS - (1.6%)
FEDERAL AGENCIES - (1.6%)
Federal National Mortgage Association 8.050%,
07/14/2004........................................... $ 650,000 648,578
-----------
TOTAL GOVERNMENT AND AGENCY BONDS - (Cost $649,245)..... 648,578
-----------
SHORT TERM INVESTMENTS - (12.6%)
U.S. GOVERNMENT SECURITIES - (3.8%)
United States Treasury Notes
6.875%, 10/31/1996................................... 500,000 501,095
6.500%, 11/30/1996................................... 500,000 501,330
6.125%, 12/31/1996................................... 500,000 501,330
-----------
1,503,755
-----------
REPURCHASE AGREEMENT - (8.8%)
State Street Bank and Trust Company
4.00%, dated 8/30/96, $3,524,566, due 09/03/96,
collateralized by $3,400,000, U.S. Treasury Note,
8.75%, 10/15/97, with a value of $3,595,297.......... 3,523,000 3,523,000
-----------
TOTAL SHORT TERM INVESTMENTS - (Cost $5,026,927)........ 5,026,755
-----------
TOTAL INVESTMENTS - (Cost $31,924,274) - 98.7%.......... 39,479,377
CASH, RECEIVABLES AND OTHER ASSETS,
LESS LIABILITIES - 1.3%................................ 515,555
-----------
NET ASSETS - 100.0%..................................... $39,994,932
===========
</TABLE>
* Non-income producing security.
See notes to financial statements.
11
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS - (69.0%)
FEDERAL AGENCIES - (58.2%)
Federal Farm Credit Bank
9.000%, 03/07/1997................................... $ 350,000 $ 355,926
-----------
Federal Home Loan Bank
8.450%, 07/26/1999................................... 150,000 157,079
7.250%, 07/29/1999................................... 260,000 264,017
7.585%, 02/10/2000................................... 1,000,000 1,025,160
5.500%, 03/02/2001 (a)............................... 950,000 933,078
8.060%, 03/10/2005................................... 500,000 502,863
7.250%, 06/27/2005................................... 1,000,000 970,310
7.151%, 09/13/2005................................... 540,000 521,186
7.000%, 01/24/2006................................... 1,000,000 956,720
7.700%, 07/12/2010................................... 1,000,000 964,690
8.000%, 08/23/2010................................... 1,000,000 973,590
-----------
7,268,693
-----------
Federal Home Loan Mortgage Corporation
8.000%, 02/01/1999................................... 121,222 123,230
7.680%, 05/23/2001................................... 150,000 150,212
7.900%, 09/19/2001................................... 280,000 291,374
6.800%, 09/18/2002................................... 700,000 678,125
6.600%, 03/25/2003................................... 700,000 673,967
5.780%, 10/22/2003................................... 380,000 349,186
8.030%, 04/06/2005................................... 1,475,000 1,477,301
7.490%, 05/25/2005................................... 1,000,000 982,340
7.250%, 06/08/2005................................... 500,000 486,405
6.550%, 11/28/2005................................... 500,000 471,095
6.910%, 11/30/2005................................... 500,000 471,795
7.500%, 01/01/2007................................... 29,193 28,563
6.500%, 05/01/2008................................... 127,682 122,734
6.770%, 03/21/2011................................... 1,000,000 917,190
7.000%, 09/15/2023................................... 925,764 842,722
6.500%, 02/15/2024................................... 206,782 197,690
-----------
8,263,929
-----------
</TABLE>
See notes to financial statements.
12
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS - (CONTINUED)
FEDERAL AGENCIES - (CONTINUED)
Federal National Mortgage Association
8.950%, 07/10/1997................................... $ 230,000 $ 235,426
8.800%, 07/25/1997................................... 190,000 194,512
5.550%, 10/05/1998 (a)............................... 650,000 633,470
5.380%, 10/23/1998 (a)............................... 840,000 815,346
7.000%, 07/01/1999................................... 815,401 816,786
8.550%, 08/30/1999................................... 360,000 378,619
8.600%, 12/12/2001................................... 500,000 503,205
7.900%, 04/10/2002................................... 700,000 700,546
7.800%, 06/10/2002................................... 550,000 549,571
7.000%, 08/12/2002................................... 280,000 273,919
6.950%, 09/10/2002................................... 700,000 683,158
7.300%, 10/28/2002................................... 280,000 276,545
6.400%, 03/25/2003................................... 1,140,000 1,089,407
7.600%, 04/14/2004................................... 190,000 186,971
7.850%, 09/10/2004................................... 500,000 501,170
8.420%, 10/27/2004................................... 1,000,000 1,010,940
8.330%, 02/08/2005................................... 1,000,000 1,029,220
7.650%, 03/10/2005................................... 500,000 514,765
7.130%, 07/06/2005................................... 1,000,000 957,810
8.000%, 05/15/2006................................... 1,000,000 990,940
8.000%, 06/21/2006................................... 1,000,000 1,003,590
8.100%, 05/11/2010................................... 1,000,000 1,020,080
8.000%, 08/02/2010................................... 500,000 500,465
-----------
14,866,461
-----------
Federal National Mortgage Association REMIC
6.750%, 08/25/2021................................... 920,000 883,760
7.050%, 04/25/2022................................... 925,000 897,434
-----------
1,781,194
-----------
Student Loan Marketing Association (a)
7.000%, 06/21/2000................................... 500,000 501,370
-----------
33,037,573
-----------
</TABLE>
See notes to financial statements.
13
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS - (CONTINUED)
HOUSING AND URBAN DEVELOPMENT BONDS - (0.5%)
Allentown Pennsylvania U.S. Government Guaranteed Note
8.400%, 08/01/1997.................................... $ 15,000 $ 15,222
Des Moines Iowa U.S. Government Guaranteed Note
8.400%, 08/07/1997.................................... 30,000 30,445
New Haven Connecticut U.S. Government Guaranteed Note
8.400%, 08/01/1997.................................... 30,000 30,445
Sacramento California Housing & Redevelopment
8.400%, 08/01/1997.................................... 50,000 50,875
Syracuse New York Industrial Development Agency USG
8.400%, 08/01/1997.................................... 115,000 116,766
-----------
243,753
-----------
U.S. GOVERNMENT SECURITIES - (10.3%)
United States Treasury Note
8.000%, 01/15/1997.................................... 275,000 277,450
6.500%, 05/15/1997.................................... 500,000 502,345
5.125%, 02/28/1998.................................... 460,000 452,884
5.125%, 04/30/1998.................................... 920,000 903,753
6.250%, 06/30/1998.................................... 500,000 499,530
9.250%, 08/15/1998.................................... 135,000 142,109
7.125%, 10/15/1998.................................... 1,000,000 1,015,310
5.875%, 03/31/1999.................................... 380,000 374,893
7.000%, 04/15/1999.................................... 1,000,000 1,012,810
6.000%, 10/15/1999.................................... 690,000 680,188
-----------
5,861,272
-----------
TOTAL GOVERNMENT AND AGENCY BONDS - (Cost $39,269,391)... 39,142,598
-----------
CORPORATE BONDS - (27.7%)
FINANCE & BANKING - (8.7%)
Associates Corporation NA
7.125%, 05/15/2000.................................... 1,000,000 1,004,564
Ford Capital BV
9.375%, 05/15/2001.................................... 380,000 412,021
</TABLE>
See notes to financial statements.
14
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS - (CONTINUED)
FINANCE & BANKING - (CONTINUED)
General Electric Capital Corporation
8.750%, 11/26/1996................................... $ 190,000 $ 191,307
7.730%, 02/13/2002................................... 400,000 411,598
-----------
602,905
-----------
Merrill Lynch & Company Incorporated
8.000%, 02/01/2002................................... 325,000 335,055
8.230%, 04/30/2002 (a)............................... 500,000 506,100
8.300%, 11/01/2002................................... 460,000 481,483
8.000%, 06/01/2007................................... 500,000 514,094
-----------
1,836,732
-----------
Morgan Stanley Group Incorporated
8.100%, 06/24/2002................................... 460,000 477,691
Texaco Capital Incorporated
9.000%, 12/15/1999................................... 340,000 360,791
United Postal Savings Association
9.000%, 07/26/1999................................... 250,000 263,998
-----------
4,958,702
-----------
INDUSTRIALS - (11.3%)
Anheuser Busch Companies, Incorporated
8.750%, 12/01/1999................................... 225,000 236,502
duPont (EI) de Nemours & Company
8.450%, 10/15/1996................................... 30,000 30,092
8.125%, 03/15/2004................................... 265,000 278,875
-----------
308,967
-----------
Ford Motor Company
9.000%, 09/15/2001................................... 280,000 301,132
9.500%, 09/15/2011................................... 230,000 264,405
-----------
565,537
-----------
Kimberly Clark Corporation
8.625%, 05/01/2001................................... 280,000 297,405
Lilly Eli & Company
8.125%, 12/01/2001................................... 500,000 523,302
</TABLE>
See notes to financial statements.
15
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS - (CONTINUED)
INDUSTRIALS - (CONTINUED)
Loews Corporation
8.500%, 04/15/1998................................... $ 175,000 $ 179,778
Monsanto Company
8.800%, 07/15/1997................................... 150,000 153,289
8.750%, 05/15/2001................................... 200,000 212,100
-----------
365,389
-----------
Pepsico Incorporated
7.625%, 11/01/1998................................... 280,000 285,405
Philip Morris Companies Incorporated
7.500%, 03/15/1997................................... 500,000 503,675
8.750%, 06/01/2001................................... 250,000 263,722
7.500%, 01/15/2002................................... 360,000 360,472
7.250%, 01/15/2003................................... 700,000 689,237
-----------
1,817,106
-----------
R R Donnelley & Sons Company
7.000%, 01/01/2003................................... 700,000 693,222
Rockwell International Corporation
8.375%, 02/15/2001................................... 280,000 294,353
Shell Canada Limited
7.375%, 06/01/1999................................... 265,000 268,046
Wal-Mart Stores Incorporated
8.625%, 04/01/2001................................... 430,000 456,003
Weyerhaeuser Company
8.940%, 04/09/2001................................... 100,000 106,933
-----------
6,397,948
-----------
TRANSPORTATION - (0.4%)
Norfolk & Southern Railway Company
7.750%, 08/15/2005................................... 225,000 231,932
-----------
UTILITIES - (7.3%)
AT & T Corporation
7.125%, 01/15/2002................................... 960,000 961,509
Carolina Telephone & Telegraph Company
7.250%, 12/15/2004................................... 1,000,000 985,177
</TABLE>
See notes to financial statements.
16
<PAGE>
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS - (CONTINUED)
UTILITIES - (CONTINUED)
General Telephone California
6.750%, 12/01/1997................................... $ 750,000 $ 751,847
Northern Telecom Limited
8.750%, 06/12/2001................................... 430,000 458,311
Pacific Bell
7.250%, 07/01/2002................................... 1,000,000 999,457
-----------
4,156,301
-----------
TOTAL CORPORATE BONDS - (Cost $15,643,233).............. 15,744,883
-----------
SHORT TERM INVESTMENTS - (1.7%)
REPURCHASE AGREEMENT - (1.7%)
State Street Bank and Trust Company 2.00%, dated
8/30/96, $940,209, due 9/03/96, collateralized by
$910,000, U.S. Treasury Note, 8.75%, 10/15/97, with a
value of $962,271.................................... 940,000 940,000
-----------
TOTAL SHORT TERM INVESTMENTS - (Cost $940,000).......... 940,000
-----------
TOTAL INVESTMENTS - (Cost $55,852,624) - 98.4%.......... 55,827,481
CASH, RECEIVABLES AND OTHER ASSETS,
LESS LIABILITIES - 1.6%................................ 936,467
-----------
NET ASSETS - 100.0%..................................... $56,763,948
===========
</TABLE>
(a) Interest rate resets annually.
See notes to financial statements.
17
<PAGE>
MAGNA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1996
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
----------- ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $28,401,274, $54,912,624, respectively)....... $35,956,377 $54,887,481
Repurchase agreements, at value and cost............. 3,523,000 940,000
Cash................................................. 234 50,759
Receivable for securities sold....................... 320,827 0
Receivable for fund shares sold...................... 99,653 102,610
Dividends receivable................................. 99,351 0
Interest receivable.................................. 32,698 1,033,492
Deferred organizational expenses..................... 31,647 61,801
Prepaid insurance expense............................ 10,300 14,881
----------- -----------
TOTAL ASSETS........................................ 40,074,087 57,091,024
----------- -----------
LIABILITIES:
Investment advisory fee payable (Note 3)............. 17,180 19,413
Distributions payable................................ 0 225,945
Administrative fee payable (Note 3).................. 6,529 9,223
Trustees fees payable................................ 5,445 5,445
Other accrued expenses and liabilities............... 50,001 67,050
----------- -----------
TOTAL LIABILITIES................................... 79,155 327,076
----------- -----------
NET ASSETS............................................ $39,994,932 $56,763,948
=========== ===========
NET ASSETS CONSIST OF:
Paid-in capital...................................... 31,416,152 57,056,291
Undistributed net investment income.................. 114,458 1,466
Accumulated realized gain (loss) on investments -
net................................................ 909,219 (268,666)
Unrealized appreciation (depreciation) on
investments - net................................... 7,555,103 (25,143)
----------- -----------
NET ASSETS............................................ $39,994,932 $56,763,948
=========== ===========
Shares of beneficial interest outstanding, no par
value................................................ 2,436,247 4,566,580
Net asset value and redemption price per share........ $ 16.42 $ 12.43
Maximum offering price per share ($16.42/0.96 and
$12.43/0.96)......................................... $ 17.10 $ 12.95
</TABLE>
See notes to financial statements.
18
<PAGE>
MAGNA FUNDS
STATEMENTS OF OPERATIONS YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
---------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................. $ 268,795 $ 3,850,089
Dividends............................................ 755,703 0
---------- -----------
TOTAL INCOME........................................ 1,024,498 3,850,089
---------- -----------
EXPENSES:
Investment advisory fees (Note 3).................... 271,864 274,199
12b-1 fees (Note 3).................................. 90,621 137,099
Administration fees (Note 3)......................... 68,872 104,196
Transfer agent fees.................................. 57,503 47,406
Professional fees.................................... 44,206 63,137
Custodian fees....................................... 55,610 67,226
Amortization of deferred organizational expenses..... 10,544 20,595
Trustees' fees....................................... 16,850 16,850
Other expenses....................................... 24,379 35,971
---------- -----------
Total expenses before reductions and waivers......... 640,449 766,679
Reductions and waivers of expenses (Note 3).......... (181,243) (191,939)
---------- -----------
TOTAL EXPENSES, net of reimbursements and waivers... 459,206 574,740
---------- -----------
NET INVESTMENT INCOME................................. 565,292 3,275,349
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS:
Realized gain on investments - net................... 1,077,400 67,299
Net change in unrealized appreciation (depreciation)
on investments - net................................ 4,250,144 (1,523,540)
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS........................................ 5,327,544 (1,456,241)
---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $5,892,836 $ 1,819,108
========== ===========
</TABLE>
See notes to financial statements.
19
<PAGE>
MAGNA FUNDS
MAGNA GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR SEPTEMBER 1, 1994*
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income...................... $ 565,292 $ 502,451
Net realized gain (loss) on investments.... 1,077,400 (107,744)
Net change in unrealized appreciation on
investments............................... 4,250,144 3,304,959
----------- -----------
Net increase in net assets resulting from
operations................................ 5,892,836 3,699,666
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... (522,116) (431,169)
Net realized gains......................... (60,437) 0
----------- -----------
Net decrease in net assets resulting from
distributions to shareholders............. (582,553) (431,169)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.................. 6,430,315 28,810,769
Shares issued in reinvestment of
distributions............................. 239,172 152,082
Payments for shares redeemed............... (2,268,580) (1,997,606)
----------- -----------
Net increase in net assets from fund share
transactions.............................. 4,400,907 26,965,245
----------- -----------
NET INCREASE IN NET ASSETS.................. 9,711,190 30,233,742
----------- -----------
NET ASSETS:
Beginning of period........................ 30,283,742 50,000
----------- -----------
End of period (1).......................... $39,994,932 $30,283,742
=========== ===========
(1) INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME..................................... $ 114,458 $ 71,282
=========== ===========
</TABLE>
* Commencement of operations.
See notes to financial statements.
20
<PAGE>
MAGNA FUNDS
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR SEPTEMBER 1, 1994*
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income...................... $ 3,275,349 $ 2,833,258
Net realized gain (loss) on investments.... 67,299 (332,422)
Net change in unrealized appreciation
(depreciation) on investments............. (1,523,540) 1,498,397
----------- -----------
Net increase in net assets resulting from
operations................................ 1,819,108 3,999,233
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................... (3,277,592) (2,833,092)
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.................. 11,087,902 57,932,811
Shares issued in reinvestment of
distributions............................. 636,548 593,361
Payments for shares redeemed............... (5,587,492) (7,656,839)
----------- -----------
Net increase in net assets from fund share
transactions.............................. 6,136,958 50,869,333
----------- -----------
NET INCREASE IN NET ASSETS.................. 4,678,474 52,035,474
----------- -----------
NET ASSETS:
Beginning of period........................ 52,085,474 50,000
----------- -----------
End of period (1).......................... $56,763,948 $52,085,474
=========== ===========
(1) INCLUDES UNDISTRIBUTED NET INVESTMENT
INCOME................................. $ 1,466 $ 166
=========== ===========
</TABLE>
* Commencement of operations.
See notes to financial statements.
21
<PAGE>
MAGNA FUNDS
GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each period
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR SEPTEMBER 1, 1994*
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 14.05 $ 12.50
------- -------
Net investment income....................... 0.24 0.25
Net realized and unrealized gain (loss) on
investments................................ 2.39 1.52
------- -------
Total from investment operations............ 2.63 1.77
------- -------
Less distributions:
Dividends from net investment income........ (0.23) (0.22)
Dividends from net realized gains........... (0.03) 0.00
------- -------
Total dividends and distributions........... (0.26) (0.22)
------- -------
Net asset value, end of period.............. $ 16.42 $ 14.05
======= =======
Total investment return (1)................. 18.77% 14.33%
======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ($000's).......... $39,995 $30,284
Ratio of expenses to average net assets..... 1.27% 1.25%
Ratio of net investment income to average
net assets................................. 1.56% 1.98%
Portfolio turnover rate..................... 31% 41%
Average commission rate (2)................. $0.0600 NA
</TABLE>
- -------------------------------------------------------------------------------
Net investment income per share and the annualized ratios of expenses and net
investment income to average net assets before reductions and waivers of fees
by the advisor, distributor and administrator were $0.17, 1.77% and 1.06%, for
the year ended August 31, 1996 and $0.13, 1.88% and 1.35% for the period
September 1, 1994* through August 31, 1995, respectively.
(1) Total return excludes sales charges. Had the advisor, distributor and
administrator not reduced or waived certain expenses, total returns would
have been lower.
(2) The average commission rate paid is applicable for Funds that invest
greater than 10% of average net assets in equity security transactions on
which commissions are charged. This disclosure is required for fiscal
periods beginning on or after September 1, 1995.
* Commencement of operations.
See notes to financial statements.
22
<PAGE>
MAGNA FUNDS
INTERMEDIATE GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each period
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR SEPTEMBER 1, 1994*
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ------------------
<S> <C> <C>
Net asset value, beginning of period........ $ 12.75 $ 12.50
------- -------
Net investment income....................... 0.76 0.74
Net realized and unrealized gain (loss) on
investments................................ (0.32) 0.25
------- -------
Total from investment operations............ 0.44 0.99
------- -------
Less distributions:
Dividends from net investment income........ (0.76) (0.74)
------- -------
Total dividends and distributions........... (0.76) (0.74)
------- -------
Net asset value, end of period.............. $ 12.43 $ 12.75
======= =======
Total investment return (1)................. 3.48% 8.30%
======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ($000's).......... $56,764 $52,085
Ratio of expenses to average net assets..... 1.05% 1.10%
Ratio of net investment income to average
net assets................................. 5.97% 6.00%
Portfolio turnover rate..................... 20% 34%
</TABLE>
- -------------------------------------------------------------------------------
Net investment income per share and the annualized ratios of expenses and net
investment income to average net assets before reductions and waivers of fees
by the advisor, distributor and administrator were $0.72, 1.40% and 5.62% for
the year ended August 31, 1996 and $0.70, 1.43% and 5.66%, for the period
September 1, 1994* through August 31, 1995, respectively.
(1) Total return excludes sales charges. Had the advisor, distributor and
administrator not reduced or waived certain expenses, total returns would
have been lower.
* Commencement of operations.
See notes to financial statements.
23
<PAGE>
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND FUND DESCRIPTION
Magna Funds (the "Trust") is an open-end, diversified management investment
company registered under the Investment Company Act of 1940 (the "Act"), as
amended. The Trust was organized as a Massachusetts business trust on April
28, 1994, and is authorized to issue an unlimited number of shares of
beneficial interest in multiple series. Two series commenced investment
operations on September 1, 1994: the Magna Growth & Income Fund and the Magna
Intermediate Government Bond Fund (the "Funds").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust.
Investment Valuation: Equity securities listed on an established securities
exchange or on the NASDAQ National Market System are valued at their last sale
price on the exchange where primarily traded or, if there is no reported sale
during the day, and in the case of over-the-counter securities not so listed,
at the last bid price. Long-term debt securities are valued by a pricing
service, which determines valuations of normal institutional-size trading
units of long-term debt securities. Short-term debt securities having a
maturity of 60 days or less from the valuation date are valued at amortized
cost which approximates market value. Other securities for which current
market quotations are not readily available (including restricted securities,
if any) and all other assets are taken at fair value as determined in good
faith under procedures determined by the Trustees. At August 31, 1996, there
were no board valued securities.
Investment Transactions: All securities transactions are recorded on a trade
date basis. Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Realized gains and losses on sales of
securities are determined on the basis of identified cost.
Repurchase Agreements: A repurchase agreement customarily obligates the seller
at the time it sells securities to the Funds to repurchase the securities at a
mutually agreed upon time and price which, in the case of the Funds'
transactions, is usually within seven days. The total amount received by the
Funds on repurchase is calculated to exceed the price paid by the Funds,
reflecting an agreed upon market rate of interest for the period of time to
the settlement date, and will not necessarily be related to the interest rate
on the underlying securities. The underlying securities are ordinarily United
States government securities. Repurchase agreements will be fully
collateralized at all times. However, to the extent that the proceeds from any
sale upon default in the obligation to repurchase is less than the repurchase
price, the Funds would suffer a loss. Also, the Funds might incur costs and
encounter delays in liquidating collateral.
Deferred Organizational Expenses: Deferred organizational expenses are being
amortized over a period of sixty months.
Dividends and Distributions to Shareholders: The Magna Intermediate Government
Bond Fund declares dividends from net investment income daily and makes
payments monthly. The Magna Growth & Income Fund declares and pays dividends
from net investment income quarterly. Each Fund also distributes all of its
net capital gains, if any, on an annual basis, normally in December.
Distributions are recorded on the ex-dividend date.
24
<PAGE>
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for losses deferred due to wash sales, "post October 31
losses", and excise tax regulations. Accordingly, the Funds may periodically
make reclassifications among certain of its capital accounts without impacting
its net asset value.
Federal Income Taxes: Each Fund of the Trust is treated as a separate entity
for federal tax purposes. Each Fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986. By so qualifying, the Funds will not be subject to federal income tax
to the extent that they distribute all of their taxable income, including
realized capital gains, for the fiscal year. In addition, by distributing
substantially all of their net investment income and capital gains during the
calendar year, the Funds will not be subject to a federal excise tax. As of
August 31, 1996, the Magna Intermediate Government Bond Fund had capital loss
carryovers of $69,717 which will expire on August 31, 2003 and $198,949 which
will expire on August 31, 2004.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles may require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of these financial statements and the reported
amounts of income and expenses during the reported period. Actual results
could differ from those estimates.
3. AGREEMENTS AND FEES
The Trust has entered into an Investment Advisory Agreement with Magna Bank,
N.A. ("Magna"). Under this agreement, each Fund pays a fee, calculated daily
and paid monthly, based on the respective average daily net assets of each
Fund. This fee is 0.75% for the Magna Growth & Income Fund, and 0.50% for the
Magna Intermediate Government Bond Fund. Effective September 1, 1995, Magna
has voluntarily agreed to reduce its fees with respect to the Magna Growth &
Income Fund to 0.50% and with respect to the Magna Intermediate Government
Bond Fund to 0.40% of average daily net assets through August 31, 1996. For
the year ended August 31, 1996, Magna waived investment advisory fees of
$90,621 and $54,840, for the Magna Growth & Income Fund and Magna Intermediate
Government Bond Fund, respectively.
The Trust has entered into an Administration Services Agreement with Ernst
Asset Management Corporation ("EAMC") (the Trust's "Administrator"), a wholly
owned subsidiary of Ernst & Company ("Ernst") (the Trust's "Distributor").
Under this agreement, each Fund pays a fee, calculated daily and paid monthly,
at the rate of 0.19% of the first $125 million of each Fund's average daily
net assets, 0.17% of the next $125 million of such assets and 0.15% of such
assets in excess of $250 million.
The Trust has adopted a Service Plan (the "Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended. The purpose of the plan is to
compensate the Distributor for expenses borne in connection with the provision
of personal services provided to investors and/or maintenance of shareholder
accounts, at an annual rate not to exceed 0.25% of each Fund's average daily
net assets. For the year ended August 31, 1996, the Distributor waived
$227,720 of service fees.
Each of the Trust's Trustees who are not affiliated with Magna receive an
annual fee of $5,000 plus $500 for each meeting attended.
25
<PAGE>
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for each Fund for the year ended August 31, 1996 were as
follows:
<TABLE>
<CAPTION>
NON-U.S. U.S. NON-U.S. U.S.
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Growth & Income Fund............. $11,299,480 $ 3,518,516 $8,043,898 $2,252,773
Intermediate Government Bond
Fund............................ 4,876,840 13,005,019 3,044,447 7,739,735
</TABLE>
The identified cost for federal income tax purposes of investments owned by
each Fund and their respective gross unrealized appreciation and depreciation
at August 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
----------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Growth & Income Fund.... $31,932,905 $7,931,344 $(384,872) $7,546,472
Intermediate Government
Bond Fund.............. 55,932,688 497,578 (602,785) (105,207)
</TABLE>
5. FUND SHARE TRANSACTIONS
Share activity for the Funds were as follows:
<TABLE>
<CAPTION>
MAGNA GROWTH & INCOME FUND
---------------------------------
YEAR SEPTEMBER 1, 1994
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- -----------------
<S> <C> <C>
Shares sold.............................. 408,171 2,300,540
Shares issued in reinvestment............ 15,343 12,075
Shares redeemed.......................... (143,015) (160,867)
-------- ---------
Net increase............................. 280,499 2,151,748
======== =========
</TABLE>
<TABLE>
<CAPTION>
MAGNA INTERMEDIATE
GOVERNMENT BOND FUND
---------------------------------
YEAR SEPTEMBER 1, 1994
ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- -----------------
<S> <C> <C>
Shares sold.............................. 871,641 4,653,599
Shares issued in reinvestment............ 50,161 47,950
Shares redeemed.......................... (439,287) (621,484)
-------- ---------
Net increase............................. 482,515 4,080,065
======== =========
</TABLE>
6. OTHER INFORMATION (UNAUDITED)
For the fiscal year ended August 31, 1996, the Magna Growth & Income Fund paid
a long-term capital gain distribution of $0.03 per share, ex-dividend date
December 26, 1995.
For the fiscal year ended August 31, 1996, 100% of the dividends distributed
by the Magna Growth & Income Fund qualifies for the dividends-received
deduction for corporate shareholders.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of
Trustees of the Magna Funds:
We have audited the accompanying statements of assets and liabilities of the
Magna Intermediate Government Bond Fund and Magna Growth & Income Fund (the
"Funds") including the schedules of portfolio investments, as of August 31,
1996, and the related statements of operations, changes in net assets and the
financial highlights for the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Funds'
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 August 31, 1996 by correspondence with the custodian and broker.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Magna Intermediate Government Bond Fund and Magna Growth & Income Fund as of
August 31, 1996 the results of the operations, changes in net assets and the
financial highlights for the period indicated herein in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 18, 1996
27
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT ADVISOR
Magna Bank, N.A.
1401 South Brentwood Boulevard
St. Louis, Missouri 63144
ADMINISTRATOR
Ernst Asset Management Corporation
60 State Street
Suite 700
Boston, MA 02109
SUB-ADMINISTRATOR, TRANSFER AND
DIVIDEND PAYING AGENT AND
CUSTODIAN OF ASSETS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER SERVICING AGENT FOR
STATE STREET BANK AND TRUST
COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8500
Boston, Massachusetts 02266
DISTRIBUTOR
Ernst & Company
One Battery Park Plaza
New York, New York 10004-1478
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L. L. P.
One Post Office Square
Boston, Massachusetts 02109
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MAGNA FUNDS
A FAMILY OF FUNDS
ANNUAL REPORT
AUGUST 31, 1996
60 STATE STREET
SUITE 700
BOSTON, MA 02109
(617) 267-2525
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This report and the financial statements contained herein are provided for the
general information of the shareholders of the Magna Funds. For a free
prospectus containing more complete information, call (800) 219-4182. Read the
prospectus carefully before you invest or send money.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
