<PAGE> 1
MAGNA FUNDS
LETTER TO SHAREHOLDERS
We are pleased to send you this 1997 annual report for the Magna Funds: Magna
Growth & Income Fund and Magna Intermediate Government Bond Fund.
The fiscal year that ended August 31, 1997, was enormously rewarding both for
our fund family and for shareholders who were invested in our funds for the
12-month period. Net assets under management grew significantly to $134.7
million from $96.7 for the two funds combined. While part of the increase was
due to the rising value of our funds' holdings, new investments from
shareholders also fueled growth. We find this particularly gratifying, as it
reflects shareholders' confidence in our ability to manage their money.
While the securities markets experienced some typical volatility during the
course of the last 12 months, our funds' returns were handsome, nonetheless.
Magna Growth & Income Fund returned 39.59%,(1) excluding sales charges. As
explained in the accompanying Portfolio Manager's Report, this gain was due in
no small measure to the success of our stock-selection process. We have long
believed that the best equity opportunities can be found in the stocks of large
companies with strong earnings growth and dominant market positions. Over the
last several years, and especially during the last 12 months, these types of
stocks have been highly valued by investors, and our shareholders have benefited
from this enthusiasm for large-capitalization issues.
Magna Intermediate Government Bond Fund also turned in a solid performance for
the fiscal year, providing investors with a total return of nearly
7.96%,(1) excluding sales charges. While the bond market did not match the stock
markets' meteoric climb, fixed-income returns were quite satisfactory,
especially when measured in historical terms. With inflation low, a 7.96% gain
gave bond investors a comfortable "real" (purchasing power) return.
Still, as pleased as we are with the results of the last 12 months, the past is
only prologue for the future. What will the next year bring investors?
In our view, the news is good. The economy continues to do well, growth remains
steady and manageable, and we do not see any indication of excessive
inflationary pressure. A year ago, some investors feared that an overheated
economy would push up interest rates, which in turn, could have depressed the
stock and bond markets. The Federal Reserve Board determined there was little
threat of inflation and, except for raising interest rates a modest one-quarter
point in March, left rates alone. As I write this letter in early October, the
Fed again has decided to take no action.
To be sure, market fluctuations will always be part of the landscape. Yet, we
remain confident in our commitment to investing in stocks and bonds, and we
believe that most long-term investors will be well served by keeping at least a
portion of their assets in equities and fixed-income instruments.
This annual report lists the Schedule of Investments for the Funds, along with
comments from the portfolio managers and other useful information. We encourage
you to read the entire report so that you can fully understand how your capital
is being invested in the stock and/or bond markets.
We thank you for your continued support and look forward to serving you in the
coming year.
Sincerely,
/s/ Walter B. Grimm
- -------------------------
Walter B. Grimm
President
October 2, 1997
- ---------------
(1) With a maximum sales charge of 4.00%, the Magna Growth and Income Fund had a
one-year return of 34.04%, and the Intermediate Government Bond Fund was
3.63% for the same period.
<PAGE> 2
MAGNA GROWTH & INCOME FUND
PORTFOLIO MANAGER'S REPORT
COMMENTS FROM A CONVERSATION WITH GARY J. GUTHRIE, PORTFOLIO MANAGER
HOW DID THE FUND PERFORM
DURING THE PAST 12 MONTHS,
AND SO FAR IN 1997? The Fund performed strongly when measured against a
broad market index and our fund peer-group index
for the fiscal year ended August 31, 1997. During
that period, the Fund returned 39.59%,(1) excluding
sales charges. In comparison, the S&P 500 Index
gained 40.62%, and the Lipper Growth & Income Fund
Index rose 34.68%.
For the 1997 year-to-date period, the Fund returned
23.42%,(1) excluding sales charges, while the S&P
500 Index gained 22.91%, and the Lipper Growth &
Income Fund Index rose 19.68%.
WHAT FACTORS CONTRIBUTED TO
THE FUND'S PERFORMANCE? Our blended growth-and-value style, security
selection process and the emphasis we place on
high-quality, large-capitalization holdings all
played a part in providing shareholders with strong
returns. Our bias for quality -- and by that, I
mean our criteria for choosing the stocks of
companies with a history of earnings, growth of
earnings and commanding market positions within
their industries -- has tended to make us favor the
large-cap, high-quality stocks that have done so
well in recent years.
At the same time, our overall portfolio Beta is
0.9, which would suggest that we expose
shareholders to below-average market volatility.+
WHAT IS THE COMPOSITION OF
YOUR PORTFOLIO? Our sector weightings are similar to those that
characterized our portfolio a year ago. About 20%
of our assets still are invested in high-quality,
large-cap technology companies that hold major or
dominant market positions. We also remain bullish
on consumer stocks. One of our main themes is broad
diversification. We believe in having at least some
exposure in almost every sector. We are also
careful to avoid being overweighted in any
particular sector.*
WHAT IS YOUR OUTLOOK FOR
THE NEXT 12 MONTHS? There is little evidence of inflation in the
economy. No matter where you look, producers are
having a difficult time passing along price
increases; increased competition, both domestically
and globally, has had a dampening impact on prices
and inflation. As long as we remain in this
environment of slow-but-steady growth and low
inflation, the climate bodes well for financial
assets over the long term.
As of August 31, 1997, the Fund's top five holdings
as a percent of net assets were Dell Computer
Corp., (4.2%), Intel Corp. (4.2%), Microsoft Corp.
(2.9%), Compaq Computers (2.3%) and Procter &
Gamble (2.1%).
- ---------------
(1) With the maximum sales charge of 4.00%, the total return for the one-year
period was 34.04%, and 18.50% for the YTD return.
+ Beta is a measure of portfolio volatility, relative to that of the broader
market. A Beta of 1.0, for example, would indicate that a portfolio has moved
in the same direction, and to the same degree, as the overall stock market.
* The composition of the Fund's holdings is subject to change.
2
<PAGE> 3
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
PORTFOLIO MANAGER'S REPORT
COMMENTS FROM A CONVERSATION WITH L. CLARK ZEDRIC, PORTFOLIO MANAGER
HOW DID THE FUND PERFORM
DURING THE PAST 12 MONTHS,
AND DURING THE FIRST EIGHT
MONTHS OF 1997? The Fund provided a total return of 7.96%,(1)
exclusive of sales loads, for the 12-month period
ended August 31, 1997. In comparison, the Lehman
Brothers 6-10-Year Government/Corporate Bond Index
gained 10.28%, and the Lipper Intermediate
Government Bond Fund Index rose 8.43%.
Through August 31, the Fund's 1997 year-to-date
total return, exclusive of sales loads, was
4.13%.(1) During the same period, the Lehman
Brothers 6-10 Year Government/Corporate Bond Index
gained 4.71%, and the Lipper Intermediate
Government Bond Fund Index rose 4.19%.
THE FUND'S 12-MONTH
PERFORMANCE HAS MORE THAN
DOUBLED ITS PREVIOUS YEAR'S
RETURN. WHAT ACCOUNTED FOR
SUCH DRAMATIC IMPROVEMENT? Interest rates went in our favor. During this past
year, we saw quite a bit of volatility, but as
summer drew to a close, interest rates were lower
than they had been 12 months earlier. Because bond
values rise as interest rates fall, this decline in
rates helped push our total return higher.
AT THE SAME TIME, YOU
WERE ABLE TO MAINTAIN A
HIGH-QUALITY PORTFOLIO
AND A RELATIVELY GENEROUS
COUPON RATE, THE LATTER
TRANSLATING INTO A HEALTHY
YIELD PAID TO SHAREHOLDERS. Yes. As of August 31, 68.9% of the portfolio was
invested in Federal Agency Bonds and U.S. Treasury
Notes -- with the remainder in high-quality
corporate paper and cash. The Fund's average credit
quality was AAA; the Fund does not own junk bonds.
As of August 31, the average portfolio coupon
rate(2) was 7.3%.*
HOW HAVE YOU POSITIONED THE
FUND FOR THE COMING YEAR? An essential part of our strategy is to maintain "a
ladder" within our portfolio, holding bonds with
different maturities. This allows us to take
advantage of anticipated changes in the bond market
and ensures that we will have at least some of our
bonds maturing every year. "Laddering" maturities
means that as we buy new bonds, we might shorten
our ladder to five- or six-year maturities, or
extend a bit to longer maturities. Lately, we have
been going out to 10- or 12-year maturities, to
increase our ladder. This move reflects our belief
that interest rates, at least in the near term,
will remain stable or decline.
- ---------------
(1) With a maximum sales charge of 4.00%, the total return for the one-year
period would have been 3.63%, and -0.07% for the YTD return.
(2) The interest rate stated on the face of a bond represents the percentage of
interest to be paid by the issuer on the face value of the bond.
* The composition of the Fund's holdings is subject to change.
3
<PAGE> 4
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE MAGNA GROWTH & INCOME FUND, THE S&P 500 STOCK INDEX AND THE
LIPPER GROWTH & INCOME FUND INDEX
<TABLE>
<CAPTION>
LIPPER GROWTH
MEASUREMENT PERIOD & INCOME FUND MAGNA GROWTH & S&P 500 STOCK
(FISCAL YEAR COVERED) INDEX INCOME FUND INDEX
<S> <C> <C> <C>
8/31/94 10,000 9,601 10,000
8/31/95 11,691 10,978 12,125
8/31/96 13,492 13,040 14,415
8/31/97 19,033 18,203 20,271
</TABLE>
COMPARATIVE TOTAL RETURN
for the periods ended August 31, 1997
<TABLE>
<CAPTION>
1997 One Since Inception
YTD Year (8/31/94)
--------------------------------
<S> <C> <C> <C>
Magna Growth & Income Fund
Without sales charge..... 23.42% 39.59% 23.74%
With sales charge*....... 18.50% 34.04% 22.08%
</TABLE>
* Reflects maximum sales charge of 4.00%.
Past performance is not predictive of
future results.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Percent
<S> <C>
Services 2.4
General Business 3.1
Technology 23.4
Transportation 2.0
Basic Industries 7.9
Consumer 30.2
Capital Goods 6.8
Utilities 5.8
Energy 6.9
Finance 11.5
</TABLE>
The performance of the Magna
Growth and Income Fund is
measured against the Standard &
Poor's 500 Index and the Lipper
Growth & Income Fund Index. The
S&P 500 is generally
representative of the performance
of the domestic stock universe.
The index does not reflect the
deduction of expenses associated
with a mutual fund, such as
investment management and fund
accounting fees. However, the
Lipper Growth & Income Fund
Index, a managed index, and the
Fund's performance do reflect the
deduction of fees for these
value-added services. The Fund's
total returns would have been
lower had certain fees not been
waived during the periods shown.
Investment return and NAV will
fluctuate, so that an investor's
shares, when redeemed, may be
worth more or less than the
original cost.
SECTOR WEIGHTINGS
<PAGE> 5
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE 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
<TABLE>
<CAPTION>
LEHMAN LEHMAN
MAGNA BROTHERS BROTHERS
INTERMEDIATE 1-5-YEAR 6-10-YEAR
MEASUREMENT PERIOD GOVERNMENT GOVERNMENT/CORPORATE GOVERNMENT/CORPORATE
(FISCAL YEAR COVERED) BOND FUND BOND INDEX BOND INDEX
<S> <C> <C> <C>
8/31/94 9,601 10,000 10,000
8/31/95 10,398 10,850 11,325
8/31/96 10,760 11,368 11,623
8/31/97 11,617 12,233 12,864
</TABLE>
COMPARATIVE TOTAL RETURN
for the periods ended August 31, 1997
<TABLE>
<CAPTION>
1997 One Since Inception
YTD Year (8/31/94)
--------------------------------
<S> <C> <C> <C>
Magna Intermediate Government
Bond Fund
Without sales charge..... 4.13% 7.96% 6.55%
*With sales charge....... (0.07)% 3.63% 5.12%
</TABLE>
* Reflects maximum sales charge of 4.00%.
Past performance is not predictive of
future results.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Percent
<S> <C>
Cash and Cash Equivalent 2.3
Corporate 28.8
T. Bills 6.8
Federal Agency 62.1
</TABLE>
The performance of the Magna
Intermediate Government Bond Fund
is measured against the Lehman
Brothers 1-5-Year
Government/Corporate Bond Index
and the Lehman Brothers 6-10-Year
Government/Corporate Bond Index;
those two indices are unmanaged
and generally represent a range
of 1-5 and 6-10-year maturities.
These indices do not reflect the
deduction of fees associated with
a mutual fund, such as investment
management and fund accounting
fees. The Fund's performance
reflects the deduction of fees
for these value-added services.
The Fund's total returns would
have been lower had certain fees
not been waived during the
periods shown.
Investment return and NAV will
fluctuate, so that an investor's
shares, when redeemed, may be
worth more or less than the
original cost.
PORTFOLIO COMPOSITION
<PAGE> 6
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS -- (86.6%):
AEROSPACE/DEFENSE -- (2.6%):
Boeing Company................................................ 15,000 $ 816,563
Lockheed Martin Corporation................................... 10,000 1,036,875
-----------
1,853,438
-----------
AGRICULTURAL MACHINERY -- (0.8%):
Deere & Company............................................... 10,000 560,000
-----------
AIR TRAVEL -- (1.2%):
Delta Air Lines Incorporated.................................. 10,000 865,000
-----------
ALUMINUM -- (1.2%):
Aluminum Company of America................................... 10,000 822,500
-----------
APPAREL & TEXTILES -- (1.1%):
Nike Incorporated (Class B)................................... 14,000 747,250
-----------
AUTOMOBILES & TRUCKS -- (2.2%):
Chrysler Corporation.......................................... 20,000 702,500
Ford Motor Company............................................ 20,000 860,000
-----------
1,562,500
-----------
BANKS -- (6.6%):
Banc One Corporation.......................................... 12,000 643,500
BankAmerica Corporation....................................... 10,000 658,125
Chase Manhattan Corporation................................... 8,000 889,500
First Union Corporation....................................... 20,000 961,250
Mellon Bank Corporation....................................... 18,300 880,687
Norwest Corporation........................................... 10,000 574,375
-----------
4,607,437
-----------
BREWERY -- (1.2%):
Anheuser-Busch Companies, Incorporated........................ 20,000 852,500
-----------
CHEMICALS -- (3.4%):
DuPont (EI) de Nemours & Company.............................. 21,000 1,308,562
Monsanto Company.............................................. 25,000 1,098,437
-----------
2,406,999
-----------
</TABLE>
continued
6
<PAGE> 7
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- ------ -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
COMPUTERS & BUSINESS EQUIPMENT -- (11.6%):
Cisco Systems Incorporated*................................... 12,000 $ 904,500
Compaq Computer Corporation*.................................. 25,000 1,637,500
Dell Computer Corporation*.................................... 36,000 2,954,250
Hewlett-Packard Company....................................... 20,000 1,226,250
Sun Microsystems Incorporated*................................ 30,000 1,440,000
-----------
8,162,500
-----------
COMPUTER SOFTWARE -- (4.1%):
Microsoft Corporation*........................................ 15,200 2,009,250
Oracle Systems Corporation.................................... 22,500 857,812
-----------
2,867,062
-----------
COSMETICS & TOILETRIES -- (2.5%):
Colgate Palmolive Company..................................... 15,000 942,180
Dial Corporation.............................................. 50,000 843,750
-----------
1,785,930
-----------
DIVERSIFIED OPERATIONS -- (1.8%):
General Electric Company...................................... 20,600 1,287,500
-----------
DRUGS & HEALTHCARE -- (11.6%):
American Home Products Corporation............................ 10,000 720,000
Bristol-Myers Squibb Company.................................. 15,000 1,140,000
Humana Incorporated*.......................................... 26,800 631,475
Johnson & Johnson............................................. 11,000 623,563
Lilly (Eli) & Company......................................... 11,000 1,150,875
Medtronic Incorporated........................................ 12,000 1,084,500
Merck & Company Incorporated.................................. 10,100 927,306
Pfizer Incorporated........................................... 15,000 830,625
Tenet Healthcare Corporation*................................. 10,000 272,500
Warner-Lambert Company........................................ 6,000 765,750
-----------
8,146,594
-----------
ELECTRICAL EQUIPMENT -- (0.8%):
Emerson Electric Company...................................... 10,000 546,875
-----------
</TABLE>
continued
7
<PAGE> 8
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- ------ -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRONIC COMPONENTS -- (5.2%):
Intel Corporation............................................. 32,000 $ 2,948,000
Xilinx Incorporated*.......................................... 15,000 712,500
-----------
3,660,500
-----------
ENTERTAINMENT -- (1.1%):
Walt Disney Company........................................... 10,000 768,125
-----------
FINANCIAL SERVICES -- (1.2%):
Fannie Mae.................................................... 20,000 880,000
-----------
FOOD & BEVERAGES -- (3.0%):
Coca-Cola Company............................................. 16,000 917,000
PepsiCo Incorporated.......................................... 10,600 381,600
Sara Lee Corporation.......................................... 20,000 805,000
-----------
2,103,600
-----------
HOUSEHOLD PRODUCTS -- (2.1%):
Procter & Gamble Company...................................... 11,000 1,463,687
-----------
INSURANCE -- (3.7%):
Allstate Corporation.......................................... 12,000 876,750
Conseco Incorporated.......................................... 22,000 946,000
Hartford Financial Services Group............................. 10,000 797,500
-----------
2,620,250
-----------
INTERNATIONAL OIL -- (4.7%):
Exxon Corporation............................................. 15,000 917,813
Mobil Corporation............................................. 15,200 1,105,800
Texaco Incorporated........................................... 11,000 1,267,750
-----------
3,291,363
-----------
OIL & GAS -- (1.5%):
Atlantic Richfield Company.................................... 10,000 750,000
Ultramar Diamond Shamrock Corporation......................... 10,000 326,250
-----------
1,076,250
-----------
PAPER (1.4%):
Kimberly-Clark Corporation.................................... 20,000 948,750
-----------
</TABLE>
continued
8
<PAGE> 9
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- ------ -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
RAILROADS & EQUIPMENT -- (0.6%):
Burlington Northern Santa Fe.................................. 4,600 $ 421,763
-----------
RESTAURANTS -- (1.0%):
McDonald's Corporation........................................ 14,700 695,494
-----------
TOBACCO -- (1.9%):
Philip Morris Companies, Incorporated......................... 30,000 1,308,750
-----------
TELECOMMUNICATION -- (3.1%):
GTE Corporation............................................... 19,500 868,969
Lucent Technologies Incorporated.............................. 12,000 934,500
SBC Communications Incorporated............................... 7,100 386,063
-----------
2,189,532
-----------
UTILITIES -- (3.4%):
Central & South West Corporation.............................. 20,000 413,750
Entergy Corporation........................................... 20,000 496,250
GPU Incorporated.............................................. 20,000 672,500
New Century Energies Incorporated*............................ 20,000 808,740
-----------
2,391,240
-----------
TOTAL COMMON STOCKS -- (Cost $38,103,254).......................... 60,893,389
-----------
PREFERRED STOCKS -- (2.7%):
ELECTRICAL & ELECTRONIC -- (0.7%):
KCPL Financing................................................ 20,000 516,250
-----------
INSURANCE -- (1.3%):
Aetna Services Incorporated................................... 10,000 880,000
-----------
OIL & GAS -- (0.7%):
Ultramar Diamond Shamrock Corporation......................... 20,000 510,000
-----------
TOTAL PREFERRED STOCKS -- (Cost $1,708,100)........................ 1,906,250
-----------
</TABLE>
continued
9
<PAGE> 10
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
SHORT TERM INVESTMENTS -- (10.1%):
U.S. GOVERNMENT SECURITIES -- (7.1%):
United States Treasury Notes
5.75%, 9/30/1997............................................ $500,000 $ 500,076
5.75%, 10/31/1997........................................... 500,000 500,235
6.00%, 11/30/1997........................................... 500,000 500,545
6.00%, 12/31/1997........................................... 500,000 500,705
5.13%, 2/28/1998............................................ 500,000 498,905
5.13%, 3/31/1998............................................ 500,000 498,750
5.13%, 4/30/1998............................................ 500,000 498,360
6.00%, 5/31/1998............................................ 500,000 501,015
5.13%, 6/30/1998............................................ 500,000 497,735
5.25%, 7/31/1998............................................ 500,000 497,810
-----------
4,994,136
-----------
REPURCHASE AGREEMENTS -- (3.0%):
Fifth Third Bank, 5.05%, dated 9/2/1997 (Collateralized by
$2,081,000 Federal Home Loan Mortgage Corporation, 7.50%,
2/1/2012, Market Value -- $2,124,571)........................ 2,082,839 2,082,839
-----------
TOTAL SHORT TERM INVESTMENTS -- (Cost $7,075,966).................. 7,076,975
-----------
TOTAL INVESTMENTS -- (Cost $46,887,320) -- 99.4%................... 69,876,614
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES -- 0.6%....... 399,873
-----------
NET ASSETS -- 100.0%............................................... $70,276,487
===========
</TABLE>
- ---------------
Percentages are based on net assets of $70,276,487.
* Represents non-income producing securities.
See notes to financial statements.
10
<PAGE> 11
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS -- (68.1%):
FEDERAL AGENCIES -- (61.4%):
Federal Home Loan Bank
8.45%, 7/26/1999............................................ $ 150,000 $ 156,258
7.59%, 2/10/2000............................................ 1,000,000 1,030,780
6.50%, 3/2/2001(a).......................................... 950,000 950,589
7.05%, 6/24/2002............................................ 500,000 499,295
8.06%, 3/10/2005............................................ 500,000 516,405
7.25%, 6/27/2005............................................ 1,000,000 992,660
7.15%, 9/13/2005............................................ 540,000 533,925
7.00%, 1/24/2006............................................ 1,000,000 983,910
7.33%, 5/30/2007............................................ 1,000,000 1,005,470
7.25%, 8/20/2007............................................ 1,000,000 990,000
7.70%, 7/12/2010............................................ 1,000,000 989,530
-----------
8,648,822
-----------
Federal Home Loan Mortgage Corporation
8.00%, 2/1/1999............................................. 82,731 84,092
7.90%, 9/19/2001............................................ 280,000 294,918
6.80%, 9/18/2002............................................ 700,000 695,184
6.60%, 3/25/2003............................................ 700,000 690,592
5.78%, 10/22/2003........................................... 380,000 363,436
8.03%, 4/6/2005............................................. 1,475,000 1,487,670
7.49%, 5/25/2005............................................ 1,000,000 1,000,000
7.25%, 6/8/2005............................................. 500,000 497,110
6.55%, 11/28/2005........................................... 500,000 487,265
6.91%, 11/30/2005........................................... 500,000 491,640
8.00%, 9/11/2006............................................ 1,000,000 1,009,690
7.50%, 1/1/2007............................................. 23,822 24,260
6.50%, 5/1/2008............................................. 109,488 108,807
6.77%, 3/21/2011............................................ 1,000,000 960,310
6.71%, 12/5/2011............................................ 2,000,000 1,961,880
7.27%, 2/6/2012............................................. 1,000,000 1,025,620
7.49%, 4/16/2012............................................ 1,000,000 1,043,120
7.09%, 11/22/2016........................................... 500,000 496,015
6.50%, 2/15/2024............................................ 188,650 184,051
-----------
12,905,660
-----------
</TABLE>
continued
11
<PAGE> 12
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS -- (CONTINUED)
FEDERAL AGENCIES -- (CONTINUED)
Federal National Mortgage Association
5.55%, 10/5/1998............................................ $ 650,000 $ 647,459
5.38%, 10/23/1998........................................... 840,000 835,540
7.00%, 7/1/1999............................................. 660,195 665,450
8.55%, 8/30/1999............................................ 360,000 375,019
6.95%, 9/10/2002............................................ 700,000 696,829
7.30%, 10/28/2002........................................... 280,000 280,000
6.40%, 3/25/2003............................................ 1,140,000 1,118,807
7.85%, 9/10/2004............................................ 500,000 512,580
8.42%, 10/27/2004........................................... 1,000,000 1,004,530
8.33%, 2/8/2005............................................. 1,000,000 1,039,690
7.65%, 3/10/2005............................................ 500,000 531,640
7.13%, 7/6/2005............................................. 1,000,000 990,780
8.00%, 6/21/2006............................................ 1,000,000 1,018,590
7.50%, 10/5/2006............................................ 1,000,000 997,660
8.00%, 4/9/2007............................................. 1,000,000 1,004,530
8.10%, 5/11/2010............................................ 1,000,000 1,002,190
7.00%, 12/5/2011............................................ 1,000,000 991,870
7.00%, 8/14/2012............................................ 1,500,000 1,457,580
7.00%, 12/12/2016........................................... 1,000,000 990,940
6.75%, 8/25/2021............................................ 920,000 909,356
7.05%, 4/25/2022............................................ 925,000 924,417
-----------
17,995,457
-----------
U.S. GOVERNMENT SECURITIES -- (6.7%):
United States Treasury Notes
5.13%, 2/28/1998............................................ 460,000 458,993
5.13%, 4/30/1998............................................ 920,000 916,982
9.25%, 8/15/1998............................................ 135,000 139,261
7.13%, 10/15/1998........................................... 750,000 760,433
5.88%, 3/31/1999............................................ 380,000 379,821
7.00%, 4/15/1999............................................ 1,000,000 1,016,250
6.00%, 10/15/1999........................................... 690,000 690,752
-----------
4,362,492
-----------
TOTAL GOVERNMENT AND AGENCY BONDS -- (Cost $43,550,820)............ 43,912,431
-----------
</TABLE>
continued
12
<PAGE> 13
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CORPORATE BONDS -- (28.4%):
FINANCE & BANKING -- (9.4%):
Associates Corporation
NA 7.13%, 5/15/2000......................................... $1,000,000 $ 1,018,400
Ford Capital BV
9.88%, 5/15/2001............................................ 380,000 414,010
Merrill Lynch & Company Incorporated
8.00%, 2/1/2002............................................. 325,000 341,214
8.30%, 11/1/2002............................................ 460,000 492,379
8.00%, 6/1/2007............................................. 500,000 536,600
-----------
1,370,193
-----------
Morgan Stanley Group Incorporated
8.10%, 6/24/2002............................................ 460,000 486,123
Nationsbank Corporation
7.04%, 8/15/2012............................................ 500,000 488,250
Norwest Financial Incorporated
7.20%, 5/1/2007............................................. 1,000,000 1,020,020
St. Paul Companies Incorporated
7.29%, 8/28/2007............................................ 500,000 514,250
Toyota Motor Credit Corporation
7.13%, 9/26/2006............................................ 500,000 491,060
United Postal Savings Association
9.00%, 7/26/1999............................................ 250,000 261,898
-----------
Total Finance & Banking.................................. 6,064,204
-----------
INDUSTRIALS -- (10.3%):
Anheuser Busch Companies, Incorporated
8.75%, 12/1/1999............................................ 225,000 236,243
Dupont (EI) de Nemours & Company
8.13%, 3/15/2004............................................ 265,000 285,410
Ford Motor Company
9.00%, 9/15/2001............................................ 280,000 303,512
9.50%, 9/15/2011............................................ 230,000 276,212
-----------
579,724
-----------
</TABLE>
continued
13
<PAGE> 14
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CORPORATE BONDS -- (CONTINUED)
INDUSTRIALS -- (CONTINUED)
Kimberly-Clark Corporation
8.88%, 5/1/2001............................................. $ 280,000 $ 299,323
Lilly Eli & Company
8.13%, 12/1/2001............................................ 500,000 529,705
Loews Corporation
8.50%, 4/15/1998............................................ 175,000 177,632
6.75%, 12/15/2006........................................... 500,000 486,835
-----------
664,467
-----------
Monsanto Company
8.75%, 5/15/2001............................................ 200,000 214,072
PepsiCo Incorporated
7.63%, 11/1/1998............................................ 280,000 284,810
Philip Morris Companies Incorporated
8.75%, 6/1/2001............................................. 250,000 265,745
7.50%, 1/15/2002............................................ 360,000 368,064
7.25%, 1/15/2003............................................ 700,000 708,064
-----------
1,341,873
-----------
R R Donnelley & Sons Company
7.00%, 1/1/2003............................................. 700,000 709,002
Rockwell International Corporation
8.38%, 2/15/2001............................................ 280,000 296,461
Shell Canada, Limited
7.38%, 6/1/1999............................................. 265,000 270,175
Texaco Capital Incorporated
9.00%, 12/15/1999........................................... 340,000 359,043
Wal-Mart Stores Incorporated
8.63%, 4/1/2001............................................. 430,000 459,520
Weyerhaeuser Company
8.94%, 4/9/2001............................................. 100,000 107,557
-----------
Total Industrials........................................ 6,637,385
-----------
</TABLE>
continued
14
<PAGE> 15
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
- ------------------------------------------------------------------- --------- -----------
<S> <C> <C>
CORPORATE BONDS -- (CONTINUED)
TRANSPORTATION -- (0.4%):
Norfolk & Southern Railway Company
7.75%, 8/15/2005............................................ $ 225,000 $ 237,371
-----------
UTILITIES -- (8.3%):
A T & T Corporation
7.13%, 1/15/2002............................................ 960,000 980,746
Carolina Telephone & Telegraph Company
7.25%, 12/15/2004........................................... 1,000,000 1,026,470
General Electric Company
7.73%, 2/13/2002............................................ 400,000 420,788
National Rural Utilities
7.30%, 9/15/2006............................................ 1,000,000 1,033,250
7.20%, 10/1/2015............................................ 450,000 444,555
-----------
1,477,805
-----------
Northern Telecom, Limited
8.75%, 6/12/2001............................................ 430,000 461,364
Pacific Bell
7.25%, 7/1/2002............................................. 1,000,000 1,027,120
-----------
Total Utilities............................................... 5,394,293
-----------
TOTAL CORPORATE BONDS -- (Cost $17,904,326)........................ 18,333,253
-----------
SHORT TERM INVESTMENTS -- (2.3%):
REPURCHASE AGREEMENTS -- (2.3%):
Fifth Third Bank, 5.05%, dated 9/2/1997 (Collateralized by
$1,472,000 Federal Home Loan Mortgage Corporation, 7.50%,
2/1/2010, Market Value -- $1,502,820)......................... 1,472,782 1,472,782
-----------
TOTAL SHORT TERM INVESTMENTS -- (Cost $1,472,782).................. 1,472,782
-----------
TOTAL INVESTMENTS -- (Cost $62,927,928) -- 98.8%................... 63,718,466
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES -- 1.2%....... 740,458
-----------
NET ASSETS -- 100.0%............................................... $64,458,924
===========
</TABLE>
- ---------------
Percentages are based on net assets of $64,458,924
(a) Interest rate resets annually.
See notes to financial statements.
15
<PAGE> 16
MAGNA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1997
================================================================================
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
----------- ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $44,804,481 and
$61,455,146, respectively)..................................... $67,793,775 $62,245,684
Repurchase agreements, at cost................................... 2,082,839 1,472,782
----------- -----------
TOTAL INVESTMENTS.............................................. 69,876,614 63,718,466
Interest receivable.............................................. 221,646 1,162,248
Receivable for investment securities matured..................... 500,000 --
Receivable for fund shares sold.................................. 2,925 --
Deferred organization costs...................................... 21,101 41,204
Prepaid expenses and other assets................................ 7,457 8,154
----------- -----------
TOTAL ASSETS................................................... 70,629,743 64,930,072
----------- -----------
LIABILITIES:
Payable for investment securities purchased...................... 254,995 --
Distributions payable............................................ -- 359,712
Accrued expenses:
Advisory fees.................................................. 30,621 21,868
Administration fees............................................ 2,425 2,327
Legal fees..................................................... 32,636 47,135
Audit fees..................................................... 9,463 15,217
Custodian and Fund Accounting fees............................. 4,299 6,736
Transfer agent fees............................................ 7,683 5,485
Printing costs................................................. 4,673 5,689
Registration and filing fees................................... 4,246 4,886
Trustees' fees and expenses.................................... 2,189 1,311
Other.......................................................... 26 782
----------- -----------
TOTAL LIABILITIES.............................................. 353,256 471,148
----------- -----------
NET ASSETS....................................................... $70,276,487 $64,458,924
=========== ===========
COMPOSITION OF NET ASSETS
Paid-in capital.................................................. $46,443,226 $63,926,633
Undistributed (distributions in excess of) net investment
income......................................................... 188,483 (5)
Accumulated net realized gains (losses) on investment
transactions................................................... 655,484 (258,242)
Net unrealized appreciation from investments..................... 22,989,294 790,538
----------- -----------
NET ASSETS....................................................... $70,276,487 $64,458,924
=========== ===========
Shares of beneficial interest outstanding, no par value.......... 3,168,108 5,111,891
=========== ===========
Net asset value and redemption price per share................... $ 22.18 $ 12.61
=========== ===========
Maximum Sales Charge............................................. 4.00% 4.00%
=========== ===========
Maximum Offering Price (100%/(100% -- Maximum Sales Charge) of
net asset value adjusted to nearest cent) per share............ $ 23.10 $ 13.14
=========== ===========
</TABLE>
See notes to financial statements.
16
<PAGE> 17
MAGNA FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1997
================================================================================
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
----------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income.................................................. $ 353,347 $4,334,079
Dividend income.................................................. 926,793 --
----------- -----------
TOTAL INCOME................................................... 1,280,140 4,334,079
----------- -----------
EXPENSES:
Advisory fees (Note 3)........................................... 396,797 304,596
Administration fees (Note 3)..................................... 100,523 115,747
12b-1 fees (Note 3).............................................. 132,266 152,298
Legal fees....................................................... 21,506 30,496
Audit fees....................................................... 12,850 16,333
Custodian and Fund Accounting fees (Note 3)...................... 53,376 65,228
Amortization of organization costs............................... 10,545 20,597
Transfer agent fees (Note 3)..................................... 56,824 47,246
Printing costs................................................... 7,825 9,326
Insurance costs.................................................. 10,986 15,834
Registration and filing fees..................................... 3,532 3,690
Trustees' fees and expenses...................................... 16,430 16,432
Other............................................................ 1,702 2,408
----------- -----------
TOTAL EXPENSES................................................. 825,162 800,231
Less: Expenses voluntarily reduced/waived (Note 3)............. (264,532) (213,217)
----------- -----------
Net expenses................................................... 560,630 587,014
----------- -----------
NET INVESTMENT INCOME............................................ 719,510 3,747,065
----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENT
TRANSACTIONS:
Realized gains (losses) on investment transactions............... 664,115 67,662
Net change in unrealized appreciation(depreciation) on
investments.................................................... 15,434,191 815,681
----------- -----------
Net realized and unrealized gains on Investment Transactions..... 16,098,306 883,343
----------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS................... $16,817,816 $4,630,408
=========== ===========
</TABLE>
See notes to financial statements.
17
<PAGE> 18
MAGNA FUNDS
GROWTH & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income....................................... $ 719,510 $ 565,292
Net realized gains (losses) from investment transactions.... 664,115 1,077,400
Net change in unrealized appreciation (depreciation) on
investments............................................... 15,434,191 4,250,144
----------- -----------
Change in net assets resulting from operations.............. 16,817,816 5,892,836
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (645,485) (522,116)
Net realized gains.......................................... (917,850) (60,437)
----------- -----------
Change in net assets from shareholder distributions......... (1,563,335) (582,553)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from sale of shares................................ 21,143,569 6,430,315
Shares issued in reinvestment of distributions.............. 1,132,911 239,172
Payments for shares redeemed................................ (7,249,406) (2,268,580)
----------- -----------
Change in net assets from fund share transactions........... 15,027,074 4,400,907
----------- -----------
NET INCREASE IN NET ASSETS.................................. 30,281,555 9,711,190
----------- -----------
NET ASSETS:
Beginning of period......................................... 39,994,932 30,283,742
----------- -----------
End of period............................................... $70,276,487 $39,994,932
=========== ===========
</TABLE>
See notes to financial statements.
18
<PAGE> 19
MAGNA FUNDS
INTERMEDIATE GOVERNMENT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income..................................... $ 3,747,065 $ 3,275,349
Net realized gains (losses) from investment
transactions............................................ 67,662 67,299
Net change in unrealized appreciation (depreciation) on
investments............................................. 815,681 (1,523,540)
----------- -----------
Change in net assets resulting from operations............ 4,630,408 1,819,108
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (3,748,531) (3,277,592)
In excess of net investment income........................ (57,243) --
----------- -----------
Change in net assets from shareholder distributions....... (3,805,774) (3,277,592)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from sale of shares.............................. 12,518,368 11,087,902
Shares issued in reinvestment of distributions............ 637,814 636,548
Payments for shares redeemed.............................. (6,285,840) (5,587,492)
----------- -----------
Change in net assets from fund share transactions......... 6,870,342 6,136,958
----------- -----------
NET INCREASE IN NET ASSETS................................ 7,694,976 4,678,474
----------- -----------
NET ASSETS:
Beginning of period....................................... 56,763,948 52,085,474
----------- -----------
End of period............................................. $64,458,924 $56,763,948
=========== ===========
</TABLE>
See notes to financial statements.
19
<PAGE> 20
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").
The investment objective of the Magna Growth & Income Fund is to seek long-term
growth of capital, current income and growth of income. The investment objective
of the Magna Intermediate Government Bond Fund is to achieve current income
consistent with preservation of capital.
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 the closing 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.
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 agreements 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: The Funds bear all costs in connection with
their organization, including the fees and expenses of registering and
qualifying shares for distribution under Federal and State securities
regulations. All such costs are amortized using the straight-line method over a
period of five years from the dates each Fund commenced operations: September 1,
1994, for the Magna Growth & Income Fund and the Magna Intermediate Government
Bond Fund.
continued
20
<PAGE> 21
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. The differences are
primarily due to differing treatments for mortgage-backed securities, expiring
capital loss carryforwards, and deferrals of certain losses. Permanent book and
tax basis differences have been reclassified among the components of net assets.
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 calender year, the
Funds will not be subject to a federal excise tax.
Expenses: Expenses that are directly related to one of the Funds are charged
directly to that Fund. Expenses relating to the Funds collectively are prorated
to the Funds on the basis of each Fund's relative net assets.
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. RELATED PARTY TRANSACTIONS
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. For the year ended August 31, 1997, Magna
waived investment advisory fees of $132,266 and $60,919 for the Magna Growth &
Income Fund and Magna Intermediate Government Bond Fund, respectively.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"), an
Ohio limited partnership, is a subsidiary of The BISYS Group, Inc. BISYS, with
whom certain officers and a trustee of the Trust are affiliated, serves the
Trust as distributor, administrator, transfer agent and fund accountant. Such
officers and trustee are not paid any fees directly by the Funds for serving as
officers and trustee of the Trust.
From inception through June, 1, 1997 the Trust had entered into an
Administration Services Agreement with Ernst Asset Management Corporation
("EAMC"), a wholly owned subsidiary of Ernst & Company ("Ernst"). Under this
agreement, each Fund paid a fee, calculated daily and paid monthly, at the rate
of 0.19% of the first
continued
21
<PAGE> 22
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
$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. For
the period September 1, 1996 through June 1, 1997, EAMC earned $70,951 from the
Growth & Income Fund, and $87,869 from the Intermediate Government Bond Fund in
administrative fees. As of June 2, 1997 the Trust has entered into an
Administration Service Agreement with BISYS Fund Services ("BISYS"),
("Administrator"), who provides management and administrative services to the
Funds, under the agreement. The Trust pays BISYS a fee for its services to each
Fund under the Administration Service Agreement at the annual rate of 0.20% of
the Trust's average net assets. For the period June 2 through August 31, 1997
BISYS earned $29,572 from the Magna Growth & Income Fund, and $27,878 from the
Magna Intermediate Government Bond Fund.
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 period September 1, 1996 through June 1, 1997 EAMC (the prior
Distributor) earned service fees of $93,356 and $115,617 for the Magna Growth &
Income Fund and the Magna Intermediate Government Bond Fund, respectively. EAMC
voluntarily waived $93,356 and $115,617 of service fees for the Magna Growth &
Income Fund and the Magna Intermediate Government Bond Fund, respectively. For
the period June 2, 1997 through August 31, 1997 BISYS (the current Distributor)
earned service fees of $38,910 and $36,681 for the Magna Growth & Income Fund
and the Magna Intermediate Government Bond Fund, respectively. For the period
June 2, 1997 through August 31, 1997 BISYS (the Distributor) voluntarily waived
$38,910 and $36,681 of service fees for the Magna Growth & Income Fund and the
Magna Intermediate Government Bond Fund, respectively.
EAMC was entitled to receive commissions on sales of shares of the Funds for the
period from September 1, 1996 through June 1, 1997. EAMC received $8,484 from
the commissions on sales of shares of the Funds, of which $8,449 was allowed to
affiliated broker/dealers of the Funds. BISYS was entitled to receive
commissions on sales of shares of the Funds for the period from June 2, 1997
through August 31, 1997. BISYS received $1,835 from the commissions on sales of
shares of the Funds, of which $1,656 was allowed to affiliated broker/dealers of
the Funds.
For the period June 2, 1997 through August 31, 1997 BISYS received Transfer
Agent fees of $17,099 and $14,911 from the Magna Growth & Income Fund and the
Magna Intermediate Government Bond Fund, respectively.
As Fund Accountant for the period from June 2, 1997 through August 31, 1997,
BISYS received $4,501 and $6,396 from the Magna Growth & Income Fund and Magna
Intermediate Bond Fund, respectively.
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.
continued
22
<PAGE> 23
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities, for the year ended August 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Magna Growth & Income Fund.......................................... $22,792,093 $ 8,545,189
Magna Intermediate Government Bond Fund............................. $18,898,240 $11,275,272
</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, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
----------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Magna Growth & Income Fund.............. $46,887,320 $23,745,802 $ (756,508) $ 22,989,294
Magna Intermediate Government Bond
Fund.................................. $62,927,928 $ 1,101,480 $ (310,942) $ 790,538
</TABLE>
5. FUND SHARE TRANSACTIONS
Share activity for the Funds were as follows:
<TABLE>
<CAPTION>
MAGNA GROWTH & INCOME FUND
---------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
Shares sold................................................. 1,017,201 408,171
Shares issued in reinvestment............................... 60,944 15,343
Shares redeemed............................................. (346,284) (143,015)
---------- --------
Net increase................................................ 731,861 280,499
========== ========
</TABLE>
<TABLE>
<CAPTION>
MAGNA INTERMEDIATE
GOVERNMENT BOND FUND
---------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
Shares sold................................................. 993,664 871,641
Shares issued in reinvestment............................... 50,648 50,161
Shares redeemed............................................. (499,001) (439,287)
---------- --------
Net increase................................................ 545,311 482,515
========== ========
</TABLE>
continued
23
<PAGE> 24
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. OTHER INFORMATION (UNAUDITED)
For the fiscal year ended August 31, 1997, 100% of the dividends distributed by
the Magna Growth & Income Fund qualified for the dividends-received deduction
for corporate shareholders.
As of August 31, 1997, the Magna Intermediate Government Bond Fund had capital
loss carryovers of $258,242 of which $59,293 will expire in 2003 and $198,949
will expire in 2004 to offset any future net capital gains, if any, to the
extent provided by the Treasury regulations. To the extent that this carryover
is used to offset future capital gains, it is probable that the gains so offset
will not be distributed to shareholders.
24
<PAGE> 25
MAGNA FUNDS
MAGNA GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated:
================================================================================
<TABLE>
<CAPTION>
YEAR YEAR SEPTEMBER 1, 1994*
ENDED ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- ------------------
<S> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD... $ 16.42 $ 14.05 $ 12.50
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.26 0.24 0.25
Net realized and unrealized gains from
investment transactions................ 6.12 2.39 1.52
------ ------ ------
Total income from investment
operations............................. 6.38 2.63 1.77
------ ------ ------
LESS DISTRIBUTIONS:
Net investment income.................... (0.25) (0.23) (0.22)
Net realized gain from investment
transactions........................... (0.37) (0.03) --
------ ------ ------
Total dividends and distributions........ (0.62) (0.26) (0.22)
------ ------ ------
NET ASSET VALUE -- END OF PERIOD......... $ 22.18 $ 16.42 $ 14.05
====== ====== ======
Total return (1)......................... 39.59% 18.77% 14.33%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's)........ $70,276 $39,995 $ 30,284
Ratio of expenses to average net
assets................................. 1.06% 1.27% 1.25%
Ratio of net investment income to average
net assets............................. 1.36% 1.56% 1.98%
Ratio of expenses to average net assets
without fee waivers**.................. 1.56% 1.77% 1.88%
Ratio of net investment income to average
net assets without fee waivers**....... 0.86% 1.06% 1.35%
Portfolio turnover rate.................. 17% 31% 41%
Average commission rate (2).............. $0.0500 $0.0600 NA
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(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.
See notes to financial statements.
25
<PAGE> 26
MAGNA FUNDS
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated:
================================================================================
<TABLE>
<CAPTION>
YEAR YEAR SEPTEMBER 1, 1994*
ENDED ENDED THROUGH
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
--------------- --------------- ------------------
<S> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD... $ 12.43 $ 12.75 $ 12.50
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.79 0.76 0.74
Net realized and unrealized gain from
investment transactions................ 0.19 (0.32) 0.25
------- ------- -------
Total income from investment
operations............................. 0.98 0.44 0.99
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income..... (0.79) (0.76) (0.74)
In excess of net investment income....... (0.01) -- --
------- ------- -------
Total dividends and distributions........ (0.80) (0.76) (0.74)
------- ------- -------
NET ASSET VALUE -- END OF PERIOD......... $ 12.61 $ 12.43 $ 12.75
======= ======= =======
Total return (1)......................... 7.96% 3.48% 8.30%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000's)........ $64,459 $56,764 $ 52,085
Ratio of expenses to average net
assets................................. 0.96% 1.05% 1.10%
Ratio of net investment income to average
net assets............................. 6.15% 5.97% 6.00%
Ratio of expenses to average net assets
without fee waivers**.................. 1.31% 1.40% 1.43%
Ratio of net investment income to average
net assets without fee waivers**....... 5.80% 5.62% 5.66%
Portfolio turnover rate.................. 19% 20% 34%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(1) Total return excludes sales charges. Had the advisor, distributor and
administrator not reduced or waived certain expenses total returns would
have been lower.
See notes to financial statements.
26
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Trustees
of the Magna Funds:
We have audited the accompanying statements of assets and liabilities of the
Magna Growth & Income Fund and the Magna Intermediate Government Bond Fund (the
"Funds") including the schedules of portfolio investments, as of August 31,
1997, and the related statements of operations, statements of changes in net
assets, and the financial highlights for the periods presented. 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, 1997 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of the
Magna Growth & Income Fund and the Magna Intermediate Government Bond Fund as of
August 31, 1997, and the results of operations, changes in net assets and the
financial highlights for the periods presented in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
October 21, 1997
27
<PAGE> 28
======================================================
INVESTMENT ADVISOR
Magna Bank, N.A.
1401 South Brentwood Boulevard
St. Louis, Missouri 61344
ADMINISTRATOR & DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
TRANSFER AND
DIVIDEND PAYING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN
Fifth Third Bank
Fifth Third Center
Cincinnati, OH 45263
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
10-97
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter to Shareholders.................... 1
Portfolio Manager's Report................ 2
Schedule of Portfolio Investments......... 6
Statements of Assets and Liabilities...... 16
Statements of Operations.................. 17
Statements of Changes in Net Assets....... 18
Notes to Financials....................... 20
Financial Highlights...................... 25
Report of Independent Accountants......... 27
</TABLE>
======================================================
======================================================
MAGNA FUNDS
A FAMILY OF FUNDS
ANNUAL REPORT
AUGUST 31, 1997
3435 STELZER ROAD
COLUMBUS, OH 43219
(800) 219-4182
======================================================
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.
======================================================
