<PAGE> 1
MAGNA FUNDS
LETTER TO SHAREHOLDERS
We are pleased to provide you with the 1998 Annual Report for the Magna Funds:
Magna Growth & Income Fund and Magna Intermediate Government Bond Fund.
Fiscal year end August 31, 1998 was a good year for the Magna Funds and for our
shareholders. Net assets under management at the end of the fiscal year were in
excess of $146 million. This included growth in the value of the funds'
holdings, as well as investments from shareholders.
Magna Growth & Income Fund returned 8.84%(1) over the last 12 months, excluding
sales charges. We believe that growth opportunities will continue to be found in
stocks of large companies with strong earnings and dominant market positions.
Magna Intermediate Government Bond Fund continues to provide solid performance
with a total return of 9.33%(2), excluding sales charges, for the fiscal year.
As inflation continues to be low, bonds can offer investors a substantial, if
not spectacular, return.
During the last year, concerns surrounded financial markets in the United
States. Possible recession has replaced inflation as the primary target of the
Federal Reserve Board's economic policy. The deepening economic crisis in Japan
and other Asian nations, concerns about consumer confidence and spending and the
possibility of weaker corporate earnings have brought uncertainty and
unprecedented volatility in their wake. Still, we remain confident in our
long-term commitment to stocks and bonds.
This report includes the Schedule of Investments, comments from the portfolio
managers, and other important information for each fund. We encourage you to
read the report and thank you for your continued support.
Sincerely,
Walter B. Grimm
Walter B. Grimm
President
- ---------------
(1) With a maximum sales charge of 4.00%, the total return for the fiscal year
ended August 31, 1998 would have been 4.50%.
(2) With a maximum sales charge of 4.00%, the total return for the fiscal year
ended August 31, 1998 would have been 4.92%.
<PAGE> 2
MAGNA GROWTH & INCOME FUND
PORTFOLIO MANAGER REPORT
COMMENTS FROM DISCUSSIONS WITH GARY J. GUTHRIE, PORTFOLIO MANAGER
HOW DID THE FUND PERFORM
DURING THE PAST 12 MONTHS,
AND
DURING THE FIRST EIGHT
MONTHS OF
1998? Despite the August meltdown, the Fund performed
very well when measured against a broad market
index and our fund peer-group index for the fiscal
year ended August 31, 1998. During that period, the
Fund returned 8.84%(1), excluding sales charges. In
comparison, the S&P 500 Index gained 8.10% and the
Lipper Growth & Income Fund Index lost (1.34)%.
Through August 31, 1998, the Fund's 1998
year-to-date total return was 4.15%(1), excluding
sales charges, while the S&P 500 Index lost
(0.38)%, and the Lipper Growth & Income Fund Index
lost (6.77)%.
WHAT FACTORS CONTRIBUTED TO
THE
FUND'S PERFORMANCE? Our security selection process and the emphasis
placed on high quality holdings all played a part
in providing shareholders with strong relative
performance. 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 held value during the
market downturn. Lower volatility (versus S&P 500)
has been a characteristic of our style since
inception.
WHAT IS THE COMPOSITION OF
YOUR
PORTFOLIO? Our sector weightings are similar to those that
characterized our portfolio a year ago. About 19%
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 drug and pharmaceutical 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 over-
weighted in any particular sector.*
As of August 31, 1998, the Fund's top five holdings
as a percent of net assets were Dell Computer
Corp., (4.6%), Microsoft Corp., (3.9%), Warner
Lambert, (2.6%), Pfizer, (2.5%), and General
Electric, (2.5%).*
WHAT IS YOUR OUTLOOK FOR
THE NEXT
12 MONTHS? Concern over 1999 earnings and the turmoil overseas
may eventually impact our markets. A flight to
safety in U.S. Treasuries has driven interest rates
to record lows. Stocks will probably retest their
August lows as investors seek companies with less
foreign exposure. Traditional measures of valuation
have returned to the market from the peaks reached
in July. Consumer demand remains the key to
domestic economic growth. Low inflation and lower
interest rates should continue to drive long term
growth.
- ---------------
(1) With a maximum sales charge of 4.00%, the total return for the fiscal year
ended August 31, 1998 would have been 4.50%, and the total return for the
1998 year-to-date period (through August 31, 1998) would have been 0.00%.
* The composition of the Fund's holdings is subject to change.
2
<PAGE> 3
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
& INCOME FUND MAGNA GROWTH S&P 500 STOCK
INDEX & INCOME FUND INDEX
<S> <C> <C> <C>
8/31/94 10000 9601 10000
8/31/95 11691 10978 12125
8/31/96 13492 13040 14415
8/31/97 19033 18203 20271
8/31/98 18030 19814 21925
</TABLE>
COMPARATIVE TOTAL RETURN
for the periods ended August 31, 1998
<TABLE>
<CAPTION>
1998 One Since Inception
YTD Year (8/31/94)
------------------------------
<S> <C> <C> <C>
Magna Growth & Income Fund
Without sales charge...... 4.15% 8.84% 19.86%
With sales charge*........ 0.00% 4.50% 18.64%
</TABLE>
* Reflects maximum sales charge of 4.00%.
PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE RESULTS.
The performance of the Magna
Growth & 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 large
capitalization 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.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Percent
<S> <C>
Services 9.2
Retail 1.5
Technology 18.6
Health 14.1
Basic Industries 9.7
Short-Term Investment 5.1
Preferred Stock 5.4
Treasury Notes 2.0
Consumer 14.2
Utilities 2.5
Energy 5.5
Finance 12.1
</TABLE>
SECTOR WEIGHTINGS*
*Portfolio composition subject to change. Percentages based upon net assets.
3
<PAGE> 4
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
PORTFOLIO MANAGER REPORT
COMMENTS FROM DISCUSSIONS WITH L. CLARK ZEDRIC, PORTFOLIO MANAGER.
HOW DID THE FUND PERFORM
DURING THE PAST 12 MONTHS,
AND
DURING THE FIRST EIGHT
MONTHS OF
1998? The Fund provided a total return of 9.33%(1),
exclusive of sales charges, for the 12 month period
ending August 31, 1998. In comparison the Lehman
Brothers 6-10 Year Government/Corporate Bond Index
gained 11.05%, and the Lehman Brothers 1-5 Year
Government/Corporate Bond Index rose 8.01%.
Through August 31, 1998, the Fund's 1998
year-to-date total return, exclusive of sales
charges, was 5.58%(1). During the same period, the
Lehman Brothers 6-10 Year Government/Corporate Bond
Index gained 6.26%, and the Lehman Brothers 1-5
Year Government/Corporate Bond Index rose 5.09%.
THE FUND'S 12 MONTH
PERFORMANCE HAS GROWN AGAIN
ABOVE ITS PREVIOUS YEAR'S
RETURN.
WHAT PRIMARILY ACCOUNTED
FOR THE
IMPROVEMENT? During the 12 month period, interest rates
basically fell off the table. The long bond went
from a 6.61% the end of August 1997 to 5.25% at
month end August 1998. 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. Yes. As of August 31, 1998, 63.30% 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 dominant
credit rating was AAA; the Fund owns nothing below
an A rating. As of August 31, 1998, the average
portfolio coupon rate(2) was over 7.00%*.
HOW HAVE YOU POSITIONED THE
FUND FOR THE COMING YEAR? An essential part of our strategy is to maintain a
"ladder" with bond maturities spread over several
years. This helps us to lessen the impact of
interest rate fluctuations on the value of the
portfolio and ensures that some bonds mature each
year. We continue the "ladder" strategy and
recently have been extending the length slightly by
purchasing some bonds with 10 to 14 years to
maturity, modestly increasing average life and
duration. This action reflects our view that
interest rates should decline a little further in
this cycle.
- ---------------
(1) With a maximum sales charge of 4.00%, the total return for the fiscal year
ended August 31, 1998 would have been 4.92%, and the total return for the
1998 year-to-date period (through August 31, 1998) would have been 1.38%.
(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.
4
<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 1-5- BROTHERS 6-10-
INTERMEDIATE YEAR YEAR
GOVERNMENT GOVERNMENT/CORPORATE GOVERNMENT/CORPORATE
BOND FUND BOND INDEX BOND INDEX
<S> <C> <C> <C>
8/31/94 9601 10000 10000
8/31/95 10398 10850 11325
8/31/96 10760 11368 11623
8/31/97 11617 12233 12864
8/31/98 12704 13508 15882
</TABLE>
COMPARATIVE TOTAL RETURN
for the periods ended August 31, 1998
<TABLE>
<CAPTION>
1998 One Since Inception
YTD Year (8/31/94)
------------------------------
<S> <C> <C> <C>
Magna Intermediate Government
Bond Fund
Without sales charge...... 5.58% 9.33% 7.25%
*With sales charge........ 1.38% 4.92% 6.17%
</TABLE>
* Reflects maximum sales charge of 4.00%.
PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE RESULTS.
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.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Percent
<S> <C>
Cash and Cash Equivalent 5.9
Corporate Paper and Cash 31.2
U.S. Government Securities 7.1
Federal Agency 56.2
</TABLE>
PORTFOLIO COMPOSITION*
*Portfolio composition subject to change. Percentages based upon net assets.
5
<PAGE> 6
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS -- (87.4%):
AEROSPACE/DEFENSE -- (1.2%):
Lockheed Martin Corporation............................ 10,000 $ 874,375
-----------
AIR TRAVEL -- (1.4%):
Delta Air Lines, Incorporated.......................... 10,000 1,020,000
-----------
ALUMINUM -- (0.8%):
Aluminum Company of America............................ 10,000 598,750
-----------
AUTOMOBILES & TRUCKS -- (2.4%):
Chrysler Corporation................................... 15,000 669,375
Ford Motor Company..................................... 25,000 1,100,000
-----------
1,769,375
-----------
BREWERY -- (1.2%):
Anheuser-Busch Companies, Incorporated................. 20,000 922,500
-----------
CHEMICALS -- (3.6%):
DuPont (EI) de Nemours & Company....................... 23,000 1,326,813
Monsanto Company....................................... 25,000 1,367,187
-----------
2,694,000
-----------
CLOTHING -- (1.5%):
TJX Companies, Incorporated............................ 50,000 1,115,625
-----------
COMPUTER SOFTWARE -- (5.1%):
Computer Sciences Corporation.......................... 15,000 848,438
Microsoft Corporation*................................. 30,400 2,916,500
-----------
3,764,938
-----------
COMPUTERS & BUSINESS EQUIPMENT -- (12.1%):
Cisco Systems, Incorporated*........................... 22,500 1,842,187
Compaq Computer Corporation............................ 46,000 1,285,125
Dell Computer Corporation*............................. 34,000 3,400,000
Hewlett-Packard Company................................ 20,000 971,250
Sun Microsystems, Incorporated*........................ 35,000 1,386,875
-----------
8,885,437
-----------
DIVERSIFIED OPERATIONS -- (2.5%):
General Electric Company............................... 23,000 1,840,000
-----------
</TABLE>
continued
6
<PAGE> 7
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
DRUGS & HEALTHCARE -- (12.7%):
Bristol-Myers Squibb Company........................... 15,000 $ 1,468,125
Johnson & Johnson...................................... 15,000 1,035,000
Lilly (Eli) & Company.................................. 14,000 917,000
Merck & Company, Incorporated.......................... 10,100 1,170,969
Pfizer, Incorporated................................... 20,000 1,859,999
Tenet Healthcare Corporation*.......................... 35,000 903,438
Warner-Lambert Company................................. 30,000 1,957,500
-----------
9,312,031
-----------
ELECTRONIC COMPONENTS -- (1.4%):
Intel Corporation...................................... 15,000 1,067,813
-----------
ENTERTAINMENT -- (1.1%):
Walt Disney Company.................................... 30,000 823,125
-----------
FINANCE & BANKING -- (6.8%):
Banc One Corporation................................... 13,200 501,600
Chase Manhattan Corporation............................ 20,000 1,059,999
First Union Corporation................................ 20,000 970,000
Mellon Bank Corporation................................ 18,300 951,600
Norwest Corporation.................................... 20,000 595,000
SunTrust Banks, Incorporated........................... 5,000 280,000
Southtrust Corporation................................. 20,000 647,500
-----------
5,005,699
-----------
FINANCIAL SERVICES -- (2.7%):
Fannie Mae............................................. 20,000 1,136,250
Hartford Financial Services Group...................... 20,000 895,000
-----------
2,031,250
-----------
FOOD & BEVERAGES -- (3.0%):
Coca-Cola Company...................................... 16,000 1,042,000
PepsiCo, Incorporated.................................. 10,600 293,487
Sara Lee Corporation................................... 20,000 905,000
-----------
2,240,487
-----------
</TABLE>
continued
7
<PAGE> 8
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
HOUSEHOLD PRODUCTS -- (3.7%):
Dial Corporation....................................... 55,000 $ 1,072,500
Procter & Gamble Company............................... 22,000 1,683,000
-----------
2,755,500
INSURANCE -- (2.6%):
Allstate Corporation................................... 30,000 1,125,000
Conseco, Incorporated.................................. 30,000 828,750
-----------
1,953,750
-----------
INTERNATIONAL OIL -- (4.4%):
Exxon Corporation...................................... 15,000 981,563
Mobil Corporation...................................... 15,200 1,050,700
Texaco, Incorporated................................... 22,000 1,222,375
-----------
3,254,638
-----------
MEDICAL INSTRUMENTS -- (1.4%):
Medtronic, Incorporated................................ 20,000 1,027,500
-----------
MULTIMEDIA -- (1.6%):
Time Warner, Incorporated.............................. 15,000 1,205,625
-----------
OIL & GAS -- (1.1%):
Atlantic Richfield Company............................. 10,000 580,000
Ultramar Diamond Shamrock Corporation.................. 10,000 231,250
-----------
811,250
-----------
PAPER -- (1.0%):
Kimberly-Clark Corporation............................. 20,000 762,500
-----------
RAILROADS -- (0.6%):
Burlington Northern Santa Fe........................... 4,600 428,088
-----------
RESTAURANTS -- (1.1%):
McDonald's Corporation................................. 14,700 824,119
-----------
</TABLE>
continued
8
<PAGE> 9
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
TELECOMMUNICATIONS -- (6.2%):
GTE Corporation........................................ 19,500 $ 975,000
Lucent Technologies, Incorporated...................... 20,000 1,417,499
SBC Communications, Incorporated....................... 24,200 919,600
Sprint Corporation..................................... 10,000 670,625
Worldcom, Incorporated................................. 15,000 614,063
-----------
4,596,787
-----------
TOBACCO -- (1.7%):
Philip Morris Companies, Incorporated.................. 30,000 1,246,875
-----------
UTILITIES -- (2.5%):
GPU, Incorporated...................................... 25,000 939,063
New Century Energies, Incorporated..................... 20,000 922,500
-----------
1,861,563
-----------
TOTAL COMMON STOCKS -- (Cost $39,280,206)................... 64,693,600
-----------
PREFERRED STOCKS -- (5.4%):
BANKING -- (1.0%):
Harris Preferred Capital, Series A..................... 30,000 753,750
-----------
INSURANCE -- (2.0%):
Aetna Services, Incorporated........................... 10,000 620,625
Allstate Corporation................................... 35,000 868,438
-----------
1,489,063
-----------
OIL & GAS -- (0.7%):
UDS Capital, Series I.................................. 20,000 511,250
-----------
UTILITIES -- (1.7%):
Duke Energy Capital Trust.............................. 30,000 761,250
KCPL Financing, Series I............................... 20,000 523,750
-----------
1,285,000
-----------
TOTAL PREFERRED STOCKS -- (Cost $4,083,100)................. 4,039,063
-----------
</TABLE>
continued
9
<PAGE> 10
MAGNA GROWTH & INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
SHORT TERM INVESTMENTS -- (7.1%):
REPURCHASE AGREEMENT -- (5.1%):
Fifth Third Bank
5.35%, maturing 9/1/1998 (Collateralized by $3,032,000
Fannie Mae, 6.50%, 8/1/2024, Market
Value -- $3,060,425 and by $841,000, Fannie Mae, 6.75%
7/1/2024, Market Value -- $851,250)................... $3,797,012 $ 3,797,012
-----------
SHORT TERM INVESTMENTS -- (CONTINUED):
U.S. TREASURY NOTES -- (2.0%):
6.00%, 9/30/1998....................................... 500,000 500,268
5.13%, 12/31/1998...................................... 500,000 499,845
5.50%, 2/28/1999....................................... 500,000 500,935
-----------
1,501,048
-----------
TOTAL SHORT TERM INVESTMENTS -- (Cost $5,296,574)........... 5,298,060
-----------
TOTAL INVESTMENTS -- (Cost $48,659,880) (a) -- 99.9%........ 74,030,723
CASH, RECEIVABLES AND OTHER ASSETS,
LESS LIABILITIES -- 0.1%.................................. 100,268
-----------
NET ASSETS -- 100.0%........................................ $74,130,991
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $74,130,991.
(a) Cost for federal income tax and financial reporting is substantially the
same.
* Represents non-income producing securities.
See notes to financial statements.
10
<PAGE> 11
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
CORPORATE BONDS -- (31.2%):
FINANCE & BANKING -- (13.8%):
Associates Corporation NA
7.13%, 5/15/2000..................................... $1,000,000 $ 1,024,950
-----------
Bear Stearns Companies, Incorporated
7.00%, 3/1/2007...................................... 1,000,000 1,023,470
-----------
Ford Capital BV
9.38%, 5/15/2001..................................... 380,000 414,075
-----------
Merrill Lynch & Company, Incorporated
8.00%, 2/1/2002...................................... 325,000 345,400
8.30%, 11/1/2002..................................... 460,000 496,915
8.00%, 6/1/2007...................................... 500,000 556,690
-----------
1,399,005
-----------
Morgan Stanley Group, Incorporated
8.10%, 6/24/2002..................................... 460,000 493,295
-----------
Nationsbank Corporation
6.38%, 2/15/2008..................................... 1,000,000 1,004,530
6.60%, 5/15/2010..................................... 1,000,000 1,011,540
7.04%, 8/15/2012..................................... 500,000 506,160
-----------
2,522,230
-----------
Norwest Financial, Incorporated
7.20%, 5/1/2007...................................... 1,000,000 1,067,220
-----------
St. Paul Companies, Incorporated
7.29%, 8/28/2007..................................... 500,000 548,815
-----------
Toyota Motor Credit Corporation
7.13%, 9/26/2006..................................... 500,000 508,585
-----------
Wachovia Corporation
6.38%, 2/1/2009...................................... 1,000,000 1,000,000
-----------
10,001,645
-----------
INDUSTRIALS -- (9.4%):
Dupont Corporation
8.13%, 3/15/2004..................................... 265,000 291,606
-----------
</TABLE>
continued
11
<PAGE> 12
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
<->CORPORATE BONDS -- (CONTINUED):
INDUSTRIALS -- (CONTINUED):
Ford Motor Company
9.00%, 9/15/2001..................................... $ 280,000 $ 304,220
9.50%, 9/15/2011..................................... 230,000 299,849
-----------
604,069
-----------
J.C. Penney Company, Series A
6.88%, 10/15/2015.................................... 1,000,000 1,023,645
-----------
Kimberly-Clark Corporation
8.63%, 5/1/2001...................................... 280,000 299,743
-----------
Lilly Eli & Company
8.13%, 12/1/2001..................................... 500,000 534,795
-----------
Loews Corporation
6.75%, 12/15/2006.................................... 500,000 506,695
-----------
Monsanto Company
8.75%, 5/15/2001..................................... 200,000 216,946
-----------
Philip Morris Companies, Incorporated
8.75%, 6/1/2001...................................... 250,000 266,183
7.50%, 1/15/2002..................................... 360,000 374,612
7.25%, 1/15/2003..................................... 700,000 728,602
-----------
1,369,397
-----------
R.R. Donnelley & Sons Company
7.00%, 1/1/2003...................................... 700,000 728,532
-----------
Rockwell International Corporation
8.38%, 2/15/2001..................................... 280,000 296,344
-----------
Texaco Capital, Incorporated
9.00%, 12/15/1999.................................... 340,000 353,042
-----------
Wal-Mart Stores, Incorporated
8.63%, 4/1/2001...................................... 430,000 459,459
-----------
Weyerhaeuser Company
8.94%, 4/9/2001...................................... 100,000 108,052
-----------
6,792,325
-----------
TRANSPORTATION -- (0.3%):
Norfolk & Southern Railway Company
7.75%, 8/15/2005..................................... 225,000 242,494
-----------
</TABLE>
continued
12
<PAGE> 13
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
<->CORPORATE BONDS -- (CONTINUED):
UTILITIES -- (7.7%):
AT&T Corporation
7.13%, 1/15/2002..................................... $ 960,000 $ 1,000,109
-----------
Carolina Telephone & Telegraph Company
7.25%, 12/15/2004.................................... 1,000,000 1,095,569
-----------
General Electric Company
7.73%, 2/13/2002..................................... 400,000 426,604
-----------
National Rural Utilities
7.30%, 9/15/2006..................................... 1,000,000 1,085,990
7.20%, 10/1/2015..................................... 450,000 500,274
-----------
1,586,264
-----------
Northern Telecom, Limited
8.75%, 6/12/2001..................................... 430,000 459,464
-----------
Pacific Bell
7.25%, 7/1/2002...................................... 1,000,000 1,051,320
-----------
5,619,330
-----------
TOTAL CORPORATE BONDS -- (Cost $21,675,419)................. 22,655,794
-----------
GOVERNMENT AND AGENCY BONDS -- (63.3%):
FEDERAL AGENCIES -- (56.2%):
Fannie Mae
5.55%, 10/5/1998..................................... 650,000 650,116
5.38%, 10/23/1998.................................... 840,000 840,686
7.00%, 7/1/1999...................................... 417,581 417,836
8.55%, 8/30/1999..................................... 360,000 371,250
7.85%, 9/10/2004..................................... 500,000 512,420
8.33%, 2/8/2005...................................... 1,000,000 1,041,870
7.65%, 3/10/2005..................................... 500,000 559,060
8.00%, 6/21/2006..................................... 1,000,000 1,020,000
7.50%, 10/5/2006..................................... 1,000,000 1,002,030
6.83%, 10/10/2007.................................... 500,000 508,985
6.58%, 12/17/2007.................................... 1,000,000 1,031,090
6.14%, 9/2/2008...................................... 1,000,000 1,011,720
7.00%, 12/5/2011..................................... 1,000,000 1,037,240
7.00%, 8/14/2012..................................... 1,500,000 1,559,760
7.00%, 8/27/2012..................................... 1,500,000 1,590,704
7.00%, 10/29/2012.................................... 500,000 521,955
</TABLE>
continued
13
<PAGE> 14
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS -- (CONTINUED):
FEDERAL AGENCIES -- (CONTINUED):
Fannie Mae -- (continued)
6.26%, 11/26/2012.................................... $1,000,000 $ 1,058,598
7.00%, 12/12/2016.................................... 1,000,000 1,035,450
6.75%, 8/25/2021..................................... 920,000 954,500
7.05%, 4/25/2022..................................... 925,000 970,094
-----------
17,695,364
-----------
Federal Farm Credit Bank
6.20%, 11/30/2009.................................... 1,000,000 1,041,870
6.01%, 6/16/2010..................................... 2,000,000 2,053,440
6.13%, 1/22/2013..................................... 1,000,000 1,024,220
6.27%, 1/26/2016..................................... 1,000,000 1,024,370
-----------
5,143,900
-----------
Federal Home Loan Bank
8.45%, 7/26/1999..................................... 150,000 154,359
7.59%, 2/10/2000..................................... 1,000,000 1,031,410
8.06%, 3/10/2005..................................... 500,000 520,155
7.33%, 5/30/2007..................................... 1,000,000 1,031,410
6.03%, 4/8/2008...................................... 500,000 514,530
7.01%, 12/4/2012..................................... 1,000,000 1,022,500
6.13%, 1/9/2013...................................... 2,000,000 2,095,620
-----------
6,369,984
-----------
Freddie Mac
8.00%, 2/1/1999...................................... 46,483 46,681
7.90%, 9/19/2001..................................... 280,000 300,345
5.78%, 10/22/2003.................................... 380,000 377,743
6.55%, 11/28/2005.................................... 500,000 500,545
6.91%, 11/30/2005.................................... 500,000 501,485
8.00%, 9/11/2006..................................... 1,000,000 1,002,970
7.50%, 1/1/2007...................................... 17,484 17,902
6.50%, 5/1/2008...................................... 85,678 86,851
6.14%, 2/15/2011..................................... 1,000,000 1,039,060
6.77%, 3/21/2011..................................... 1,000,000 1,068,280
6.71%, 12/5/2011..................................... 2,000,000 2,127,820
7.27%, 2/6/2012...................................... 1,000,000 1,106,720
7.49%, 4/16/2012..................................... 1,000,000 1,125,940
</TABLE>
continued
14
<PAGE> 15
MAGNA INTERMEDIATE GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
AUGUST 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
-------------------- ---------- -----------
<S> <C> <C>
GOVERNMENT AND AGENCY BONDS -- (CONTINUED):
FEDERAL AGENCIES -- (CONTINUED):
Freddie Mac -- (continued)
7.09%, 11/22/2016.................................... $ 500,000 $ 542,110
7.00%, 1/15/2023..................................... 1,000,000 1,040,310
7.00%, 12/15/2023.................................... 546,000 572,104
6.50%, 2/15/2024..................................... 169,304 170,363
-----------
11,627,229
-----------
40,836,477
-----------
U.S. GOVERNMENT SECURITIES -- (7.1%):
Tennessee Valley Authority
6.00%, 3/15/2013..................................... 3,000,000 3,085,320
-----------
United States Treasury Notes
5.88%, 3/31/1999..................................... 380,000 381,543
7.00%, 4/15/1999..................................... 1,000,000 1,011,410
6.00%, 10/15/1999.................................... 690,000 696,465
-----------
2,089,418
-----------
5,174,738
-----------
TOTAL GOVERNMENT AND AGENCY BONDS -- (Cost $44,231,553)..... 46,011,215
-----------
SHORT TERM INVESTMENTS -- (5.9%):
REPURCHASE AGREEMENT -- (5.9%):
Fifth Third Bank
5.35%, maturing 9/1/1998 (Collateralized by
$4,338,000
Fannie Mae, 6.75%, 7/1/2024, Market
Value -- $4,390,869)................................ 4,252,763 4,252,763
-----------
TOTAL SHORT TERM INVESTMENTS -- (Cost $4,252,763)........... 4,252,763
-----------
TOTAL INVESTMENTS -- (Cost $70,159,735)(a) -- 100.4%........ 72,919,772
CASH, RECEIVABLES AND OTHER ASSETS,
LESS LIABILITIES -- (0.4%)................................ (305,553)
-----------
NET ASSETS -- 100.0%........................................ $72,614,219
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $72,614,219
(a) Cost for federal income tax and financial reporting is substantially the
same.
See notes to financial statements.
15
<PAGE> 16
MAGNA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
----------- ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $44,862,868 and
$65,906,972, respectively)................................ $70,233,711 $68,667,009
Repurchase agreements, (cost $3,797,012 and $4,252,763,
respectively)............................................. 3,797,012 4,252,763
----------- -----------
TOTAL INVESTMENTS......................................... 74,030,723 72,919,772
Dividends and Interest receivable........................... 156,952 1,072,653
Receivable for investment securities sold................... -- 721
Deferred organization costs................................. 10,525 20,733
Prepaid expenses and other assets........................... 10,597 10,323
----------- -----------
TOTAL ASSETS.............................................. 74,208,797 74,024,202
----------- -----------
LIABILITIES:
Payable for investment securities purchased................. -- 1,000,000
Distributions payable....................................... -- 345,236
Advisory fees payable Accrued expenses:
Advisory fees............................................. 34,662 24,282
Administration fees....................................... 2,203 1,990
Professional fees......................................... 18,557 19,217
Custodian fees............................................ 2,380 1,281
Transfer agent fees....................................... 1,859 2,658
Printing costs............................................ 7,137 5,462
Registration and filing fees.............................. 2,473 2,491
Trustees' fees and expenses............................... 7,512 5,847
Other..................................................... 1,023 1,519
----------- -----------
TOTAL LIABILITIES......................................... 77,806 1,409,983
----------- -----------
NET ASSETS.................................................. $74,130,991 $72,614,219
=========== ===========
COMPOSITION OF NET ASSETS
Paid-in capital............................................. $45,813,162 $70,013,960
Accumulated undistributed (distributions in excess of) net
investment income......................................... 137,057 (1,152)
Accumulated net realized gains (losses) on investment
transactions.............................................. 2,809,929 (158,626)
Net unrealized appreciation (depreciation) from
investments............................................... 25,370,843 2,760,037
----------- -----------
NET ASSETS.................................................. $74,130,991 $72,614,219
=========== ===========
Shares of beneficial interest outstanding, no par value..... 3,159,909 5,586,876
=========== ===========
Net asset value and redemption price per share.............. $ 23.46 $ 13.00
=========== ===========
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.... $ 24.44 $ 13.54
=========== ===========
</TABLE>
See notes to financial statements.
16
<PAGE> 17
MAGNA FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INTERMEDIATE
INCOME GOVERNMENT
FUND BOND FUND
---------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income............................................. $ 347,205 $4,609,324
Dividend income............................................. 1,203,390 --
---------- ----------
TOTAL INCOME.............................................. 1,550,595 4,609,324
---------- ----------
EXPENSES:
Advisory fees (Note 3)...................................... 596,301 338,078
Administration fees (Note 3)................................ 158,698 134,948
12b-1 fees (Note 3)......................................... 198,767 169,039
Fund accounting fees (Note 3)............................... 36,991 38,973
Professional fees........................................... 74,611 53,486
Custodian fees.............................................. 7,606 9,900
Amortization of organization costs.......................... 10,577 20,471
Transfer agent fees (Note 3)................................ 43,216 29,063
Printing costs.............................................. 21,931 16,683
Insurance costs............................................. 1,287 2,641
Registration and filing fees................................ 9,507 6,218
Trustees' fees and expenses................................. 26,357 24,287
Other....................................................... 1,484 1,182
---------- ----------
TOTAL EXPENSES............................................ 1,187,333 844,969
Less: Expenses voluntarily reduced/waived................. (397,534) (236,654)
---------- ----------
Net Expenses.............................................. 789,799 608,315
---------- ----------
NET INVESTMENT INCOME....................................... 760,796 4,001,009
---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENT
TRANSACTIONS:
Realized gains (losses) on investment transactions.......... 3,524,168 98,469
Net change in unrealized appreciation (depreciation) from
investments............................................... 2,381,549 1,969,499
---------- ----------
Net realized and unrealized gains (losses) on investment
transactions.............................................. 5,905,717 2,067,968
---------- ----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS.............. $6,666,513 $6,068,977
========== ==========
</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, 1998 AUGUST 31, 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss).............................. $ 760,796 $ 719,510
Net realized gains (losses) on investment transactions.... 3,524,168 664,115
Net change in unrealized appreciation (depreciation) from
investments............................................. 2,381,549 15,434,191
----------- -----------
Change in net assets resulting from operations............ 6,666,513 16,817,816
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (812,222) (645,485)
Net realized gains........................................ (1,369,723) (917,850)
----------- -----------
Change in net assets from shareholder distributions....... (2,181,945) (1,563,335)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from sale of shares.............................. 10,354,580 21,143,569
Shares issued in reinvestment of distributions............ 1,697,386 1,132,911
Payments for shares redeemed.............................. (12,682,030) (7,249,406)
----------- -----------
Change in net assets from fund share transactions......... (630,064) 15,027,074
----------- -----------
NET INCREASE IN NET ASSETS................................ 3,854,504 30,281,555
----------- -----------
NET ASSETS:
Beginning of period....................................... 70,276,487 39,994,932
----------- -----------
End of period............................................. $74,130,991 $70,276,487
=========== ===========
SHARE TRANSACTIONS:
Issued.................................................... 422,534 1,017,201
Reinvested................................................ 72,896 60,944
Redeemed.................................................. (503,629) (346,284)
----------- -----------
Change in shares.......................................... (8,199) 731,861
=========== ===========
</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, 1998 AUGUST 31, 1997
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss).............................. $ 4,001,009 $ 3,747,065
Net realized gains (losses) on investment transactions.... 98,469 67,662
Net change in unrealized appreciation (depreciation) from
investments............................................. 1,969,499 815,681
----------- -----------
Change in net assets resulting from operations............ 6,068,977 4,630,408
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................... (4,001,009) (3,748,531)
In excess of net investment income........................ -- (57,243)
----------- -----------
Change in net assets from shareholder distributions....... (4,001,009) (3,805,774)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from sale of shares.............................. 15,220,676 12,518,368
Shares issued in reinvestment of distributions............ 674,015 637,814
Payments for shares redeemed.............................. (9,807,364) (6,285,840)
----------- -----------
Change in net assets from fund share transactions......... 6,087,327 6,870,342
----------- -----------
NET INCREASE IN NET ASSETS................................ 8,155,295 7,694,976
----------- -----------
NET ASSETS:
Beginning of period....................................... 64,458,924 56,763,948
----------- -----------
End of period............................................. $72,614,219 $64,458,924
=========== ===========
SHARE TRANSACTIONS:
Issued.................................................... 1,188,041 993,664
Reinvested................................................ 52,724 50,648
Redeemed.................................................. (765,780) (499,001)
----------- -----------
Change in shares.......................................... 474,985 545,311
=========== ===========
</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. 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 financial statements have been prepared in conformity with
generally accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. Actual
results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
Each Fund has entered into a separate Investment Advisory Agreement with Magna
Bank, N.A. ("Magna"). Under these agreements, each Fund pays a fee, calculated
daily and paid monthly, based on the respective average daily net assets of such
Fund. This fee is 0.75% for the Magna Growth & Income Fund, and 0.50% for the
Magna Intermediate Government Bond Fund. 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 daily net
assets through August 31, 1999. This voluntary reduction has been in effect
since September 1, 1995. For the year ended August 31, 1998, Magna voluntarily
waived investment advisory fees of $198,767 and $67,615 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 of the Trust are affiliated, serves the Trust as
distributor, administrator, transfer agent and fund accountant. Such officers
are not paid any fees directly by the Funds for serving as officers of the
Trust.
The Trust has entered into an Administration Service Agreement with BISYS, who
provides management and administrative services to the Funds pursuant to this
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
continued
21
<PAGE> 22
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
assets. For the year ended August 31, 1998, BISYS earned $158,698 from the Magna
Growth & Income Fund, and $134,948 from the Magna Intermediate Government Bond
Fund.
Each Fund has adopted a Service Plan (the "Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended. The purpose of each plan is to
compensate the Funds' 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, 1998, BISYS (the
"Distributor") voluntarily waived the entire 0.25% for each Fund, amounting to
$198,767 and $169,039 of service fees for the Magna Growth & Income Fund and the
Magna Intermediate Government Bond Fund, respectively.
BISYS is entitled to receive commissions on sales of shares of the Funds for the
year ended August 31, 1998. The amount of $2,459 was allowed to affiliated
broker/dealers of the Funds for the year ended August 31, 1998; however, BISYS
did not retain any commissions on sales of shares of the Funds.
BISYS also serves the Funds as Transfer Agent. For the year ended August 31,
1998, BISYS received Transfer Agent fees of $43,216 and $29,063 from the Magna
Growth & Income Fund and the Magna Intermediate Government Bond Fund,
respectively.
As Fund Accountant for the year ended August 31, 1998, BISYS received Fund
Accounting fees of $36,991 and $38,973 from the Magna Growth & Income Fund and
the Magna Intermediate Government Bond Fund, respectively.
Each of the Trust's Trustees who are not affiliated with Magna receives an
annual fee of $5,000 plus $500 for each meeting attended. Total fees paid to
Trustees for the year ended August 31, 1998 were $35,750.
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, 1998 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Magna Growth & Income Fund.................................. $19,268,117 $21,241,084
Magna Intermediate Government Bond Fund..................... $24,674,516 $20,303,531
</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, 1998 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................. $48,659,880 $26,663,595 $(1,292,752) $25,370,843
Intermediate Government Bond Fund.... $70,159,735 $ 2,771,337 $ (11,300) $ 2,760,037
</TABLE>
continued
22
<PAGE> 23
MAGNA FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. OTHER INFORMATION (UNAUDITED)
For the fiscal year ended August 31, 1998, 100% of the dividends distributed by
the Magna Growth & Income Fund qualified for the dividends-received deduction
for corporate shareholders.
The Magna Growth & Income Fund capital gain dividend distributions from
long-term capital gains for the fiscal year ended August 31, 1998 was
$1,369,723, of which, $634,792 was taxed at 28% and $734,931 was taxed at 20%.
As of August 31, 1998, the Magna Intermediate Government Bond Fund had a capital
loss carryover of $158,626 which 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.
23
<PAGE> 24
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 YEAR SEPTEMBER 1, 1994*
ENDED ENDED ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD..... $ 22.18 $ 16.42 $ 14.05 $ 12.50
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.23 0.26 0.24 0.25
Net realized and unrealized gains from
investment transactions.................. 1.72 6.12 2.39 1.52
------- ------- ------- -------
Total income from investment operations.... 1.95 6.38 2.63 1.77
------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income...................... (0.25) (0.25) (0.23) (0.22)
Net realized gain from investment
transactions............................. (0.42) (0.37) (0.03) --
------- ------- ------- -------
Total dividends and distributions.......... (0.67) (0.62) (0.26) (0.22)
------- ------- ------- -------
NET ASSET VALUE -- END OF PERIOD........... $ 23.46 $ 22.18 $ 16.42 $ 14.05
======= ======= ======= =======
Total return (1)........................... 8.84% 39.59% 18.77% 14.33%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period ($000's)......... $74,131 $70,276 $39,995 $30,284
Ratio of expenses to average net assets.... 0.99% 1.06% 1.27% 1.25%
Ratio of net investment income to average
net assets............................... 0.96% 1.36% 1.56% 1.98%
Ratio of expenses to average net assets
without fee waivers**.................... 1.49% 1.56% 1.77% 1.88%
Ratio of net investment income to average
net assets without fee waivers**......... 0.46% 0.86% 1.06% 1.35%
Portfolio turnover rate.................... 26% 17% 31% 41%
</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.
24
<PAGE> 25
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 YEAR SEPTEMBER 1, 1994*
ENDED ENDED ENDED THROUGH
AUGUST 31, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF
PERIOD............................ $ 12.61 $ 12.43 $ 12.75 $ 12.50
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.76 0.79 0.76 0.74
Net realized and unrealized gains
from investment transactions...... 0.39 0.19 (0.32) 0.25
------- ------- ------- -------
Total income from investment
operations........................ 1.15 0.98 0.44 0.99
------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income............... (0.76) (0.79) (0.76) (0.74)
In excess of net investment
income............................ -- (0.01) -- --
------- ------- ------- -------
Total dividends and distributions... (0.76) (0.80) (0.76) (0.74)
------- ------- ------- -------
NET ASSET VALUE -- END OF PERIOD.... $ 13.00 $ 12.61 $ 12.43 $ 12.75
======= ======= ======= =======
Total return (1).................... 9.33% 7.96% 3.48% 8.30%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
($000's).......................... $72,614 $64,459 $56,764 $52,085
Ratio of expenses to average net
assets............................ 0.90% 0.96% 1.05% 1.10%
Ratio of net investment income to
average net assets................ 5.92% 6.15% 5.97% 6.00%
Ratio of expenses to average net
assets without fee waivers**...... 1.25% 1.31% 1.40% 1.43%
Ratio of net investment income to
average net assets without fee
waivers**......................... 5.57% 5.80% 5.62% 5.66%
Portfolio turnover rate............. 32% 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.
25
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees
The Magna Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, and the related statements of operations
and changes in net assets, and the financial highlights present fairly, in all
material respects, the financial position of The Magna Funds (comprising,
respectively, the Growth and Income Fund and Intermediate Government Bond Fund)
at August 31, 1998, the results of each of their operations for the year then
ended, the changes in each of their net assets for the two years then ended, and
their financial highlights for each of the periods in the four years then ended,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of The Magna Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
October 19, 1998
26
<PAGE> 27
- ------------------------------------------------------
- ------------------------------------------------------
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
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
10-98
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter to Shareholders.................... 1
Portfolio Manager 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 Financial Statements............. 20
Financial Highlights...................... 24
Report of Independent Accountants......... 26
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
MAGNA FUNDS
A FAMILY OF FUNDS
ANNUAL REPORT
AUGUST 31, 1998
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. THIS MATERIAL MUST
BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS. FOR A FREE PROSPECTUS CONTAINING
MORE COMPLETE INFORMATION, CALL (800) 219-4182. READ THE PROSPECTUS CAREFULLY
BEFORE YOU INVEST OR SEND MONEY. INVESTMENTS IN MUTUAL FUNDS INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. MUTUAL FUNDS ARE NOT FDIC INSURED OR
BANK GUARANTEED.
- ------------------------------------------------------
- ------------------------------------------------------
