SEMIANNUAL
REPORT
MARCH 31, 1998
[LOGO OMITTED]
TIP FUNDS
TRUSTED INSTITUTIONAL PARTNERS
============================
Penn Capital Select
Financial Services Fund
============================
<PAGE>
STATEMENT OF NET ASSETS TIP FUNDS
March 31, 1998 (Unaudited)
PENN CAPITAL SELECT Value
FINANCIAL SERVICES FUND Shares (000)
- -------------------------------------------------------
COMMON STOCKS (100.0%)
BANKS (85.0%)
Bank of New York 440 $ 28
BankBoston 150 17
California Federal Bank -
Contingent Litigation
Recovery Participation
Interests 1,150 25
California Federal Bank -
Secondary Contingent
Litigation Recovery
Participation Interests 525 13
Cape Cod Bank & Trust 430 19
Carnegie Bancorp New Jersey 225 8
Chase Manhattan Bank 300 41
Citicorp 290 41
CoreStates Financial 125 11
Crestar Financial 460 27
Equitable Federal Savings Bank* 300 10
First Union 700 40
Fleet Financial Group 400 34
IBS Financial 2,000 39
Long Island Bancorp 340 22
Medford Bancorp 385 17
National Penn Bancshares 1,080 38
NSS Bancorp 325 15
PNC Bank 1,595 96
Provident Bankshares 730 26
Regions Financial 550 23
Seacoast Banking of Florida 550 20
Southern Jersey Bancorp 275 16
Sovereign Bancorp 996 18
Summit Bancorp 1,650 83
Trust Company of New Jersey 400 11
------
738
------
FINANCIAL SERVICES (15.0%)
Advest Group 450 11
Green Tree Financial 640 18
Legg Mason 325 19
Scott & Stringfellow Financial 1,730 44
Southern Pacific Funding 2,500 38
------
130
------
Value
Shares (000)
- -------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $794) $ 868
------
MUTUAL FUNDS (7.8%)
SEI Daily Income Trust Money
Market Portfolio (A) 8,848 9
SEI Daily Income Trust Prime
Obligation Portfolio (A) 58,849 59
------
TOTAL MUTUAL FUNDS
(Cost $68) 68
------
TOTAL INVESTMENTS (107.8%)
(Cost $862) 936
------
OTHER ASSETS AND LIABILITIES, NET (-7.8%) (68)
------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 65,902 outstanding
shares of beneficial interest 763
Undistributed net investment income 1
Accumulated net realized gain
on investments 30
Net unrealized appreciation
on investments 74
------
TOTAL NET ASSETS (100.0%) $ 868
======
Net Asset Value, Offering
and Redemption Price
Per Share $13.17
======
*NON-INCOME PRODUCING SECURITY
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
STATEMENT OF OPERATIONS (000) TIP FUNDS
(Unaudited)
<TABLE>
<CAPTION>
PENN CAPITAL SELECT
FINANCIAL SERVICES FUND
-----------------------
FOR THE PERIOD
FROM 10/19/97
THROUGH 3/31/98
- ---------------------------------------------------------------------------------------
Investment Income:
<S> <C>
Dividends................................................. $ 3
Interest ................................................. 1
- ---------------------------------------------------------------------------------------
Total Investment Income................................. 4
- ---------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ................................. 2
Investment Advisory Fee Waiver ........................... (2)
Reimbursements by Advisor................................. (56)
Administrator Fees ....................................... 1
Custodian Fees ........................................... 3
Transfer Agent Fees ...................................... 12
Professional Fees ........................................ 12
Trustee Fees ............................................. 1
Registration Fees ........................................ 19
Pricing Fees ............................................. 1
Printing Fees ............................................ 5
Amortization of Deferred Organizational Costs............. 3
Insurance and Other Fees ................................. 2
- ---------------------------------------------------------------------------------------
Total Expenses ......................................... 3
- ---------------------------------------------------------------------------------------
Net Investment Income .............................. 1
- ---------------------------------------------------------------------------------------
Net Realized Gain From Securities Sold ................... 36
Net Unrealized Appreciation
of Investment Securities ............................... 74
- ---------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments ....................................... 110
- ---------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
From Operations ....................................... $111
=======================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the inancial statements.
2
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) TIP FUNDS
(Unaudited)
<TABLE>
<CAPTION>
PENN CAPITAL SELECT
FINANCIAL SERVICES FUND
-----------------------
FOR THE PERIOD
FROM 10/19/97
THROUGH 3/31/98
- ------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C>
Net Investment Income ............................................... $ 1
Net Realized Gain on Securities Sold................................. 36
Net Unrealized Appreciation of
Investment Securities ............................................. 74
- ------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations ................................................. 111
- ------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ............................................... --
Realized Capital Gain ............................................... (6)
- ------------------------------------------------------------------------------------------------
Total Distributions ............................................... (6)
- ------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ......................................... 767
Proceeds from Shares Issued in Lieu of Cash Distributions............ 6
Cost of Shares Redeemed.............................................. (10)
- ------------------------------------------------------------------------------------------------
Increase in Net Assets From
Capital Share Transactions......................................... 763
- ------------------------------------------------------------------------------------------------
Total Increase in Net Assets ...................................... 868
- ------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period................................................ --
- ------------------------------------------------------------------------------------------------
End of Period...................................................... $868(1)
================================================================================================
Shares Issued and Redeemed:
Issued .............................................................. 66
Issued in Lieu of Cash Distributions................................. 1
Redeemed............................................................. (1)
- ------------------------------------------------------------------------------------------------
Net Increase in Share Transactions................................... 66
- ------------------------------------------------------------------------------------------------
<FN>
(1) Includes undistributed net investment income of $1 as of 3/31/98.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FINANCIAL HIGHLIGHTS TIP FUNDS
For a Share Outstanding Throughout the Period (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Net Ratio of Net
Asset Unrealized Distributions Distributions Asset Assets Ratio Investment
Value Net Gains from Net from Value End of Expenses Income
Beginning Investment on Investment Capital End Total of Period to Average to Average
of Period Income Investments Income Gains of Period Return(1) (000) Net Assets Net Assets
--------- ---------- ------------ ------------- ------------- --------- --------- --------- ---------- ----------
- --------------------------------------------
PENN CAPITAL SELECT FINANCIAL SERVICES FUND
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998(3) $10.00 0.02 3.36 (0.01) (0.20) $13.17 33.97% $868 1.38%* 0.67%*
Ratio of Net
Ratio of Investment
Expenses Income to
to Average Average
Net Assets Net Assets
(Excluding (Excluding Portfolio Average
Waivers and Waivers and Turnover Commission
Reimbursements) Reimbursements) Rate Rate(2)
--------------- --------------- --------- ----------
- --------------------------------------------
PENN CAPITAL SELECT FINANCIAL SERVICES FUND
- --------------------------------------------
<S> <C> <C> <C> <C>
1998(3) 29.23%* (27.18)%* 99.31% $.0515
<FN>
* Annualized
(1) Returns are for the period indicated and have not been annualized.
(2) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.
(3) Commenced operations on October 19, 1997.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS TIP FUNDS
March 31, 1998 (Unaudited)
1. ORGANIZATION:
TIP FUNDS (the "Trust") a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company with 12 funds. The financial statements included herein is
for the Penn Capital Select Financial Services Fund (the "Penn Cap Select
Fund"), (the "Fund"). The financial statements of the remaining portfolios are
presented separately. The assets of the fund are segregated, and a shareholder's
interest is limited to the fund in which shares are held. The Fund's prospectus
provides a description of the Fund's investment objectives, policies, and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Fund.
SECURITY VALUATION -- Investments in equity securities which are traded on
a national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding 60 days to maturity for which market quotations are
readily available are valued at the most recently quoted bid price. Debt
obligations with 60 days or less remaining until maturity may be valued at
their amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no provision
for Federal income taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized on the accrual basis. Costs used in determining realized
gains and losses on the sales of investment securities are those of the
specific securities sold during the respective holding period.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated on each business day, by dividing the total value of the Fund's
assets, less liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters an
insolvency proceeding, realization of the collateral by the Fund may be
delayed or limited.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) TIP FUNDS
March 31, 1998 (Unaudited)
EXPENSES -- Expenses that are directly related to the Fund is charged to
that Fund. Other operating expenses of the Trust are prorated to the Funds
on the basis of relative daily net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared and paid to Shareholders on a quarterly basis. Any net
realized capital gains on sales of securities are distributed to
Shareholders at least annually.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principals. These book/tax differences are either
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of income and
expenses during the reported period. Actual results could differ from those
estimates.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Trust are also officers of SEI Fund Resources (the
"Administrator") and/or SEI Investments Distribution Co. (the "Distributor").
Such officers are paid no fees by the Trust for serving as officers and trustees
of the Trust.
4. ADMINISTRATION, SHAREHOLDER SERVICING, AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an agreement under which the
Administrator provides management and administrative services for an annual fee
of 0.12% of the average daily net assets of the Fund up to $75 million, 0.10% on
the next $75 million, 0.09% on the next $150 million, 0.08% on the next $300
million, and 0.075% of such assets in excess on $600 million. There is a minimum
annual fee of $75,000 per Fund payable to the Administrator for services
rendered to the Fund under the Administration Agreement. During fiscal 1998, the
Administrator has voluntarily waived a portion of its fee.
DST Systems, Inc., (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Fund under a transfer agency agreement with
the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated
April 30, 1996. The Distributor receives no fees for its distribution services
under this agreement.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Concluded) TIP FUNDS
March 31, 1998 (Unaudited)
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Trust and Penn Capital Management Company, Inc. (the "Adviser") are parties
to an Investment Advisory Agreement, under which the Adviser receives an annual
fee equal to 1.00% of the average daily net assets of the Penn Cap Select Fund.
The Adviser has voluntarily agreed to waive all or a portion of its fees and to
reimburse expenses of the Penn Cap Select Fund in order to limit their total
operating expenses (as a percentage of average daily net assets on an annualized
basis) to not more than 1.40%. Fee waivers and expense reimbursements are
voluntary and may be terminated at any time.
CoreStates Bank, N.A. acts as custodian (the "Custodian") for the Fund. Fees of
the Custodian are being paid on the basis of the net assets of the Fund. The
Custodian plays no role in determining the investment policies of the Funds or
which securities are to be purchased or sold in the Fund.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended March 31, 1998, are as follows
(000):
PENN CAPITAL SELECT
FINANCIAL SERVICES
-------------------
Purchases ....................... $1,230
Sales ........................... $ 472
At March 31, 1998, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Fund
at March 31, 1998, are as follows (000):
PENN CAPITAL SELECT
FINANCIAL SERVICES
-------------------
Aggregate gross unrealized
appreciation ................... $77
Aggregate gross unrealized
depreciation ................... (3)
---
Net unrealized appreciation ....... $74
===
7
<PAGE>
TRUST
TIP Funds
P.O. Box 419805
Kansas City, MO 64141-6805
INVESTMENT ADVISOR
Penn Capital Management Company, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
ADMINISTRATOR
SEI Fund Resources
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
INDEPENDENT AUDITORS
Ernst & Young LLP
To open an account, receive account information,
make inquiries, or request literature:
1-800-224-6312
THIS REPORT WAS PREPARED FOR SHAREHOLDERS IN THE TIP FUNDS. IT MAY BE
DISTRIBUTED TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A TIP FUNDS PROSPECTUS,
WHICH CONTAINS DETAILED INFORMATION.
PEN-F-003-01
