<PAGE> 1
Semiannual
Report
--------------------
April 30, 1995
(Unaudited)
[PICTURE]
[PICTURE] [PICTURE]
COMMON
SENSE TRUST
FAMILY OF FUNDS
COMMON SENSE(R) II
GROWTH OPPORTUNITY FUND
<PAGE> 2
<PAGE> 3
Shareholders' Message
- --------------------------------------------------------------------------------
June 1, 1995
Dear Shareholder,
During the six-month period covered by this report, November 1, 1994 through
April 30, 1995, we saw the close of a challenging and difficult year in the
financial market-and the beginning of a new year, with renewed optimism and
strength on many fronts.
Market Overview
In an effort to moderate economic growth and keep inflation under control, the
Federal Reserve Board raised the federal funds rate (the rate banks charge each
other for overnight loans) seven times from February 1994 through February
1995. As a result, the fed funds rate doubled from 3 percent to 6 percent, its
highest level in three years. Intermediate- and long-term interest rates
quickly followed the Fed's lead and moved significantly higher as well. The
yield on 30-year Treasury securities, for example, began 1994 at 6.35 percent
and increased to a high of 8.16 percent, before retreating to 7.89 percent at
the end of the year. However, since yields and prices move in opposite
directions, this had a negative impact on prices of fixed-income securities.
Stock market investors did not fare much better during this rising interest
rate environment which continued into early 1995. Despite the robust economy
and stronger corporate earnings, the market was concerned that higher interest
rates and the prospect for continued rate hikes might altogether extinguish the
economic expansion.
In contrast, 1995 began more positively as the bond market got a boost from
growing sentiment that the Fed had stabilized economic growth while keeping
inflation under control, and that it may be near the end of its tightening
cycle. Subsequently, the yield on 30-year Treasury securities fell to 7.34
percent at the end of April-down more than three quarters of a percentage point
from its November 1994 high of 8.16 percent.
The stock market responded in late February with the Dow Jones Industrial
Average breaking through the 4000 mark, setting a new record high and raising
expectations for a stronger market in 1995. At the same time, almost all other
major stock indexes rose, including the S&P 500 Index, the New York Stock
Exchange Composite Index, and the Nasdaq Composite Index.
Additionally, at the end of April, the Van Kampen American Capital Index of
Investor Intentions reached 138, an increase of 11 percent over its March-end
level of 124. The index, computed from an independently conducted survey and
published by Van Kampen American Capital, measures the investment climate
(investors' confidence) by asking 1,000 investors about what they intend to do
with their money over the next 60-90 days. A total of 46.3 percent of investors
said the next 60-90 days would be a "good" time to invest.
1
<PAGE> 4
Outlook
Economic data continues to point to a slowdown in the economy. First-quarter
gross domestic product, for example, grew at an annualized rate of 2.8 percent,
substantially lower than its fourth-quarter rate of 5.1 percent last year. Many
analysts now expect the GDP to grow between 1 and 2 percent for the second half
of the year. If this happens, we do not believe the Fed will be compelled to
raise short-term interest rates. On the other hand, if GDP grows between 2.5
percent and 4 percent, we may see the Fed increase interest rates once again.
But, we do not anticipate the same level of volatility from a rate hike that we
saw in the markets last year.
We believe stocks and bonds will continue to perform well, as the economy
grows at a moderate pace and inflation remains low. Corporate earnings continue
to be stronger-than-expected despite a slower economy, which has helped to
drive stock prices higher. The Dow Jones Industrial Average, for example,
closed above the 4,300 mark at the end of April, its 17th record high since
late February. Likewise, bond prices continue to appreciate as yields on
long-term rates continue to fall.
On the following pages, you can read about your Fund's performance during
the past six months, as well as portfolio management's outlook for the Fund in
the coming months. We hope that you will find this information helpful in
reviewing your investment with Common Sense Trust.
We look forward to communicating with you on a regular basis, providing
information about your Fund's performance and new investment opportunities. We
appreciate your continued confidence in Common Sense Trust.
Sincerely,
/s/ Don G. Powell
Don G. Powell
President
2
<PAGE> 5
Portfolio Perspective
- --------------------------------------------------------------------------------
***************************************************************************
* *
* The following is an interview with Harvey Eisen, portfolio manager of *
* Common Sense II Growth Opportunity Fund. *
* *
***************************************************************************
Q. WHAT FACTORS HAD THE GREATEST IMPACT ON THE PERFORMANCE OF THE FUND DURING
THE SIX MONTHS ENDED APRIL 30, 1995?
A. The biggest boost to stock prices came from interest rates, which declined
during the reporting period. After watching rates rise during the previous
six months, investors were optimistic about the impact that falling rates
would have on corporate profits. In response, the stock market continued
to attract new money and set several record highs, as measured by the Dow
Jones Industrial Average, an unmanaged index that reflects the performance
of large, industrial companies.
Lower interest rates help companies for two reasons. First, they are
an indication that the stock market is not concerned about inflation, which
generally boosts stock prices. Second, they reduce a company's cost of
borrowing, which provides a direct boost to profits.
The Fund also benefited from the continued slowing of economic growth
rates and a declining U.S. dollar. Slower growth means inflation is less
likely to be a problem, which means the Federal Reserve Board is less
likely to raise interest rates. The devaluing of the dollar compared to the
Japanese yen and European currencies meant U.S. exports were more
affordable and imports less affordable, both of which helped increased
sales for domestic companies.
Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO TO DEAL WITH THE CHANGING
ECONOMIC CONDITIONS?
A. The Fund is managed using a "bottom up" approach, which means we select
individual stocks that we believe offer good growth potential, rather than
trying to guess which way specific industries or the overall market will
move. However, companies in certain industries are more likely to benefit
from the change in interest rates and the value of the dollar, so we have
invested more of the portfolio in these industries. We reduced the Fund's
holdings of cyclical stocks, which are companies most likely to be affected
by changes in the economy, while increasing our holdings of financial
services stocks. Firms in this industry usually benefit from lower interest
rates. Some of the stocks in the portfolio that performed well during the
reporting period included 3M, Capital One Financial and Eastman Kodak,
which benefited from both growth and a restructuring. The diversification
of the Fund is shown by the chart at right.
COMMON SENSE II
GROWTH OPPORTUNITY FUND
HOLDINGS BY INDUSTRY
[PIE CHART]
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 1995?
A. Common Sense II Growth Opportunity Fund Class A Shares achieved a total
return at net asset value (without a sales charge) of 5.49 percent,
including reinvestment of dividends totaling $.06 per share, and a capital
gains distribution of $0.015 per share. Class B Shares achieved a total
return at net asset value of 5.14 percent, including reinvestment of a
capital gains distribution of $0.015 per share. By comparison, the Standard
& Poor's 500-Stock Index, an unmanaged index that reflects
3
<PAGE> 6
general stock market performance, achieved a total return of 10.45 percent.
The index does not reflect any commissions or fees that would be paid by an
investor purchasing the securities it represents. Additionally, the index
primarily includes the stocks of larger companies, which performed better
during the reporting period than the smaller and mid-size companies in
which the Fund invests.
Q. WHAT IS THE OUTLOOK FOR STOCKS?
A. We believe that stocks are fairly valued. However, certain segments of the
stock market remain attractive, including companies in the energy and
communications industries, and the stocks of smaller companies.
Small-company stocks are selling at historically low prices when compared
to the stocks of larger companies, and would greatly benefit from any
reduction in capital gains tax rates. Additionally, smaller companies
should be impacted less by the decline in the value of the dollar than
larger companies, which usually have more international operations.
We will continue to look for stocks that have solid fundamentals and
that we believe offer good prospects for growth, regardless of economic
conditions. This strategy may continue to provide the added benefit of
enhanced growth from takeovers, since we anticipate merger activity to
remain steady or increase.
/s/ Harvey Eisen
Harvey Eisen
Portfolio Manager
Common Sense II Growth Opportunity Fund
4
<PAGE> 7
Statement of Net Assets
- --------------------------------------------------------------------------------
April 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 89.8%
CONSUMER DISTRIBUTION 9.4%
*20,000 Diagnostek Inc. . . . . . . . . . . . . . . . . . . . . . . . . $ 370,000
20,000 Dole Food, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 597,500
25,000 Heilig-Meyers Co. . . . . . . . . . . . . . . . . . . . . . . . 525,000
*45,000 Home Shopping Network, Inc. . . . . . . . . . . . . . . . . . . 309,375
*40,000 Jacor Communications, Inc. . . . . . . . . . . . . . . . . . . . 520,000
*10,000 Lands' End, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 157,500
35,000 Lilian Vernon Corp. . . . . . . . . . . . . . . . . . . . . . . 713,125
40,000 Limited Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 855,000
*20,000 Petrie Stores Corp. . . . . . . . . . . . . . . . . . . . . . . 120,000
50,347 Quality Food Centers, Inc. . . . . . . . . . . . . . . . . . . . 1,022,673
*130,000 Quidel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 503,750
*10,000 Toys R Us, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 252,500
------------
TOTAL CONSUMER DISTRIBUTION . . . . . . . . . . . . . . . . . 5,946,423
------------
CONSUMER DURABLES 6.9%
26,800 Arbor Drugs, Inc. . . . . . . . . . . . . . . . . . . . . . . . 686,750
*100,000 Broadway Stores, Inc. . . . . . . . . . . . . . . . . . . . . . 675,000
*25,000 Copart, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 509,375
30,000 Eastman Kodak Co. . . . . . . . . . . . . . . . . . . . . . . . 1,725,000
17,500 Shaw Industries, Inc. . . . . . . . . . . . . . . . . . . . . . 229,688
12,500 Walgreen Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 587,500
------------
TOTAL CONSUMER DURABLES . . . . . . . . . . . . . . . . . . . 4,413,313
------------
CONSUMER NON-DURABLES 4.0%
10,000 Allergan, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 271,250
*35,500 Bell Sports Corp. . . . . . . . . . . . . . . . . . . . . . . . 488,125
10,000 Maybelline, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 220,000
50,000 Sara Lee Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 1,393,750
*10,000 Warnaco Group, Inc., Class A . . . . . . . . . . . . . . . . . 171,250
------------
TOTAL CONSUMER NON-DURABLES . . . . . . . . . . . . . . . . . 2,544,375
------------
CONSUMER SERVICES 12.4%
10,000 American Classic Voyages Co. . . . . . . . . . . . . . . . . . . 102,500
*13,000 Cablevision Systems Corp. . . . . . . . . . . . . . . . . . . . 742,625
*10,000 CINAR Films, Inc., Class A . . . . . . . . . . . . . . . . . . 77,229
*10,000 CINAR Films, Inc., Class B . . . . . . . . . . . . . . . . . . 73,551
40,000 Comcast Corp., Class A . . . . . . . . . . . . . . . . . . . . 622,500
*20,000 Coral Gables Federal Corp. . . . . . . . . . . . . . . . . . . . 522,500
*10,000 Data Broadcasting Corp. . . . . . . . . . . . . . . . . . . . . 45,625
7,500 Donnelly (R.R.) & Sons Co. . . . . . . . . . . . . . . . . . . . 255,000
5,000 Hilton Hotels Corp. . . . . . . . . . . . . . . . . . . . . . . 381,875
*18,500 King World Productions, Inc. . . . . . . . . . . . . . . . . . . 744,625
22,500 National Data Corp. . . . . . . . . . . . . . . . . . . . . . . 419,063
*25,000 New World Communications Group, Class A . . . . . . . . . . . . 421,875
25,000 Reuters Holdings, PLC, ADR . . . . . . . . . . . . . . . . . . . 1,137,500
*60,000 Tele-Communications, Inc. . . . . . . . . . . . . . . . . . . . 1,147,500
27,000 Time Warner, Inc. . . . . . . . . . . . . . . . . . . . . . . . 988,875
10,000 Turner Broadcasting System, Inc., Class A . . . . . . . . . . . 175,000
------------
TOTAL CONSUMER SERVICES . . . . . . . . . . . . . . . . . . . 7,857,843
------------
</TABLE>
5
<PAGE> 8
Statement of Net Assets, continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY 7.3%
*24,000 Addington Resources, Inc. . . . . . . . . . . . . . . . . . . . $ 270,000
*150,000 Global Marine, Inc. . . . . . . . . . . . . . . . . . . . . . . 656,250
*10,000 Lufkin Industries, Inc. . . . . . . . . . . . . . . . . . . . . 195,000
20,000 Monsanto Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,665,000
*45,000 Primark Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 731,250
*25,000 Rowan Companies, Inc. . . . . . . . . . . . . . . . . . . . . . 171,875
*13,000 Triton Energy Corp. . . . . . . . . . . . . . . . . . . . . . . 500,500
10,000 Vigoro Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 398,750
*21,000 Zapata Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 76,125
------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . 4,664,750
------------
FINANCE 20.9%
8,000 Alexander & Alexander Services . . . . . . . . . . . . . . . . 191,000
25,000 American Express Co. . . . . . . . . . . . . . . . . . . . . . . 868,750
10,000 American International Group, Inc. . . . . . . . . . . . . . . . 1,067,500
*20,000 Banca Quadrum, SA, ADS . . . . . . . . . . . . . . . . . . . . . 125,000
15,000 BayBanks, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 937,500
20,000 Beneficial Corp. . . . . . . . . . . . . . . . . . . . . . . . . 815,000
20,000 Capital One Financial Corp. . . . . . . . . . . . . . . . . . . 402,500
*34,200 Capsure Holdings Corp. . . . . . . . . . . . . . . . . . . . . . 448,875
15,000 City National Corp. . . . . . . . . . . . . . . . . . . . . . . 151,875
6,000 First Chicago Corp. . . . . . . . . . . . . . . . . . . . . . . 331,500
27,500 Foremost Corp. of America . . . . . . . . . . . . . . . . . . . 1,038,125
5,000 General Re Corp. . . . . . . . . . . . . . . . . . . . . . . . . 636,875
11,500 Horace Mann Educators Corp. . . . . . . . . . . . . . . . . . . 237,187
*37,500 Long Island Bancorp, Inc. . . . . . . . . . . . . . . . . . . . 693,750
50,000 Manufactured Home Communities, Inc. . . . . . . . . . . . . . . 787,500
2,000 Mercantile Bancorporation, Inc. . . . . . . . . . . . . . . . . 73,000
15,000 PaineWebber Group, Inc. . . . . . . . . . . . . . . . . . . . . 256,875
5,000 Raychem Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 178,125
10,000 Salomon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 361,250
20,000 Signet Banking Corp. . . . . . . . . . . . . . . . . . . . . . . 425,000
50,000 Student Loan Marketing Association . . . . . . . . . . . . . . . 2,025,000
22,500 TIG Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . 506,250
34,500 Twentieth Century Industries . . . . . . . . . . . . . . . . . 418,313
25,000 Western National Corp. . . . . . . . . . . . . . . . . . . . . . 331,250
------------
TOTAL FINANCE . . . . . . . . . . . . . . . . . . . . . . . . 13,308,000
------------
HEALTH CARE 11.3%
*4,000 Benson Eyecare Corp. . . . . . . . . . . . . . . . . . . . . . . 40,000
*55,000 Beverly Enterprises, Inc. . . . . . . . . . . . . . . . . . . . 790,625
25,000 Ivax Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 646,875
70,000 Marion Merrell Dow, Inc. . . . . . . . . . . . . . . . . . . . . 1,671,250
*45,000 North American Biologicals, Inc. . . . . . . . . . . . . . . . . 410,625
*35,000 Ramsay Health Care, Inc. . . . . . . . . . . . . . . . . . . . . 196,875
10,000 Schering-Plough Corp. . . . . . . . . . . . . . . . . . . . . . 754,350
10,000 Tambrands, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 416,250
*10,000 Thermo Cardiosystems, Inc. . . . . . . . . . . . . . . . . . . . 335,000
20,000 Upjohn Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 725,000
15,000 Warner Lambert Co. . . . . . . . . . . . . . . . . . . . . . . . 1,196,250
------------
TOTAL HEALTH CARE . . . . . . . . . . . . . . . . . . . . . . 7,183,100
------------
</TABLE>
6
<PAGE> 9
Statement of Net Assets, continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Market
of Shares Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 9.3%
14,000 Deere & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,148,000
10,000 General Electric Co. . . . . . . . . . . . . . . . . . . . . . . 560,000
32,500 Honeywell, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 1,255,312
35,000 Minnesota Mining and Manufacturing Co. . . . . . . . . . . . . . 2,086,875
15,000 Pall Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,625
*10,000 Thermo Electron Corp. . . . . . . . . . . . . . . . . . . . . . 538,750
------------
TOTAL PRODUCER MANUFACTURING . . . . . . . . . . . . . . . . . 5,939,562
------------
RAW MATERIALS/PROCESSING INDUSTRIES 1.8%
*36,500 Giant Group, Ltd. . . . . . . . . . . . . . . . . . . . . . . . 246,375
*15,000 Repap Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . 105,469
*16,500 Scotts Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,000
10,000 Temple-Inland, Inc. . . . . . . . . . . . . . . . . . . . . . . 440,000
------------
TOTAL RAW MATERIALS/PROCESSING INDUSTRIES . . . . . . . . . . . 1,121,844
------------
TECHNOLOGY 6.5%
*7,000 Alliant Techsystems, Inc. . . . . . . . . . . . . . . . . . . . 258,125
*25,000 American Superconductor Corp. . . . . . . . . . . . . . . . . . 412,500
*25,000 Auspex Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . 259,375
*10,000 Cray Research, Inc. . . . . . . . . . . . . . . . . . . . . . . 197,500
*20,000 Itel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 720,000
50,400 Kollmorgen Corp. . . . . . . . . . . . . . . . . . . . . . . . . 321,300
*14,700 Phoenix Technology, Limited . . . . . . . . . . . . . . . . . . 119,437
*23,000 Recognition International, Inc. . . . . . . . . . . . . . . . . 169,625
*20,289 Storage Technology Corp. . . . . . . . . . . . . . . . . . . . . 420,997
*37,500 Syquest Technology, Inc. . . . . . . . . . . . . . . . . . . . . 421,875
5,000 United Technologies Corp. . . . . . . . . . . . . . . . . . . . 365,625
30,000 Westinghouse Electric Corp. . . . . . . . . . . . . . . . . . . 450,000
------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . . . . . . . . 4,116,359
------------
TOTAL COMMON STOCK (Cost $54,267,373) . . . . . . . . . . . . 57,095,569
------------
</TABLE>
7
<PAGE> 10
Statement of Net Assets, continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Obligations 3.1%
$ 1,000,000 Mobile Telecommunication Technology, 13.50%, 2/15/02 . . . . . . $ 1,070,000
1,000,000 World Corp., 7.00%, 5/15/04 . . . . . . . . . . . . . . . . . . 925,000
------------
TOTAL CORPORATE OBLIGATIONS (Cost $1,770,000) . . . . . . . . 1,995,000
------------
Repurchase Agreement 11.0%
6,990,000 CitiBank, dated 4/28/95, 5.90%, due 5/1/95 (collateralized by
U.S. Government obligations) repurchase proceeds
$6,993,437 (Cost $6,990,000) . . . . . . . . . . . . . . . . . 6,990,000
------------
TOTAL INVESTMENTS (Cost $63,027,373) 103.9% . . . . . . . . . . 66,080,569
Other assets and liabilities, net (3.9%) . . . . . . . . . . . . (2,498,834)
------------
NET ASSETS, equivalent to $12.80 per share for Class A shares
and $12.78 per share for Class B shares 100% . . . . . . . . . $ 63,581,735
============
</TABLE>
<TABLE>
<S> <C>
NET ASSETS WERE COMPRISED OF:
Shares of beneficial interest, at par; 3,349,714 Class A and 1,620,981
Class B shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . $ 49,707
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,053,300
Undistributed net realized gain on securities . . . . . . . . . . . . . . . . 300,684
Net unrealized appreciation of securities . . . . . . . . . . . . . . . . . . 3,053,196
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . 124,848
------------
NET ASSETS at April 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . $ 63,581,735
============
</TABLE>
*Non-income producing security.
See Notes to Financial Statements.
8
<PAGE> 11
Statement of Operations
- --------------------------------------------------------------------------------
Six months ended April 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 512,737
Dividends (net of $2,676 foreign taxes withheld at source) . . . . . . . . . 322,700
------------
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835,437
------------
EXPENSES
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,489
Shareholder service agent's fees and expenses . . . . . . . . . . . . . . . . 84,592
Accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Service fees - Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,015
Distribution and service fees - Class B . . . . . . . . . . . . . . . . . . . 84,016
Trustees' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 10,666
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,050
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,903
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,620
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,603
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . 59,521
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,707
------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,730
------------
REALIZED AND UNREALIZED GAIN ON SECURITIES
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . 309,288
Net realized appreciation of securities during the period . . . . . . . . . . 2,769,867
------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES . . . . . . . . . . . . . . . 3,079,155
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . $ 3,306,885
============
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS MAY 3, 1994*
ENDED THROUGH
APRIL 30, 1995 OCTOBER 31, 1994
-------------- ----------------
<S> <C> <C>
NET ASSETS, beginning of period . . . . . . . . . . . . . . . . $ 39,186,283 $ 200
------------- ------------
OPERATIONS
Net investment income . . . . . . . . . . . . . . . . . . . 227,730 60,329
Net realized gain on securities . . . . . . . . . . . . . . 309,288 51,407
Net unrealized appreciation of securities during the period 2,769,867 283,329
------------- ------------
Increase in net assets resulting from operations . . . . 3,306,885 395,065
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A . . . . . . . . . . . . . . . . . . . . . . . . (163,211) -
Class B . . . . . . . . . . . . . . . . . . . . . . . . - -
------------- ------------
(163,211) -
------------- ------------
Net realized gain on securities
Class A . . . . . . . . . . . . . . . . . . . . . . . . (40,710) -
Class B . . . . . . . . . . . . . . . . . . . . . . . . (19,301) -
------------- ------------
(60,011) -
------------- ------------
Total distributions . . . . . . . . . . . . . . . . . . (223,222) -
------------- ------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A . . . . . . . . . . . . . . . . . . . . . . . . 17,010,310 28,199,479
Class B . . . . . . . . . . . . . . . . . . . . . . . . 8,834,537 12,149,352
------------- ------------
25,844,847 40,348,831
------------- ------------
Proceeds from shares issued for distributions reinvested
Class A . . . . . . . . . . . . . . . . . . . . . . . . 203,164 -
Class B . . . . . . . . . . . . . . . . . . . . . . . . 19,284 -
------------- ------------
222,448 -
------------- ------------
Cost of shares redeemed
Class A . . . . . . . . . . . . . . . . . . . . . . . . (3,447,927) (1,446,811)
Class B . . . . . . . . . . . . . . . . . . . . . . . . (1,307,579) (111,002)
------------- ------------
(4,755,506) (1,557,813)
------------- ------------
Increase in net assets resulting from
capital transactions . . . . . . . . . . . . . . . . . 21,311,789 38,791,018
------------- ------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . 24,395,452 39,186,083
------------- ------------
NET ASSETS, end of period . . . . . . . . . . . . . . . . . . . $ 63,581,735 $ 39,186,283
============= ============
</TABLE>
*Commencement of operations.
See Notes to Financial Statements.
10
<PAGE> 13
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
Note 1-Significant Accounting Policies
Common Sense Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment company
which offers shares in eleven separate portfolios, one of which is described in
this report: Common Sense II Growth Opportunity Fund (formerly Common Sense
Trust II Aggressive Opportunity Fund - the "Fund"). The following is a summary
of significant accounting policies consistently followed by the Trust in the
preparation of its financial statements.
A. Investment Valuations
Securities listed or traded on a national securities exchange are valued at
the last sale price. Unlisted securities and listed securities for which
the last sale price is not available are valued at the most recent bid
price. Securities for which market quotations are not readily available
are valued at fair value under a method approved by the Board of Trustees.
Short-term investments with a maturity of more than 60 days when purchased
are valued based on market quotations until the remaining days to maturity
becomes less than 61 days. From such time, until maturity, the investments
are valued at amortized cost.
B. Repurchase Agreements
A repurchase agreement is a short-term investment in which the Fund
acquires ownership of a debt security and the seller agrees to repurchase
the security at a future time and specified price. Repurchase agreements
are collateralized by the underlying debt security. The Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the custodian bank. The seller is required
to maintain the value of the underlying security at not less than the
repurchase proceeds due the Fund.
C. Federal Income Taxes
No provision for federal income taxes is required because the Fund intends
to elect to be taxed as a "regulated investment company" under the Internal
Revenue Code and intends to maintain this qualification by annually
distributing all taxable net investment income and taxable net realized
gains to its shareholders.
D. Investment Transactions and Related Investment Income
Investment transactions are accounted for on the trade date. Realized gains
and losses on investments are determined on the basis of identified cost.
Dividend income is recorded on the ex-dividend date. Interest income is
accrued daily.
Under the applicable foreign tax laws, a withholding tax may be imposed on
interest, dividends and realized gains generated from foreign investments.
Such withholding taxes are reflected on the Statement of Operations as a
reduction of the related income or gain.
E. Dividends and Distributions
The Fund declares annual distributions from net investment income and net
realized capital gains. Dividends and distributions to shareholders are
recorded on the record date. The Trust distributes tax basis earnings in
accordance with the minimum distribution requirements of the Internal
Revenue Code, which may differ from generally accepted accounting
principles. Such dividends or distributions may exceed financial statement
earnings.
F. Debt Discount or Premium
The Fund accounts for debt discounts or premiums on the same basis as is
followed for federal income tax reporting. Accordingly, original issue
discounts on long-term securities purchased are amortized over the life of
the security. Premiums are not amortized. Market discounts are recognized
at the time of sale as realized gains for book purposes, and ordinary
income for tax purposes.
Note 2-Management Fees and Other Transactions with Affiliates
Smith Barney Strategy Advisers Inc. (the "Adviser") provides investment
advisory services to the Fund. Advisory fees to the Adviser are paid monthly,
based on the average daily net assets of the Fund at the annual rate of 1.00%.
11
<PAGE> 14
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
Common Sense Shareholder Services ("CSSS") serves as the Fund's shareholder
service agent. CSSS is a subsidiary of PFS Services, Inc. Shareholder services
fees for the period were $73,134. Common Sense Distributors, subsidiary of PFS
Distributors, Inc., serves as Distributor of the Fund's shares through an
exclusive selling agreement with PFS Investments Inc. (the "Retail Dealer").
The Retail Dealer is an indirect wholly-owned subsidiary of Primerica Financial
Services. The Distributor and the Retail Dealer received $80,439 and $516,732,
respectively, as their portion of the commissions charged on sales of Fund
shares during the period.
Under the Distribution Plans, each class of shares pays .25% per annum of its
average daily net assets to the Distributor as a service fee. The service fee
is intended to cover personal services provided to the shareholders by
representatives of the Retail Dealer. Class B shares pay an additional fee of
.75% per annum of their average daily net assets to reimburse the Distributor
for its distribution costs. Actual distribution expenses incurred by the
Distributor for Class B shares may exceed the amounts reimbursed to the
Distributor by the Fund. At April 30, 1995, the Fund was advised that the
unreimbursed expenses incurred by the Distributor under the Class B plan
aggregated approximately $802,000 and may be carried forward and reimbursed
through either the collection of the contingent deferred sales charges from
share repurchases or, subject to the annual renewal of the plans, future Fund
reimbursements of distribution fees.
Note 3-Investment Activity
During the period, the cost of purchases and proceeds from sales of
investments, excluding short-term investments, were $56,133,190 and
$24,444,239, respectively.
For federal income tax purposes, the identified cost of portfolio securities
was the same as for book purposes. Gross unrealized appreciation aggregated
$4,640,681 and gross unrealized depreciation aggregated $1,587,485.
Note 4-Capital
The Fund offers two classes of shares at their respective net asset values per
share, plus a sales charge which is imposed either at the time of purchase (the
Class A shares) or at the time of redemption on a contingent deferred basis
(the Class B shares). All classes of shares have the same rights, except that
Class B shares bear the cost of distribution fees and certain other class
specific expenses. Class B shares automatically convert to Class A shares six
years after purchase, subject to certain conditions. Realized and unrealized
gains or losses, investment income and expenses (other than class specific
expenses) are allocated daily to each class of shares based upon the relative
proportion of net assets of each class.
The Fund has an unlimited number of each class of shares of $.01 par value
beneficial interest authorized. Transactions in shares of beneficial interest
for the period were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
April 30, 1995 October 31, 1994
-------------- ----------------
<S> <C> <C>
Shares sold
Class A . . . . . . . . . . . . . . . . . . . . . . . . 1,394,911 2,336,039
Class B . . . . . . . . . . . . . . . . . . . . . . . . 728,765 1,005,526
--------- ---------
2,123,676 3,341,565
--------- ---------
Shares issued for distributions reinvested
Class A . . . . . . . . . . . . . . . . . . . . . . . . 17,015 -
Class B . . . . . . . . . . . . . . . . . . . . . . . . 1,614 -
--------- ---------
18,629 -
--------- ---------
Shares redeemed
Class A . . . . . . . . . . . . . . . . . . . . . . . . (278,508) (119,743)
Class B . . . . . . . . . . . . . . . . . . . . . . . . (105,830) (9,094)
--------- ---------
(384,338) (128,837)
--------- ---------
Shares outstanding . . . . . . . . . . . . . . . . . . . 1,757,967 3,212,728
========= =========
</TABLE>
12
<PAGE> 15
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
Note 5-Trustee Compensation
Trustees who are not affiliated with the Adviser are compensated by the Fund at
the annual rate of $1,440 plus a fee of $100 per day for the Board meetings
attended. During the period, such fees aggregated $9,883.
Note 6-Plan of Reorganization
On or about May 4, 1995, a Notice of Special Meeting of Shareholders was sent
to all Fund shareholders announcing a meeting to be held on June 23, 1995. The
meeting has been scheduled to consider a Plan of Reorganization providing for
the acquisition of all or substantially all of the net assets of the Fund (the
"Acquired Fund") by the Smith Barney Growth Opportunity Fund (the "Acquiring
Fund") in exchange for Class A and Class B shares, respectively, of the
Acquiring Fund. Following the Reorganization, shares of the Acquiring Fund will
be distributed to shareholders of the Acquired Fund in liquidation of the
Acquired Fund and the Acquired Fund will be terminated. Pending the receipt of
all appropriate approvals, the closing of the Reorganization is scheduled for
no earlier than June 30, 1995.
13
<PAGE> 16
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated (Unaudited).
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------- ----------------------------------
SIX MONTHS MAY 3, 1994(1) SIX MONTHS MAY 3, 1994(1)
ENDED THROUGH ENDED THROUGH
APRIL 30, 1995 OCTOBER 31, 1994(2) APRIL 30, 1995 OCTOBER 31, 1994(2)
-------------- ------------------- -------------- -------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period . . . . $12.20 $11.81 $12.17 $11.81
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Investment income . . . . . . . . . . . . . . .18 .21 .16 .20
Expenses . . . . . . . . . . . . . . . . . . (.12) (.16) (.14) (.20)
------ ------ ------ ------
Net investment income . . . . . . . . . . . . .06 .05 .02 .00
Net realized and unrealized gains
on securities . . . . . . . . . . . . . . . .615 .34 .605 .36
------ ------ ------ ------
Total from investment operations . . . . . . .675 .39 .625 .36
------ ------ ------ ------
LESS DISTRIBUTIONS FROM
Net investment income . . . . . . . . . . . . (.06) - - -
Net realized gain on distribution . . . . . . (.015) - (.015) -
------ ------ ------ ------
Total distributions . . . . . . . . . . . . . (.075) - (.015) -
------ ------ ------ ------
Net asset value, end of period . . . . . . . $12.80 $12.20 $12.78 $12.17
====== ====== ====== ======
TOTAL RETURN(3) . . . . . . . . . . . . . . . 5.49% 3.39% 5.14% 3.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions) . . . . $42.9 $27.1 $20.7 $12.1
Average net assets (millions) . . . . . . . . $35.2 $13.7 $16.8 $5.2
Ratios to average net assets (annualized)
Expenses . . . . . . . . . . . . . . . . . 2.11% 2.64% 2.87% 3.40%
Net investment income . . . . . . . . . . . 1.13% .86% .36% .05%
Portfolio turnover rate . . . . . . . . . . . 65% 27% 65% 27%
</TABLE>
(1) Commencement of operations.
(2) Based on average month-end shares outstanding.
(3) Total return has not been annualized and does not consider the effect of
sales charges.
See Notes to Financial Statements.
14
<PAGE> 17
Common Sense Trust II
Board of Trustees
Donald M. Carlton F. Robert Paulsen
A. Benton Cocanougher R. Richardson Pettit
Stephen R. Gross Don G. Powell
Norman Hackerman Alan B. Shepard, Jr.
Robert D. H. Harvey Miller Upton
Alan G. Merten Benjamin N. Woodson
Steven Muller
- ---------------------------------------------------------------------------
Officers
Don G. Powell Curtis W. Morell
President Vice President and
Treasurer
Gerald Baxter
Stephen L. Boyd Tanya M. Loden
Jim Conheady Vice President and
Kenneth S. Durham Controller
Harvey Eisen
James A. Gilligan Nori L. Gabert
John A. Helms Vice President and
David C. Johnson Secretary
Gary M. Lewis
Dennis J. McDonnell Huey P. Falgout, Jr.
Jeff New J. David Wise
Ronald A. Nyberg Assistant Secretaries
Robert C. Peck, Jr.
Greg Pitts Perry F. Farrell
John R. Reynoldson M. Robert Sullivan
Jeffrey Russell Assistant Treasurers
Alan T. Sachtleben
David R. Troth
D. Richard Williams
Paul R. Wolkenberg
Vice Presidents
- ---------------------------------------------------------------------------
Investment Adviser
Smith Barney Strategy Advisers Inc.
2 World Trade Center, New York, New York 10048
- ---------------------------------------------------------------------------
Distributor
Common Sense Distributors
3120 Breckinridge Blvd., Duluth, Georgia 30199-0001
- ---------------------------------------------------------------------------
Shareholder Service Agent
Common Sense Shareholder Services
3120 Breckinridge Blvd., Duluth, Georgia 30199-0062
- ---------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110
- ---------------------------------------------------------------------------
Counsel
Sullivan & Worcester
1025 Connecticut Avenue N.W., Washington, D.C. 20036
- ---------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors
unless it has been preceded or is accompanied by an effective prospectus of
the Fund which contains additional information on how to purchase shares,
the sales charge, and other pertinent data.
***************************************************************************
* *
* Shareholder inquiries should be directed in writing to the *
* Shareholder Service Agent, Common Sense Shareholder Services, 3120 *
* Breckinridge Blvd., Duluth, Georgia 30199-0062, or by calling (800) *
* 544-5445. *
* *
***************************************************************************
15
<PAGE> 18
Intentionally Left Blank
<PAGE> 19
******************
* BULK RATE *
* U.S. POSTAGE *
* PAID *
* Permit No. 747 *
* Atlanta, GA. *
******************
COMMON
SENSE TRUST
FAMILY OF FUNDS
Common Sense Shareholder Services
3120 Breckinridge Blvd.
Duluth, Georgia 30199-0001
If you have any questions, please contact
one of our Customer Service Representatives
1-800-544-5445
PRINTED MATTER
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