INSIGHTFUL INVESTOR GROWTH FUND
Semi-Annual Report
June 30, 1996
<PAGE>
INSIGHTFUL INVESTOR GROWTH FUND
July, 1996
Dear Shareholder:
I think you already know what the investment goal of your Insightful
Investor Growth Fund is. Simply stated, it's long-term growth.
What you may be somewhat less clear about is what makes the Fund different
from virtually all other equity funds.
The overriding principle of the Fund is to invest in great growth
companies that some of America's greatest growth investors own. By superimposing
my own fundamental and technical analysis, I try to eliminate those companies
with the slightest weakness. What I'm left with are just a few pearls; great
growth companies selling at undervalued prices.
I strive to have a diversified portfolio but, unlike most funds, I don't
want the Fund to be so over-diversified as to guarantee mediocrity of
performance. As a result, the Fund will own a select group of approximately
20-30 growth stocks at any one time.
This Fund, which commenced operations on July 28, 1995, is still in its
infancy. What I mean by this is that many of the companies that I have invested
in have yet to accomplish the kind of stock price appreciation that I expect to
see them accomplish.
But, remember my outlook is long-term, and I trust yours is as well.
Month to month, quarter to quarter and even in any single year, the
results the portfolio obtains are far less important to me than how it performs
over a full business cycle (multi-year). I can't emphasize enough, I'm a
long-term investor.
In fact, if anything, the one word I would use to describe the first half
of 1996 would have to be "frustrating." You see, your Insightful Investor Growth
Fund was running a bit ahead of the S&P 500, up approximately 10% as of June
5th. Adding on the Fund's 15.9% gain during the second half of 1995, things were
looking pretty decent.
However, during the last three weeks of June, the sharp sell-off in small
cap stocks in general and technology stocks in particular resulted in several of
the Fund's key portfolio holdings dropping sharply in price.
As a result, the Fund's 10% gain over the first 5+ months of the year
disappeared in just three weeks. Thus, for the first six months of 1996, the
Fund reported a fractional loss of less than 1% (.69% to be exact), compared
with a 10.04% gain for the S&P 500 during the same period.
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INSIGHTFUL INVESTOR GROWTH FUND
Sell-Off Is A Great Buying Opportunity
While it's frustrating to see some truly superior companies' stock prices
come down, I view the recent market activity as a great buying opportunity. I
will not sell great growth companies just because their stock price has fallen
as long as the long-term fundamentals remain in place.
I'll discuss several of these superb growth companies with you in a minute
and why I'm extremely optimistic that they'll perform well in the months and
years to come. But, before I do, let me briefly discuss why I believe the
June/July sell-off will be seen in the future as an outstanding buying
opportunity.
Primarily, I view this sell-off as an expression of investors' concerns
about inflation and the potential that the FED might raise interest rates. In
spite of the conflicting government reports, I don't believe that inflation will
be a major factor over the next year or so. The reasons are really quite simple.
There are two basic types of inflation: 1) Cost-Push Inflation and 2)
Demand-Pull Inflation. Both are not going to be strong over the near term. Let
me explain.
Companies are not raising prices, for the most part, because competition
is strong, productivity has increased significantly as a result of technology
advances, and labor is not generally in a position these days to command big
wage increases.
You've probably heard the joke going around. The Clinton administration
says it's created millions of new jobs. A middle-class worker responds by
saying, "I know they have - - I've got three of them myself."
Consumer demand is also lukewarm because wages are not increasing
dramatically and consumers are basically tapped out as a result of the high
levels of debt (mortgage, car loans and credit-card payments).
In short, while I share Sir John Templeton's view that inflation will
probably be a long-term concern, I'm not overly concerned in the near-term. I'd
particularly be surprised if the FED raises rates (at least no more than 1/4 of
a point) during this election year.
Investing In Great Growth Companies At Great Prices
I used the sell-off to accumulate more shares of some of the Fund's
portfolio holdings at very attractive prices. I believe the benefits of this
strategy will be extremely beneficial over the long-term. Now onto some of your
Fund's holdings:
CompuCom Systems Reports Record Sales and Earnings
CompuCom Systems is a PC services integration company. CompuCom provides
hardware, software and network integration services for large corporate
customers nationwide. I learned about this company from Warren Musser, the
chairman of Safeguard Scientifics, which has a large position in CompuCom.
To put it simply, business is booming. Latest quarter sales rose an
impressive 45%. Net income rose an impressive 47%. I would think that the
company will probably earn about $.50/share this year and could earn $.75/share
next year.
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INSIGHTFUL INVESTOR GROWTH FUND
Yet, the stock, which had been as high as $13/share earlier this year,
dropped to $9-10/share in July during the tech sell-off. Here's a perfect
example of what I'm talking about. CompuCom, in spite of its stellar
performance, has been taken down in price with all the other high-techs. I used
this sell-off to accumulate more shares of this superb growth company.
Green Tree Financial Is Boring All The Way To The Bank
Here's another old friend - - Green Tree Financial, the leading lender in
the manufactured housing industry. Originally, I was introduced to this stellar
performer by growth stock investor extraordinaire Charles Allmon.
Green Tree's latest quarter was yet another record-setter with sales
rising 28% and earnings up 22%. In my view, the company should earn between
$2.20 and $2.40/share this year. Next year, it could earn $2.75-$2.85.
As a finance company, Green Tree sports a terrific 35%-40% bottom line
profit margin. Pretty impressive stuff! Yet, with everyone worried about
interest rates, the stock has traded in a fairly narrow range for months between
$30 to $35 per share. In my opinion, this is a $50 stock waiting to happen based
on its impressive growth history and prospects.
Polyphase Is An Undervalued Conglomerate
Now, for some new names. As of June 30th, the Fund's largest holding was a
little-known company called Polyphase. It's a unique holding company that
currently operates in four industry segments: food services, computer
networking, electronic transformers, and forestry.
Revenues for 1994 were approximately $25 million. Last year revenues
jumped to $102 million, thanks in large part to its acquisition of Overhill
Farms in its food services group. Earnings also jumped dramatically to $3.3
million ($.26/share), compared with a loss of $1.4 million in 1994. For the
first six months of 1996, revenue is running in record territory once again,
totaling over $75 million. Earnings are up 48% for this period. Needless to say,
the company is experiencing impressive growth.
The prospects for this company have never looked better, as well. In
January, the company announced that it had reached an agreement to manage a most
exciting project to develop and build a domed, multi-purpose sports,
entertainment and convention facility in Las Vegas. Polyphase has obtained a 14%
economic interest in this project. Obviously, a development of this size will
take time to materialize but the potential profits are huge.
I think it was Peter Lynch who said that good stocks are like good
singers, it takes a long time for them to get noticed, but once they are you
never forget them. Eventually, the secret of Polyphase is sure to get out!
Latin American Casinos Is An Exciting Niche Company
Here's another little-known, underfollowed, small company that your Fund
owns. Their business is very simple. Latin American Casinos lease used slot
machines to entrepreneurs in Peru and Colombia. The economics are most
impressive. The cost of the machines to the company are approximately $400 and
they are able to lease out the
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INSIGHTFUL INVESTOR GROWTH FUND
machines for about $100 a month. After all, the South American
entrepreneur is making a lot of money on each machine he leases. You do the
math, it's not too bad a business, huh?
I believe that the company should earn around $.40-.50/share this year and
a lot more, as much as $.65-.70/share, next year. Oh, by the way, the company
doesn't have one dollar of debt and has plenty of cash in the bank. The stock
has pulled back from $7/share recently to south of $5. Based on its earnings
growth, I wouldn't be surprised to see the stock trading at $15 by this time
next year. This is the type of position that I feel very comfortable taking.
Growth Is Where It's At
I'd love to go on and discuss each and every holding. I'm very excited
about DVI, Olympic Financial, and many others. I'm particularly excited about
Electro Scientific, which is a steal at its current price of $18. At this level,
the stock is trading at 6-7 times my expected earnings for the company. Now,
that's what I call cheap, especially given its astounding growth. Last quarter's
sales were up 25% and earnings surged 52%. What am I missing...this is cheap by
anyone's standards!
Sometimes you just need to be patient...this is one of those times. Peter
Lynch has been known to say that in the short-run there may be very little
correlation between a company's earnings performance and its stock price. But in
the long-run the correlation is 100%. I have a strong feeling that several of
the Fund's holdings will soon be recognized as being great growth companies and
that their stock prices will surge as a result of this recognition.
I will continue to work hard on your behalf to uncover great growth
companies at undervalued prices. I sincerely thank you for your continued
support. I will report back to you on our progress soon after the end of the
year.
Sincerely,
/s/
Dan Bruce Levine
Portfolio Manager
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<TABLE>
<CAPTION>
INSIGHTFUL INVESTOR GROWTH FUND
PORTFOLIO OF INVESTMENTS at June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 89.8% Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Advertising: 3.1%
<S> <C> <C>
4,000 National Media Corp..................................................... $ 70,500
--------
Computer Peripherals: 4.0%
2,000 3 COM................................................................... 91,500
------
Computers & Software: 2.4%
5,000 CompuCom Systems, Inc................................................... 54,375
------
Conglomerate/Food Services: 8.6%
60,000 PolyPhase............................................................... 195,000
-------
Construction: 1.2%
25,000 DualStar Technologies Corp.............................................. 28,125
------
Consumer Electronics: 1.3%
2,000 Polk Audio.............................................................. 29,250
------
Drugs: 3.8%
35,000 Lidak Pharmaceuticals, Class A.......................................... 86,406
------
Electronics: 1.9%
2,000 Electro Scientific Industries, Inc...................................... 42,000
------
Entertainment: 4.3%
18,000 Latin American Casinos.................................................. 96,750
------
Financial Services: 13.3%
6,750 DVI, Inc................................................................ 106,312
3,300 Green Tree Financial Corp............................................... 103,125
4,000 Olympic Financial Ltd................................................... 92,000
------
301,437
-------
Games & Toys: 1.7%
4,000 Acclaim Entertainment, Inc.............................................. 38,500
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INSIGHTFUL INVESTOR GROWTH FUND
PORTFOLIO OF INVESTMENTS at June 30, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
Government Services: 2.7%
4,500 Analysis & Technology................................................... $ 61,875
--------
Information Technology: 4.6%
8,000 Tangram Solutions....................................................... 104,000
-------
Insurance: 2.9%
25,000 Lloyd Thompson Group PLC................................................ 65,625
------
Manufacturers: 3.8%
10,500 Techdyne, Inc........................................................... 85,313
------
Manufacturers of Protective Gear/Clothing: 3.1%
90,000 EASTCO Industrial Safety Corp........................................... 70,313
------
Manufacturers/Specialty Equipment: 3.3%
7,000 Tridex.................................................................. 75,250
------
Oil Equipment & Services: 4.1%
3,400 Seitel, Inc............................................................. 93,075
------
Retail: 5.8%
34,000 U.S. Pawn............................................................... 129,625
-------
Semiconductor Equipment: 1.9%
4,000 GaSonics International.................................................. 42,000
------
Telecommunications: 10.2%
25,000 Alpine Group............................................................ 125,000
3,250 Intermedia Communications, Inc.......................................... 104,812
-------
229,812
-------
Transportation Technology: 1.8%
7,000 DSP Technology.......................................................... 40,250
------
Total Common Stocks (cost $2,019,490)................................... 2,030,981
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INSIGHTFUL INVESTOR GROWTH FUND
PORTFOLIO OF INVESTMENTS at June 30, 1996 (Unaudited), Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
$201,000 Star Bank Repurchase Agreement, 5.00%, dated 6/28/96,
due 7/1/96 (proceeds $201,083) (cost $201,000) (a)...................... $ 201,000
---------
Total Investment in Securities (cost $2,220,490+): 98.7%................ 2,231,981
Other Assets less Liabilities: 1.3%..................................... 30,370
------
Total Net Assets: 100.0%................................................ $ 2,262,351
===========
SECURITIES SOLD SHORT at June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Common Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
1,000 Sensormatic Electronics Corp............................................ $ 16,375
4,424 SyQuest................................................................. 34,839
------
Total (proceeds $58,325)................................................ $ 51,214
========
<FN>
(a) It is the Fund's intention to receive U.S. Government securities as
collateral for any repurchase agreement with a market value which is at least
equal to 100% of the value of the amount invested by the Fund plus accrued
interest. The repurchase agreement is collateralized by $215,000 GNMA, due
5/20/22, which have a value of $212,500. If the market value of the U.S.
Government securities subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will obtain additional
collateral. The Fund further intends for collateral to be physically delivered
or transferred by book entry to the account of the custodian.
+ At June 30, 1996, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Unrealized appreciation and depreciation
of securities were as follows:
Gross unrealized appreciation........................................... $ 235,251
Gross unrealized depreciation........................................... (216,649)
--------
Net unrealized appreciation.................................... $ 18,602
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
INSIGHTFUL INVESTOR GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES at June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in securities, at value (identified cost $2,220,490) (Note 2-A) ........... $2,231,981
Deposit with brokers for securities sold short......................................... 96,873
Cash................................................................................... 904
Receivables:
Expense reimbursement............................................................ 2,785
Investment securities purchased.................................................. 60,272
Fund shares sold................................................................. 36,524
Dividends and interest .......................................................... 84
Prepaid expenses and other assets...................................................... 11,186
------
Total assets .............................................................. 2,440,609
---------
LIABILITIES
Securities sold short, at value - proceeds $58,325..................................... 51,214
Payable for investment securities purchased............................................ 122,383
Accrued expenses ...................................................................... 4,661
-----
Total liabilities.......................................................... 178,258
-------
NET ASSETS .................................................................... $2,262,351
==========
Net asset value and redemption price per share
($2,262,351/196,734 shares outstanding;
unlimited number of shares authorized without par value) ........................ $11.50
======
Computation of offering price per share ($11.50/.9375)*................................ $12.27
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $2,025,555
Accumulated net investment loss........................................................ (13,557)
Undistributed net realized gain on investments......................................... 231,751
Net unrealized appreciation of investments............................................. 18,602
------
Net assets ...................................................................... $2,262,351
==========
<FN>
*On investments of greater than $50,000, the offering price is reduced.
</FN>
</TABLE>
See accompanying notes to financial statements.
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INSIGHTFUL INVESTOR GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - For the Six Months ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Income
Interest ........................................................................ $ 11,115
Dividends........................................................................ 3,054
-----
Total investment income ................................................... 14,169
------
Expenses
Advisory fees (Note 3) .......................................................... 13,852
Management fees (Note 3)......................................................... 14,959
Custodian and accounting fees.................................................... 8,438
Transfer agent fees.............................................................. 3,241
Auditing fees.................................................................... 5,984
Trustees' fees................................................................... 1,496
Legal fees....................................................................... 748
Reports to shareholders.......................................................... 1,496
Registration fees................................................................ 695
Distribution expenses (Note 4)................................................... 2,771
Miscellaneous.................................................................... 1,496
-----
Total expenses............................................................. 55,176
Less: expenses reimbursed (Note 3)......................................... (27,450)
-------
Net expenses............................................................... 27,726
------
Net investment loss ...................................................... (13,557)
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions .......................................... 282,768
Net change in unrealized appreciation of investments .................................. (281,032)
--------
Net realized and unrealized gain of investments ................................. 1,736
-----
Net Decrease in Net Assets Resulting from Operations ...................... $ (11,821)
=========
</TABLE>
See accompanying notes to financial statements.
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INSIGHTFUL INVESTOR GROWTH FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months July 28, 1995*
ended through
June 30, 1996# December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM:
OPERATIONS
<S> <C> <C>
Net investment (loss) income.................................................... $ (13,557) $ 1,891
Net realized gain (loss) on security transactions .............................. 282,768 (51,017)
Net change in unrealized appreciation of investments............................ (281,032) 299,634
-------- -------
Net (decrease) increase in net assets resulting from operations .......... (11,821) 250,508
------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ($0.00 and $.012 per share, respectively)................. -0- (1,891)
- ------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding
shares (a)................................................................ 210,470 1,815,085
------- ---------
Total increase in net assets ............................................. 198,649 2,063,702
NET ASSETS
Beginning of period ............................................................ 2,063,702 -0-
--------- -
End of period (including accumulated net investment loss of
$13,557 and $0, respectively) ........................................... $2,262,351 $2,063,702
========== ==========
<FN>
(a) A summary of capital shares transactions is as follows:
Six Months July 28, 1995*
ended through
June 30, 1996# December 31, 1995
Shares Value Shares Value
Shares sold ...................................... 45,999 $516,481 183,449 $1,873,324
Shares issued in reinvestment of distribution..... -0- -0- 184 1,891
Shares redeemed................................... (27,371) (306,011) (5,527) (60,130)
------- -------- ------ -------
Net increase ..................................... 18,628 $210,470 178,106 $1,815,085
====== ======== ======= ==========
*Commencement of operations.
#Unaudited.
</FN>
</TABLE>
See accompanying notes to financial statements.
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INSIGHTFUL INVESTOR GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months July 28, 1995*
ended through
June 30, 1996# December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ........................................ $11.59 $10.00
------ ------
Income from investment operations:
Net investment (loss) income .......................................... (.07) .01
Net realized and unrealized (loss) gain on investments ................ (.02) 1.59
---- ----
Total from investment operations............................................. (.09) 1.60
---- ----
Less distributions:
Dividends from net investment income................................... -0- (.01)
- ----
Net asset value, end of period .............................................. $11.50 $11.59
====== ======
Total return ................................................................ (1.55)%+ 15.93%
Ratios/supplemental data:
Net assets, end of period (millions)......................................... $ 2.3 $ 2.1
Ratio of expenses to average net assets:
Before expense reimbursement .......................................... 4.98%+ 8.13%+
After expense reimbursement............................................ 2.50%+ 2.50%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement .......................................... (3.70)%+ (5.31)%+
After expense reimbursement ........................................... (1.22)%+ 0.32%+
Portfolio turnover rate ..................................................... 129.94% 50.75%
<FN>
*Commencement of operations.
+Annualized.
#Unaudited.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
INSIGHTFUL INVESTOR GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Insightful Investor Growth Fund (the "Fund") is a diversified series
of shares of beneficial interest of Professionally Managed Portfolios (the
"Trust"), which is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end management investment company. The Fund began
operations on July 28, 1995.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on
an exchange or NASDAQ for which there has been no sale and other
over-the-counter securities are valued at the last reported bid
price. Securities for which quotations are not readily available are
valued at their respective fair values as determined in good faith by
the Board of Trustees. Short-term investments are stated at cost,
which when combined with accrued interest, approximates market value.
U.S. Government securities with less than 60 days remaining to
maturity when acquired by the Fund are valued on an amortized cost
basis. U.S. Government securities with more than 60 days remaining to
maturity are valued at the current market value (using the mean
between the bid and asked price) until the 60th day prior to
maturity, and are then valued at amortized cost based upon the value
on such date unless the Board determines during such 60 day period
that this amortized cost basis does not represent fair value.
B. Federal Income Taxes. The Fund intends to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. Security Transactions, Investment Income and Distributions. As
is common in the industry, security transactions are
accounted for on the trade date. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
D. Short Sales. A short sale transaction occurs when the Fund sells a
security it does not own, in anticipation that the market price of
the security will decline. If the value of the security sold short
increases between the time of the short sale and the time the Fund
closed out the short position, the Fund realizes a loss. Any dividend
declared on short positions existing on the record date shall be
recorded on the ex-dividend date and included as an expense of the
period.
E. Accounting Estimates. In preparing financial statements in
conformity with generally accepted accounting principles,
management makes estimates and assumptions that affect the reported
amounts of assets and
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INSIGHTFUL INVESTOR GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates.
NOTE 3 - INVESTMENT ADVISORY AND MANAGEMENT FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
For the period ended June 30, 1996, Insightful Management Corporation
(the "Adviser") provided the Fund with investment management services under an
Investment Advisory Agreement. The Adviser furnished all investment advice,
office space, facilities, and most personnel needed by the Fund. As compensation
for its services, the Adviser is entitled to a monthly fee at the annualized
rate of 1.25% based upon the average daily net assets of the Fund. For the
period ended June 30, 1996, the Fund incurred $13,852 in advisory fees.
The Fund is responsible for its own operating expenses. The Adviser has
agreed to reduce fees payable to it by the Fund to the extent necessary to limit
the Fund's aggregate annual operating expenses to the most stringent limits
prescribed by any state in which the Fund's shares are offered for sale. During
the period ended June 30, 1996, the Adviser waived all of its advisory fees and
in addition, voluntarily reimbursed $13,598 of the Fund's operating expenses.
Any such reductions made by the Adviser in its fees or payments or reimbursement
of expenses which are the Fund's obligation are subject to reimbursement by the
Fund within the following three years provided the Fund is able to effect such
reimbursement and remain in compliance with applicable expense limitations.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the following annual rate: Under $15 million - $30,000, $15 to $50 million -
0.20% of average net assets, $50 to $100 million - 0.15% of average net assets,
$100 to $150 million - 0.10% of average net assets, over $150 million - 0.05% of
average net assets.
Newcomb & Company (the "Distributor") acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Adviser.
Certain officers and Trustees of the Trust are also officers and/or
directors of the Administrator.
NOTE 4 - DISTRIBUTION COSTS
The Fund has adopted a Distribution and Shareholder Servicing Plan (the
"Plan") in accordance with Rule 12b-1 under the 1940 Act. The Plan provides that
the Fund may pay a fee to the Distributor at an annual rate of up to 0.25% of
the average daily net assets of the Fund. Payments made pursuant to the Plan are
limited to the actual expenses incurred by the Distributor in activities that
are primarily designed to promote the sale of shares of the Fund. The Fund
incurred $2,771 in distribution expenses for the period ended June 30, 1996.
<PAGE>
INSIGHTFUL INVESTOR GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
NOTE 5 - INVESTMENT TRANSACTIONS
Purchases and sales of securities, other than short-term investments,
for the period ended June 30, 1996 were $2,547,606 and
$2,354,047, respectively.
At December 31, 1995 the Fund had a capital loss carryforward for federal
income tax purposes of $22,053 which expires in 2003. In addition, the Fund
realized losses for financial reporting purposes of $28,964 which will not be
realized for federal income tax purposes until 1996.
<PAGE>
Adviser
Insightful Management Corporation
175 Great Neck Road - Suite 307
Great Neck, New York 11021
Distributor
Newcomb & Company
Six New England Executive Park
Burlington, Massachusetts 01803
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Transfer Agent
American Data Services, Inc.
24 West Carver Street, 2nd Floor
Huntington, New York 11743
Auditors
Tait, Weller & Baker
2 Penn Center Plaza
Philadelphia, Pennsylvania 19102
Legal Counsel
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
This report is intended for shareholders
of the Insightful Investor Growth
Fund and may not be used as sales
literature unless preceded or
accompanied by a current prospectus.
