<PAGE>
TRIUMPH FUNDS, INC.
1501 Reedsdale St., Suite 3002
Pittsburgh, PA 15223
PRESIDENT'S MESSAGE
Dear Shareholders,
This year has been a transition year for the Triumph Fund. First of all,
expenses, performance and service were tantamount in providing success of the
Triumph Fund. Triumph Funds, Inc. The newly elected Board of Directors has
decided to maintain all previous agreements for shareholder servicing,
recordkeeping and asset custody. The Board has also nominated Executive
Investment Advisors (EIA) as the Investment Advisor for the fund. This
nomination is critical to the success of Triumph Funds for several reasons. EIA
currently manages over $350 million of both institutional and individual client
monies. EIA is highly rated by Nelson's Rating Service (an independent rating
service) for both equity and fixed income investments. EIA will bring strong
historical performance to Triumph Fund. Triumph Funds, Inc. will also be
distributed through Summit Investment Group, Inc. Summit Investment Group is a
registered Broker/Dealer located in Pittsburgh and all at Summit are interested
in and excited about the promise of selling and marketing this fund to its
clientele.
Triumph Funds has also elected a Board of Directors that are industry leaders in
their expertise of business and are committed to the success of the fund.
In conclusion, your Board of Directors wishes to thank you for your patience and
continued support. With our newly assembled management team, distribution
network, Investment Advisor and Board of Directors, we are all extremely
optimistic about the future success and possibilities of the Triumph Fund.
Best Regards,
/s/Timothy B. Gabriel
Timothy B. Gabriel
President
<PAGE>
TRIUMPH FUNDS, INC.
1501 Reedsdale St., Suite 3002
Pittsburgh, PA 15223
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Asset Allocation Fund's transition period is also reflected in the fund's
performance. Because of the transition of the fund from different management
groups, the assets have been held in mainly treasury securities. Therefore, in
the beginning of the year when much of the market had a rather substantial
upward bias, the performance of the fund suffered because of the conservative
posture. However, the recent violation in the market has evaporated much of
these previous gains and the stability of this position has maintained value in
the face of this volitility. This strategy resulted in a loss of 60.79% in the
overall portfolio of the fiscal year ending September 30, 1997. During the same
period, the standard and Poor's 500 Index, the benchmark of the largest 500
companies in the marketplace, increased 29.20%.
Again. Because of the transition of this fund to new management and lack of
active management, the loss in asset value is reflective of these facts.
Triumph Fund
Historical Performance of $10,000 Investment
(chart)
[The chart is line graph showing the data below for the Fund's annual
performance plus the S&P 500 for the same periods also starting with a $10,000
investment. The S&P 500 data is as follows:
<TABLE>
<CAPTION>
Month end Invested Amount Market Value
<S> <C> <C>
Nov. 1991 $10,000 $ 10,000
Sept. 1992 0 11,025
Sept. 1993 0 12,666
Sept. 1994 0 13,156
Sept. 1995 0 16,623
Sept. 1996 0 20,617
Sept. 1997 0 26,772]
</TABLE>
November 12, 1991 to September 30, 1997
Past performance may not be indicative of future performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Month Invested Capital Gains Market
end Amount Reinvested Value
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Nov 91 10,000 0 9,525
Sept 92 0 0 8,833
Sept 93 0 479 8,034
Sept 94 0 0 6,981
Sept 95 0 0 6,712
Sept 96 0 0 3,521
Sept 97 0 0 1,380
</TABLE>
Annualized Internal Rate of Return (Life of Fund): 27.53%
Internal Rate of Return (One year with maximum load): 62.65%
<TABLE>
<CAPTION>
Beginning Ending
Value Value
<S> <C> <C>
Triumph Fund 9,525 1,380
Standard & Poor's 500 Index 10,000 26,772
</TABLE>
The S & P Index is an unmanaged index generally considered to be representative
of the U.S. Stock market
<PAGE>
27955 Clemens Road
McCurdy Westlake, Ohio 44145
[LOGO M&A] & Associates Phone: (440) 835-8500
CPA's, Inc. Fax: (440) 835-1093
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and
Board of Directors
Triumph Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Asset Allocation Fund (the sole portfolio of the Triumph Funds, Inc.) including
the schedule of investments, as of September 30, 1997, and the related
statements of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Asset Allocation Fund of the Triumph Funds, Inc. as of September 30, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
/s/ McCurdy & Associates
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
October 29, 1997
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Short Term Investments:
Star Treasury Fund
(Cost - $39,089) $ 39,089
--------
Total Investments (Cost $39,089)** $ 39,089
Other Assets Less Liabilities (15,086)
--------
Total Net Assets 100% $ 24,003
========
</TABLE>
**Cost for federal income tax purposes is the same.
The accompanying notes are an integral
part of these financial statements
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
STATEMENT OF ASSETS & LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets:
Ivestments at Market Value
(Cost - $39,089) $ 39,089
Receivable for Dividends and Interest 172
--------
Total Assets 39,261
Liabilities:
Accrued Expenses and Other 15,258
--------
Total Liabilities 15,258
Net Assets: $ 24,003
========
Net Assets Consist of:
Paid In Capital $164,480
Undistributed Realized Capital Loss (140,477)
--------
NET ASSETS FOR 22,191 SHARES OUTSTANDING $ 24,003
========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE ($24,003/22,191 SHARES) $1.09
=====
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
STATEMENT OF OPERATIONS
THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest $ 2,447
--------
Total Investment Income $ 2,447
Expenses:
Advisory Fees (Note 4) 249
Legal Expenses 9,570
Audit Expenses 7,948
Regulatory and Filing Fees 4,793
Custodial Fees 3,581
Transfer Agent Fees 2,287
Accounting Fees 8,550
Administrative Fees (Note 4) 2,000
Amortized Organizational Expense (Note 1) 2,659
Other Expenses 1,784
--------
Total Expenses 43,421
Net Investment Loss (40,974)
--------
Realized and Unrealized Gain (Loss)
Net Realized Loss on Investments (2,905)
--------
Net Realized and Unrealized Gain
on Investments (2,905)
--------
Net Decrease in Net Assets from Operations $(43,879)
========
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets
From Operations: 1997 1996
---- ----
<S> <C> <C>
Net Investment Loss $(40,974) $ (86,788)
Net Realized Loss on Investments (2,905) 35,510
Change in Unrealized Appreciation
(Depreciation) of Investments 1,693 (42,387)
-------- ---------
Net Decrease in Net Assets
from Operations (42,186) (93,665)
Dividends Paid to Shareholders From:
Net Investment Income 0 0
Net Realized Gain on Investments 0 0
Capital Shares Transactions (Note 2) (7,165) (530,469)
-------- ---------
Total Increase (Decrease) in
Net Assets (49,351) (624,134)
Net Assets:
Beginning of Period 73,354 697,488
-------- ---------
End of Period $ 24,003 $ 73,354
======== =========
</TABLE>
The accompanying notes are an integral
part of these financial statements
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT A PERIOD)
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period
Income from Investment
Operations:
Net Investment Loss $2.78 $5.30 $5.47 $6.29 $7.41
Net Realized and Unrealized (1.57) (1.50) (1.07) (0.88) (0.60)
Gains (Losses) on Investments (0.12) (1.02) (0.90) (0.06) (0.12)
------ ------ ------ ------ ------
Total from Investment
Operations (1.69) (2.52) (0.17) (0.82) (0.72)
Less Distributions:
Distributions from Net
Realized Gains 0.00 0.00 0.00 0.00 0.36
Return of Capital 0.00 0.00 0.00 0.00 0.04
------ ------ ------ ------ ------
Total Distributions 0.00 0.00 0.00 0.00 0.40
Change in Net Asset Value (1.69) (2.52) (0.17) (0.82) (1.12)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $1.09 $2.78 $5.30 $5.47 $6.29
Total Return*** (60.79)% (47.55)% (3.11)% (13.04) (10.49)%
Ratios/Supplemental Data
Net Assets, End of Period (000) 24 73 697 485 664
Ratios to Average Net Assets:
Expenses 109.62% 33.74% 21.92% 12.56% 8.40%
Net Investment Income (Loss) (103.44%) (31.37)% (20.61)% (11.55)% (6.48)%
Portfolio Turnover Rate 162% 187% 141% 200% 116%
Average Commission Rate Paid $.5881 $.2102
</TABLE>
*** Total return does not reflect sales commissions
The accompanying notes are an integral
part of these financial statements
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1. Summary of Accounting Policies
------------------------------
Triumph Funds, Inc. (the "Fund"), formerly known as Penn Capital Funds,
Inc. is registered under the Investment Company Act of 1940 as an open
end diversified management investment company. The Fund currently has
one series, the Asset Allocation Fund whose investment objective is to
provide long term high total investment return, partly through current
income, but principally through capital appreciation. Its financial
statements are prepared in accordance with generally accepted accounting
principles for investment companies as follows:
Security Valuation
------------------
Investments securities listed or traded on a recognized national stock
exchange or NASDAQ are valued at the last reported sales prices on the
principal exchange on which the securities are traded. Over-the-counter
securities and listed securities for which no sale is reported are
valued at the mean between the last current bid and asked prices.
Securities for which market quotations are not readily available are
valued at fair value in accordance with standards determined in good
faith by the Board of Directors.
Federal Income Taxes
--------------------
The Fund's policy is to comply with requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to
distribute all its taxable income to its shareholders. Therefore, no
federal income tax position is required.
Deferred Organization Expenses
-----------------------------
Organization costs had been deferred and were amortized over the
five-year period ended November 12, 1996.
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
SEPTEMBER 30, 1997
Other
-----
Investment transactions are accounted for on a trade date basis.
Realized gains and losses from securities transactions are reported on
the identified cost basis. Dividend income is recognized on the ex-
dividend date, and interest income is recorded on an accrual basis.
Dividends and capital gain distributions to shareholders are recorded on
the ex-dividend date.
NOTE 2. Capital Share Transactions
--------------------------
As of September 30, 1997, there were 300,000,000 shares of no par value
capital stock authorized of which 10,000,000 shares have been allocated
to the Asset Allocation Fund. Transactions in capital stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Shares Sold 0 $ 0 0 $ 0
Shares Redeemed (4,233) $(7,165) (105,071) $(530,469)
------- -------- --------- ----------
Net Increase (Decrease) (4,233) $(7,165) (105,071) $(530,469)
======= ======== ========= ==========
</TABLE>
NOTE 3. Investment Transactions
-----------------------
During the year ended September 30, 1997, the cost of purchases and
proceeds from sales of investment securities (excluding short-term
securities) were $0 and $74,849, respectively. At September 30, 1997,
the Fund had tax basis net capital losses of $(140,477), which may be
carried forward to offset future capital gains. Such losses expire
between September 30, 2001 and 2005.
NOTE 4. Investment Advisory Fees and Other Affiliates
---------------------------------------------
International Investments, Inc. served as the Fund's investment advisor
through March 1, 1997. On that date they were replaced by Executive
Investment Advisors, Inc. For its services as Fund Adviser, it is paid
an advisory fee at an annual rate of 1.00% of the average daily net
asset value of the Fund on the first $25 million of average daily net
asset value; 0.75% on the next $75 million of average daily net asset
value; and 5/8th of 1% on any amount over $100 million in average daily
net asset value.
<PAGE>
TRIUMPH ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
SEPTEMBER 30, 1997
NOTE 4. Investment Advisory Fees and Other Affiliates (Cont'd)
------------------------------------------------------
The Fund has entered into an administrative services agreement with
James M. Beinel, Jr., while he was president of the Fund. Under this
agreement, Mr. Beimel, who does not receive a salary from the Fund, will
perform all the needed administrative services for the Fund, including
providing space for PCF's offices in Pittsburgh. Mr. Beimel resigned
early in the year and was not formally replaced until October 1997.
Dunwoody Brokerage Services, Inc. ("Dunwoody") is the Fund's
distributor. Dunwoody retained $1,235 from brokerage fees on execution
of portfolio transactions.
NOTE 5. Reclassification
----------------
In accordance with AICPA Statement of Position 93-2, the components of
net assets of the Fund have been reclassified to the extent that the net
investment loss of $40,974 sustained during the fiscal year ended September 30,
1997, which represents a permanent difference for income tax purposes, has been
reclassified as a decrease in net capital paid in.
NOTE 6. Financial Instruments Disclosure
--------------------------------
There are no reportable financial instruments which have any off-balance
sheet risk as of September 30, 1997.
NOTE 7. Subsequent Events
-----------------
Summit Investment Group took over as underwriter for the Fund under a
contract dated October 1, 1997.
Gabriel Capital Management, Inc. took over as administrator for the Fund
under a contract dated October 1, 1997. For these duties it will be paid
a fee equal of the greater of $5,000 per month or a net asset charge of
.50% (50 basis points).
The Fund let its state registrations and insurance lapse during the
current fiscal year. However, it did not sell any shares during this
time frame. The Fund is now in the process of updating it's state
registrations and has reinstated it's insurance effective as of October
31, 1997.
The Fund has received commitments from investors to purchase sufficient
shares to cover expected expenses during the 1997-98 fiscal year. These
purchases will occur as soon as the state registrations are current.
