<PAGE> 1
CHAIRMAN'S LETTER TO SHAREHOLDERS
Dear Shareholder:
The first half of 1996 has been both a challenging and rewarding time for the
New USA Growth Fund.
During the first six months of our fiscal year (ended 7/31/96), we generated a
10.9% return*. These results were particularly gratifying when compared to the
lackluster performance of the broader averages. Over this same period, the S&P
was down 0.62% and the NASDAQ Composite was off 1.96%.
In previous letters, we have stressed that our size, investment style and
database tools allow us to respond rapidly to changing market conditions.
Accordingly, we were able to quickly reduce our investment in a number of
high-technology former leaders in 1996, thereby minimizing our exposure to the
painful corrections experienced by many of these stocks. This kind of nimble
stock selection has helped cushion us from the sharp volatility in the NASDAQ
market in recent months.
Despite this volatility, we remain optimistic that the market will provide an
ample number of growth opportunities over the next year. In this environment,
additional groups should emerge as new leaders in coming months, giving us a
fresh assortment of investment choices.
Once again, we would like to thank our shareholders for their faith in our
stewardship and encourage our current and prospective holders to view us as a
long-term investment. As always, we remain dedicated to our goal of
outperforming both the broader averages and our peer group competitors.
Sincerely,
William J. O'Neil
Chairman
* The Fund's average annual total return from its inception date
(04/29/92) to 06/30/96 was 15.2%. The Fund's average annual total
return for the one year period ending 06/30/96 was 33.6%. All
Fund returns quoted include the deduction of the maximum 5% sales
charge. Past performance is no guarantee of future results.
Investment return and principal value will fluctuate so that, when
redeemed, an investor's shares may be worth more or less than
their original costs.
The Fund's Distributor is William O'Neil + Co. Incorporated, a
member of the NYSE, NASD and SIPC.
<PAGE> 2
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 3
NEW USA GROWTH FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
COMMON STOCKS - 86.42%
AEROSPACE/DEFENSE - 3.42%
75,000 Boeing Co. $6,637,500
----------
Auto Manufacturing/
Foreign - 0.99%
20,000 Honda Motor Limited, ADR 960,000
20,000 Toyota Motor Co., ADR 970,000
----------
1,930,000
----------
Building-Mobile/
Manufacturing & RV - 0.99%
30,000 American Homestar Corp. + 573,750
37,500 Coachmen Industries Inc. 1,359,375
----------
1,933,125
----------
Chemicals/Basic - 0.04%
3,000 Nuco2 Inc. + 76,500
----------
Commercial Services/
Miscellaneous - 0.87%
30,000 Clintrials Research Inc. + 1,125,000
20,000 Robert Half International
Inc. + 565,000
----------
1,690,000
----------
Commercial Services/Security/
Safety - 0.02%
1,500 Invision Technologies Inc. + 31,125
----------
Commercial Services/
Schools - 0.82%
85,050 Youth Services International
Inc. + 1,594,687
----------
Computer/Hardware - 1.13%
40,000 Compaq Computer Corp. + 2,190,000
----------
Computer/Integrated
Systems - 3.45%
45,500 HCIA Inc. + 2,604,875
105,000 Oracle Systems Corp. + 4,108,125
----------
6,713,000
----------
Computer/Local Area
Networks - 0.24%
30,000 Vanstar Corp. + 472,500
----------
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
Computer/Mini/Micro - 1.14%
40,000 Dell Computer Corp. + $2,220,000
----------
Computer/Peripheral
Equipment - 0.13%
10,000 Encad Inc. + 241,250
----------
Computer/Services - 2.71%
20,000 Envoy Corp. New + 475,000
78,200 HBO & Co. 4,789,750
----------
5,264,750
----------
Computer/Software - 7.37%
45,400 Access Health Marketing Inc. + 1,918,150
32,500 Cambridge Technology
Partners Inc. + 853,125
5,000 Citrix Systems Inc. + 188,750
95,600 McAfee Associates Inc. + 4,803,900
25,000 Parametric Technology Corp. + 1,040,625
31,000 Transaction Systems Architects
Inc. + 976,500
105,000 Vantive Corp. + 4,541,250
----------
14,322,300
----------
Electronics/Scientific
Instruments. - 0.57%
35,000 Input/Output Inc. + 1,102,500
---------
Electronics/Semiconductor
Manufacturing - 4.56%
103,500 DSP Communications Inc. + 4,825,687
40,000 Intel Corp. 3,005,000
40,000 Vitesse Semiconductor
Corp. + 1,040,000
---------
8,870,687
---------
Electrical/Equipment - 1.41%
55,000 Robbins & Myers Inc. 2,750,000
---------
Finance/Consumer Loans - 0.07%
20,000 First Enterprise Financial
Group+ 145,000
-------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
Finance/Mortgage & Realty
Services - 6.82%
107,500 Aames Financial Corp. $ 4,219,375
207,500 Cityscape Financial Group + 6,847,500
65,000 GreenTree Financial Corp. 2,185,625
----------
13,252,500
----------
Financial Services/
Miscellaneous - 0.70%
16,900 Concord EFS Inc. + 430,950
25,000 Medaphis Corp. + 928,125
----------
1,359,075
----------
Household/Office
Furniture - 1.37%
129,600 Bush Industries Inc. 2,494,800
5,000 Miller Herman Inc. 160,313
----------
2,655,113
----------
Insurance/Accident &
Health - 0.69%
65,000 American Travellers Corp. + 1,340,625
----------
Leisure/Movies &
Related - 2.95%
135,100 Regal Cinemas Inc. + 5,741,750
----------
Medical/Biomed/
Genetics - 1.85%
55,000 Amgen Inc. + 3,004,375
20,000 Biochem Pharmaceuticals
Inc. + 597,500
----------
3,601,875
----------
Medical/Ethical Drugs - 1.62%
45,000 Pfizer Inc. 3,144,375
----------
Medical/Outpatient/
Home Care - 0.87%
55,000 Phycor Inc. + 1,691,250
----------
Metal/Processing &
Fabrication - 1.39%
60,000 Kaydon Corp. 2,707,500
----------
Metal/Steel Pipe & Tube - 0.38%
5,000 Maverick Tube Corp. + 60,625
25,000 Shaw Group Inc. + 678,125
----------
738,750
----------
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
Oil & Gas/Drilling - 4.09%
85,000 Diamond Offshore Drilling
Inc. + $ 4,016,250
40,000 Ensco International Inc. + 1,080,000
140,000 Reading & Bates Corp. + 2,852,500
----------
7,948,750
----------
Oil & Gas/Field Services - 1.17%
67,500 Tidewater Inc. 2,278,125
----------
Oil & Gas/Machinery/
Equipment - 0.48%
20,000 Cooper Cameron Corp. + 925,000
----------
Oil & Gas/U.S. Exploration &
Products - 2.15%
72,600 Belco Oil & Gas Corp. + 2,087,250
58,000 Benton Oil & Gas Co. + 1,145,500
50,000 Swift Energy Co. + 950,000
----------
4,182,750
----------
Pollution Control/
Services - 2.00%
43,500 Newpark Resources Inc. + 1,430,063
58,000 Sanifill Inc. + 2,457,750
----------
3,887,813
----------
Retail/Apparel &
Shoes - 6.30%
210,600 Gadzooks Inc. + 5,107,050
30,000 Gap Inc. 892,500
61,000 Just For Feet Inc. + 2,394,250
90,000 Ross Stores Inc. 2,655,000
40,000 TJX Cos. Inc. 1,205,000
----------
12,253,800
----------
Retail/Department
Stores - 0.21%
15,000 Neiman Marcus Group Inc. + 403,125
----------
Retail/Discount &
Variety - 1.17%
47,500 Dollar Tree Stores Inc. + 1,377,500
12,500 Party City Corp. + 256,250
30,000 Stein Mart Inc. + 637,500
----------
2,271,250
----------
Retail/Mail Order &
Direct - 0.71%
40,000 CUC International Inc. + 1,390,000
----------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 5
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
Retail/Miscellaneous/
Diversified - 3.07%
205,000 Pier 1 Imports Inc. $3,459,375
101,500 The Sports Authority Inc. + 2,042,687
25,000 Urban Outfitters Inc. + 468,750
----------
5,970,812
----------
Retail/Restaurants - 1.31%
67,500 Boston Chicken Inc. + 1,788,750
33,000 Landry's Seafood Restaurant Inc. + 734,250
1,000 Planet Hollywood
International Inc. + 24,375
----------
2,547,375
----------
Retail/Wholesale
Computers - 2.16%
45,000 CDW Computer Centers Inc. + 2,480,625
30,000 CompUSA Inc. + 1,185,000
10,000 Inacom Corp. + 222,500
5,000 Pomeroy Computer
Resources + 81,250
10,000 Tech Data Corp. + 221,250
----------
4,190,625
----------
Retail/Wholesale/Building
Products - 2.67%
80,000 Home Depot Inc. 4,040,000
35,000 Hughes Supply Inc. 1,141,875
----------
5,181,875
----------
Retail/Wholesale/
Jewelry - 1.62%
110,000 Claire's Stores Inc. 3,148,750
----------
Shoes/Related Apparel - 3.32%
80,000 Fila Holdings S.p.A, ADR 6,450,000
----------
Soap/Cleaning
Preparation - 1.01%
54,000 USA Detergents Inc. + 1,971,000
----------
Steel/Producers - 0.45%
60,000 Lone Star Technologies Inc. + 870,000
----------
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
<CAPTION>
SHARES MARKET
HELD VALUE
<S> <C>
Telecommunications/
Services - 2.13%
160,000 Worldcom Inc. Georgia + $4,140,000
----------
Textile/Apparel
Manufacturing - 0.57%
40,000 Nautica Enterprises Inc. + 1,100,000
----------
Transportation/Air
Freight - 0.60%
30,000 Atlas Air Inc. + 1,162,500
----------
Trucks and Parts/Heavy
Duty - 0.66%
35,000 Miller Industries Inc. + 1,277,500
----------
Total Common Stocks
(cost $161,248,401) 167,968,787
-----------
</TABLE>
<TABLE>
<CAPTION>
CONTRACT
VALUE
<S> <C> <C>
REPURCHASE AGREEMENT - 15.23%
$ 29,602,678 Repurchase Agreement dated
7/31/96 with State Street Bank
and Trust Co., 4.75%, due
8/01/96, collateralized by
United States Treasury Bill
Discount Note, due 1/01/97
(market value $30,935,000)
(repurchase proceeds $29,606,584)
(cost $29,602,678) 29,602,678
-----------
TOTAL INVESTMENTS AND
REPURCHASE AGREEMENT--
101.65%
(cost $190,851,079) 197,571,465
OTHER ASSETS LESS
LIABILITIES--(1.65)% (3,207,340)
------------
NET ASSETS--100.00%$ $194,364,125
============
</TABLE>
+ Non-income producing security.
The accompanying notes are an integral part of this statement.
<PAGE> 6
<TABLE>
<CAPTION>
NEW USA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
(UNAUDITED)
<S> <C>
ASSETS:
Investments in securities, at value
(cost $161,248,401) (Note 1) . . . . . . . . . . . . . . $167,968,787
Repurchase agreement (Note 1) . . . . . . . . . . . . . . 29,602,678
------------
Total investments and repurchase
agreement . . . . . . . . . . . . . . . . . . . . . . . 197,571,465
------------
Receivable for securities sold . . . . . . . . . . . . . . . 6,850,445
Receivable for Fund shares sold . . . . . . . . . . . . . . . . 147,314
Deferred organization expenses -
net (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . 50,424
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 41,236
Dividends receivable . . . . . . . . . . . . . . . . . . . . . 18,325
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . 3,906
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . 6,096
-----
Total Assets . . . . . . . . . . . . . . . . . . 204,689,211
------------
LIABILITIES:
Payable for securities purchased . . . . . . . . . . . . . . 9,556,380
Payable for Fund shares redeemed . . . . . . . . . . . . . . . 315,631
Investment management fee
payable (Note 2) . . . . . . . . . . . . . . . . . . . . . . . 172,068
Distributor fee payable (Note 2) . . . . . . . . . . . . . . . 69,153
Administration fee payable (Note 2) . . . . . . . . . . . . . . 35,693
Other accrued expenses and
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 176,161
------------
Total Liabilities . . . . . . . . . . . . . . . 10,325,086
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $194,364,125
============
Net assets consist of:
Capital stock, $0.01 par value;
200,000,000 shares authorized,
12,174,940 shares issued and
outstanding (Note 4) . . . . . . . . . . . . . . . . . . $ 121,749
Additional paid-in capital . . . . . . . . . . . . . . . 137,119,215
Accumulated realized gain
on investments - net . . . . . . . . . . . . . . . . . . . 50,402,775
Unrealized appreciation on
investments - net . . . . . . . . . . . . . . . . . . . . . 6,720,386
------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . $194,364,125
============
Net asset value and redemption
price per share . . . . . . . . . . . . . . . . . . . . $ 15.96
============
Maximum offering price
per share . . . . . . . . . . . . . . . . . . . . . . . $ 16.80
============
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
<CAPTION>
NEW USA GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1996
(UNAUDITED)
<S> <C>
INVESTMENT INCOME (NOTE 1):
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 167,201
Dividends (net of foreign withholding
tax of $7,203) . . . . . . . . . . . . . . . . . . . . . . . . 158,249
Miscellaneous income . . . . . . . . . . . . . . . . . . . . . 19,367
------
344,817
-------
EXPENSES:
Investment management fees (Note 2) . . . . . . . . . . . . . 1,019,953
Distribution fees (Note 2) . . . . . . . . . . . . . . . . . . 548,955
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . 148,293
Administration fees (Note 2) . . . . . . . . . . . . . . . . . 102,225
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 85,831
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 34,875
Amortization of deferred organization
expenses (Note 1) . . . . . . . . . . . . . . . . . . . . . . 33,868
Directors' fees . . . . . . . . . . . . . . . . . . . . . . . . 19,512
Reports to shareholders . . . . . . . . . . . . . . . . . . . . 12,999
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 12,309
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . 64,492
---------
Total expenses excluding interest . . . . . . . . 2,083,312
Interest expense (Note 5) . . . . . . . . . . . . . 295,930
---------
Total expenses . . . . . . . . . . . . . . . . . 2,379,242
---------
Net investment loss . . . . . . . . . . . . . . . . . . . . (2,034,425)
---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 3):
Net realized gain from
securities transactions . . . . . . . . . . . . . . . . . . 36,164,243
Change in unrealized appreciation on
investments - net . . . . . . . . . . . . . . . . . . . . (13,912,698)
----------
Net realized and unrealized gain on
investments . . . . . . . . . . . . . . . . . . . . . . . . 22,251,545
----------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . $20,217,120
===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 7
NEW USA GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, 1996 JANUARY 31, 1996
(UNAUDITED) (AUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment loss . . . . . . . . . . . . . . . . . . . . . . . . $ (2,034,425) $(4,207,619)
Realized gain on securities, futures
and short sales transactions - net . . . . . . . . . . . . 36,164,243 56,852,165
Change in unrealized appreciation
on investments - net . . . . . . . . . . . . . . . . . . . (13,912,698) 12,032,523
-------------- --------------
Net increase in net assets resulting from operations . . . 20,217,120 64,677,069
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on securities, futures,
short sales and options transactions . . . . . . . . . . . -- (27,138,147)
------------- -----------
FROM FUND SHARE TRANSACTIONS (Note 4):
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . 11,619,094 12,165,690
Shares issued to shareholders in
reinvestment of distributions . . . . . . . . . . . . . . -- 24,126,151
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . (22,339,180) (59,079,462)
-------------- --------------
Net decrease in net assets from Fund share transactions . (10,720,086) (22,787,621)
-------------- --------------
Net increase in net assets . . . . . . . . . . . . . . . . 9,497,034 14,751,301
-------------- --------------
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . 184,867,091 170,115,790
-------------- --------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . $194,364,125 $184,867,091
============== ==============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 8
NEW USA GROWTH FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Interest and dividends received . . . . . . . . . . . . . . . . . . . . . . . . $ 337,757
Expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,372,030)
-------------
Net cash used for operating activities . . . . . . . . . . . . . . . . . . . . . (2,034,273)
-------------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Purchase of portfolio securities . . . . . . . . . . . . . . . . . . . . . . . . (462,969,999)
Sales and maturities of portfolio securities . . . . . . . . . . . . . . . . . . 490,359,330
-------------
Net cash flows provided by investing activities . . . . . . . . . . . . . . . . 27,389,331
-------------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,575,000
Payments against borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . (89,575,000)
Proceeds from capital stock shares sold . . . . . . . . . . . . . . . . . . . . 11,590,622
Cost of capital stock shares redeemed . . . . . . . . . . . . . . . . . . . . . (22,945,680)
-------------
Net cash flows used for financing activities . . . . . . . . . . . . . . . . . (25,355,058)
-------------
NET DECREASE IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
CASH AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . --
-------------
CASH AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ --
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH FLOWS USED FOR
OPERATING ACTIVITIES:
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . $ 20,217,120
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (36,164,243)
Decrease in unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . 13,912,698
Increase in interest and dividends receivable . . . . . . . . . . . . . . . . . . (8,167)
Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,674
Increase in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . (6,096)
Increase in accrued expenses and other payables . . . . . . . . . . . . . . . . . . 4,741
-------------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . $ (2,034,273)
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest . . . . . . . . . . . . . . . . . . . . $ 295,930
=============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 9
- -------------------------------------------------------------------------------
NEW USA GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APRIL 29, 1992*
SIX MONTHS ENDED YEAR ENDED JANUARY 31, THROUGH
JULY 31, 1996 ---------------------------------- JANUARY 31,
(UNAUDITED) 1996 1995 1994 1993
----------- -------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period . . . . . $ 14.39 $ 11.63 $ 12.88 $ 13.20 $ 12.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment loss . . . . . . . . . . . (0.17) (0.37) (0.15) (0.14) (0.01)
Net realized and unrealized gain (loss) on
securities, futures, short sales and options
transactions . . . . . . . . . . . . . . 1.74 5.54 (1.10) 1.27 1.21
-------- -------- -------- -------- --------
Total from investment operations . . . . . . . 1.57 5.17 (1.25) 1.13 1.20
Less distributions to shareholders from:
Net realized gain on securities, futures,
short sales and options transactions . . -- (2.41) -- (1.45) --
-------- -------- ------ -------- --------
Total distributions . . . . . . . . . . . . . . -- (2.41) -- (1.45) --
-------- -------- ------ -------- --------
Net asset value, end of period . . . . . . . . $ 15.96 $ 14.39 $11.63 $ 12.88 $ 13.20
======== ======== ====== ======== ========
TOTAL INVESTMENT RETURN (a) . . . . . . . . . . 10.90% 44.61% (9.70)% 8.92% 10.00% (b)
RATIOS AND SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets 0.29% (c) 0.49% -- -- --
Ratio of distribution fees to average net assets 0.54% (c) 0.60% 0.61% 0.51% 0.56% (c)
Ratio of net expenses (excluding interest expense
and distribution fees) to average net assets 1.50% (c) 1.60% 1.51% 1.60% 1.65% (c)
------ ------ ----- ------ ----
Ratio of net expenses to average net assets 2.33% (c) 2.69% 2.12% 2.11% 2.21% (c)(d)
====== ====== ===== ====== ====
Ratio of net investment loss to average net assets (1.99)%(c) (2.32)% (0.63)% (1.02)% (0.18)%(c)(d)
Borrowings, end of period (millions) . . . . . -- (e) $14.0 (e) -- -- --
Average amount of borrowings outstanding
during the period (millions) . . . . . . . $15.4 (e) $15.7 (e) -- -- --
Average number of shares outstanding
during the period (millions) . . . . . . . 12.4 (e) 12.4 (e) -- -- --
Average amount of borrowings per
share during the period (000's) . . . . . $1.24 (e) $1.27 (e)
Portfolio turnover rate . . . . . . . . . . . . 209.21% (b) 525.28% 344.45% 395.15% 280.66%
Average commission rate (f) . . . . . . . . . $0.048 (f) -- -- -- --
Net assets, end of period (000's) . . . . . . . $194,364 $184,867 $170,116 $266,605 $295,590
</TABLE>
- -------------------------------------------------------------------------------
* Commencement of operations.
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charge. Total return would be reduced if a sales charge were taken
into account. Total return for a period of less than one year is not
annualized.
(b) Non-annualized.
(c) Annualized.
(d) For the period April 29, 1992 through January 31, 1993, the Manager
reimbursed expenses in the amount of $254,725. Had the Manager not
reimbursed expenses for that period the annualized ratio of net operating
expenses to average net assets and the annualized ratio of net investment
loss to average net assets would have been 2.35% and (0.31)%,
respectively.
(e) Averages computed on a weighted average daily basis.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
The accompanying notes are an integral part of this statement
<PAGE> 10
NEW USA GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES New USA Mutual Funds, Inc. (the
"Company"), a Maryland corporation, was organized on December 30, 1991 as a
diversified, open end management investment company registered under the
Investment Company Act of 1940, as amended. The Company has established one
fund series to date: New USA Growth Fund (the "Fund") (formerly The New USA
Mutual Fund), which commenced operations on April 29, 1992. O'Neil Data
Systems, Inc. is the parent company of William O'Neil + Co. Incorporated (WON +
Co.) (the Fund's "Distributor") and New USA Research & Management Co. (the
Fund's "Manager"). The Fund seeks capital growth by investing, under normal
market conditions, the majority of its assets in the common stock of companies
that are exhibiting accelerating earnings growth and are expected to continue
to achieve superior growth in earnings and/or revenues.
Effective May 15, 1996, the name of the Fund was changed to New USA
Growth Fund.
The following is a summary of significant accounting policies followed
by the Fund.
Investment Valuation: Portfolio securities listed on national securities
exchanges are valued at the last sale price on the business day as of which
such value is being determined or, lacking any sales, at the closing bid price
on such day. Portfolio securities traded in the over-the-counter market are
valued at the current or last bid price. If no bid is quoted on such day, the
security is valued by such method as the Board of Directors of the Company
shall determine in good faith to reflect the security's fair value. Index
options are valued at the last sale price or, in the absence of a sale, the
last bid price. Short-term debt securities having a maturity of 60 days or less
from the valuation date are valued at amortized cost which approximates market
value. Portfolio securities for which market quotations are not readily
available are valued as determined in good faith by or under the direction of
the Board of Directors.
Index Futures Contracts: The Fund may purchase or sell index futures contracts
for the purpose of hedging the market risk on existing portfolio holdings or
the intended purchase of securities. Futures contracts are contracts to buy or
sell units of an index at a specified date at a price agreed upon when the
contract is made. Upon entering into a contract, the Fund deposits with its
custodian or broker an amount of "initial margin" of cash and liquid assets to
guarantee delivery and payment of the futures contract. Subsequent payments to
and from the broker, called "variation margin", are made on a daily basis as
the value of the contract fluctuates. Such receipts or payments are recorded by
the Fund as unrealized gains or losses. When the contract is closed or expires,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed or expired. Risks of entering into futures contracts include the
possibility that a change in the value of the contract may not correlate with
the changes in the value of the underlying securities. As of July 31, 1996,
there were no futures contracts held.
Options on Indices: The Fund may purchase call and put options on any
securities indices for hedging purposes only. To hedge the Fund's portfolio
against a decline in value, the Fund may buy puts on stock indices; to hedge
against increases in equity price pending investment in additional equities,
the Fund may buy calls on stock indices. Upon the purchase of a call option or
a protective put option by the Fund, the premium paid is recorded as an
investment, and subsequently marked-to-market to reflect the current market
value of the option. If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund will realize a loss in the amount of the
cost of the option. If the Fund enters into a closing sale transaction, the
Fund will realize a gain or loss, depending on whether the sale proceeds from
the closing sale transaction are greater or less than the cost of the option.
If the Fund exercises a purchased call or put option, the Fund will realize a
gain or loss based on the change in the value of the index. As of July 31,
1996, there were no options contracts held.
<PAGE> 11
Short Sales: The Fund may engage in short sale transactions. A short sale is
effected when it is believed that the price of a particular security will
decline, and involves the sale of a security which the Fund does not own in the
hope of purchasing the same security at a later date at a lower price. To make
delivery to the buyer, the Fund must borrow the security. The Fund is then
obligated to return the security to the lender, and therefore must subsequently
purchase the same security. Upon entering into a short sale, the Fund must
leave the proceeds from the short sale with the broker, and must also deposit
with the broker a certain amount of cash or U.S. Government securities to
collateralize its obligation to replace the borrowed securities which have been
sold. In addition, the Fund must deposit cash or U.S. Government securities as
collateral in a segregated account with its custodian in an amount such that
the value of both collateral deposits is at all times equal to 100% of the
current market value of the securities sold short. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a capital loss,
and if the price declines during this period, the Fund will realize a capital
gain. The Fund may also sell securities short "against the box" in which it
owns, or has the right to acquire at no additional cost, securities identical
to those sold short. As of July 31, 1996, there were no open short sales.
Security Transactions and Investment Income: Security transactions are recorded
on the dates the transactions are entered into (the trade dates). Realized
gains and losses on security transactions are determined on the identified cost
basis. Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, premium amortized and discount
earned.
Dividends and Distributions to Shareholders: The Fund records all distributions
to shareholders from net investment income and realized gains on the
ex-dividend date. Such distributions are determined in conformity with income
tax regulations which may differ from the generally accepted accounting
principals. These differences are primarily due to differing treatments for
losses deferred due to wash sales and excise tax regulations.
Federal Income Taxes: It is the Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable income, the Fund (but
not the shareholders) will be relieved of Federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made. In order
to avoid imposition of the excise tax applicable to regulated investment
companies, it is also the Fund's intention to declare as dividends in each
calendar year at least 98% of its net investment income and 98% of its net
realized capital gains plus undistributed amounts from prior years.
Deferred Organization Expenses: Expenses of organization have been capitalized
and are being amortized on a straight-line basis over five years.
Repurchase Agreements: A repurchase agreement is an instrument under which the
purchaser acquires a security but agrees at the time of purchase to sell back
the security to the seller at an agreed-upon date, price and interest rate. It
is the policy of the Fund that the custodian takes possession of the underlying
collateral securities. Collateral is marked-to-market daily to ensure that the
market value of the underlying assets, including accrued interest is at least
equal to the value of the seller's repurchase obligation. In the event of a
bankruptcy or other default of the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses. These losses would equal the contract value of the repurchase agreement
and accrued interest, net of any proceeds received in liquidation of the
underlying securities. To minimize the possibility of loss, the Fund enters
into repurchase agreements only with commercial banks and registered
broker/dealers deemed to be creditworthy by the Manager and only with respect
to obligations of the U.S. government or its agencies. Refer to the Fund's
Schedule of Investments for the contract value of
<PAGE> 12
repurchase agreements and accrued interest as of July 31, 1996.
Use of Estimates: The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities,
revenues, and expenses of the Fund.
2. AGREEMENTS WITH AFFILIATES AND OTHER PARTIES Under the terms of the
Investment Management Agreement (the "Manage-ment Agreement") between the Fund
and the Manager, the Manager has agreed to provide investment management and
advisory services, subject to the policies and control of the Board of
Directors. The Management Agreement also requires the Manager to provide the
Fund with office space and certain administrative services and provide the
personnel needed by the Fund with respect to the Manager's responsibilities
under the Management Agreement with the Fund. For these services and
facilities, the Fund pays the Manager a management fee, computed and accrued
daily and paid monthly, based upon the average daily net assets of the Fund at
the following annual rates: 1% on the first $500 million of net assets and
0.75% on net assets exceeding $500 million.
Certain states in which shares of the Fund are qualified for sale
impose limitations on expenses (including management fees) of the Fund. The
most restrictive annual expense limitation requires that the Manager reimburse
the Fund to the extent that expenses exceed 2.5% of the Fund's first $30
million of average net assets, 2.0% of the Fund's next $70 million of average
net assets, and 1.5% of the average net assets in excess of $100 million,
subject to a formula that permits the Fund to exclude certain expenses from
that calculation. There was no reimbursement of expenses by the Manager for the
six months ended July 31, 1996.
Any deferrals made by the Manager in its fees and any payments by the
Distributor of Rule 12b-1 expenses are subject to recoupment or reimbursement
by the Fund within the following three fiscal years, provided the Fund is able
to effect such recoupment or reimbursement and remain in compliance with
applicable expense limitations, provided the Manager is still at that time
serving in such capacity and provided the payment of such expenses (or the
recoupment of such fee) would not affect the Fund's tax status or otherwise
have an adverse tax impact on the Fund or its shareholders.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan is to
permit the Fund to compensate the Distributor for services provided and
expenses incurred by it in promoting the sale of shares of the Fund, reducing
redemptions, or maintaining or improving services provided to shareholders by
the Distributor or dealers. The Plan provides for monthly payments by the Fund
to the Distributor, subject to the authority of the Fund's Board of Directors
to reduce the amount of payments or to suspend the Plan for such periods as
they may determine. The amount of any such reimbursement by the Fund is limited
under the Plan to 0.25% for service fees and 0.75% for all other permissible
distribution expenses of the Fund's average net assets annually, and is also
subject to state expense limitations.
The Distributor acts as the Fund's principal underwriter in a
continuous public offering of the Fund's shares. For the six months ended July
31, 1996, the Distributor earned $49,024 in underwriting and broker commissions
on sales of the Fund's shares. Additionally, the Distributor earned $88,115 in
soft dollar commissions as broker on trades of portfolio securities for the six
months ended July 31, 1996.
The Fund has entered into an Administration Agreement with State
Street Bank and Trust Company (the Fund's "Administrator") dated May 1, 1993.
The Administrator performs, or arranges for the performance of, certain
administrative services for the Fund, including maintaining the books and
records of the Fund, and preparing certain reports and other documents required
by federal and/or state laws and regulations. For these services, the Fund pays
the Administrator a fee at an annual rate of 0.10% of the Fund's average daily
net assets up to $125 million, 0.08%
<PAGE> 13
of the next $125 million, and 0.04% of those assets in excess of $250 million,
subject to certain minimum requirements.
Certain officers and/or directors of the Fund are officers and/or
directors of O'Neil Data Systems, Inc., WON + Co. and/or New USA Research &
Management Co.
3. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of
investments, excluding short-term securities, for the six months ended July 31,
1996, were $425,757,913 and $484,418,002 , respectively. At July 31, 1996, net
unrealized appreciation for Federal income tax purposes aggregated $6,720,386
of which $13,658,653 related to appreciated securities and $6,938,267 related
to depreciated securities. The aggregate cost of investments at July 31, 1996
for Federal income tax purposes was $161,248,401.
4. FUND SHARE TRANSACTIONS Proceeds and payments of Fund shares as shown
in the Statements of Changes in Net Assets are the result of the following
share transactions:
<TABLE>
<CAPTION>
Six Months Year Ended
Ended July 31, January 31,
1996 1996
-------------- -----------
<S> <C> <C>
Shares sold . . . . . 693,321 809,986
Shares reinvested from
distributions . . -- 1,691,876
Less shares
redeemed . . . . . (1,360,847) (4,283,992)
---------- ----------
Net decrease
in shares
outstanding . . . (667,526) (1,782,130)
---------- ----------
</TABLE>
5. LINE OF CREDIT The Fund established a revolving line of credit with
First Interstate Bank, enabling the Fund to borrow up to $30,000,000 with
interest at either the prime rate minus 2% or the bank's adjusted cost of funds
rate. In addition, the Fund is required to pay an annual fee of 0.125% of the
unused portion on a quarterly basis. The average daily loan balance was
$15,355,442, at a weighted average interest rate of 6.25%. The maximum loan
outstanding during the six months ended July 31, 1996 was $26,225,000.
<PAGE> 14
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<PAGE> 15
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<PAGE> 16
NEW USA MUTUAL FUNDS, INC.
DIRECTORS AND OFFICERS
William J. O'Neil Chairman of the Board, Chief Executive
Officer and Director
Jerry Dackerman Director
James H. Macklin Director
Jong S. Park, M.D. Director
Fredrick M. Russo, M.D. Director
Margaret R. Harries Senior Vice President and Secretary
David Ryan Senior Vice President
Natalie D. Carter Chief Financial Officer
- -------------------------------------------------------------------------
Investment New USA Research & Management Co.
Manager 12655 Beatrice Street
Los Angeles, California 90066
Distributor New USA Mutual Funds Distributor
A Division of
William O'Neil + Co. Incorporated
12655 Beatrice Street
Los Angeles, California 90066
Administrator State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Transfer Agent State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Auditors Arthur Andersen LLP
One International Place
Boston, Massachusetts 02110
Legal Counsel Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not
be considered a representation of future performance. Investment return and
principal value of shares, when redeemed, may be worth more or less than their
original cost.
========================================
NEW USA MUTUAL FUNDS, INC.
1-800-222-2872
NEW USA MUTUAL FUNDS, INC.
New USA Growth Fund
Semi-Annual Report
July 31, 1996
