HOMESTATE
---------
PENNSYLVANIA [GRAPHIC] CAPITAL "E" IN AN OCTAGONAL-SHAPED LOGO GROWTH FUND
SEMI-ANNUAL REPORT
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DECEMBER 31, 1995
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
ABOUT THE FUND
--------------
The HomeState Pennsylvania Growth Fund seeks long-term growth of capital
through investment primarily in the common stocks of companies with
headquarters or significant operations in the Commonwealth of Pennsylvania.
FUND MANAGEMENT HAS IDENTIFIED THREE KEY POINTS AS COMPONENTS OF ITS
INVESTMENT STRATEGY:
PENNSYLVANIA AS A PRIMARY MARKET
--------------------------------
The State is home to over 500 publicly traded companies, including 33 Fortune
500 companies. Pennsylvania's $244 billion economy is similar in size to that
of many individual countries', including Mexico and South Korea. Its
corporate profile is diverse, from traditional manufacturing companies to
state-of-the-art biopharmaceutical firms, with growth and expansion in medical
and health services, trade, education and financial institutions.
UNCOVERING INVESTMENT OPPORTUNITIES
-----------------------------------
The Fund's investment adviser, Emerald Advisers, Inc., employs a full-time
research staff to explore the local Pennsylvania companies that are often
ignored by traditionally nationally oriented research firms. Emerald's
mission is to keep a constant eye on the State's business community, actively
updating a company's progress by talking to its management, employees,
suppliers, customers and competitors.
AN EXPERIENCED MANAGEMENT TEAM
------------------------------
Emerald Advisers, Inc.'s team of investment professionals bring to the Fund
diverse background experience gained from the securities brokerage, trust and
banking, institutional investment advisory and mutual fund industries.
The Fund's portfolio is managed by Kenneth G. Mertz II, CFA, who previously
served as chief investment officer to the $12 billion Pennsylvania State
Employees Retirement System.
BY SEEKING OUT THE INVESTMENT OPPORTUNITIES FOUND HERE IN OUR HOME STATE, OUR
EXPERIENCED INVESTMENT PROFESSIONALS WORK TO PROVIDE FUND SHAREHOLDERS WITH
WHAT WE CALL. . .
"THE HOMESTATE ADVANTAGE."
THIS REPORT CONTAINS INFORMATION ABOUT THE FUND'S PERFORMANCE. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. AN INVESTMENT IN THE FUND WILL
FLUCTUATE IN VALUE SO THAT YOUR ACCOUNT, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN YOUR ORIGINAL PURCHASE PRICE.
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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REPORT FROM MANAGEMENT
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February 15, 1996
Dear Shareholder:
We are pleased to report the performance results for the first six months of
the HomeState Pennsylvania Growth Fund's fourth fiscal year. The total return
without adjustments for sales charges for the six-month period ended December
31, 1995 was 18.34%, substantially better than market benchmarks such as the
Standard & Poor's 500 Index's return of 14.43% and the Wilshire 5000 Index's
(a composite of all issues traded on the New York, American and NASDAQ
exchanges) return of 14.48%. The Fund's results were also substantially higher
than the Russell 2000 Index's (a small company index), which was up 12.27%
including reinvested dividends, and the Morningstar Growth Funds average,
which was up 11.34%. Including the Fund's maximum sales charge of 5%, the Fund
was up 12.42% for the six-month period.
Performance results for the Fund for periods ended December 31, 1995 are as
follows:
AVERAGE ANNUALIZED RETURNS CUMULATIVE
--------------------------- TOTAL RETURNS
ONE THREE SINCE SINCE
FUND/INDEX YEAR YEARS 10/1/92 10/1/92
- ---------- ------ ------ ------- -------------
HomeState PA Growth (at N.A.V.) 44.52% 20.59% 21.94% 90.62%
HomeState PA Growth 37.29% 18.55% 20.03% 81.09%
(at Maximum Offering Price)
Standard & Poor's 500 Index 37.52% 15.32% 15.79% 61.06%
Wilshire 5000 Index 36.47% 14.93% 16.19% 62.86%
Morningstar Growth Funds Average 30.74% 12.73% 14.69% 56.12%
The Standard & Poor's 500 and Wilshire 5000 indices are unmanaged stock market
indices without any associated expenses and their returns assume the
reinvestment of all dividends. The Morningstar Growth Funds average is a
composite average of 770, 437, and 404 growth-oriented funds over the one
year, three year, and since inception (10/l/92) time periods, respectively.
Please keep in mind past performance is no guarantee of future results.
These performance results helped your HomeState Fund receive national
attention in the last few months. The Fund was cited by Lipper Analytical
Services, Inc. ("Lipper") in THE WALL STREET JOURNAL on January 3, 1996, as
one of the Top 15 Growth Funds in the nation, of 558 funds measured for the 52
weeks ended December 28, 1995. The Fund also appeared in a Lipper survey in
USA TODAY on December 7 as one of the Top 10 Small Funds in the nation from a
survey of 377 equity funds with $100 million or less in assets for the three-
year period ended November 30, 1995. And finally, Morningstar, Inc. awarded
the Fund their highest rating, Five Stars (*****), for the three-year period
ended December 31st. Only 10% of the 1,606 equity funds measured received
five stars.
3
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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REPORT FROM MANAGEMENT
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Two of the Fund's top holdings were cited as among the best NASDAQ and New
York Stock Exchange ("NYSE") performers for calendar year 1995: Iomega Corp.
was the best performing NASDAQ issue, and Safeguard Scientifics Inc. was among
the Top 10 NYSE issues, from a study published by BARRON'S. While both of
these companies have received a great amount of publicity, they are largely
ignored by other institutional research firms, and are a direct result of our
research team's efforts in uncovering exceptional growth stories both inside
as well as outside of the Commonwealth of Pennsylvania. Our research efforts
continue to be focused on those companies with little (if any) other research
coverage.
With a slowing environment in the fourth calendar quarter of 1995, the Fund
emphasized investments in companies that are either first or second in their
marketplace and have superior growth rates compared to their peers and the
"market." For 1996, investors will be faced with a slow-growth economy.
Industrial production is flat and basic manufacturing in the United States is
under pressure. Additionally, the leading economic indicators have shown a
steady decline for the last ten months. This weakness in economic growth will
put continued pressure on the Federal Reserve Board to lower rates in the
beginning of 1996. We believe this is likely to occur because worldwide rates
and federal government expenditures are declining, and inflation remains under
control. With a lack of wage pressure, continued corporate restructuring, and
a declining capacity utilization, a lack of inflation will continue to be a
major positive for both bond and stock investors in 1996.
This economic environment is leading us to invest only in companies with
pricing power and an ability to control their pricing points and therefore
their own destiny. These companies are usually niche players and market-share
leaders. We are also looking for stable growth companies: stability of
earnings means less risk and more confidence in earnings estimates. These
companies, represented by industry stocks such as food, cable, and healthcare
are not dependent on cyclical or economically driven demand.
Finally, we are pleased to note that the Fund's total assets have more than
doubled in the twelve months of 1995, a feat accomplished every year since the
Fund's inception. Fund assets stood at just below $30 million at December
31st and Emerald Advisers, Inc., the Fund's investment adviser, now manages
more than $120 million for individual and institutional investors. We are
also pleased to welcome Rodney Square Management Corp. as the Fund's new
administrator and transfer agent and trust you will find improving customer
service as a result. As always, we thank you for your confidence and support
and welcome your comments or questions.
Sincerely,
/s/ Kenneth G. Mertz II
Kenneth G. Mertz II
Chief Investment Officer
4
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
COMMON STOCK - 98.3%
FINANCE, INSURANCE & REAL ESTATE - 11.4%
INSURANCE CARRIERS - 3.2%
American Travellers Corp.*................ 9,500 $ 267,188
Donegal Group, Inc........................ 10,700 200,625
Penn-America Group, Inc................... 8,500 121,125
Penn Treaty American Corp.*............... 12,250 202,125
Walshire Assurance Co..................... 9,350 153,106
-----------
944,169
-----------
NATIONAL COMMERCIAL BANKS - 1.3%
First Capitol Bank/York Pa*............... 2,600 57,850
Mellon Bank Corp.......................... 6,450 346,687
-----------
404,537
-----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 2.1%
Parkvale Financial Corp................... 7,108 195,470
Prime Bancorp, Inc........................ 7,755 157,039
Sovereign Bancorp, Inc.................... 15,750 159,469
York Financial Corp. ..................... 7,150 120,656
-----------
632,634
-----------
SECURITY & COMMODITY BROKERS, DEALERS & SERVICES - 0.4%
BHC Financial, Inc. ...................... 7,500 135,000
-----------
STATE & NATIONAL BANKS - 4.4%
BT Financial Corp......................... 3,483 121,034
Commerce Bancorp, Inc..................... 6,500 143,812
Corestates Financial Corp................. 4,000 151,500
First Colonial Group, Inc................. 4,625 84,984
Kish Bancorp.............................. 600 29,700
Omega Financial Corp...................... 6,000 201,000
Sun Bancorp, Inc.......................... 11,515 303,708
Susquehanna Bancshares, Inc............... 10,000 265,000
-----------
1,300,738
-----------
TOTAL FINANCE, INSURANCE & REAL ESTATE.... 3,417,078
-----------
MANUFACTURING - 62.7%
CHEMICALS & ALLIED PRODUCTS - 2.8%
Air Products and Chemicals, Inc........... 7,400 390,350
MacDermid, Inc.a.......................... 3,500 208,250
OM Group, Inc.a........................... 7,500 248,437
-----------
847,037
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 5
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
COMMUNICATION EQUIPMENT - 2.6%
C-COR Electronics, Inc.*.................. 30,000 $ 705,000
Scientific-Atlanta, Inc.a................. 5,000 75,000
-----------
780,000
-----------
COMPUTER & OFFICE EQUIPMENT - 11.6%
Black Box Corp.*.......................... 16,200 265,275
HDS Network Systems, Inc.*................ 13,000 71,500
HADCO Corp.*a............................. 12,200 343,125
Iomega Corp.*a............................ 14,000 680,750
Mattson Technology, Inc.*a................ 10,000 150,000
Nocopi Technologies, Inc.*................ 70,000 48,300
Safeguard Scientifics, Inc.*.............. 26,300 1,301,850
Semiconductor Packaging Materials Co.,
Inc.*a.................................. 9,100 84,175
Silicon Graphics, Inc.*a.................. 5,500 151,250
SubMicron Systems, Inc.*.................. 17,800 166,875
Tseng Laboratories, Inc.*................. 10,000 93,750
Zycon Corp.*a............................. 10,000 112,500
-----------
3,469,350
-----------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 2.1%
Cohu, Inc.a .............................. 12,000 306,000
Genrad, Inc.*a............................ 33,000 317,625
-----------
623,625
-----------
FOOD & BEVERAGE - 1.8%
Boston Beer Company, Inc.................. 1,750 41,562
Heinz (H.J.) Co........................... 8,550 283,219
Hershey Foods Corp........................ 3,500 227,500
-----------
552,281
-----------
GLASS, CONCRETE & OTHER PRODUCTS - 0.4%
Giant Cement Holding, Inc.*............... 9,800 112,700
-----------
IRON & STEEL - 3.0%
Carpenter Technology Corp................. 12,100 497,613
Universal Stainless & Alloy Products,
Inc.*a.................................. 37,00 393,125
-----------
890,738
-----------
MISC. ELECTRICAL MACHINERY, EQUIP. & SUPPLIES - 14.1%
Allen Organ Co. (B Shares)................ 6,300 265,387
AMETEK, Inc............................... 22,500 421,875
AMP, Inc.................................. 12,200 468,175
6 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
Amphenol Corp. (A Shares)*a............... 10,000 $ 242,500
Cable Design Technologies*................ 9,800 431,200
Charter Power Systems, Inc................ 14,500 416,875
ECC International Corp.*.................. 25,300 278,300
Emcee Broadcast Products, Inc.*........... 70,800 513,300
Technitrol, Inc........................... 28,100 639,275
Vishay Intertechnology, Inc.*............. 17,200 541,800
-----------
4,218,687
-----------
MISC. INDUSTRIAL MACHINERY & EQUIP. - 5.4%
Harsco Corp............................... 9,800 569,625
Kennametal, Inc........................... 10,000 317,500
Owosso Corp............................... 18,700 165,963
Robroy Industries, Inc. (A Shares)........ 10,037 161,847
York International Corp................... 8,500 399,500
-----------
1,614,435
-----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 1.3%
Penn Engineering & Manufacturing Corp..... 3,700 358,900
Total Containment, Inc.*.................. 8,000 32,000
-----------
390,900
-----------
OPTICAL & OPHTHALMIC GOODS, PHOTOGRAPHIC EQUIP. & SUPPLIES - 0.7%
II-VI, Inc.*.............................. 19,500 209,625
-----------
PAPER & PAPER PRODUCTS - 0.4%
Glatfelter (P.H.) Co...................... 7,150 122,444
-----------
PHARMACEUTICAL PREPARATIONS - 7.5%
Centocor, Inc.*........................... 18,000 555,750
IBAH, Inc.*............................... 51,500 321,875
Integra Lifesciences Corp.*a.............. 7,000 45,500
Magainin Pharmaceuticals, Inc.*........... 63,000 826,875
Mylan Laboratories, Inc................... 16,800 394,800
Procept, Inc.*a........................... 24,500 76,562
-----------
2,221,362
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 3.1%
Arrow International, Inc.................. 5,000 198,750
Healthdyne, Inc.*a........................ 10,000 86,250
Healthdyne Information Enterprises,
Inc.*a.................................. 10,000 21,250
Healthdyne Technologies, Inc.*a........... 14,000 161,000
Medical Technology, Inc.*a................ 100,000 206,250
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 7
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
Respironics, Inc.*........................ 12,000 $ 252,000
-----------
925,500
-----------
RUBBER & PLASTICS - 0.8%
Tuscarora, Inc............................ 10,000 242,500
-----------
SPECIAL INDUSTRIAL MACHINERY - 1.7%
Met-Pro Corp.............................. 34,300 501,638
-----------
TELECOMMUNICATIONS EQUIPMENT - 1.5%
DSC Communications Corp.*a................ 6,000 221,250
Tollgrade Communications, Inc............. 14,000 210,000
-----------
431,250
-----------
TRANSPORTATION EQUIPMENT - 1.9%
JLG Industries, Inc....................... 19,000 565,250
-----------
TOTAL MANUFACTURING....................... 18,719,322
-----------
REAL ESTATE INVESTMENT TRUSTS - 1.9%
Kranzco Realty Trust...................... 7,772 114,637
Liberty Property Trust.................... 21,700 450,275
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS....... 564,912
-----------
SERVICES - 10.4%
BUSINESS SERVICES - 1.2%
Right Management Consultants*............. 15,000 348,750
-----------
COMPUTER SERVICES - 3.9%
Datastream Systems, Inc.*a................ 15,000 285,000
Sungard Data Systems, Inc.*............... 13,200 376,200
Systems & Computer Technology Corp.*...... 26,000 516,750
-----------
1,177,950
-----------
ENGINEERING SERVICES - 0.5%
Astrotech International Corp.*............ 39,766 146,637
-----------
FINANCE SERVICES - 1.2%
DVI, Inc.................................. 11,500 161,000
DiMark, Inc.*............................. 12,500 181,250
-----------
342,250
-----------
8 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
MEDICAL & HEALTH SERVICES - 3.6%
Apria Healthcare Group, Inc.*a............ 10,500 $ 296,625
Concord Health Group, Inc.*............... 37,500 187,500
Corecare Systems, Inc.*................... 20,000 27,500
Genesis Health Ventures, Inc.*............ 8,300 302,950
Renal Treatment Centers, Inc.*............ 6,000 264,000
-----------
1,078,575
-----------
TOTAL SERVICES............................ 3,094,162
-----------
TRANSPORTATION, COMMUNICATION, ELECTRIC & SANITATION - 4.4%
COMMUNICATION & BROADCASTING - 2.5%
Adelphia Communications Corp. (A Shares)*. 10,000 70,000
American Telecasting, Inc.*a.............. 6,000 87,000
Comcast Corp., Special (A Shares)......... 25,150 457,416
Wireless Cable of Atlanta, Inc.*a......... 11,300 124,300
-----------
738,716
-----------
ELECTRIC, GAS & WATER UTILITIES - 0.7%
Philadelphia Suburban Corp................ 11,000 228,250
-----------
TRANSPORTATION - 0.5%
Arnold Industries, Inc.................... 9,000 156,375
-----------
TRANSPORTATION SERVICES - 0.7%
Buckeye Partners, L.P..................... 6,000 204,750
-----------
TOTAL TRANSPORTATION, COMMUNICATION, ELECTRIC
& SANITATION............................ 1,328,091
-----------
WHOLESALE & RETAIL TRADE - 7.5%
MISCELLANEOUS RETAIL STORES - 1.5%
National Media Corp.*..................... 13,000 273,000
Rite Aid Corp............................. 5,000 171,250
-----------
444,250
-----------
RETAIL APPAREL & ACCESSORY STORES - 1.4%
Mothers Work, Inc......................... 5,000 73,750
Piercing Pagoda, Inc.*.................... 19,400 349,200
-----------
422,950
-----------
WHOLESALE CHEMICALS & DRUGS - 1.2%
AmeriSource Health Corp. (A Shares)*...... 10,400 343,200
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 9
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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SCHEDULE OF INVESTMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
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SHARES MARKET VALUE**
------ ---------------
WHOLESALE ELECTRONIC EQUIP. & COMPUTERS - 0.9%
SCI Systems, Inc.*a....................... 9,000 $ 279,000
-----------
WHOLESALE MISCELLANEOUS - 2.5%
Alco Standard Corp........................ 8,600 392,375
Exide Corp................................ 7,500 344,063
-----------
736,438
-----------
TOTAL WHOLESALE & RETAIL TRADE............ 2,225,838
-----------
TOTAL COMMON STOCK (COST $22,690,980)..... 29,349,403
-----------
MONEY MARKET MUTUAL FUND - 1.0%
SEI Liquid Asset Trust - Government
Portfolio (COST $304,529)............... 304,529 304,529
-----------
TOTAL INVESTMENTS (COST $22,995,509) - 99.3%... 29,653,932
OTHER ASSETS AND LIABILITIES, NET - 0.7%....... 209,930
-----------
NET ASSETS - 100.0%............................ $29,863,862
===========
* Non-income producing security.
** See Note 1 to Financial Statements.
a Non-Pennsylvania Company as defined in the Fund's current prospectus (the
aggregate value of such securities amounted to $5,202,724 as of December
31, 1995).
10 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) DECEMBER 31, 1995
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ASSETS
Investments in securities at market
value (cost $22,995,509)............................. $29,653,932
Cash 8,000
Receivables for:
Dividends and interest............................... 26,669
Investment securities sold........................... 396,533
Reimbursement from Adviser........................... 14,000
Capital shares sold.................................. 258,771
-----------
Total Assets.................................... 30,357,905
-----------
LIABILITIES
Payables for:
Investment securities purchased...................... 399,238
Accrued expenses..................................... 78,909
Capital shares repurchased........................... 15,896
-----------
Total Liabilities............................... 494,043
-----------
NET ASSETS............................................... $29,863,862
===========
NET ASSETS CONSISTED OF:
Shares of beneficial interest,
no par value, 50,000,000
authorized; 1,662,083 issued
and outstanding...................................... $22,168,741
Accumulated net investment loss.......................... (55,711)
Accumulated net realized gain on
investments.......................................... 1,092,409
Unrealized appreciation on investments................... 6,658,423
-----------
Total net assets................................ $29,863,862
===========
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE ($29,863,862/1,662,083
shares).............................................. $17.97
======
Maximum offering price per share
(100/95 of net asset value per share)................ $18.92
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 11
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX-MONTH PERIOD ENDED
DECEMBER 31, 1995
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INVESTMENT INCOME
Dividends............................................ $ 158,245
Interest............................................. 16,964
----------
Total Investment Income......................... 175,209
----------
EXPENSES
Advisory fees........................................ 94,389
12b-1 fees........................................... 43,134
Administration fees.................................. 5,742
Transfer agent fees.................................. 15,251
Custodial fees....................................... 13,808
Accounting services fees............................. 15,934
Professional fees.................................... 14,741
Printing expenses.................................... 2,302
Trustees fees and expenses........................... 2,762
Miscellaneous expenses............................... 22,857
----------
Total Expenses.................................. 230,920
----------
NET INVESTMENT LOSS...................................... (55,711)
----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investment
transactions....................................... 1,397,462
Change in unrealized appreciation on
investments........................................ 2,798,290
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS.......................................... 4,195,752
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................ $4,140,041
==========
12 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
FOR THE SIX-MONTH
PERIOD ENDED FOR THE FISCAL
DECEMBER 31, 1995 YEAR ENDED
(UNAUDITED) JUNE 30, 1995
----------------- --------------
OPERATIONS
Net investment loss................ $ (55,711) $ (14,949)
Net realized gain on
investment transactions.......... 1,397,462 442,297
Change in unrealized
appreciation on investments...... 2,798,290 3,570,194
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........ 4,140,041 3,997,542
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment
transactions..................... (747,908) (174,096)
----------- -----------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS - Note 2........ 6,083,830 6,672,056
----------- -----------
TOTAL INCREASE IN NET ASSETS.......... 9,475,963 10,495,502
NET ASSETS:
Beginning of period................ 20,387,899 9,892,397
----------- -----------
End of period...................... $29,863,862 $20,387,899
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 13
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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FINANCIAL HIGHLIGHTS
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FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
PERIODS ENDED
-------------------------------------------
12/31/95(b) 6/30/95 6/30/94 6/30/93(a)
----------- ------- ------- ----------
Net asset value at beginning
of period....................... $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)....... (0.03) (0.01) (0.03) 0.03
Net realized and unrealized gains
on investments.................. 2.85 3.54 1.53 0.95
------ ------ ------ ------
Total from investment
operations.................. 2.82 3.53 1.50 0.98
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment
income.......................... 0.00 0.00 (0.03) 0.00
Distributions from net realized
gains........................... (0.53) (0.22) (0.08) 0.00
------ ------ ------ ------
Total distributions........... (0.53) (0.22) (0.11) 0.00
------ ------ ------ ------
Net asset value at end of period... $17.97 $15.68 $12.37 $10.98
====== ====== ====== ======
Total return**..................... 18.34% 28.96% 13.75% 13.07%*
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted).................. $29,864 $20,388 $9,892 $3,026
Ratio of expenses to average net
assets before reimbursement
by Adviser...................... 1.83%* 2.00% 2.67% 7.85%*
Ratio of expenses to average net
assets after reimbursement by
Adviser......................... na1 1.91% 2.23% 1.87%*
Ratio of net investment loss to
average net assets before
reimbursement by Adviser........ (0.44%)* (0.20%) (0.76%) (5.24%)*
Ratio of net investment income
(loss) to average net assets
after reimbursement by Adviser.. na1 (0.10%) (0.32%) 0.74%*
Portfolio turnover rate............ 47% 51% 51% 63%
(a) From commencement of operations: October 1, 1992.
(b) For the six-month period ended December 31, 1995 (Unaudited).
* Annualized.
** Total return does not reflect 5.0% maximum sales charge.
1 Not applicable: no reimbursements were made by the Adviser.
14 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1995
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NOTE 1 - ACCOUNTING POLICIES
The HomeState Pennsylvania Growth Fund (the "Fund") is a portfolio series
of The HomeState Group, a Pennsylvania common law trust operating as a
diversified open-end management company registered under the Investment
Company Act of 1940, as amended. The Fund was organized on August 26,
1992, and commenced operations on October 1, 1992. Operations up to
October 1, 1992 were limited to issuance of 10,000 shares at $10.00 per
share to the Fund's investment adviser. Under normal circumstances, the
Fund invests a minimum of 65% of its total net assets in the securities of
issuers with headquarters or significant operations in the Commonwealth of
Pennsylvania. Because of its investment objective, the Fund may be subject
to risk from economic changes and political developments occurring within
Pennsylvania. Following is a summary of significant accounting policies,
in conformity with generally accepted accounting principles, which were
consistently followed by the Fund in the preparation of its financial
statements:
SECURITY VALUATION - Investment securities traded on a national securities
exchange are valued at the last reported sales price at 4:00 p.m. Eastern
time, unless there are no transactions on the valuation date, in which case
they are valued at the mean between the closing asked price and the closing
bid price. Securities traded over-the-counter are valued at the last
reported sales price unless there is no reported sales price, in which case
the mean between the closing asked price and the closing bid price is used.
Debt securities with maturities of sixty days or less are valued at
amortized cost, which approximates market value. Where market quotations
are not readily available, securities are valued using methods which the
Board of Trustees believe in good faith accurately reflects their fair
value.
INCOME RECOGNITION - Interest income is accrued daily. Dividend income is
recorded on the ex-dividend date.
SECURITIES TRANSACTIONS - Security transactions are accounted for on the
date the securities are purchased or sold. Realized gains and losses on
securities sold are determined using the identified cost method.
DISTRIBUTIONS TO SHAREHOLDERS - The Fund records distributions to
shareholders on the ex-dividend date. Net gains realized from securities
transactions, if any, will normally be distributed to shareholders in July
and December. The amounts of distributions from net investment income and
net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from those amounts determined under
generally accepted accounting principles. These book/tax differences are
either temporary or permanent in nature. To the extent these differences
are permanent, they are charged or credited to paid-in capital in the
period that the difference arises.
FEDERAL INCOME TAXES - The Fund intends to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies,
including the distribution of substantially all of its taxable income.
Accordingly, no provision for federal income taxes is considered necessary
in the financial statements.
15
<PAGE>
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 2 - CAPITAL STOCK
At December 31, 1995, there were 50,000,000 authorized shares of beneficial
interest with no par value. As of December 31, 1995, the Fund had
1,662,083 shares issued and outstanding. Capital share transactions for
the six-month period ended December 31, 1995 and for the year ended June
30, 1995 were:
FOR THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 1995 FOR THE YEAR
(UNAUDITED) ENDED JUNE 30, 1995
------------------------ --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
Sales 496,901 $8,383,420 670,899 $9,021,148
Reinvested distributions 41,716 681,246 13,102 161,946
Redemptions (176,536) (2,980,836) (183,880) (2,511,038)
-------- ---------- -------- ----------
Net increase 362,081 $6,083,830 500,121 $6,672,056
======== ========== ======== ==========
NOTE 3 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term
investments, aggregated $10,995,678 and $5,779,748, respectively, for the
six-month period ended December 31, 1995.
At December 31, 1995, net unrealized appreciation for reporting and Federal
income tax purposes aggregated $6,658,423, of which $7,542,167 related to
appreciated securities and $883,744 related to depreciated securities.
NOTE 4 - EXPENSES AND TRANSACTIONS WITH AFFILIATED PARTIES
Emerald Advisers, Inc. serves as the investment adviser (the "Adviser") to
the Fund for which it receives investment advisory fees from the Fund. The
fee is based on average net assets at the annual rate of 0.75% on assets up
to and including $250 million, 0.65% for assets in excess of $250 million
and up to and including $500 million, 0.55% for assets in excess of $500
million and up to and including $750 million, and 0.45% for assets in
excess of $750 million. For the six-month period ended December 31, 1995,
the Fund had incurred investment advisory fees of $94,389. Under the terms
of the investment advisory agreement which expires on December 31, 1996,
Emerald Advisers, Inc. will reimburse the Fund if the Fund's total expenses
exceed the most restrictive expense limitation in effect by a state
regulatory agency where the Fund's shares are registered for purchase. The
Adviser may also voluntarily reimburse the Fund for certain expenses. For
the six-month period ended December 31, 1995, the Adviser made no voluntary
expense reimbursements. At December 31, 1995, Emerald Advisers, Inc. owned
100 shares of the Fund.
Rodney Square Distributors, Inc. ("RSD"), a wholly owned subsidiary of
Wilmington Trust Company, is the sole distributor of Fund shares pursuant
to a Distribution Agreement with the Fund dated as of November 20, 1995.
The Fund has adopted a distribution services plan (the "Plan") under Rule
12b-1 of the Investment Company Act of 1940. The Plan allows the Fund to
16
<PAGE>
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
reimburse RSD for a portion of the costs incurred in distributing the
Fund's shares, including amounts paid to brokers or dealers, at an annual
rate not to exceed 0.35% of the Fund's average daily net assets. During
the period from November 20, 1995, through December 31, 1995, the Fund
incurred expenses totaling $11,469 pursuant to the Plan. Prior to November
20, 1995, Fund/Plan Broker Services, Inc. served as the principal
underwriter and distributor of Fund shares. During the period from July 1,
1995, through November 19, 1995, the Fund incurred expenses totaling
$31,665 pursuant to the Plan.
Pursuant to separate Administration, Accounting Services and Transfer
Agency Agreements with the Fund, each dated November 20, 1995, Rodney
Square Management Corporation ("RSMC"), a wholly owned subsidiary of
Wilmington Trust Company, serves as administrator, accounting and transfer
agent. During the period from November 20, 1995 through December 31, 1995,
the Fund paid RSMC administration fees totaling $5,742, accounting services
fees totaling $5,164 and transfer agent fees totaling $4,999.
Prior to November 20, 1995, Fund/Plan Services, Inc. served as the transfer
and dividend disbursing agent and provided accounting and pricing services
for the Fund. During the period from July 1, 1995 through November 19,
1995, the Fund paid Fund/Plan Services, Inc. transfer agency fees totaling
$10,252, and accounting and pricing services fees totaling $10,770.
The Fund's Declaration of Trust provides that each Trustee affiliated with
the Fund's Adviser shall serve without compensation and each Trustee who is
not so affiliated shall receive fees from the income of the Fund, and
expense reimbursements for each Trustees meeting attended. An unaffiliated
Trustee's annual fee shall not exceed $1,000. A member of the Fund's Board
of Trustees who is not affiliated with the Adviser is employed as a
practicing attorney and is a partner in the law firm of Duane, Morris &
Heckscher, the Fund's legal counsel.
17
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
INVESTMENT ADVISER BOARD OF TRUSTEES:
------------------ ------------------
EMERALD ADVISERS, INC. BRUCE E. BOWEN
LANCASTER, PA KENNETH G. MERTZ II, CFA
SCOTT C. PENWELL, Esq.
DISTRIBUTOR SCOTT L. REHR
----------- H.J. ZOFFER, PHD
RODNEY SQUARE DISTRIBUTORS, INC.
WILMINGTON, DE FUND MANAGEMENT
---------------
ADMINISTRATOR AND EMERALD ADVISERS, INC.
TRANSFER AGENT 1857 WILLIAM PENN WAY
---------------- P.O. BOX 10666
RODNEY SQUARE MANAGEMENT CORPORATION LANCASTER, PA 17605
WILMINGTON, DE
SHAREHOLDER SERVICES
CUSTODIAN --------------------
--------- RODNEY SQUARE MANAGEMENT CORPORATION
CORESTATES FINANCIAL CORP. P.O. BOX 8987
PHILADELPHIA, PA WILMINGTON, DE 19899-9752
INDEPENDENT ACCOUNTANTS TELEPHONE NUMBERS
----------------------- -----------------
PRICE WATERHOUSE LLP THE FUND (800) 232-0224
PHILADELPHIA, PA THE FUND (VIA
THE INTERNET) [email protected]
LEGAL COUNSEL MARKETING / BROKER
------------- SERVICES (800) 232-OK-PA
DUANE, MORRIS & HECKSCHER SHAREHOLDER
HARRISBURG, PA SERVICES (800) 892-1351
DAILY NEWSPAPER QUOTES
----------------------
"HomeStPA"
SYMBOL: HSPGX
THIS REPORT IS FOR THE GENERAL INFORMATION OF FUND SHAREHOLDERS. FOR MORE
DETAILED INFORMATION ABOUT THE FUND, PLEASE CONSULT A COPY OF THE FUND'S
CURRENT PROSPECTUS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY A COPY OF
THE CURRENT PROSPECTUS.
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