[GRAPHIC] HomeState Pennsylvania Growth Fund Logo
SEMI-ANNUAL REPORT
==================
DECEMBER 31, 1996
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
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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
- --------------------------------------
REPORT FROM MANAGEMENT
- ---------------------------------------------------------------------------
January 20, 1997
Dear Shareholder:
We are pleased to report the performance results for the first six months
of the HomeState Pennsylvania Growth Fund's fifth fiscal year. The total
return without adjustments for the Fund's maximum sales charge of 5.0% for
the six-month period ended December 31, 1996 was +2.70%. The Fund ended
- -2.44% for the six-month period when the sales charge effects are included.
In a year which will be best remembered for the absolute domination by
large-cap, blue chip stocks, the HomeState Pennsylvania Growth Fund closed
the year 1996 ahead of its peer-group mutual fund and other comparative
industry averages. Performance results for the HomeState Fund for various
periods ended December 31, 1996 are as follows:
AVERAGE ANNUALIZED RETURNS
------------------------------------ CUMULATIVE
SINCE INCEPTION TOTAL RETURNS
FUND/INDEX ONE YEAR THREE YEARS 10/1/92 SINCE 10/1/92
- ---------- -------- ----------- ------- -------------
HomeState PA Growth
(at N.A.V.) +21.44% +21.38% +21.81% +131.50%
HomeState PA Growth
(at Maximum Offering
Price) +15.37% +19.32% +20.35% +119.93%
Standard & Poor's
500 Index +22.95% +19.66% +17.44% + 98.01%
Wilshire 5000 Index +21.20% +18.23% +17.34% + 97.29%
Russell 2000 Index +16.54% +13.69% +17.83% +100.80%
Morningstar Small
Company Funds Ave. +19.89% +16.06% +19.30% +111.70%
The S & P 500, Wilshire 5000 and Russell 2000 are unmanaged stock market
indices without any associated expenses and their returns assume the
reinvestment of all dividends. The Morningstar Small Company Funds average
includes the total return (without effects of sales charges) for the one-
year, three-year and HomeState Fund since inception periods ended December
31, 1996 for 408, 242 and 150 small company-oriented funds, respectively.
Please remember that past performance is no guarantee of future results.
The Standard & Poor's 500 Index was a tough benchmark to beat in 1996. The
S&P 500 represents the large capitalization marketplace and its gains were
especially narrow during this year. For example, the top six performers in
the index in 1996 accounted for nearly 25% of its performance. Indeed,
Intel alone accounted for over 6.9% of the S&P's performance. The six
issues included Intel, Microsoft, General Electric, Coca Cola, IBM and
Exxon (all larger than $75 billion in individual market capitalization).
These returns made life difficult for all money managers, especially
those like your Fund's management who concentrate mainly on smaller
companies. For comparative purposes, we point out that the Russell 2000
Growth Index (an index measuring performance of small companies with
higher P/E and higher forecasted growth rates) was up only 11.26% in 1996.
For the past two years equity returns have been considerably above long-
term historical averages. With this in mind and with the Dow Jones
Industrial Average hitting new highs several times already in 1997, we are
often asked whether these market gains can continue. We believe the last
two years (HomeState's returns at N.A.V. were 44.52% and 21.44% for the
years ended December 31, 1995 and 1996, respectively) were extraordinary
and we fear that some investors have raised their expectations to excessive
levels. This unbridled enthusiasm could lead to a market wide correction of
ten percent or greater at any time in 1997. Indeed, greater volatility in
1997 is almost a given, as investors react more quickly and in greater
magnitude to the littlest bit of economic news or changes in individual
companies earnings reports.
That's the bad news. Now for some good news. With all of this as a
backdrop, the long-term keys to this bull market still seem to be in place.
We remain in an earnings-led economy, which means corporate profits should
continue to exceed real Gross Domestic Product growth rates. This remains a
long-term market positive. Corporate boardrooms continue to focus on
productivity increases and enhancing shareholder returns. Supply and demand
factors remain favorable to higher equity values. Buybacks of shares seen
in 1996 can be expected to continue over the next several years. Mutual
funds continue to attract huge new cash flows as the baby boomers increase
their savings vs. consumption.
In our Report to Shareholders dated December 31, 1995, we noted that two of
the Fund's top holdings were cited as among the best NASDAQ and New York
Stock Exchanges best performers in a study by Barron's magazine (Iomega
Corp. and Safeguard Scientifics, respectively). This year, another of the
Fund's holdings, Zitel Corp., was cited by Barron's as the number two
performer of all NASDAQ companies for calendar-year 1996. Zitel was found
by our in-house research team and was the Fund's top holding for most of
December until we decided to realize some of our profits in the stock. I
point out this remarkable non-Pennsylvania performer because it symbolizes
our research team's efforts to uncover exceptional undiscovered growth
opportunities nationwide, as a supplement to our concentration on
Pennsylvania-based companies.
The HomeState Fund enjoyed dramatic growth in the number of new
shareholders joining our fund family in 1996. Total Fund net assets
surpassed $75 million at calendar year-end, up from less than $30 million
at year-end 1995. For our many new shareholders, I'd like to talk for a
moment about what makes HomeState a different kind of mutual fund: what we
call "The HomeState Advantage." Research is the foundation on which the
HomeState Pennsylvania Growth Fund is built. Our expanding research team
(we added several new members to our team in the second half of 1996)
emphasizes in-depth coverage of companies underfollowed by other
institutional investors. We typically start with an on-site visit to the
company's headquarters to meet with the chief executive officer and the
management team. Next, we talk with the company's suppliers, competitors,
customers and industry contacts. We feel this intensive process provides
greater insights to the future net worth of our investments.
The latest economic reports continue to be at or below their historical
long-term averages. With a slow-growth environment, we continued to
emphasize investments in companies we believe are #1 or #2 in their market
niches. Our list of holdings reflects our commitment to finding the best
growth companies who are market leaders, but that are selling at attractive
valuation levels. The current environment demands our attention to those
companies which can deliver above-average gains to their shareholders. This
in turn means our attention to some critical investment factors: what we
have labeled "Keys to Investing:" 1. Leadership is of utmost importance in
selecting companies for investment: leadership in management, market share
and earnings growth; 2. Research is the key to finding this leadership; 3.
We do not use "group think." We create portfolios that bear little
resemblance to the market; 4. We seek to understand the risks embedded in
each equity and in the entire portfolio; 5. We invest in growth companies
which are not yet fully appreciated by the market.
In summary, we believe our process of hands-on fundamental research,
combined with professional portfolio management, will continue to enable us
to uncover and manage quality growth opportunities in the market. We
appreciate your continuing support and look forward to providing you with
"The HomeState Advantage" in the years to come. And as always, we welcome
any questions or comments you may have, as we strive to be your homestate
mutual fund.
Sincerely,
/s/ Kenneth G. Mertz
Kenneth G. Mertz II,
CFA Chief Investment Officer
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
- --------------------------------------
SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1996
- ------------------------------------------------------------------------------
MARKET
SHARES VALUE++
------ -------
COMMON STOCK - 94.5%
COMMUNICATIONS & BROADCASTING - 3.4%
American Telecasting, Inc.+*............ 50,700 $ 291,525
Comcast Corp., Special (A Shares)*...... 57,650 1,026,891
People's Choice TV Corp.+*.............. 62,000 379,750
Tel-Save Holdings, Inc.*................ 16,000 464,000
Wireless Cable of Atlanta, Inc.+*....... 21,800 395,125
-----------
2,557,291
-----------
FINANCE, INSURANCE & REAL ESTATE - 21.6%
INSURANCE CARRIERS - 6.3%
Conseco, Inc............................ 10,651 678,983
Donegal Group, Inc...................... 64,900 1,330,450
Penn-America Group, Inc................. 61,500 991,688
Penn Treaty American Corp.*............. 57,750 1,501,500
Walshire Assurance Co................... 18,535 271,074
-----------
4,773,695
-----------
NATIONAL COMMERCIAL BANKS - 1.4%
First Capitol Bank/York, Pa*............ 4,800 130,800
Mellon Bank Corp........................ 12,950 919,450
-----------
1,050,250
-----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 3.3%
Parkvale Financial Corp................. 31,747 817,485
Patriot Bank Corp....................... 25,800 348,300
Prime Bancorp, Inc...................... 21,255 435,727
Sovereign Bancorp, Inc.................. 41,537 545,173
York Financial Corp..................... 21,615 351,244
-----------
2,497,929
-----------
STATE & NATIONAL BANKS - 10.6%
BT Financial Corp....................... 24,841 984,325
Commerce Bancorp, Inc.+................. 35,325 1,165,725
First Colonial Group, Inc............... 23,481 516,582
Keystone Financial, Inc................. 26,500 662,500
Kish Bancorp............................ 600 30,600
Omega Financial Corp.................... 18,750 656,250
Onbancorp, Inc.......................... 12,500 464,062
PNC Bank Corp........................... 10,000 376,250
Signet Banking Corp.+................... 28,500 876,375
Sun Bancorp, Inc........................ 12,090 411,060
Susquehanna Bancshares, Inc............. 33,100 $ 1,146,087
Zions Bancorporation+................... 6,500 676,000
-----------
7,965,816
-----------
TOTAL FINANCE, INSURANCE & REAL ESTATE............ 16,287,690
-----------
MANUFACTURING - 43.2%
CHEMICALS & ALLIED PRODUCTS - 2.6%
Macdermid, Inc.+........................ 30,000 825,000
OM Group, Inc.+......................... 41,500 1,120,500
-----------
1,945,500
-----------
COMPUTER & OFFICE EQUIPMENT - 5.0%
HDS Network Systems, Inc.*.............. 28,000 203,000
Iomega Corp.+*.......................... 53,000 920,875
SI Handling Systems, Inc................ 75,650 1,139,478
Safeguard Scientifics, Inc.*............ 41,300 1,311,275
Tseng Laboratories, Inc.*............... 49,600 155,000
-----------
3,729,628
-----------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 1.8%
Genrad, Inc.+*.......................... 59,000 1,371,750
-----------
FOOD & BEVERAGE - 1.8%
Hershey Foods Corp...................... 22,000 962,500
Quigley Corp.*.......................... 21,000 366,188
-----------
1,328,688
-----------
IRON & STEEL - 0.6%
Carpenter Technology Corp............... 11,600 424,850
-----------
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES - 13.5%
Allen Organ Co. (B Shares).............. 9,300 369,675
AMETEK, Inc............................. 26,500 589,625
AMP, Inc................................ 7,600 291,650
Cable Design Technologies*.............. 46,700 1,453,537
Charter Power Systems, Inc.............. 35,500 1,082,750
Emcee Broadcast Products, Inc.*......... 96,900 702,525
Harsco Corp............................. 19,300 1,322,050
JPM Company*............................ 36,600 640,500
Technitrol, Inc......................... 50,700 1,945,613
Teleflex, Inc........................... 12,200 635,925
Zitel Corp.+*........................... 25,500 1,131,562
-----------
10,165,412
-----------
MISCELLANEOUS INDUSTRIAL MACHINERY & EQUIPMENT - 3.7%
JLG Industries, Inc..................... 31,000 $ 496,000
Met-Pro Corp............................ 97,150 1,299,381
York International Corp................. 17,500 977,813
-----------
2,773,194
-----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 0.7%
Penn Engineering & Manufacturing
Corp.*................................. 15,600 319,800
Toll Brothers........................... 10,000 195,000
-----------
514,800
-----------
OPTICAL & OPHTHALMIC GOODS, PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.6%
II-VI, Inc.*............................ 47,000 1,233,750
-----------
PETROLEUM REFINING - 3.8%
Buckeye Partners, L.P................... 12,000 511,500
Coastal Corp............................ 18,200 889,525
Mapco, Inc.+............................ 12,500 425,000
Tesoro Petroleum Corp.+*................ 50,500 707,000
USX - Marathon Group.................... 15,000 358,125
-----------
2,891,150
-----------
PHARMACEUTICAL PREPARATIONS - 4.2%
Aronex Phamaceuticals, Inc.+*........... 30,000 281,250
Centocor, Inc.*......................... 20,500 732,875
IBAH, Inc.*............................. 75,000 506,250
Magainin Pharmaceuticals, Inc.*......... 85,000 818,125
Nabi, Inc.+*............................ 43,500 380,625
Neose Technologies, Inc.*............... 16,200 291,600
Viropharma, Inc.*....................... 13,500 118,125
-----------
3,128,850
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 2.0%
Arrow International, Inc................ 15,000 431,250
Healthdyne Information Enterprises,
Inc.+*................................. 73,000 401,500
Medical Technology and Innovations,
Inc.*.................................. 145,000 113,281
Respironics, Inc.*...................... 31,000 538,625
-----------
1,484,656
-----------
TELECOMMUNICATIONS EQUIPMENT - 0.7%
Gilbert Associates, Inc. (A Shares)..... 8,300 114,125
Tollgrade Communications, Inc.*......... 14,000 434,000
-----------
548,125
-----------
TEXTILES & APPAREL - 1.2%
Jones Apparel Group, Inc.*.............. 25,000 934,375
-----------
TOTAL MANUFACTURING............................... 32,474,728
-----------
MINING - 0.0%
Daleco Resources Corp.+*................ 50,000 $ 10,156
-----------
REAL ESTATE INVESTMENT TRUSTS - 2.8%
Brandywine Realty Trust................. 31,500 614,250
First Industrial Realty+................ 16,000 486,000
Liberty Property Trust.................. 39,100 1,006,825
-----------
2,107,075
-----------
SERVICES - 12.3%
BUSINESS SERVICES - 3.5%
CRW Financial, Inc.*.................... 50,475 429,038
Physician Support Systems, Inc.*........ 14,000 269,500
Prepaid Legal Services, Inc.+*.......... 26,000 474,500
Right Management Consultants*........... 46,500 1,034,625
Telespectrum Worldwide Inc.............. 23,300 369,887
-----------
2,577,550
-----------
COMPUTER SERVICES - 3.7%
Ansoft Corp.*........................... 59,000 324,500
Ansys, Inc.*............................ 17,000 229,500
Fore Systems, Inc.*..................... 8,000 263,000
Integrated Systems Consulting
Group, Inc.*........................... 9,383 129,016
Mastech Corp.*.......................... 22,000 418,000
Metatools, Inc.+*....................... 16,000 188,000
Microleague Multimedia, Inc.*........... 15,000 105,000
Physician Computer Network, Inc.+*...... 28,000 238,000
Sungard Data Systems, Inc.*............. 23,200 916,400
-----------
2,811,416
-----------
ENGINEERING SERVICES - 0.6%
Astrotech International Corp.*.......... 78,766 452,905
-----------
FINANCE SERVICES - 0.5%
DVI, Inc.*.............................. 29,500 383,500
-----------
HOME HEALTHCARE SERVICES - 0.3%
Home Health Corp.*...................... 23,700 259,219
-----------
MEDICAL & HEALTH SERVICES - 3.7%
Corecare Systems, Inc.*................. 82,000 128,125
Genesis Health Ventures, Inc.*.......... 26,700 831,037
Genome Therapeutics Corp.+*............. 33,000 354,750
Renal Treatment Centers, Inc.*.......... 29,400 $ 749,700
SMT Health Services, Inc.*.............. 79,300 674,050
-----------
2,737,662
-----------
TOTAL SERVICES.................................... 9,222,252
-----------
ELECTRIC, GAS & WATER UTILITIES - 2.3%
Consolidated Natural Gas Co............. 17,000 939,250
Numar Corp.............................. 5,000 68,438
Philadelphia Suburban Corp.............. 36,000 715,500
-----------
1,723,188
-----------
WHOLESALE & RETAIL TRADE - 8.9%
MISCELLANEOUS RETAIL STORES - 1.8%
Borders Group, Inc.+*................... 10,000 358,750
Rite Aid Corp........................... 26,500 1,053,375
-----------
1,412,125
-----------
RETAIL APPAREL & ACCESSORY STORES - 2.6%
Mothers Work, Inc.*..................... 16,000 164,000
Piercing Pagoda, Inc.*.................. 66,900 1,622,325
Urban Outfitters, Inc................... 11,000 143,000
-----------
1,929,325
-----------
RETAIL EATING & DRINKING PLACES - 0.4%
Schlotzsky's, Inc.+*.................... 28,500 285,000
-----------
RETAIL FURNITURE & APPLIANCE STORES - 0.3%
Brookstone, Inc.+*...................... 21,500 225,750
-----------
RETAIL-AUTOMOTIVE, DEALERS & SUPPLY STORES - 0.2%
Pep Boys-Manny, Moe & Jack.............. 5,000 153,750
-----------
WHOLESALE CHEMICALS & DRUGS - 1.3%
Amerisource Health Corp. (A Shares)*.... 20,900 1,008,425
-----------
WHOLESALE ELECTRONIC EQUIPMENT & COMPUTERS - 0.7%
CHS Electronics, Inc.................... 29,000 496,625
-----------
WHOLESALE MISCELLANEOUS - 1.6%
Alco Standard Corp...................... 23,300 1,202,862
-----------
TOTAL WHOLESALE & RETAIL TRADE.................... 6,713,862
-----------
Total Common Stock (Cost $58,280,375)............. 71,096,242
-----------
MONEY MARKET MUTUAL FUNDS - 6.3%
CoreFund Treasury Reserve
Portfolio.............................. 2,747,311 $ 2,747,311
CoreFund Elite Treasury Reserve
Portfolio.............................. 2,000,000 2,000,000
-----------
Total Money Market Mutual Funds (Cost $4,747,311). 4,747,311
-----------
TOTAL INVESTMENTS (COST $63,027,686) - 100.8%......... 75,843,553
-----------
OTHER ASSETS AND LIABILITIES, NET - (0.8)%............ (566,095)
-----------
NET ASSETS - 100.0%................................... $75,277,458
-----------
++ See Note 2 to Financial Statements.
* Non-income producing security.
+ Non-Pennsylvania Company as defined in the Fund's current prospectus (the
aggregate value of such securities amounted to $13,970,469 as of December
31, 1996).
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities at market value (cost $63,027,686).............. $ 75,843,553
Receivables for:
Dividends and interest................................................... 60,828
Investment securities sold............................................... 1,036,497
Capital shares sold...................................................... 290,568
-------------
Total Assets............................................................ 77,231,446
-------------
LIABILITIES
Payables for:
Investment securities purchased.......................................... 1,688,206
Capital shares repurchased............................................... 60,772
Accrued expenses.......................................................... 150,155
Other payables............................................................ 54,855
-------------
Total Liabilities....................................................... 1,953,988
-------------
NET ASSETS ............................................................... $ 75,277,458
=============
NET ASSETS CONSISTED OF:
Shares of beneficial interest, no par value, 50,000,000
authorized; 3,726,069 issued and outstanding ............................ $ 61,959,018
Accumulated net investment loss........................................... (129,255)
Accumulated net realized gain on investments.............................. 631,828
Unrealized appreciation on investments.................................... 12,815,867
-------------
Net assets.............................................................. $ 75,277,458
=============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($75,277,458/3,726,069 shares)........................................... $20.20
======
Maximum offering price per share
(100/95 of net asset value per share).................................... $21.26
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX-MONTH PERIOD ENDING
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................................ $ 308,900
Interest................................................................. 85,815
-------------
Total Investment Income .............................................. 394,715
-------------
EXPENSES
Advisory fees............................................................ 234,823
12b-1 fees............................................................... 110,633
Administration fees...................................................... 41,973
Transfer agent fees...................................................... 46,254
Custodial fees........................................................... 19,513
Accounting services fees................................................. 22,576
Professional fees........................................................ 21,525
Printing expenses........................................................ 11,320
Registration fees........................................................ 7,891
Trustees fees and expenses............................................... 3,176
Miscellaneous expenses................................................... 4,286
-------------
Total Expenses........................................................ 523,970
-------------
NET INVESTMENT LOSS ...................................................... (129,255)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions............................. 983,091
Change in unrealized appreciation on investments......................... 1,804,184
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........................... 2,787,275
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................................... $ 2,658,020
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED FOR THE FISCAL
DECEMBER 31,1996 YEAR ENDED
(UNAUDITED) JUNE 30,1996
------------- ---------------
<S> <C> <C>
OPERATIONS
Net investment loss ..................................................... $ (129,255) $ (189,331)
Net realized gain on investment transactions............................. 983,091 3,898,165
Change in unrealized appreciation on investments......................... 1,804,184 7,151,550
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... 2,658,020 10,860,384
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions........................... (3,944,375) (747,908)
------------- -------------
NET INCREASE FROM CAPITAL
SHARE TRANSACTIONS - Note 3.............................................. 20,735,760 25,327,678
------------- -------------
TOTAL INCREASE IN NET ASSETS ............................................. 19,449,405 35,440,154
NET ASSETS:
Beginning of period ..................................................... 55,828,053 20,387,899
------------- -------------
End of period ........ $ 75,277,458 $ 55,828,053
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
PERIODS ENDED
--------------------------------------------------
12/31/96++ 6/30/96 6/30/95 6/30/94 6/30/93+
---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period............. $21.25 $15.68 $12.37 $10.98 $10.00
------ ------ ------ ------ ------
Income from Investment Operations
- ---------------------------------
Net investment income (loss) ...................... (0.03) (0.07) (0.01) (0.03) 0.03
Net realized and unrealized gains on investments... 0.39 6.17 3.54 1.53 0.95
------ ------ ------ ------ ------
Total from investment operations................ 0.36 6.10 3.53 1.50 0.98
------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends from net investment income .............. 0.00 0.00 0.00 (0.03) 0.00
Distributions from net realized gains ............. (1.41) (0.53) (0.22) (0.08) 0.00
------ ------ ------ ------ ------
Total distributions............................. (1.41) (0.53) (0.22) (0.11) 0.00
------ ------ ------ ------ ------
Net asset value at end of period .................. $20.20 $21.25 $15.68 $12.37 $10.98
====== ====== ====== ====== ======
Total return**..................................... 2.70% 39.94% 28.96% 13.75% 13.07%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)........... $75,277 $55,828 $20,388 $9,892 $3,026
Ratio of expenses to average net assets before
reimbursement by Adviser......................... 1.67%* 1.85% 2.00% 2.67% 7.85%*
Ratio of expenses to average net assets after
reimbursement by Adviser......................... na1 na1 1.91% 2.23% 1.87%*
Ratio of net investment loss to average
net assets before reimbursement by Adviser....... (0.41)%* (0.58)% (0.20)% (0.76)% (5.24)%*
Ratio of net investment income (loss) to average
net assets after reimbursement by Adviser........ na1 na1 (0.10)% (0.32)% 0.74%*
Average commission rate paid....................... $0.0963 $0.0961 - - -
Portfolio turnover rate............................ 57%* 66% 51% 51% 63%
</TABLE>
+ From commencement of operations: October 1, 1992.
++ For the six-month period ended December 31, 1996 (Unaudited).
* Annualized.
** Total return does not reflect 5.0% maximum sales charge.
1 Not applicable: no reimbursements were made by the Adviser.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
===========================================================================
THE HOMESTATE PENNSYLVANIA GROWTH FUND
- --------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1996
- ---------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF FUND
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. The
investment objective of the Fund is long-term growth of capital through
investments primarily in the common stock of companies with headquarters
or significant operations in the Commonwealth of Pennsylvania. To
pursue its objective, the fund will invest at least 65% of its total
assets in such companies. Consequently, the Fund may be subject to risk
from economic changes and political developments occurring within
Pennsylvania.
NOTE 2 - SIGNIFICANT ACCOUNTING PRINCIPLES
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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of 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.
NOTE 3 - CAPITAL STOCK
At December 31, 1996, there were 50,000,000 authorized shares of
beneficial interest with no par value. As of December 31, 1996, the
Fund had 3,726,069 shares issued and outstanding. Capital share
transactions for the periods ended December 31, 1996 and June 30, 1996
were:
FOR THE SIX-MONTH PERIOD
ENDED DECEMBER 31, 1996 FOR THE YEAR
(UNAUDITED) ENDED JUNE 30, 1996
------------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
Sales................ 999,890 $19,114,085 1,551,022 $29,459,053
Reinvested
distributions...... 205,190 3,637,037 41,712 681,175
Redemptions.......... (106,181) (2,015,362) (265,566) (4,812,550)
--------- ----------- --------- -----------
Net increase......... 1,098,899 $20,735,760 1,327,168 $25,327,678
========= =========== ========= ===========
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term
investments, aggregated $36,231,571 and $17,115,094, respectively, for
the six-month period ended December 31, 1996.
At December 31, 1996, net unrealized appreciation for reporting and
Federal income tax purposes aggregated $12,804,853, of which $15,939,443
related to appreciated securities and $3,134,590 related to depreciated
securities.
NOTE 5 - 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, 1996, the Fund had incurred investment advisory fees
of $234,823. Under the terms of the investment advisory agreement which
expires on December 31, 1997, 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, 1996, the Adviser made no voluntary expense reimbursements.
At December 31, 1996, Emerald Advisers, Inc. owned 115 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 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 six-month period ending December
31, 1996, the Fund incurred expenses totaling $110,633 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 six-month period ended December 31, 1996,
the Fund paid RSMC administration fees totaling $41,973, accounting
services fees totaling $22,576 and transfer agent fees totaling $46,254.
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.
<PAGE>
[Outside cover -- divided into two sections]
[Left section]
=================================================================
THE HOMESTATE PENNSYLVANIA GROWTH FUND
--------------------------------------
INVESTMENT ADVISER
------------------
EMERALD ADVISERS, INC.
LANCASTER, PA
DISTRIBUTOR
-----------
RODNEY SQUARE DISTRIBUTORS, INC.
WILMINGTON, DE
ADMINISTRATOR AND
TRANSFER AGENT
--------------
RODNEY SQUARE MANAGEMENT CORPORATION
WILMINGTON, DE
CUSTODIAN
---------
CORESTATES FINANCIAL CORP.
PHILADELPHIA, PA
INDEPENDENT ACCOUNTANTS
-----------------------
PRICE WATERHOUSE LLP
PHILADELPHIA, PA
LEGAL COUNSEL
-------------
DUANE, MORRIS & HECKSCHER
HARRISBURG, PA
[Right section]
BOARD OF TRUSTEES
-----------------
BRUCE E. BOWEN
KENNETH G. MERTZ II, CFA
SCOTT C. PENWELL, ESQ.
SCOTT L. REHR
H.J. ZOFFER, PHD
FUND MANAGEMENT
---------------
EMERALD ADVISERS, INC.
1857 WILLIAM PENN WAY
P.O. BOX 10666
LANCASTER, PA 17605
SHAREHOLDER SERVICES
--------------------
RODNEY SQUARE MANAGEMENT CORPORATION
P.O. BOX 8987
WILMINGTON, DE 19899-9752
TELEPHONE NUMBERS
-----------------
THE FUND (800) 232-0224
MARKETING / BROKER SERVICES (800) 232-OK-PA
SHAREHOLDER SERVICES (800) 892-1351
DAILY NEWSPAPER QUOTES
----------------------
"HOMESTPA"
SYMBOL: HSPGX
THIS REPORT IS FOR THE GENERAL INFORMATION OF FUND SHAREHOLDERS. FOR MORE
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.
- --------------------------------------------------------------------------
02/97
