<PAGE>
DOMINION INSIGHT GROWTH FUND
ANNUAL REPORT
JUNE 30, 1997
DOMINION INSIGHT GROWTH FUND
A SERIES OF DOMINION FUNDS, INC.
- -----------------------------------------------------
To Our Shareholders:
While performance for the first six weeks of the calendar year was flat and for
the year ended June 30, 1997 was -8.21%, the total return since inception
(October 27, 1992) was 103.38%, or 16.43% average annualized return on a
compounded basis. Our exhortation for patience and dollar cost averaging
expressed in the semi-annual report for DOMINION INSIGHT GROWTH FUND (FUND) on
December 31, 1996, has proven to be prophetic half-way through the third quarter
of 1997. The FUND'S NAV has increased significantly from the beginning of the
year to $19.12 as of this writing.
Notwithstanding the sell-off experienced by the FUND at times during the past
twelve months, caused notably by continued strength in S&P 500 companies, we
anticipate a rotation back to small/mid-cap stocks. Investors are recognizing
that many small/mid-cap stocks offer higher growth rates at more reasonable
valuations than most large-cap stocks. This has been caused, in part, by the
sell-off of small/mid-cap market, especially technology issues, beginning in
July 1996. We believe the market has entered a period where the small/mid-cap
stocks will reemerge into leading the market again.
It is important for our shareholders to consider why they invest in equities.
Recognizing that past performance is no guarantee of the future, investors buy
stocks in anticipation of earnings growth, not solely past performance. With
the FUND'S portfolio earnings growth in the range of 50%, it seems reasonable we
are due to capture much of the gain our analysis projects for the 18 months
ahead. We trust you will be part of the success, and thank you for your
confidence.
/s/ Douglas W. Powell /s/ C. Dewey Elliott, III
August 21, 1997 Douglas W. Powell C. Dewey Elliott, III
Chairman of the Board President
The performance data presented does not reflect the deduction of the sales load
and, if reflected, the load would reduce the performance quoted. The
performance data presented represents past performance, and the investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
DOMINION INSIGHT GROWTH FUND
INVESTMENTS IN SECURITIES
JUNE 30, 1997
Market Percent of
Common Stocks (Continued) Shares Value Total Assets
- ------------- ------ ---------- ------------
Commercial Services - Printing
Consolidated Graphic (a) 13,100 $ 546,925 2.38%
---------- ---------
Computer - Memory Devices
Smart Modular Tech (a) 17,150 578,813 2.52
---------- ---------
Computer - Mini/Micro
Compaq (a) 6,500 645,125 2.81
---------- ---------
Computer - Services
Data Dimensions, Inc. (a) 19,500 429,000 1.87
---------- ---------
Computer - Software
Compuware Corp. (a) 31,200 1,489,800 6.48
McAfee Association (a) 11,650 735,406 3.20
Microsoft Corp. (a) 12,000 1,516,500 6.60
Peoplesoft Inc. (a) 22,800 1,202,700 5.23
---------- ---------
4,944,406 21.51
---------- ---------
Electronics - Measuring Instrument
Teradyne (a) 13,400 525,950 2.29
---------- ---------
Electronics - Semiconductors
Altera Corp. (a) 18,000 909,000 3.95
Applied Materials (a) 13,300 941,806 4.10
Microlinear (a) 30,000 315,000 1.37
Orbotech Ltd. (a) 22,300 710,813 3.09
Sanmine Corp. (a) 12,400 787,400 3.43
Semtech Corp. (a) 20,200 737,300 3.21
Texas Instruments 4,800 403,500 1.76
Vecco Instruments (a) 12,600 488,250 2.12
---------- ---------
5,293,069 23.03
---------- ---------
Food - Meat Products
Smithfields Foods (a) 12,200 750,300 3.26
---------- ---------
Insurance - Life
Conseco Inc. 11,900 440,300 1.91
---------- ---------
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
INVESTMENTS IN SECURITIES
JUNE 30, 1997
Market Percent of
Common Stocks (continued) Shares Value Total Assets
- ------------------------- ------ ---------- ------------
Medical - Ethical Drugs
Medicis Pharmaceutical (a) 14,550 $ 725,681 3.16%
Teva Pharmaceutical ADR 7,800 505,050 2.20
---------- ---------
1,230,731 5.36
---------- ---------
Medical - Outpatient/Home Care
Rehabcare Group (a) 13,300 492,100 2.14
---------- ---------
Oil & Gas - Machinery/Equipment
Energy Ventures (a) 15,000 630,000 2.74
---------- ---------
Retail - Discount & Variety
Ninety-Nine Cents (a) 16,200 488,025 2.12
Tuesday Morning Corp (a) 27,000 543,375 2.36
---------- ---------
1,031,400 4.48
---------- ---------
Retail/Wholesale Computer
Dell Computer (a) 13,500 1,585,406 6.90
---------- ---------
Telecommunications - Equipment
Bright Point (a) 23,800 774,988 3.37
Teledata Comm (a) 20,100 690,938 3.01
Tellabs Inc. (a) 14,700 821,363 3.57
---------- ---------
2,287,289 9.95
---------- ---------
Transportation - Truck
Swift Transportation (a) 19,800 584,100 2.54
---------- ---------
Total Investments in Securities
(cost $16,822,485) $21,994,912 95.69%
---------- ---------
---------- ---------
NOTES:
(a) Presently non-income producing.
(b) Percentage of investments as shown is the ratio of the total market
value to total assets.
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ASSETS
Investments in securities, at value $ 21,994,912
(identified cost $16,822,485)
Cash 504,688
Receivables
Investment securities sold 481,332
Capital shares sold 483
Dividends and interest 5,349
Organization costs, net 6
-------------
TOTAL ASSETS $ 22,986,770
-------------
-------------
LIABILITIES
Accrued investment advisory fee $ 18,999
Accrued administrative fee 23,741
-------------
TOTAL LIABILITIES 42,740
-------------
NET ASSETS $ 22,944,030
-------------
-------------
Capital shares outstanding 1,453,179
Net asset value and offering price per share
Net asset value per share $ 15.79
-------------
-------------
Offering price per share $ 16.36
-------------
-------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
INVESTMENT LOSS
Investment income
Dividends $ 24,139
Interest 40,612
-------------
Total investment income 64,751
-------------
Expenses
Investment advisory fee 254,477
Administration fee 318,097
Amortization 9,541
-------------
Total expenses 582,115
-------------
NET INVESTMENT LOSS (517,364)
-------------
REALIZED LOSS AND UNREALIZED APPRECIATION ON INVESTMENTS
Net realized loss on investments in securities (2,607,737)
Net change in unrealized appreciation
of investments in securities 757,148
-------------
NET LOSS ON INVESTMENTS (1,850,589)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (2,367,953)
-------------
-------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
CHANGE IN NET ASSETS FROM OPERATIONS 1997 1996
------------ ------------
Net investment loss $ (517,364) $ (281,524)
Net realized gain (loss) on investments (2,607,737) 3,556,449
Net change in unrealized appreciation 757,148 1,978,534
------------ ------------
Net increase (decrease) in net
assets resulting from operations (2,367,953) 5,253,459
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gains on investments (2,641,139) (1,003,817)
CAPITAL SHARE TRANSACTIONS 44,943 15,569,399
------------ ------------
Total increase (decrease) in net assets (4,964,149) 19,819,041
NET ASSETS
Beginning of year 27,908,179 8,089,138
------------ ------------
END OF YEAR (including undistributed
investment loss of $1,179,887
and $662,523, respectively) $ 22,944,030 $ 27,908,179
------------ ------------
------------ ------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED JUNE 30,
1997 1996 1995 1994 1993 (1)
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE INCOME AND CAPITAL CHANGES
FOR A SHARE OUTSTANDING DURING THE
PERIOD (2):
Net asset value, beginning of period $ 19.04 $ 13.53 $ 10.24 $ 10.97 $ 9.79
---------- --------- --------- ---------- ---------
Income (loss) from investment operations:
Net investment loss (0.33) (0.34) (0.24) (0.24) (0.18)
Net realized and unrealized gain
(loss) on investments (1.16) 7.39 4.33 (0.49) 1.36
---------- --------- --------- ---------- ---------
Total income (loss) from investment
operations (1.49) 7.05 4.09 (0.73) 1.18
---------- --------- --------- ---------- ---------
Less distributions:
Distributions from net realized gains (1.76) (1.54) (0.80) - -
---------- --------- --------- ---------- ---------
Net asset value, end of period $ 15.79 $ 19.04 $ 13.53 $ 10.24 $ 10.97
---------- --------- --------- ---------- ---------
---------- --------- --------- ---------- ---------
Total return (3)(4) (8.21%) 54.32% 42.25% (6.65%) 18.08%
---------- --------- --------- ---------- ---------
---------- --------- --------- ---------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 22,944 $ 27,908 $ 8,089 $ 6,271 $ 5,968
Ratio of expenses to average
daily net assets 2.30% 2.31% 2.38% 2.37% 2.10%
Ratio of net investment loss to
average net assets 2.04% 2.03% 2.16% 2.01% 1.83%
Portfolio turnover rate 261.05% 172.87% 210.23% 140.87% 135.40%
Average brokerage commission rate for
the underlying portfolio (5) $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
</TABLE>
(1) Financial highlights are for the period from October 27, 1992 (effective
date of the Fund's Registration Statement under the Securities Act of 1933)
to June 30, 1993, and, other than total return, have not been annualized.
(2) Per share information has been calculated using the average number of
shares outstanding.
(3) Sales load is not reflected in total return.
(4) Total return is annualized.
(5) Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not
separately reflected in the Fund's Statement of Operations. The rate is
calculated by dividing the total brokerage commissions paid on applicable
purchases and sales of portfolio securities for the period by the total
number of related shares purchased and sold.
The accompanying notes are an integral part of these financial highlights.
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS
Dominion Insight Growth Fund (Fund) is a separate series of
shares of common stock of Dominion Funds, Inc. (Company). The
Company was incorporated in the State of Texas in June of 1992.
The Company is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management
investment company. In addition, the Fund is subject to various
investment restrictions as set forth in the Statement of
Additional Information. The effective date of the Fund's
Registration Statement under the Securities Act of 1933 was
October 27, 1992. The primary investment objective of the Fund
is capital appreciation. The Company may designate one or more
series of common stock. The only series currently designated is
the Fund. Each share represents an equal proportionate interest
in the assets of the Fund with each other share in such series
and no interest in any other series.
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 amounts
of the assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
VALUATION OF SECURITIES
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or in national
market systems are valued at the last quoted sales price.
Securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board of directors.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the date the
securities are purchased or sold. Realized security gains and
losses from security transactions are reported on an identified
cost basis. Dividend and interest income is reported on the
accrual basis.
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH
Cash is held in a credit interest account at May Financial
Corporation, a member of the Chicago Stock Exchange, Inc.,
bearing interest at a variable rate. At June 30, 1997, the
interest rate was 4.75%
ORGANIZATION COSTS
Organization costs have been capitalized and are being amortized
on a straight-line basis over a period of five years. If any of
the initial shares are redeemed before all the organization costs
have been amortized, the proceeds will be reduced by the redeemed
share's prorata share of the then-unamortized organization costs,
in the same proportion as the number of shares redeemed bears to
the total number of initial shares outstanding.
INCOME TAXES
The Fund's policy is to continue to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net taxable income,
including any net realized gain on investments, to its
shareholders. Therefore, no provision for income or excise taxes
is required.
Net investment income (loss), net realized gains (losses) and the
cost of investments in securities may differ for financial
statement and income tax purposes. The character of
distributions from net investment income or net realized gains
may differ from their ultimate characterization for income tax
purposes. At June 30, 1997, there were no material differences.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends declared and paid from net investment income or net
realized gains are recorded on the ex-dividend date, distributed
on the record date and are reinvested in additional shares of the
Fund at net asset value or are payable in cash without any charge
to the shareholder.
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - DISTRIBUTION TO SHAREHOLDERS
On November 30, 1996, a distribution of $1.76 aggregating
$2,641,139 was declared from net realized gains from securities
transactions. The dividend was payable on December 2, 1996 to
shareholders of record as of November 29, 1996.
NOTE 3 - CAPITAL SHARE TRANSACTIONS
As of June 30, 1997, there were 1,000,000,000 shares of $.001 par
value capital stock authorized of which 200,000,000 shares are
classified as the Fund's series and the balance is unclassified.
As of June 30, 1997, capital paid-in aggregated $21,559,165.
Transactions in shares of capital stock for the years ended June
30, 1997 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Shares Amount
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold 376,369 912,218 $ 6,333,645 $ 16,297,454
Shares issued in
reinvestment of
dividends 152,678 61,981 2,508,498 987,344
-------- ------- ------------ ------------
529,047 974,199 8,842,143 17,284,798
Shares redeemed 541,389 106,734 8,797,200 1,715,399
-------- ------- ------------ ------------
Net increase/(decrease) (12,342) 867,465 $ 44,943 $ 15,569,399
-------- ------- ------------ ------------
-------- ------- ------------ ------------
</TABLE>
NOTE 4 - SECURITIES TRANSACTIONS
Cost of purchases and sales of securities (excluding short-term
obligations) aggregated $63,693,444 and $66,455,371,
respectively, for the year ended June 30, 1997. The cost of
securities for financial statement and income tax purposes was
$16,822,485 at June 30, 1997. Net loss on investments in
securities for the year ended June 30, 1997 was $1,850,589 for
financial statement and income tax purposes. All security
transactions were in long transactions. As of June 30, 1997, the
aggregate unrealized appreciation and depreciation of securities
was as follows:
Unrealized appreciation $ 5,666,370
Unrealized depreciation (493,943)
-------------
Net unrealized appreciation $ 5,172,427
-------------
-------------
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (Advisory
Agreement) with Insight Capital Management, Inc. (Advisor) to act
as its investment advisor. The Advisor also serves as investment
advisor to certain private accounts. The Advisor's only previous
experience in advising a mutual fund is advising the Fund. The
Advisor provides the Fund with investment advice and
recommendations consistent with the Fund's investment objective,
policies and restrictions, and supervises the purchase and sale
of investment transactions on behalf of the Fund. For such
services, the Advisor receives an annual fee of 1.0% of the
Fund's average daily net assets, computed daily and paid on a
monthly basis.
The Fund has an Administration Agreement with Dominion
Institutional Services Corporation (Administrator). Pursuant to
the Administration Agreement, and subject to the authority of the
board of directors of the Fund, the Administrator is responsible
for the administration of the Fund and overall management of the
Fund's business affairs. The Administrator provides all services
required to carry on the Fund's general administrative and
corporate affairs. These services include furnishing all
executive and managerial personnel, office space and equipment,
and providing federal and state regulatory compliance. For its
services, the Administrator receives an annual fee of 1.25% of
the Fund's average daily net assets, computed daily and paid on a
monthly basis.
The Fund has a Distribution Agreement with Dominion Capital
Corporation (Distributor). Pursuant to the Distribution
Agreement, the Distributor performs services and bears the
expenses relating to the offering of Fund shares for sale to the
public. As compensation for the services provided and expenses
borne by the Distributor, the Fund pays the Distributor the sales
charges. Sales charges for distributing fund shares were
$115,746 for the year ended June 30, 1997.
During the year ended June 30, 1997, all orders for the Fund's
securities transactions were placed through the Distributor, and
it is expected that the Advisor will continue to place such
orders with the Distributor. Commissions charged by Distributor
for executing security transactions were $371,206 for the year
ended June 30, 1997.
Certain directors and officers of the Company are also directors,
officers and/or employees of the Administrator and the
Distributor.
<PAGE>
DOMINION INSIGHT GROWTH FUND
ANNUAL REPORT
JUNE 30, 1997
Officers
--------
Douglas W. Powell
Chairman and Chief Executive Officer
C. Dewey Elliott, III
President
Directors
---------
Douglas W. Powell
C. Dewey Elliott, III
Robert H. Spiro, Jr.
Peter R. Goldschmidt
Allen B. Clark, Jr.
Investment Advisor
------------------
Insight Capital Management, Inc.
1656 North California Blvd., Suite 300
Walnut Creek, CA 94696
Administrator
-------------
Dominion Institutional Services Corporation
5000 Quorum Dr., Suite 620
Dallas, TX 75240
Distributor
-----------
Dominion Capital Corporation
5000 Quorum Dr., Suite 620
Dallas, TX 75240
Custodian
---------
May Financial Corporation
8333 Douglas Ave., Suite 400
Dallas, TX 75225
Transfer Agent
--------------
Fund Services, Inc.
1500 Forest Avenue, Suite 111
Richmond, VA 23229
Independent Auditors
--------------------
Kinder & Wyman, P.C.
Certified Public Accountants
511 E. John Carpenter Freeway
Suite 200
Irving, TX 75062
Legal Counsel
-------------
Frederick C. Summers, III
A Professional Corporation
Attorney at Law
1400 St. Paul Place
750 N. St. Paul Street
Dallas, TX 75201
