<PAGE>
DOMINION INSIGHT GROWTH FUND
SEMI-ANNUAL REPORT
DECEMBER 31, 1997
Dominion Insight Growth Fund
A SERIES OF DOMINION FUNDS, INC.
- --------------------------------------------------------------------------------
To Our Shareholders:
Enclosed is the semi-annual report for the Fund.
This year's stock market was the most volatile in terms of daily price
movement since 1987. Particularly volatile were the stocks on the OTC
market. Early in the year, concerns over the Federal Reserve increasing
short-term interest rates caused most stocks to fall. As those fears
subsided, stocks did extremely well. Then, of course, problems in Asia
caused widespread selling during the fourth quarter as investors grew nervous
about possibly slowing earnings from companies doing business in the region.
The market overreacted during this time, leaving numerous attractive
investment opportunities among aggressive growth stocks. And due to tax
related selling, this pressure lasted through December 31.
There is reasonably high probability that 1998 will be exceptional
among growth stocks. One of the main reasons is that valuations are very
attractive. Analysts estimate the Russell 2000 index of
smaller-capitalization companies are expected to grow earnings by over 31% in
1998. Likewise, estimates for the stocks in the Fund are expected to
increase by more than 35% over the next 12 months. Meanwhile, these stocks
are trading with price-to-earnings (P/E) ratios below that of their growth
rates. This is a very attractive combination, especially when compared to
that of the S&P 500. The S&P 500 is selling at a P/E ratio of nearly 20
times next year's earnings, while earnings are expected to grow at less than
half that rate.
Dollar cost averaging has proved its value this past eighteen months.
Thank you for your confidence in the Fund.
/s/ Douglas W. Powell /s/ C. Dewey Elliott, III
----------------------- -------------------------
December 31, 1997 Douglas W. Powell C. Dewey Elliott, III
Chairman of the Board President
CEO
<PAGE>
DOMINION INSIGHT GROWTH FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
Common Stocks - 96.72%
- ----------------------
<TABLE>
Shares Value
------ -----
<S> <C> <C>
Banks-2.54%
Bank of Commerce 23,500 $528,050
Comml Services-Misc.--8.78%
Labor Ready Inc.* 28,300 544,775
SOS Staffing Svcs Inc.* 24,400 460,550
Staffmark Inc.* 25,800 815,925
Comml Services Printing--2.94%
Consolidated Graphics* 13,100 610,788
Comml Services Security/Safety--2.79%
Transcrypt Intl. Inc.* 23,300 579,588
Computer-Memory Device--2.18%
MTI Tech Corp.* 34,200 453,150
Computer-Mini/Micro--10.9%
Compaq Computer* 11,800 665,963
Dell Computer* 19,000 1,596,000
Computer-Service--6.46%
Mindspring Enterprises* 18,000 605,250
System & Comp. * 14,800 734,450
Computer-Software--7.59%
Compuware Corp.* 27,000 864,000
Legato Systems Inc.* 16,200 712,800
Cosmetics/Personal Care--2.23%
Rexall Sundown Inc.* 15,300 461,869
Elec-Semiconductor Equipment--5.76%
Applied Materials* 19,000 572,375
Orbotech Ltd.* 19,500 621,563
Elec-Semiconductor Mfg.--2.49%
Semtech Corp.* 13,200 516,450
Financial Services Misc.--2.17%
Healthcare Fincl Partners* 12,700 450,850
Food-Dairy Product--2.53%
Suiza Foods Corp.* 8,800 524,150
Leisure-Service--2.08%
Steiner Leisure Ltd.* 14,000 432,250
</TABLE>
<PAGE>
DOMINION INSIGHT GROWTH FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
Common Stocks - (continued)
- ---------------------------
<TABLE>
Shares Value
------ -----
<S> <C> <C>
Leisure Toys/Games/Hobbies--5.03%
Radica Games Ltd.* 34,500 534,750
THQ Inc.* 22,100 508,300
Medical-Instrument--2.35%
Arterial Vascular Engr.* 7,500 487,500
Medical-Product--6.67%
Guidant Corp.* 6,500 404,625
Osteotech Inc.* 19,500 531,375
Safeskin Corp.* 7,900 448,325
Office Supplies Mfg.--3.03%
Mail-Well Inc.* 15,500 627,750
Oil & Gas-Field Service--1.91%
BJ Services Co.* 5,500 395,656
Pollution Control-Services--2.36%
Allied Waste Industries* 21,000 489,563
Real Estate Operation--2.02%
Fairfield Communities* 9,500 419,188
Retail-Home Furnishing--2.1%
Linens N Things Inc.* 10,000 436,250
Retail-Supermarket--2.09%
Wild Oats Markets* 12,000 432,750
Retail/Wholesale Computer--3.41%
CompUSA Inc.* 22,800 706,800
Telecommunications-Equipment--4.32%
Alpine Group* 23,500 440,625
Tekelec* 15,000 457,500
-------
Total Investments in Securities--96.72% $20,071,750
-----------
-----------
Cost--$17,218,855
</TABLE>
Note: *Presently not paying dividend income.
Percentage of investments as shown is the ratio of the total market value
to total net assets.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value $ 20,071,750
(identified cost of $17,218,855)
Cash 168,078
Receivables
Capital shares sold 17,147
Dividends 3,413
Interest 1,782
Portfolio transactions 529,206
------------
TOTAL ASSETS 20,791,376
------------
LIABILITIES
Payables
Administrative fee 21,961
Investment advisory fee 17,745
------------
TOTAL LIABILITIES 39,706
------------
NET ASSETS $ 20,751,670
------------
------------
Shares Outstanding 1,325,590
Net asset value and offering price per share
Net asset value per share 15.66
Offering price per share 16.22
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 4,222
Interest 12,116
-----------
Total Investment Income 16,388
-----------
EXPENSES
Investment advisory fee 124,762
Administrative fee 155,952
Amortization 6
-----------
Total Expenses 280,720
-----------
Net Investment Loss (264,382)
-----------
REALIZED GAIN AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain on investments in securities 3,534,772
Net change in unrealized appreciation of
investments in securities (2,319,532)
-----------
Net gain on investments 1,215,240
-----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 950,858
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
CHANGE IN NET ASSETS FROM OPERATIONS
<S> <C>
Net investment loss $ (264,382)
Net realized gain on investments 3,534,722
Change in unrealized appreciation (2,319,532)
------------
Net increase in net assets from operations 950,858
CAPITAL SHARE TRANSACTIONS (2,408,069)
SHAREHOLDER DISTRIBUTIONS (735,148)
------------
Total Decrease (2,192,359)
NET ASSETS
Beginning of period 22,944,029
------------
END OF PERIOD $20,751,670
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
Six Months Ended Year Ended
12/31/97 6/30/97
(unaudited)
(1)(2) (2)
<S> <C> <C>
Per share income and capital changes
for a share outstanding during the period:
Net asset value, beginning of period $ 15.79 $ 19.04
-------- --------
Income from investment operations:
Net investment loss (0.20) (0.33)
Net realized and unrealized gain
(loss) on investments 0.64 (1.16)
-------- --------
Total income (loss) from
investment operations 0.44 (1.49)
-------- --------
Less distributions:
Distributions from net realized gains (0.57) (1.76)
-------- --------
Net asset value, end of period $ 15.66 $ 15.79
-------- --------
Total return (3) (4) 5.12% (8.21%)
-------- --------
-------- --------
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) $ 20,752 $ 22,944
Ratio of expenses to average net assets 2.25% 2.30%
Ratio of net investment loss to average
net assets 1.06% 2.04%
Portfolio turnover rate 135% 261.05%
Average brokerage commissions (5) $ 0.10 $ 0.10
</TABLE>
(1) Other than total return, financial highlights have not been annualized.
(2) Per share information has been calculated using the average number of shares
outstanding.
(3) Total return 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 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.
(4) Total return is annualized, and net of capital gains distribution, if any.
(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 statements.
<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 (the "Fund") is a separate series of
shares of common stock of Dominion Funds, Inc. (the "Company"). The
Company was incorporated in the State of Texas on June 5, 1992.
The Company is registered under the Investment Company Act of 1940
as a diversified, open-end management investment company. 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.
Security Valuation
Investments in securities traded on a national securities exchange
(or reported on the NASDAQ national market) are stated at the last
reported sales price on the day of valuation; other securities
traded in the over-the-counter market and listed securities for
which no sale was reported on that date are stated at the last
quoted bid price. Other securities for which quotations are not
readily available are valued at fair value as determined by the
Board of Directors.
Security Transactions and Related Investment Income
The Company follows industry practice and records security
transactions on the trade date. Dividend income is recognized on
the ex-dividend date, and interest income is recognized on an
accrual basis. Realized security gains and losses are reported on
an identified cost 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 December 31, 1997, the interest
rate was 4.75%.
Income Taxes
The Fund intends to qualify, under the Internal Revenue Code, as a
regulated investment company and if so qualified, will not have to
pay federal income taxes to the extent its taxable net income is
distributed. On a calendar year basis, the Fund is subject to a 4%
federal excise tax to the extent it does not distribute
substantially all of its net investment income and realized gains,
if any.
Net investment income, net realized gains and the cost of
investments in securities may differ for financial statement and
tax purposes because of book-to-tax differences. The character of
distributions from net investment income or net realized gains may
therefore differ form their ultimate characterization for federal
income tax purposes. At December 31, 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.
Income and Capital Gains Distributions
It is the policy of the Fund to generally pay annual distributions
from net investment income and make distributions of any realized
capital gains as required by law. These dividends are recorded on
the ex-dividend 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 - CAPITAL SHARE TRANSACTIONS
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
Transactions in capital stock for the six months ended December 31,
1997 were as follows:
<TABLE>
Shares Amount
------ ------
<S> <C> <C>
Shares sold 62,260 $ 1,128,007
Shares issued in reinvestment
of dividends 41,935 699,897
-------- -----------
104,195 1,827,904
Shares redeemed 231,784 4,235,973
-------- -----------
Net decrease (127,589) $(2,408,069)
-------- -----------
-------- -----------
</TABLE>
Note 3 - DISTRIBUTION TO SHAREHOLDERS
On November 29, 1997, a distribution of $.57 aggregating $735,148
was declared from net realized gains from investment transactions.
The dividend was paid on December 2, 1997, to all shareholders of
record on November 29, 1997.
Note 4 - INVESTMENT TRANSACTIONS
Purchases of investment securities and sales of investment
securities (excluding short-term securities) for the six months
ended December 31, 1997 were $28,789,097 and $31,972,499,
respectively, for common stocks. The cost of securities for federal
income taxes is the same as that shown in the schedule of
investments. Net gain on investments for the six months ended
December 31, 1997, was $1,215,240. All security transactions were
in long transactions. As of December 31, 1997, the aggregate gross
unrealized appreciation and depreciation of securities was as
follows:
Unrealized appreciation $ 3,629,633
Unrealized depreciation (776,738)
-----------
Net unrealized appreciation $ 2,852,895
-----------
-----------
<PAGE>
DOMINION INSIGHT GROWTH FUND
Notes to Financial Statements
Note 5 - INVESTMENT ADVISORY FEES AND OTHER AGREEMENTS AND TRANSACTIONS WITH
AFFILIATES
The Fund has an Investment Advisory Agreement (the "Advisory
Agreement") with Insight Capital Management, Inc. (the "Advisor")
to act as its investment advisor. The Advisor also serves as
investment advisor to certain private accounts. The Advisor
provides the Fund with investment advice and recommendations for
the Fund consistent with its investment objective, policies and
restrictions, and supervises the purchase and sale of security
transactions on behalf of the Fund, including the negotiation of
commissions and the allocation of principal business and portfolio
brokerage. 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 (the "Administrator"). Pursuant
to the Administration Agreement, and subject to the authority of
the Board of Directors of the Company, 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 entered into a Distribution Agreement with Dominion
Capital Corporation (the "Distributor") pursuant to which 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
received by the Distributor for Fund shares sold for the six months
ended December 31, 1997 were approximately $20,000.
During the six months ended December 31, 1997, all orders for the
Fund's portfolio securities transactions were placed through the
Distributor, and it is expected that the Advisor will continue to
place such orders with the Distributor. Commissions received by
the Distributor for executing portfolio transactions for the six
months ended December 31, 1997 were approximately $193,000.
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
SEMI-ANNUAL REPORT
DECEMBER 31, 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
