<PAGE>
DOMINION INSIGHT GROWTH FUND
ANNUAL REPORT
JUNE 30, 1998
DOMINION INSIGHT GROWTH FUND
A SERIES OF DOMINION FUNDS, INC.
- -------------------------------------------------------------------------------
To Our Shareholders:
The 1997-1998 fiscal year came to a close with the FUND posting a 15% return.
While modest compared to some of the hype one may have seen or heard in the
various media, the return is significant for several reasons. First, the
fund posted this return when the broad market has been experiencing a
downward trend. There are many analysts now saying that the market has
actually been in somewhat of a decline. They point to the fact that the
narrowly defined market--the handful of stocks driving some of the market
indices that get all the press--is really the exception rather than the rule.
The stocks that make up the Russell 2000 small cap index are a good example.
The Russell 2000 is down 18% from its April peak, which some see as a rather
"bearish" signal.
Second, it is significant that the FUND posted a positive return while
positioning itself to do well when small caps come back into favor. This
represents, I believe, long term wisdom on the part of our portfolio manager,
Jim Collins. While the world watched the Dow to see how high it would go,
undervalued stocks were left behind to be purchased by seasoned portfolio
managers with patience to weather the current volatility in small caps and
the frenzy over large caps.
We continue to have faith in Mr. Collins' savvy, and therefore we continue to
suggest a long-term approach for our investors. Once again, we recommend
dollar cost averaging as a central part of that long-term approach.
August 25, 1998 Brian E. White
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, 1998
<TABLE>
<CAPTION>
Market Percent of
COMMON STOCKS Shares Value Total Assets
- ------------- ------ ----------- ------------
<S> <C> <C> <C>
Banks - Major Regional
National Comm Bancorp 8,700 $ 364,312 1.84%
----------- -----
Broadcast-Media
Clear Channel Comm (a) 6,700 731,137 3.70
Tele-Comm A (a) 14,200 545,813 2.76
----------- -----
1,276,950 6.46
----------- -----
Commercial Services - Telephone
Century Tel Enterprises 16,500 756,938 3.83
----------- -----
Communication - Equipment
QWEST Comm (a) 9,800 341,775 1.73
Tellabs, Inc (a) 8,500 608,812 3.08
----------- -----
950,587 4.81
----------- -----
Computers - Hardware
Dell Computer (a) 9,700 900,281 4.55
Network Appliance Inc (a) 10,500 408,844 2.07
----------- -----
1,309,125 6.62
----------- -----
Computers - Software/Services
Aspect Development (a) 9,300 703,312 3.56
Compuware Corp (a) 16,800 858,900 4.34
Datastream International (a) 27,000 514,688 2.60
Documentum Inc (a) 8,800 422,400 2.14
HBO & Co 26,000 916,500 4.64
Legato Systems Inc (a) 15,000 585,000 2.96
Timberline Software 15,000 353,438 1.79
----------- -----
4,354,238 22.03
----------- -----
Computers - Peripheral
FileNet Corp (a) 21,800 629,475 3.18
----------- -----
Entertainment
Royal Caribbean Cruises 6,600 524,700 2.65
----------- -----
Financial - Consumer Finance
Doral Financial Corp (a) 36,000 630,000 3.19
Providian Corp 5,600 439,950 2.23
----------- -----
1,069,950 5.42
----------- -----
Financial - Diverse
Capital One Financial 6,100 757,544 3.83
Healthcare Financial Partners (a) 16,800 1,030,050 5.21
----------- -----
1,787,594 9.04
----------- -----
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
INVESTMENTS IN SECURITIES
JUNE 30, 1998
<TABLE>
<CAPTION>
Market Percent of
COMMON STOCKS (CONTINUED) Shares Value Total Assets
- ------------------------- ------ ----------- ------------
<S> <C> <C> <C>
Healthcare - Drugs Major
Watson Pharmaceuticals (a) 14,100 $ 658,294 3.33%
----------- -----
Healthcare - Medical Products &
Supply Akron Inc (a) 42,800 321,000 1.62
----------- -----
Healthcare - Specialized Services
Lincare Holdings (a) 15,400 647,762 3.28
Medquist Inc (a) 26,800 773,850 3.91
----------- -----
1,421,612 7.19
----------- -----
Oil & Gas - Drill & Equipment
Core Laboratories (a) 11,000 237,875 1.20
----------- -----
Retail - Apparel
Tarrant Apparel Group (a) 25,000 471,875 2.39
----------- -----
Retail - General Merchandise
Linens 'N Things (a) 20,000 611,250 3.09
----------- -----
Retail - Specialty
Office Depot (a) 13,500 426,094 2.16
----------- -----
Services - Advertising/Marketing
Abacus Direct Corp (a) 7,300 379,144 1.92
----------- -----
Textiles - Apparel
DM Management (a) 13,800 495,075 2.50
----------- -----
Transportation - Airlines
Atlantic Coast Airlines (a) 21,000 630,000 3.19
----------- -----
Waste Management
KTI Inc (a) 20,500 443,312 2.24
----------- -----
Total Investments in Securities
(cost $15,574,814) $19,119,400 96.71%
----------- -----
----------- -----
</TABLE>
NOTE:
(a) Presently non-income producing.
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value $19,119,400
(identified cost $15,574,814)
Cash 414,110
Receivables
Investment securities sold 220,870
Capital shares sold 12,397
Dividends and interest 2,525
-----------
TOTAL ASSETS 19,769,302
-----------
LIABILITIES
Accrued investment advisory fee 15,393
Accrued administrative fee 19,084
Payable for investment securities purchased 484,325
-----------
TOTAL LIABILITIES 518,802
-----------
NET ASSETS $19,250,500
-----------
-----------
Capital shares outstanding 1,096,264
-----------
-----------
Net asset value and offering price per share
Net asset value per share $ 17.56
-----------
-----------
Offering price per share $ 18.20
-----------
-----------
</TABLE>
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, 1998
<TABLE>
<S> <C>
INVESTMENT LOSS
Investment income
Dividends $ 13,825
Interest 24,924
-----------
Total investment income 38,749
-----------
Expenses
Investment advisory fee 228,902
Administrative fee 286,128
Amortization 6
-----------
Total expenses 515,036
-----------
Net investment loss (476,287)
-----------
REALIZED GAIN AND UNREALIZED DEPRECIATION ON INVESTMENTS
Net realized gain on investments in securities 5,494,226
Net change in unrealized appreciation
of investments in securities (1,627,841)
-----------
NET GAIN ON INVESTMENTS 3,866,385
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 3,390,098
-----------
-----------
</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 YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CHANGE IN NET ASSETS FROM OPERATIONS
Net investment loss $ (476,287) $ (517,364)
Net realized gain (loss) on investments 5,494,226 (2,607,737)
Net change in unrealized appreciation (1,627,841) 757,148
------------ ------------
Net increase (decrease) in net
assets resulting from operations 3,390,098 (2,367,953)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gains on investments (735,148) (2,641,139)
CAPITAL SHARE TRANSACTIONS - NET (6,348,480) 44,943
------------ ------------
Total decrease in net assets (3,693,530) (4,964,149)
NET ASSETS
Beginning of year 22,944,030 27,908,179
------------ ------------
End of year (including undistributed
investment loss of $1,656,174
and $1,179,887, respectively) $ 19,250,500 $ 22,944,030
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DOMINION INSIGHT GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1998 1997 1996 1995 1994
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (1):
Net asset value, beginning of period $ 15.79 $ 19.04 $ 13.53 $ 10.24 $ 10.97
-------- -------- -------- -------- ---------
Income (loss) from investment operations:
Net investment loss (0.37) (0.33) (0.34) (0.24) (0.24)
Net realized and unrealized gain
(loss) on investments 2.71 (1.16) 7.39 4.33 (0.49)
-------- -------- -------- -------- ---------
Total income (loss) from investment
operations 2.34 (1.49) 7.05 4.09 (0.73)
-------- -------- -------- -------- ---------
Less distributions:
Distributions from net realized gains (0.57) (1.76) (1.54) (0.80) -
-------- -------- -------- -------- ---------
Net asset value, end of period $ 17.56 $ 15.79 $ 19.04 $ 13.53 $ 10.24
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Total return (2) 15.00% (8.21%) 54.32% 42.25% (6.65%)
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 19,251 $ 22,944 $ 27,908 $ 8,089 $ 6,271
Ratio of expenses to average
daily net assets 2.25% 2.30% 2.31% 2.38% 2.37%
Ratio of net investment loss to
average net assets 2.08% 2.04% 2.03% 2.16% 2.01%
Portfolio turnover rate 273.25% 261.05% 172.87% 210.23% 140.87%
Average brokerage commission rate for
the underlying portfolio (3) $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
</TABLE>
(1) Per share information has been calculated using the average number of
shares outstanding.
(2) Sales load is not reflected in total return.
(3) 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.
<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 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
net 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
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, plus one day. Realized security gains and losses
from security transactions are reported on an identified cost basis.
Dividend income is recognized on the ex-dividend date, and interest
income is recognized 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, 1998, the interest rate was
4.75%
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 gains on investments, to its shareholders. Therefore, there
is no provision for income or excise taxes.
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, 1998, 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.
NOTE 2 - DISTRIBUTION TO SHAREHOLDERS
On December 2, 1997, a distribution of $.57 aggregating $735,148 was
declared from net realized gains from securities transactions. The
dividend was payable on December 2, 1997 to shareholders of record as
of December 1, 1997.
At June 30, 1998, the Fund had undistributed net realized gains of
$2,151,402.
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CAPITAL SHARE TRANSACTIONS
As of June 30, 1998, 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; the balance is unclassified. As of
June 30, 1998, capital paid-in aggregated $15,210,686.
Transactions in shares of capital stock for the years ended June 30,
1998 and June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Shares Amount
------------------------------ ---------------------------------
1998 1997 1998 1997
-------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 84,898 376,369 $ 1,516,177 $ 6,333,645
Shares issued in
reinvestment of
dividends 41,935 152,678 699,897 2,508,498
-------- ------- ----------- -----------
126,833 529,047 2,216,074 8,842,143
Shares redeemed 483,748 541,389 8,564,554 8,797,200
-------- ------- ----------- -----------
Net increase/(decrease) (356,915) (12,342) $(6,348,480) $ 44,943
-------- ------- ----------- -----------
-------- ------- ----------- -----------
</TABLE>
NOTE 4 - SECURITIES TRANSACTIONS
Cost of purchases and sales of securities (excluding short-term
obligations) aggregated $60,371,151 and $61,618,818, respectively, for
the year ended June 30, 1998. The cost of securities for financial
statement and income tax purposes was $15,574,814 at June 30, 1998.
Net gain on investments in securities for the year ended June 30, 1998
was $3,866,385 for financial statement and income tax purposes. All
security transactions were in long transactions. As of June 30, 1998,
the aggregate unrealized appreciation and depreciation of securities
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 3,991,083
Unrealized depreciation (446,497)
-------------
Net unrealized appreciation $ 3,544,586
-------------
-------------
</TABLE>
<PAGE>
DOMINION INSIGHT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INVESTMENT ADVISORY FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has an Investment 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 for distributing fund shares.
Sales charges were $23,718 for the year ended June 30, 1998.
During the year ended June 30, 1998, all orders for the Fund's
securities transactions were placed through the Distributor.
Commissions charged by the Distributor for executing security
transactions were $394,547 for the year ended June 30, 1998.
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
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - SUBSEQUENT EVENTS
The Fund terminated its distribution agreement with Dominion Capital
Corporation (DCC) in July 1998. The Fund then entered into a
distribution agreement with Northstar Securities, Inc. with
substantially the same conditions and terms as the distribution
agreement with DCC.
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors of
Dominion Insight Growth Fund
We have audited the accompanying statement of assets and liabilities of
Dominion Insight Growth Fund, including the schedule of investments in
securities, as of June 30, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of June 30, 1998, by correspondence with
the custodian and broker. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dominion Insight Growth Fund as of June 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ KINDER & WYMAN, P.C.
KINDER & WYMAN, P.C.
Irving, Texas
July 15, 1998
<PAGE>
DOMINION INSIGHT GROWTH FUND
ANNUAL REPORT
JUNE 30, 1998
OFFICERS
Brian E. White
President
DIRECTORS
Robert H. Spiro, Jr.
Peter R. Goldschmidt
Allen B. Clark, Jr.
INVESETMENT ADVISOR
Insight Capital Management, Inc.
1656 North California Blvd., Suite 300
Walnut Creek, CA 94596
ADMINISTRATOR
Dominion Institutional Services Corporation
5000 Quorum Dr., Suite 620
Dallas, TX 75240
DISTRIBUTOR
Northstar Securities, Inc.
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 North St. Paul Street
Dallas, TX 75201
