[BONNEL GROWTH FUND LETTERHEAD]
January 29, 1996
Dear Investor,
I hope you enjoyed the recent ISI Conference in Orlando. It was a pleasure for
me to have the opportunity to tell you about my fund, the Bonnel Growth Fund. It
was my intention to provide you with some helpful information regarding
investing in growth stocks and funds, and I hope that I was able to do that.
1995 was a fabulous year for most growth fund managers, as many of us were able
to bring our shareholders exceptional asset growth. With a new year underway,
it's time to uncover unique opportunities and prepare for new challenges. Below,
I'd like to share a few points that you may want to consider as you position
your portfolio to take advantage of the investment opportunities that 1996 may
bring us.
Sincerely,
/s/ Arthur J. Bonnel
Arthur J. Bonnel
Portfolio Manager
1996: BUILDING A BASE FOR FUTURE HIGHS
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As we enter the new year, most investors are wondering if the market will repeat
its 1995 performance. The answer is very simple: "No." However, years like 1995
help to give the market its average growth rate of 10+% compounded. As most
investors may remember, 1994 was not a good year. So along came 1995, and we are
back on track.
WHAT DOES THIS MEAN FOR 1996? For one thing, it is an election year. As we
all know, election years tend to be good market years because politicians want
to be re-elected.
But just because this is "supposed" to be a good year doesn't mean the
market will go straight up. And, in fact, it would be best for the market to
consolidate around its current levels (5000 to 5200 on the Dow). This could give
the market a base from which a new bull run could be launched to new highs.
EARNINGS SHOULD BE GOOD THIS YEAR. This will help the Bonnel Growth Fund
continue to produce respectable gains during the year. The objective of the Fund
is to invest in growing companies; if earnings do grow, then the Fund should be
able to participate in a favorable manner. To expect to repeat the 45% return
from last year would be asking too much . . . but we are nevertheless looking
forward to a positive year.
During 1995, technology stocks were the best investment bets. In 1996,
different industries will more likely lead the way. Health care seems to be
coming back into focus, along with oils and retailers. And technological end
users will benefit as computer equipment prices drop, making products more
accessible.
Technology's price reductions will continue to hold down inflation, thus
keeping down interest rates. As long as the Federal Reserve does not attempt to
raise interest rates, the market should provide a respectable return.
As always, one must focus on the long term. "Next year" is not long term,
and we are extremely optimistic over the next five to ten years. If this year or
the next is down, it should be viewed as a buying opportunity not as a reason to
panic. Demographics will be the driving force over the next decade, and
quarter-to-quarter fluctuations are just that: fluctuations. Investors should
continue to invest in quality growth issues, not trying to be "in" on the latest
hot issue.
As of year end, there were over 100 different companies and more than 60
different industries represented in the Bonnel Growth Fund portfolio. The
largest holding was Seagate Technology, comprising 2.4% of the Fund. The next
largest was Cognex, which represented 1.9% of the Fund. Total assets were $37.7
million, with $36.6 million in stocks (or 97.1%) and only $0.3 million in cash
(or 0.7%). The Fund ended the year up 45.2%, versus 26.2% for the Russell 2000.
P.S. If you would like to receive a prospectus for the Bonnel Growth Fund, which
also includes charges and expenses, simply call 1-800-4-BONNEL (1-800-426-6635)
and talk to one of our investor representatives. You can also return the
postage-paid reply card and an Investment Kit will be sent to you. Please read
the prospectus carefully before you invest.
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Investment returns and principal value may vary, and you may have a gain or loss
when you sell shares. Past performance is no guarantee of future results. Period
ended 12/31/95, 1 year, 45.2%. Life of the Fund, 10/17/94-12/31/95, 37.65%.
7900 Callaghan Road
Mail Address: P. O. Box 781234, San Antonio, TX 78278-1234
Tel (210) 308-1234 1-800-4-Bonnel Fax (210) 308-1220 E-mail: [email protected]
