ACCOLADE FUNDS
BONNEL GROWTH FUND
ANNUAL REPORT
SEPTEMBER 30, 1996
TABLE OF CONTENTS
PAGE
Management's Discussion of Fund Performance 2
Portfolio of Investments in Securities 5
Statement of Assets and Liabilities 9
Statement of Operations 10
Statement of Changes in Net Assets 11
Notes to Financial Statements 12
Report of Independent Accountants 20
<PAGE>
Management's Discussion of Fund Performance
September 30, 1996
This past year has been a good one for both the stock market and the Bonnel
Growth Fund ("Fund"). For the one year period ended September 30, 1996 the Fund
was up 21.27% vs. +20.21% for the S&P 500 and +13.31% for the Russell 2000
index. Part of the reason for this positive performance has been the steady
interest rate environment provided by the Federal Reserve Board. This of course
is an election year and historically the market does well during these years. It
also is quite remarkable how stable the economy has been. There has been a
steady demand for technology including networking equipment and computers in
general. Retailing this year has been brisk as compared to prior years with many
retailers reporting strong earnings growth. We are also pleased to report that
the Fund has shown very positive asset growth. Last year the Fund had $25.1
million in investments. As of September 30, 1996 the investments have grown to
$90.8 million, a 262% increase. This is very positive for you, the shareholder,
since fixed costs spread out over a larger asset base reduces the expense ratio
of the Fund.
The Fund has a high weighting of technology, retailing and healthcare issues. We
seek out companies which, in our opinion, have strong growth potential and
because of that we keep coming up with these types of issues. One issue which
has treated us well is Sears, Roebuck and Co. (S-NYSE). The Fund has held this
company since April 1995. The Fund received the Allstate spin-off and the stock
of Sears is near its yearly high. Merck & Co. (MRK-NYSE) has been in the
portfolio since October 1995. It also is doing well and the prospects look good
because of the aging of the U.S. population. Then of course there is technology.
One of our biggest winners this year was Iomega (IOMG-NASDAQ). This company was
initially purchased in January of this year for under $10 a share (after
adjusting for a 3-for-1 and a 2-for-1 stock split) and then later was gradually
sold.
It is easy and fun to discuss the big up movers, but the Fund looks at most
industries in an effort to capitalize on what we believe are undervalued
situations. As an example, we initially purchased some shares of Safeway
(SWY-NYSE) in April 1996 at a little over $31. Grocery store chains by most
definitions are not considered glamour stocks. This stock on September 30th, was
over $42. In a little over 5 1/2 months this company's stock appreciated 35%.
(We recently liquidated our position in Safeway because it no longer fit the
growth pattern for which we are looking.) These examples are not
recommendations, but are being presented to help give investors an idea about
the Fund, and what has happened. On the other hand, not every stock went up for
us. As an example, Zero Corp (ZRO-NYSE) was purchased in May at a little over
$20 and sold in September for as low as $18. This is a loss of more than two
points or over 10% in a four month time period.
- --------------------------------------------------------------------------------
2
<PAGE>
It would be nice if every stock purchased would go up but that is not the real
world. That is why a mutual fund is such a great way to participate in the stock
market. Diversification! As of September 30, 1996 the Fund held 90 issues in
over 30 different industry classifications.
As most investors know, 1996 has not been easy. The Dow Jones Industrial Average
on May 22nd peaked at 5778.80 then fell to a closing low of 5346.55 on July
23rd. This was a 7.48% loss in two months. The Nasdaq was not so lucky. It
peaked on June 5th at 1249.15 and fell to 1042.37 on July 24th. This was a
16.55% decline. As of September 30th, the Dow Jones Industrials have hit a new
high and the Nasdaq is approaching its old high. There is a saying "These are
the times that try men's souls". The May to July correction did just that. Last
year I mentioned that investors should not be surprised to see a 5% or so
correction and investors should take advantage of it to purchase more stocks and
mutual funds. I continue to feel that way. These are opportunities which will
come out of nowhere and market gurus will say it is the beginning of the end. It
will not be.
What will the new year for the Fund bring to investors? I feel very good about
the stock market but must caution investors not to expect returns to be above
20%. There will be 5% corrections, there will be 10% or more corrections. But as
the semi-annual report stated, "The true genius to investing is recognizing the
direction of the trend and not trying to pick market tops and bottoms. We
believe that the Dow Jones Industrials will reach 20,000 by the year 2007." We
still feel the same.
The Fund is going to continue to seek out companies with above average earnings
growth. The market's tremendous advance over the past 5 years leaves room for
some turbulence over the short term. The fundamentals for the economy and the
companies we seek out gives us reason to be very optimistic about both the stock
market and the Fund.
Thank you very much for your support this past year. You have a large choice of
funds from which to choose and we appreciate the opportunity to help you achieve
your financial goals.
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
Bonnel
Growth
Fund S&P 500 Russell 2000
------ ------- ------------
<S> <C> <C> <C>
10/17/94 ......................10000 10000 10000
10/18/94 ......................10000 9973 9963
10/19/94 ......................10000 10030 9993
10/20/94 ......................10000 9957 9947
10/21/94 ......................10000 9916 9917
10/24/94 ......................10000 9830 9868
10/25/94 ......................10000 9846 9827
10/26/94 ......................10000 9870 9837
10/27/94 ......................10000 9940 9894
10/28/94 ......................10010 10109 10001
10/31/94 ......................10010 10080 10002
11/1/94 .......................10010 9997 9942
11/2/94 .......................10010 9958 9952
11/3/94 .......................10010 9989 9968
11/4/94 .......................10010 9871 9913
11/7/94 .......................10010 9889 9877
11/8/94 .......................10010 9946 9888
11/9/94 .......................10010 9942 9871
11/10/94 ......................10010 9921 9828
11/11/94 ......................10020 9880 9781
11/14/94 ......................10020 9960 9812
11/15/94 ......................10020 9940 9839
11/16/94 ......................10020 9954 9825
11/17/94 ......................10020 9912 9789
11/18/94 ......................10020 9868 9749
11/21/94 ......................10020 9802 9679
11/22/94 ......................10020 9628 9501
11/23/94 ......................10030 9626 9437
11/25/94 ......................10030 9678 9492
11/28/94 ......................10030 9720 9518
11/29/94 ......................10030 9743 9558
11/30/94 ......................10030 9713 9580
12/1/94 .......................10020 9612 9492
12/2/94 .......................10020 9707 9523
12/5/94 .......................10030 9708 9528
12/6/94 .......................10030 9705 9491
12/7/94 .......................10030 9666 9420
12/8/94 .......................10020 9543 9260
12/9/94 .......................10020 9577 9223
12/12/94 ......................10030 9632 9236
12/13/94 ......................10030 9647 9250
12/14/94 ......................10040 9752 9330
12/15/94 ......................10040 9761 9460
12/16/94 ......................10050 9836 9452
12/19/94 ......................10050 9818 9430
12/20/94 ......................10050 9802 9437
12/21/94 ......................10050 9857 9543
12/22/94 ......................10050 9860 9554
12/23/94 ......................10060 9864 9598
12/27/94 ......................10080 9922 9645
12/28/94 ......................10080 9888 9620
12/29/94 ......................10090 9896 9683
12/30/94 ......................10090 9857 9819
1/3/95 ........................10070 9854 9697
1/4/95 ........................10070 9889 9713
1/5/95 ........................10070 9882 9705
1/6/95 ........................10070 9890 9730
1/9/95 ........................10070 9894 9741
1/10/95 .......................10060 9913 9765
1/11/95 .......................10050 9913 9733
1/12/95 .......................10060 9914 9737
1/13/95 .......................10080 10007 9803
1/16/95 .......................10100 10081 9873
1/17/95 .......................10100 10097 9920
1/18/95 .......................10060 10090 9896
1/19/95 .......................10070 10032 9845
1/20/95 .......................10060 9986 9791
1/23/95 .......................10040 10009 9729
1/24/95 .......................10060 10010 9764
1/25/95 .......................10020 10045 9758
1/26/95 ....................... 9970 10065 9730
1/27/95 ....................... 9950 10110 9745
1/30/95 ....................... 9869 10070 9670
1/31/95 ....................... 9859 10112 9682
2/1/95 ........................ 9960 10113 9707
2/2/95 ........................10070 10166 9751
2/3/95 ........................10140 10294 9836
2/6/95 ........................10220 10349 9901
2/7/95 ........................10240 10343 9922
2/8/95 ........................10281 10353 9954
2/9/95 ........................10341 10333 9973
2/10/95 .......................10431 10362 10015
2/13/95 .......................10451 10368 10022
2/14/95 .......................10491 10365 10011
2/15/95 .......................10591 10433 10098
2/16/95 .......................10551 10449 10038
2/17/95 .......................10441 10380 9990
2/21/95 .......................10391 10399 9956
2/22/95 .......................10401 10450 9960
2/23/95 .......................10431 10491 9999
2/24/95 .......................10461 10519 10020
2/27/95 .......................10391 10428 9956
2/28/95 .......................10491 10506 10063
3/1/95 ........................10531 10470 10042
3/2/95 ........................10602 10460 10047
3/3/95 ........................10652 10467 10076
3/6/95 ........................10662 10472 10033
3/7/95 ........................10561 10398 9967
3/8/95 ........................10612 10421 9996
3/9/95 ........................10642 10422 9993
3/10/95 .......................10742 10561 10041
3/13/95 .......................10792 10573 10047
3/14/95 .......................10922 10635 10090
3/15/95 .......................10882 10614 10095
3/16/95 .......................10943 10691 10126
3/17/95 .......................10933 10695 10092
3/20/95 .......................10943 10709 10112
3/21/95 .......................10933 10687 10086
3/22/95 .......................10902 10701 10071
3/23/95 .......................10973 10708 10100
3/24/95 .......................11063 10817 10152
3/27/95 .......................11163 10866 10191
3/28/95 .......................11223 10882 10208
3/29/95 .......................11103 10866 10193
3/30/95 .......................10943 10848 10208
3/31/95 .......................10943 10816 10227
4/3/95 ........................10983 10842 10229
4/4/95 ........................10953 10916 10227
4/5/95 ........................10963 10924 10245
4/6/95 ........................10862 10936 10246
4/7/95 ........................10862 10944 10198
4/10/95 .......................10993 10957 10260
4/11/95 .......................11063 10926 10297
4/12/95 .......................11143 10963 10313
4/13/95 .......................11193 11008 10353
4/17/95 .......................11123 10942 10353
4/18/95 .......................11043 10926 10307
4/19/95 .......................10912 10917 10220
4/20/95 .......................10933 10926 10246
4/21/95 .......................11003 10996 10296
4/24/95 .......................11203 11092 10342
4/25/95 .......................11274 11076 10353
4/26/95 .......................11344 11089 10389
4/27/95 .......................11344 11109 10421
4/28/95 .......................11424 11135 10439
5/1/95 ........................11414 11127 10430
5/2/95 ........................11424 11142 10418
5/3/95 ........................11584 11265 10466
5/4/95 ........................11504 11268 10419
5/5/95 ........................11424 11261 10418
5/8/95 ........................11524 11346 10472
5/9/95 ........................11504 11339 10455
5/10/95 .......................11484 11358 10502
5/11/95 .......................11554 11360 10548
5/12/95 .......................11655 11388 10584
5/15/95 .......................11745 11437 10626
5/16/95 .......................11795 11448 10675
5/17/95 .......................11825 11426 10699
5/18/95 .......................11715 11265 10627
5/19/95 .......................11745 11259 10611
5/22/95 .......................11905 11357 10651
5/23/95 .......................12016 11466 10704
5/24/95 .......................11875 11468 10685
5/25/95 .......................11795 11470 10666
5/26/95 .......................11665 11365 10612
5/30/95 .......................11494 11365 10560
5/31/95 .......................11594 11580 10599
6/1/95 ........................11705 11583 10648
6/2/95 ........................11715 11562 10679
6/5/95 ........................11775 11631 10755
6/6/95 ........................11745 11631 10773
6/7/95 ........................11795 11579 10778
6/8/95 ........................11865 11563 10814
6/9/95 ........................11855 11468 10794
6/12/95 .......................11915 11533 10842
6/13/95 .......................12096 11646 10912
6/14/95 .......................12186 11657 10937
6/15/95 .......................12256 11672 10993
6/16/95 .......................12226 11732 11013
6/19/95 .......................12457 11850 11069
6/20/95 .......................12527 11846 11081
6/21/95 .......................12527 11825 11090
6/22/95 .......................12688 11980 11153
6/23/95 .......................12708 11951 11139
6/26/95 .......................12487 11831 11033
6/27/95 .......................12417 11795 10993
6/28/95 .......................12427 11846 10979
6/29/95 .......................12577 11829 11025
6/30/95 .......................12678 11849 11124
7/3/95 ........................12778 11900 11129
7/5/95 ........................12858 11905 11169
7/6/95 ........................13019 12052 11230
7/7/95 ........................13360 12105 11348
7/10/95 .......................13430 12123 11400
7/11/95 .......................13310 12072 11416
7/12/95 .......................13681 12206 11522
7/13/95 .......................13791 12209 11556
7/14/95 .......................13861 12185 11565
7/17/95 .......................13972 12248 11608
7/18/95 .......................13731 12156 11515
7/19/95 .......................13099 11994 11259
7/20/95 .......................13320 12051 11351
7/21/95 .......................13510 12053 11395
7/24/95 .......................13871 12119 11506
7/25/95 .......................14062 12218 11558
7/26/95 .......................14162 12230 11613
7/27/95 .......................14333 12309 11717
7/28/95 .......................14222 12260 11735
7/31/95 .......................14122 12242 11755
8/1/95 ........................14022 12191 11701
8/2/95 ........................13731 12174 11681
8/3/95 ........................13721 12174 11658
8/4/95 ........................13831 12180 11699
8/7/95 ........................13931 12205 11732
8/8/95 ........................13901 12214 11719
8/9/95 ........................13992 12201 11750
8/10/95 .......................13881 12153 11737
8/11/95 .......................13931 12104 11731
8/14/95 .......................14132 12206 11777
8/15/95 .......................14182 12182 11792
8/16/95 .......................14433 12214 11858
8/17/95 .......................14543 12196 11909
8/18/95 .......................14563 12201 11935
8/21/95 .......................14323 12178 11981
8/22/95 .......................14433 12211 11935
8/23/95 .......................14533 12160 11943
8/24/95 .......................14423 12169 11912
8/25/95 .......................14413 12228 11938
8/28/95 .......................14242 12206 11896
8/29/95 .......................14002 12229 11825
8/30/95 .......................14122 12250 11894
8/31/95 .......................14252 12273 11974
9/1/95 ........................14242 12317 12008
9/5/95 ........................14553 12434 12092
9/6/95 ........................14814 12458 12180
9/7/95 ........................14854 12461 12237
9/8/95 ........................15035 12515 12331
9/11/95 .......................15275 12543 12351
9/12/95 .......................15265 12601 12376
9/13/95 .......................15265 12652 12392
9/14/95 .......................15125 12759 12399
9/15/95 .......................14884 12755 12326
9/18/95 .......................14934 12743 12289
9/19/95 .......................15115 12776 12310
9/20/95 .......................15155 12833 12347
9/21/95 .......................15025 12752 12299
9/22/95 .......................14954 12725 12239
9/25/95 .......................14824 12728 12164
9/26/95 .......................14623 12721 12118
9/27/95 .......................14453 12714 11995
9/28/95 .......................14884 12821 12098
9/29/95 .......................14874 12790 12173
10/2/95 .......................14613 12732 12041
10/3/95 .......................14313 12747 11923
10/4/95 .......................13781 12729 11798
10/5/95 .......................14012 12755 11814
10/6/95 .......................14052 12753 11837
10/9/95 .......................13500 12663 11634
10/10/95 ......................13460 12646 11555
10/11/95 ......................13851 12689 11684
10/12/95 ......................14152 12769 11791
10/13/95 ......................14242 12801 11847
10/16/95 ......................14182 12769 11852
10/17/95 ......................14483 12852 11871
10/18/95 ......................14563 12868 11925
10/19/95 ......................14543 12939 11900
10/20/95 ......................14323 12870 11876
10/23/95 ......................14373 12818 11809
10/24/95 ......................14473 12852 11799
10/25/95 ......................14282 12763 11681
10/26/95 ......................14162 12638 11555
10/27/95 ......................14303 12704 11553
10/30/95 ......................14473 12782 11619
10/31/95 ......................14523 12745 11619
11/1/95 .......................14543 12804 11675
11/2/95 .......................14724 12925 11805
11/3/95 .......................14784 12944 11875
11/6/95 .......................14774 12897 11881
11/7/95 .......................14453 12850 11822
11/8/95 .......................14493 12969 11857
11/9/95 .......................14714 13003 11922
11/10/95 ......................14764 12991 11935
11/13/95 ......................14744 12981 11907
11/14/95 ......................14644 12915 11826
11/15/95 ......................14664 13020 11824
11/16/95 ......................14714 13095 11876
11/17/95 ......................14623 13157 11917
11/20/95 ......................14483 13088 11853
11/21/95 ......................14353 13164 11810
11/22/95 ......................14313 13125 11815
11/24/95 ......................14333 13162 11854
11/27/95 ......................14313 13193 11892
11/28/95 ......................14543 13307 11947
11/29/95 ......................14754 13335 12030
11/30/95 ......................14804 13287 12103
12/1/95 .......................14694 13323 12148
12/4/95 .......................14864 13472 12256
12/5/95 .......................14844 13561 12281
12/6/95 .......................14804 13617 12262
12/7/95 .......................14684 13530 12196
12/8/95 .......................14754 13560 12220
12/11/95 ......................14844 13606 12239
12/12/95 ......................14704 13591 12220
12/13/95 ......................14744 13656 12260
12/14/95 ......................14603 13552 12258
12/15/95 ......................14443 13541 12174
12/18/95 ......................13855 13333 11912
12/19/95 ......................14201 13446 12001
12/20/95 ......................14212 13316 12113
12/21/95 ......................14380 13417 12184
12/22/95 ......................14390 13450 12249
12/26/95 ......................14485 13503 12270
12/27/95 ......................14590 13510 12318
12/28/95 ......................14569 13502 12315
12/29/95 ......................14653 13543 12392
1/2/96 ........................14579 13649 12428
1/3/96 ........................14348 13663 12363
1/4/96 ........................13981 13584 12189
1/5/96 ........................14065 13563 12244
1/8/96 ........................13970 13603 12251
1/9/96 ........................13592 13405 12057
1/10/96 .......................13393 13165 11880
1/11/96 .......................13582 13258 11990
1/12/96 .......................13561 13240 11967
1/15/96 .......................13372 13197 11849
1/16/96 .......................13351 13387 11835
1/17/96 .......................13508 13343 11869
1/18/96 .......................13603 13385 11923
1/19/96 .......................13771 13465 11973
1/22/96 .......................13918 13500 12047
1/23/96 .......................13928 13487 12092
1/24/96 .......................14054 13646 12175
1/25/96 .......................13981 13582 12180
1/26/96 .......................14107 13684 12206
1/29/96 .......................14180 13742 12229
1/30/96 .......................14285 13874 12291
1/31/96 .......................14443 14004 12369
2/1/96 ........................14485 14059 12445
2/2/96 ........................14516 14003 12461
2/5/96 ........................14632 14128 12490
2/6/96 ........................14769 14238 12556
2/7/96 ........................14853 14319 12527
2/8/96 ........................14979 14455 12569
2/9/96 ........................14989 14464 12594
2/12/96 .......................15042 14577 12606
2/13/96 .......................14905 14558 12543
2/14/96 .......................14926 14451 12592
2/15/96 .......................14863 14359 12580
2/16/96 .......................14832 14287 12613
2/20/96 .......................14727 14127 12508
2/21/96 .......................14947 14293 12603
2/22/96 .......................15241 14532 12752
2/23/96 .......................15367 14539 12776
2/26/96 .......................15252 14350 12758
2/27/96 .......................15168 14281 12741
2/28/96 .......................15115 14227 12757
2/29/96 .......................15031 14134 12744
3/1/96 ........................14842 14222 12711
3/4/96 ........................14947 14365 12769
3/5/96 ........................15199 14476 12819
3/6/96 ........................15231 14394 12829
3/7/96 ........................15357 14431 12842
3/8/96 ........................14821 13988 12520
3/11/96 .......................15084 14133 12632
3/12/96 .......................15483 14069 12591
3/13/96 .......................15189 14102 12686
3/14/96 .......................15483 14155 12750
3/15/96 .......................15577 14168 12750
3/18/96 .......................15861 14417 12891
3/19/96 .......................15861 14397 12901
3/20/96 .......................15714 14361 12878
3/21/96 .......................15693 14344 12898
3/22/96 .......................15724 14377 12922
3/25/96 .......................15409 14365 12853
3/26/96 .......................15504 14431 12853
3/27/96 .......................15577 14343 12883
3/28/96 .......................15546 14345 12896
3/29/96 .......................15735 14270 12973
4/1/96 ........................16092 14453 13038
4/2/96 ........................15935 14487 13069
4/3/96 ........................16092 14502 13102
4/4/96 ........................16092 14502 13131
4/8/96 ........................15956 14246 12971
4/9/96 ........................16029 14202 13038
4/10/96 .......................15945 14011 12983
4/11/96 .......................15829 13960 12922
4/12/96 .......................15892 14083 12989
4/15/96 .......................16145 14212 13081
4/16/96 .......................16239 14268 13161
4/17/96 .......................16155 14194 13133
4/18/96 .......................16355 14239 13235
4/19/96 .......................16418 14273 13276
4/22/96 .......................16827 14336 13374
4/23/96 .......................17226 14418 13473
4/24/96 .......................17374 14388 13517
4/25/96 .......................17573 14449 13580
4/26/96 .......................17479 14463 13643
4/29/96 .......................17458 14479 13657
4/30/96 .......................17605 14480 13660
5/1/96 ........................17731 14491 13738
5/2/96 ........................17479 14245 13568
5/3/96 ........................17678 14208 13604
5/6/96 ........................17689 14192 13604
5/7/96 ........................17521 14137 13557
5/8/96 ........................17458 14284 13538
5/9/96 ........................17647 14300 13634
5/10/96 .......................17951 14450 13772
5/13/96 .......................18298 14660 13904
5/14/96 .......................18466 14753 14020
5/15/96 .......................18455 14751 14045
5/16/96 .......................18666 14740 14071
5/17/96 .......................18739 14832 14144
5/20/96 .......................18928 14928 14240
5/21/96 .......................18991 14921 14239
5/22/96 .......................19096 15048 14300
5/23/96 .......................19117 14997 14291
5/24/96 .......................19107 15054 14299
5/28/96 .......................18813 14917 14181
5/29/96 .......................18697 14823 14085
5/30/96 .......................18844 14909 14133
5/31/96 .......................19086 14854 14192
6/3/96 ........................18949 14823 14176
6/4/96 ........................19149 14932 14224
6/5/96 ........................19233 15064 14260
6/6/96 ........................18865 14945 14166
6/7/96 ........................18697 14952 14069
6/10/96 .......................18855 14928 14104
6/11/96 .......................18750 14903 14091
6/12/96 .......................18823 14861 14101
6/13/96 .......................18582 14837 14013
6/14/96 .......................18193 14792 13922
6/17/96 .......................18035 14778 13875
6/18/96 .......................17416 14711 13683
6/19/96 .......................17468 14709 13610
6/20/96 .......................17226 14714 13491
6/21/96 .......................17416 14820 13532
6/24/96 .......................17479 14866 13595
6/25/96 .......................17279 14859 13502
6/26/96 .......................16628 14769 13320
6/27/96 .......................17048 14863 13404
6/28/96 .......................17552 14910 13587
7/1/96 ........................17815 15028 13638
7/2/96 ........................17773 14979 13607
7/3/96 ........................17636 14953 13523
7/5/96 ........................17153 14621 13326
7/8/96 ........................16911 14513 13205
7/9/96 ........................17100 14564 13195
7/10/96 .......................16859 14594 13049
7/11/96 .......................16271 14364 12730
7/12/96 .......................16250 14376 12695
7/15/96 .......................15273 14013 12343
7/16/96 .......................14958 13982 12163
7/17/96 .......................15693 14110 12480
7/18/96 .......................16260 14322 12665
7/19/96 .......................15945 14216 12611
7/22/96 .......................15483 14107 12458
7/23/96 .......................14905 13954 12226
7/24/96 .......................14958 13950 12071
7/25/96 .......................15283 14052 12220
7/26/96 .......................15651 14158 12338
7/29/96 .......................15525 14048 12281
7/30/96 .......................15619 14146 12297
7/31/96 .......................15735 14252 12394
8/1/96 ........................16029 14478 12528
8/2/96 ........................16512 14757 12723
8/5/96 ........................16355 14708 12736
8/6/96 ........................16470 14757 12758
8/7/96 ........................16523 14798 12847
8/8/96 ........................16502 14765 12839
8/9/96 ........................16481 14756 12842
8/12/96 .......................16533 14839 12840
8/13/96 .......................16323 14716 12771
8/14/96 .......................16386 14759 12814
8/15/96 .......................16365 14766 12852
8/16/96 .......................16449 14832 12900
8/19/96 .......................16355 14864 12917
8/20/96 .......................16302 14846 12911
8/21/96 .......................16292 14834 12901
8/22/96 .......................16596 14960 12998
8/23/96 .......................16565 14880 13012
8/26/96 .......................16491 14812 13002
8/27/96 .......................16638 14869 13090
8/28/96 .......................16817 14835 13163
8/29/96 .......................16659 14672 13120
8/30/96 .......................16565 14552 13095
9/3/96 ........................16533 14615 13075
9/4/96 ........................16596 14636 13122
9/5/96 ........................16313 14500 13005
9/6/96 ........................16554 14641 13104
9/9/96 ........................16691 14823 13164
9/10/96 .......................16785 14825 13189
9/11/96 .......................16964 14904 13205
9/12/96 .......................17142 14992 13262
9/13/96 .......................17426 15203 13366
9/16/96 .......................17573 15282 13425
9/17/96 .......................17531 15260 13423
9/18/96 .......................17489 15229 13397
9/19/96 .......................17563 15264 13387
9/20/96 .......................17689 15356 13446
9/23/96 .......................17573 15345 13397
9/24/96 .......................17594 15327 13439
9/25/96 .......................17710 15334 13481
9/26/96 .......................17867 15336 13531
9/27/96 .......................17941 15345 13551
9/30/96 .......................18014 15371 13586
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
Portfolio of Investments in Securities
September 30, 1996
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (99.29%)
- --------------------------------------------------------------------------------
BROKERAGE AND FINANCIAL SERVICES (3.08%)
Aames Financial Corporation 30,000 $ 1,511,250
Alex. Brown Incorporated 17,000 983,875
Fahnestock Viner Holdings, Inc., Class A 25,000 300,000
-----------
2,795,125
-----------
COMMUNICATIONS EQUIPMENT (6.94%)
Aspect Telecommunications Corporation 38,000 2,365,500(a)
Cidco, Inc. 20,000 415,000(a)
IFR Systems, Inc. 10,000 155,000(a)
Newbridge Networks Corporation 30,000 1,912,500(a)
Northern Telecom Limited 25,000 1,443,750
-----------
6,291,750
-----------
COMPUTER HARDWARE (4.93%)
Centennial Technologies, Inc. 40,000 1,715,000(a)
ENCAD, Inc. 20,000 837,500(a)
Gateway 2000, Inc. 40,000 1,915,000(a)
-----------
4,467,500
-----------
COMPUTER SOFTWARE AND SERVICES (14.09%)
BMC Software, Inc. 31,000 2,464,500(a)
Compuware Corporation 45,000 2,058,750(a)
Electronics for Imaging, Inc. 25,000 1,793,750(a)
McAfee Associates, Inc. 25,000 1,725,000(a)
PeopleSoft, Inc. 28,000 2,331,000(a)
Physician Computer Network, Inc. 20,000 212,500(a)
Rational Software Corporation 40,000 1,365,000(a)
Wind River Systems 18,750 829,687(a)
-----------
12,780,187
-----------
ELECTRICAL EQUIPMENT (0.50%)
AFC Cable Systems, Inc. 5,000 87,500(a)
Supertex, Inc. 20,000 362,500(a)
-----------
450,000
-----------
ELECTRONICS (5.43%)
Atmel Corporation 25,000 771,875(a)
Beckman Instruments, Inc. 15,000 583,125
IIVI, Inc. 50,000 1,037,500(a)
Uniphase Corporation 60,000 2,535,000(a)
-----------
4,927,500
-----------
FOODS (3.21%)
Albertson's, Inc. 15,000 631,875
Hershey Foods Corporation 20,000 1,005,000
Safeway Inc. 30,000 1,278,750(a)
-----------
2,915,625
-----------
- --------------------------------------------------------------------------------
5
<PAGE>
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (continued)
- --------------------------------------------------------------------------------
HEALTHCARE-MEDICAL PRODUCTS AND SUPPLIES (3.67%)
Chad Therapeutics, Inc. 15,450 $ 307,069(a)
Dentsply International, Inc. 20,000 890,000
Guidant Corporation 20,000 1,105,000
Invacare Corporation 30,000 840,000
Lifeline Systems, Inc. 10,000 187,500
-----------
3,329,569
-----------
HEALTHCARE - PHARMACEUTICAL (5.60%)
ALZA Corporation 5,000 134,375(a)
Biovail Corporation International 25,000 893,750
Jones Medical Industries, Inc. 61,750 2,994,875
Merck & Co., Inc. 15,000 1,055,625
-----------
5,078,625
-----------
HEALTHCARE - SPECIAL SERVICES (2.81%)
ClinTrials Inc. 15,000 611,250(a)
Multicare Companies Inc. 22,500 489,375(a)
Orthodontic Centers of America, Inc. 50,000 1,018,750(a)
PMR Corporation 15,000 433,125(a)
-----------
2,552,500
-----------
LEISURE TIME (2.93%)
Brunswick Corporation 20,000 480,000
Callaway Golf Company 40,000 1,365,000
Coastcast Corporation 30,000 465,000(a)
Equity Marketing, Inc. 10,000 225,000(a)
Station Casinos, Inc. 10,000 120,000(a)
-----------
2,655,000
-----------
MANUFACTURING - DIVERSE (3.77%)
Carlisle Corporation 10,000 555,000
DT Industries, Inc. 20,000 675,000
Johnson Controls, Inc. 25,000 1,875,000
TRINOVA Corporation 10,000 315,000
-----------
3,420,000
-----------
OFFICE EQUIPMENT AND SUPPLIES (2.96%)
International Imaging Materials, Inc. 15,000 328,125(a)
Pitney Bowes, Inc. 20,000 1,052,500
The Reynolds & Reynolds Company 50,000 1,306,250
-----------
2,686,875
-----------
OIL & GAS (2.97%)
Chevron Corporation 15,000 939,375
Helmerich & Payne, Inc. 20,000 872,500
Smith International, Inc. 25,000 878,125(a)
-----------
2,690,000
-----------
- --------------------------------------------------------------------------------
6
<PAGE>
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (continued)
- --------------------------------------------------------------------------------
RETAIL - APPAREL (11.44%)
Claire's Store, Inc. 30,000 $ 641,250
The Gap, Inc. 40,000 1,155,000
Jones Apparel Group, Inc. 23,000 1,466,250(a)
Just For Feet, Inc. 18,000 902,250(a)
Kohl's Corporation 30,000 1,080,000(a)
Nautica Enterprises, Inc. 60,000 1,935,000(a)
The Nieman Marcus Group, Inc. 25,000 881,250(a)
Ross Stores, Inc. 10,000 360,000
Sears, Roebuck and Co. 16,000 716,000
The Sports Authority, Inc. 30,000 798,750(a)
Stein Mart, Inc. 20,000 442,500(a)
-----------
10,378,250
-----------
RETAIL - COMPUTERS AND ELECTRONICS (5.04%)
CompUSA Inc. 35,000 1,890,000(a)
Inacom Corporation 40,000 1,370,000(a)
Pomeroy Computer Resources, Inc. 40,000 1,310,000(a)
-----------
4,570,000
-----------
SERVICES (4.57%)
AccuStaff, Inc. 16,000 414,000
Acxiom Corporation 40,000 1,645,000(a)
Interim Services 20,000 855,000(a)
Labor Ready, Inc. 47,700 846,675(a)
Pre-Paid Legal Services, Inc. 30,000 386,250(a)
-----------
4,146,925
-----------
TELECOMMUNICATIONS EQUIPMENT (4.53%)
ADC Telecommunications Corporation 30,000 1,920,000(a)
Pair Gain Technologies, Inc. 28,000 2,187,500(a)
-----------
4,107,500
-----------
MISCELLANEOUS (10.81%)
AAR Corp. (aviation parts/service) 10,000 231,250
Amrion, Inc. (distribution) 30,000 641,250(a)
The Clorox Company (household products) 10,000 958,750
Foster Wheeler Corporation
(engineering and construction) 10,000 437,500
Gentex Corporation
(auto parts and equipment) 50,000 1,137,500(a)
Kaydon Corporation (machinery) 15,000 645,000
Lone Star Technologies, Inc.
(steel pipes and tubes) 20,000 292,500(a)
Lowe's Companies, Inc.
(building supplies) 30,000 1,226,250
- --------------------------------------------------------------------------------
7
<PAGE>
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS (continued)
- --------------------------------------------------------------------------------
MISCELLANEOUS (continued)
Monsanto Company (chemicals) 40,000 $ 1,460,000
RMI Titanium Company (metals mining) 40,000 1,010,000(a)
Seattle FilmWorks, Inc.
(photographic equipment) 15,000 330,000(a)
Tech Data Corporation (distributors-durable) 45,000 1,254,375(a)
Tetra Technologies, Inc.
(waste management) 10,000 183,750(a)
------------
9,808,125
------------
TOTAL COMMON STOCKS (COST $75,256,834) 90,051,056
------------
Face
Amount
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.82%)
- --------------------------------------------------------------------------------
Joint Repurchase Agreement Account
(see note 6) (cost $745,732) $ 745,732 $ 745,732
-----------
TOTAL INVESTMENTS (100.11%)(b)
(cost $76,002,566) $ 90,796,788
===========
(a) Non-income producing security.
(b) The percentage shown represents the percentage of investments to net assets.
See accompanying notes to financial statements.
-------------------------------------------------------------------------------
8
<PAGE>
Statement of Assets and Liabilities
September 30, 1996
ASSETS
Investments in securities, at value:
(identified cost of $75,256,834).............................. $90,051,056
Repurchase agreements
(identified cost equal to value)(note 6)...................... 745,732
----------
Total investments (notes 2 and 6)............................. 90,796,788
Cash............................................................. 193,193
Receivables:
Investments sold.............................................. 130,770
Dividends & interest.......................................... 18,560
Capital shares sold........................................... 537,489
Other............................................................ 5,693
----------
Total Assets................................................ 91,682,493
----------
LIABILITIES
Payables:
Investments purchased......................................... 546,100
Capital shares redeemed....................................... 219,557
12b-1 fees.................................................... 99,253
Due to manager (note 7)....................................... 90,439
Accounts payable and accrued expenses......................... 31,591
----------
Total Liabilities........................................... 986,940
----------
Net Assets.............................................. $90,695,553
==========
NET ASSETS
Paid-in capital (note 5)......................................... $77,076,045
Accumulated undistributed net investment income (loss) .......... -0-
Accumulated undistributed net realized
gain (loss) from investments................................... (1,174,714)
Net unrealized appreciation
in value of investments........................................ 14,794,222
----------
Net assets applicable to outstanding capital shares.............. $90,695,553
==========
Capital shares outstanding (note 5).............................. 5,287,657
==========
Net asset value, redemption price and
offering price per share....................................... $ 17.15
==========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
Statement of Operations
For the year ended September 30, 1996
NET INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $413).............. $ 216,316
Interest and other............................................. 73,167
----------
Total income................................................ 289,483
----------
Expenses:
Paid to manager and affiliates (note 7):
Management fees............................................. 563,478
Transfer agency fees........................................ 108,902
Accounting service fees..................................... 24,271
12b-1 fees.................................................. 140,059
Paid to others:
Transfer agency expenses.................................... 52,669
Shareholder reporting....................................... 16,093
Custodian fees.............................................. 26,904
Professional fees........................................... 25,755
Registration fees........................................... 46,477
Trustee fees and expenses................................... 24,799
Miscellaneous............................................... 2,601
----------
Total expenses before expense offset arrangement.......... 1,032,008
Expense offset arrangement (note 2)...................... (2,233)
----------
Total expenses......................................... 1,029,775
----------
Net investment loss.................................... (740,292)
----------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS:
Net realized gain (loss) from security transactions ........... (728,847)
Net change in unrealized appreciation of investments........... 11,257,430
----------
Net realized and unrealized gain on investments............. 10,528,583
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 9,788,291
===========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
Statements of Changes in Net Assets
For the year Oct. 17, 1994*
ended to
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
FROM OPERATIONS:
Net investment loss ........................ $ (740,292) $ (127,878)
Net realized gain (loss) from investments.... (728,847) 1,211,806
Net change in unrealized appreciation
of investments............................. 11,257,430 3,536,792
----------- ----------
Net increase in net assets
resulting from operations.............. 9,788,291 4,620,720
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distribution in excess of net investment income ----- (8,034)
Distribution in excess of net capital gains... (1,492,448) -----
(1,492,448) (8,034)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares ........... 116,765,133 26,415,120
Net asset value of shares issued to shareholders
in reinvestment of distributions......... 1,437,680 8,017
Paid-in capital portion of short-term
trading fee (note 2).................... 25,613 2,640
------------ ------------
118,228,426 26,425,777
Cost of shares redeemed...................... (60,501,758) (6,465,783)
----------- -----------
Increase in net assets derived
from capital shares transactions......... 57,726,668 19,959,994
----------- -----------
NET INCREASE IN NET ASSETS..................... 66,022,511 24,572,680
NET ASSETS AT BEGINNING OF PERIOD.............. 24,673,042 100,362
----------- ------------
NET ASSETS AT END OF PERIOD (INCLUDING
UNDISTRIBUTED NET INVESTMENT INCOME
OF $-0- AND $-0-, RESPECTIVELY)................$ 90,695,553 $ 24,673,042
=========== ===========
- ----------
*Commencement of operations.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
Notes to Financial Statements
September 30, 1996
(1) ORGANIZATION
Accolade Funds (the "Trust") is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended ("1940 Act"). The Trust consists of three separate Funds and was
organized as a Massachusetts business trust on April 16, 1993, with
operations commencing on October 17, 1994. Bonnel Growth Fund (the
"Fund"), a separate Fund of the Trust, commenced operations on October 17,
1994. Bonnel Growth Fund is the only Fund in the series currently offered
to the public. The initial capital of the Fund was contributed by the
principal owners of Bonnel, Inc. (the "Sub-Advisor") on September 16,
1994.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements.
(a) SECURITIES VALUATION
Investments in securities traded on national stock exchanges are
valued at the last sales price as reported by the primary exchange on
which the security is traded prior to the time of valuation on the
day of the valuation. Securities quoted on NASDAQ are valued at the
last reported sales price. Listed securities and securities quoted on
NASDAQ for which no sale was reported and over-the-counter securities
are valued at the mean between the last reported bid and asked
prices. Taxable short-term investments with maturities of sixty days
or less at the date of purchase are valued at amortized cost, which
approximates market value.
(b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME
Securities transactions are accounted for on a trade date basis.
Realized gain (loss) from security transactions is calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis.
(c) REPURCHASE AGREEMENTS
The Fund follows a "delivery vs. payment" policy, whereby payment
will not be made for the repurchase agreement until delivery of the
underlying collateral, by way of the Federal Reserve book-entry
system, has occurred.
- --------------------------------------------------------------------------------
12
<PAGE>
The Board of Trustees has established the following directives to
ensure the Fund is adequately protected in the event of default by
the counterparty: 1) the Fund's custodian must always obtain
securities serving as underlying collateral, and 2) the market value
of securities serving as collateral must always equal or exceed 102%
of the principal amount of the repurchase obligation.
(d) FEDERAL INCOME TAXES
It is the policy of the Fund to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders.
Accordingly, no Federal income tax provision has been made.
(e) DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded by the Fund
on the ex-dividend date. The Fund generally pays dividends
semi-annually and capital gains distributions, if any, at least
annually. The Fund distributes tax basis earnings in accordance with
the distribution requirements of the Internal Revenue Code, which may
result in dividends or distributions in excess of financial statement
(book) earnings. Income dividends and capital gain distributions are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital account
based on their federal tax-basis treatment; temporary differences do
not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions
exceed current and accumulated earnings and profits for federal
income tax purposes, they are reported as distributions of paid-in
capital.
The Fund accounts for and reports distributions to shareholders in
accordance with AICPA Statement of Position 93-2, Determination,
Disclosure and Financial Statement Presentation of Income, Capital
Gain, and Return of Capital Distributions by Investment Companies.
- --------------------------------------------------------------------------------
13
<PAGE>
For the year ended September 30, 1996, the reclassification arising
from book/tax differences resulted in increases (decreases) to the
components of net assets. The current year effect of such differences
reclassified from accumulated undistributed net investment
income/loss and accumulated undistributed net realized gain/loss on
investments to paid-in capital are as follows:
Paid-In Capital $(710,608)
Accumulated Undistributed
Net Investment Income (Loss) 740,292
Accumulated Undistributed
Net Realized Gain (Loss)
from Investments (29,684)
(f) SHORT-TERM TRADING FEE
Short-term trading fees are accounted for as a reduction of Fund
expenses to the extent there are incremental expenses caused by the
short-term trading activity. Short-term trading fees that exceed such
expenses are accounted for as an addition to paid-in capital.
(g) EXPENSE OFFSET ARRANGEMENTS
During the year ended September 30, 1996, the Fund's custodian
expenses were reduced by credits earned on cash balances. These
assets, if invested directly, would have earned income rather than
earning credits to offset expenses.
(h) USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
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 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.
- --------------------------------------------------------------------------------
14
<PAGE>
(3) FEDERAL INCOME TAXES
The Fund has $1,174,714 in capital losses incurred after October 31, 1995
which were deferred until October 1, 1996 pursuant to treasury
regulations. These capital losses will be available to offset future net
realized capital gains to the extent provided by regulations.
Aggregate gross unrealized appreciation (depreciation) and the aggregate
cost of securities for federal income tax purposes are as follows as of
September 30, 1996:
Gross unrealized appreciation $15,531,154
Gross unrealized depreciation (736,932)
-----------
Net unrealized appreciation $14,794,222
===========
Aggregate cost $76,002,566
===========
(4) INVESTMENT SECURITIES TRANSACTIONS
During the period ended September 30, 1996, the cost of purchases and
proceeds from sales/maturities of investments, excluding short-term
investments, were $173,995,366 and $119,008,080, respectively.
(5) CAPITAL SHARES TRANSACTIONS
As of September 30, 1996, an indefinite number of no par value shares have
been authorized for the Fund. Following is a summary of capital share
activity for the periods indicated:
Period from
Year Ended October 17, 1994*
Sept. 30, 1996 through Sept. 30, 1995
-------------- ----------------------
Shares sold 7,483,138 2,161,599
Reinvestment of dividends 104,558 797
Shares redeemed (3,965,534) (506,921)
---------- ----------
Net increase 3,622,162 1,655,475
========== ==========
----------
*Commencement of operations.
- --------------------------------------------------------------------------------
15
<PAGE>
(6) JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund may transfer uninvested cash balances into a joint repurchase
agreement account, the daily aggregate balance of which is invested in one
or more repurchase agreements collateralized by U.S. Government
obligations. The joint account includes uninvested cash balances from the
other separate funds or series of registered investment companies for
which U.S. Global Investors, Inc. serves as the Advisor. As of September
30, 1996, each participating fund has a percentage of an undivided
interest in the repurchase agreements in the joint account. The balance in
the joint account at September 30, 1996 and related repurchase agreements
and collateral are as follows:
Principal
Amount
---------
REPURCHASE AGREEMENT DESCRIPTION
Lehman Brothers, Inc. repurchase agreement,
5.78%, dated Sept. 30, 1996, collateralized
by United States Treasury Bills due from
Oct. 3, 1996 through Dec. 26, 1996, with an
aggregate value of $77,319,820; repurchase date
Oct. 1, 1996; repurchase value $75,810,696 $75,798,526
===========
% of Undivided
Interest Owned Interest Owned
by Each Fund by Each Fund
-------------- --------------
ALLOCATED INTEREST TO EACH PARTICIPANT
Bonnel Growth Fund .98% $ 745,732
Other Funds 99.02% 75,052,794
------ -----------
100.00% $ 75,798,526
====== ===========
(7) TRANSACTIONS WITH THE MANAGER AND AFFILIATES
U.S. Global Investors, Inc. (the "Advisor" or the "Manager"), under an
Investment Advisory Agreement with the Trust in effect through March 8,
1997, furnishes management and investment advisory services and, subject
to the supervision of the Trust's Board of Trustees, directs the
investments of the Trust in accordance with the Fund's investment
objectives, policies and limitations. The Manager also furnishes all
necessary office facilities, business equipment and personnel for
administering the affairs of the Trust. Frank E. Holmes, Chief Executive
Officer and Chairman of the Board of Directors of the Advisor, as well as
President and a Trustee of the Trust has, since October 1989, owned more
than 25% of the voting stock of the Advisor and is its controlling person.
- --------------------------------------------------------------------------------
16
<PAGE>
The Advisory Agreement with the Trust provides for the Fund to pay the
Advisor an annual flat management fee of 1% of the Fund's average net
assets. Fees are computed daily and paid monthly.
The Manager and the Trust have contracted with Bonnel, Inc.
("Sub-Advisor") to serve as Sub-Advisor for the Fund. The Sub-Advisor
manages the composition of the portfolio of the Fund and furnishes the
Fund advice and recommendations with respect to its investments and its
investment program and strategy, subject to the general supervision and
control of the Manager and the Trustees. As compensation for its services,
the Advisor pays the Sub-Advisor a minimum sub-advisory fee of $150,000
per year. At a fund asset level of $30 million and above, the Advisor and
the Sub-Advisor share the management fee equally, subject to certain
adjustments. The Fund is not responsible for the Sub-Advisor's fee.
United Shareholder Services, Inc. ("USSI"), a wholly owned subsidiary of
the Advisor, is transfer and accounting service agent for the Fund. The
Fund pays an annual transfer agent fee of $23 per account ($20 per account
prior to December 1, 1995). For maintaining the books and records of the
Fund and calculating the daily net asset value, USSI is paid a fee based
upon the level of Fund net assets subject to a minimum fee of $24,000
annually. In addition, the Advisor is reimbursed certain costs for
in-house legal and compliance services pertaining to the Fund.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 of the
1940 Act whereby the Fund pays up to .25% per annum of its average net
assets to be used for or reimburse the Advisor and/or Sub-Advisor for
expenditures in connection with sales and promotional services related to
the distribution of Fund shares.
Certain Officers and Trustees of the Trust are Officers and Directors of
the Manager, the Sub-Advisor, and the Transfer Agent.
Security Trust and Financial Company ("STFC"), a wholly owned subsidiary
of the Manager, serves as the custodian for the Fund's IRA's. STFC
receives a fee of $10 from each IRA account which is paid directly to
STFC.
During the year ended September 30, 1996, A&B Mailers, Inc., a wholly
owned subsidiary of the Manager, was paid $752 for mailing services.
The Trust pays all other expenses for its operations and activities.
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<PAGE>
Expenses incurred by the Fund, exclusive of interest, brokerage fees and
commissions, taxes, distribution plan expenses (12b-1 fees), and
extraordinary items, which exceed the lowest expense limitation imposed in
any state in which shares of the Trust are registered, are reimbursed by
the Manager up to the amount of the management fee. Such limitation is
currently 2.5% of the first $30 million of average net assets, 2% of the
next $70 million of average net assets and 1.5% of the remaining average
net assets. These limitations will be pre-empted as of November 11, 1996
by recent federal legislation.
During the period ended September 30, 1996, the independent Trustees
earned in the aggregate $16,000 as compensation for serving as Trustees.
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FEDERAL TAX INFORMATION
(unaudited)
The corporate shareholders' dividends received deduction percentage for
ordinary distributions made during the fiscal year ended September 30,
1996 was 2.31%.
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<PAGE>
Selected Per Share Data and Ratios
September 30, 1996
Selected data for a capital share outstanding throughout each period is as
follows:
For the year Oct. 17, 1994*
ended to
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
Per Share Operating Performance:
Net asset value, beginning of period.. $14.81 $10.02
------ ------
Net investment loss................. (.14) (.07)(a)
Net realized and unrealized gain
on investments.................... 3.13 4.91
------ ------
Total from investment operations...... 2.99 4.84
------ ------
Dividends and distributions:
Dividends in excess of net
investment income................. --- (.05)
Distributions in excess of
net realized gains................ (.65) ---
------ ------
Total dividends and distributions..... (.65) (.05)
------ ------
Net asset value, end of period........ $17.15 $14.81
===== ======
Total Investment Return (b)........... 21.27% 48.74%
Ratio/Supplemental Data:
Net assets, end of period
(in thousands).................... $90,696 $24,673
Ratio of expenses to average
net assets........................ 1.83% 2.48%(c)
Ratio of net income to average
net assets........................ (1.32)% (1.46)%(c)
Portfolio turnover ................... 212% 145%
Average commission rate paid.......... $ .07 N/A
See accompanying notes to Financial Statements.
(a) Net of expense reimbursements and fee waivers.
(b) Total return does not reflect the effect of account fees.
(c) Annualized ratio is net of fee waivers. Had such reimbursements not
been made, the annualized expense ratio subject to the most
restrictive state limitation would have been 2.50% And the annualized
net investment income ratio would have been (1.52)%.
----------
*Commencement of operations.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Bonnel Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments in securities, and the related statements of
operations and of changes in net assets and the selected per share data and
ratios present fairly, in all material respects, the financial position of
Bonnel Growth Fund (the "Fund") at September 30, 1996, the results of its
operations for the year then ended, and the changes in its net assets and the
selected per share data and ratios for the year then ended and for the period
October 17, 1994 (commencement of operations) through September 30, 1995, in
conformity with generally accepted accounting principles. These financial
statements and selected per share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Antonio, Texas
November 18, 1996
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