- ------------------------------------------------------------------------------
SAMCO FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
Annual Report
October 31, 1998
CONTENTS
Letter from the President...............................................1
Cumulative Performance..................................................2
Portfolio of Investments................................................4
Statement of Assets and Liabilities.....................................8
Statement of Operations ................................................9
Statement of Changes in Net Assets ....................................10
Financial Highlights...................................................11
Notes to Financial Statements .........................................12
December 3, 1998
Dear Shareholder:
We are pleased to provide you with information about the SAMCO Fund, Inc. -
Fixed Income Portfolio, Class A (the "Fund"), for the first Fiscal year ended
October 31, 1998. The Fund's shares are listed under the symbol SAMFX.
We greatly appreciate your participation in the Fund. We welcome the opportunity
to discuss the objectives and results of the Fund. Please do not hesitate to
contact us with questions or comments regarding this report, or for assistance
in general.
Sincerely,
- ------------------------------ --------------------------------
Christina Seix, Chairman John Talty, President
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio Cumulative Performance
October 31, 1998
- ------------------------------------------------
[graph] Comparison of change in value of $10,000 investment in
Samco Fixed Income Portfolio and the Lehman Aggregate
Bond Index. This is an x-y line graph with x being the
date (starting 12/30/97 and ending at 10/31/98) and y
being the value of the $10,000 investment in the Fund
and the Lehman Aggregate Bond Index. At 10/31/98 the
Value of the $10,000 investment in the Fund was $10,687
and the value of the same investment in the Lehman
Aggregate Bond Index was $10,799.
INVESTMENT PERFORMANCE
(For the period ended October 31, 1998)
Total Return
Cumulative Inception (12/30/97)
SAMCO Fixed Income Portfolio(a) 6.87%
Lehman Aggregate Bond Indes 7.99%
(a) Reflects waiver of fees and reimbursement of
expenses by the investment advisor. Absent
such waiver and
reimbursement, the Fund's total return
would have been lower.
Market Review:
Alan Greenspan and Charles Dickens captured the
essence of 1998 from an investor's perspective.
"I've never seen anything like this." A. Greenspan;
"It was the best of times, it was the worst of
times." C. Dickens
For US consumers and workers, it was the best of times as continued economic
expansion drove unemployment to new lows and confidence to new highs. Commodity
deflation, a firm dollar and superior productivity gains kept a firm ceiling on
inflation.
The combination of continued calm on the inflation front, growing concerns that
weakened foreign economies would slow US growth and the leveraged technical
condition of the financial markets, led the Federal Reserve to shift gears in
the Fall and embark on a policy of monetary easing. Since their policy shift,
they have eased three times, reducing the pivotal Federal Funds rate by 75 basis
points.
Interest rates fell dramatically 1998, accompanied by a steepening yield curve.
By the end of the Fund's fiscal year, Treasuries were near low yields, with the
long bond closing at 5.15%. Despite the powerful interest rate move, the markets
reaction drafted a new chapter in the financial history of the US. The fixed
income markets experienced a dramatic flight to quality. This trend gained
ferocious momentum during the third quarter of the year, triggered by the
Russian devaluation and debt moratorium. The ensuing solvency crises at large,
highly leveraged hedge funds cemented the desire for pure liquidity protection
and risk aversion felt by many investors. A dynamic that, as suggested by Fed
Chairman Greenspan's comment above, reflected the reality that "this time was
different."
Looking back over the prior 5, 10 and 15 years, Corporate Bonds have
consistently and significantly outperformed Government Bonds. Additionally,
moving down the credit scale within the Investment Grade Bond market has also
historically added value. This historical pattern changed dramatically in 1998.
The flight to quality resulting from the spillover of global financial and
economic concerns made Treasury bonds the best performers and the historical
pattern of investors getting incremental return for moving down the credit scale
was turned upside down. The results of investors passion for liquidity was most
evident In the third quarter as Governments outperformed Corporates by an
astounding +2.52% and BBB-rated Corporates underperformed AAA-rated Corporates
by -3.94%.
Such dramatic pattern inversions are rare within the fixed income markets. They
usually occur in a severely weakened economy or when there is evidence that
powerful recessionary forces are close at hand. Despite the global upheaval
during the past year, according to Alan Greenspan, "the truth of the matter is
that we have got an economy, which ... is really still quite an impressive
sight." We believe that normal return patterns in the Fixed Income Markets have
begun to reassert themselves, resulting in substantial profit opportunities.
Portfolio Overview:
The environment described above has been a trying one for our investment
approach. Seix Investment Advisors' income orientation and focus on
well-researched credits and structures have not been rewarded in the
marketplace. However, our Income-Oriented, Value style is based on very strong
historical performance patterns and we have no temptation to change our
investment style, particularly as relative value opportunities now abound.
Our strategy in this environment has been one of adding liquidity and moving up
the credit scale within our Corporate holdings. We have also reduced our
exposure to credits that were most sensitive to economic weakness, even though a
downturn is not yet in sight. Mortgage-Backed Securities (MBS) remain attractive
on a relative value basis as well as cheap relative to their historical spread
relationship to Treasuries. In fact, MBS are among the most attractive "value"
sectors in the market today and undoubtedly have the greatest liquidity of all
non-Government sectors. We continue to allocate to this sector and we expect MBS
to provide significant returns as the volatility in interest rates subsides.
While investment performance has been disappointing in the past year, the events
of 1998 have created a much more fertile environment for our investment style.
We are confident that the Fund will capture many of these value opportunities in
the months ahead.
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio Portfolio of Investments (continued)
October 31, 1998
<TABLE>
<S> <C> <C>
Par/Face Value*
- ---------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 13.7%
American Express Master Trust, 5.760%, due 8/15/02 $ 320,000 $ 319,050
AT&T Universal Card Trust (FRN), Ser. 1996-3, Class A, 5.788% due 9/17/03 320,000 318,867
BA Master Credit Card Trust, 5.700%, due 7/15/04 315,000 313,321
Citibank Credit Card Master Trust (FRN), Ser. 1996-5, Class A, 5.793% due 9/15/05 685,000 678,424
Contimortgage Home Equity Loan , 6.270%, due 2/15/12 321,304 321,095
Contimortgage Home Equity Trust (FRN), Ser. 1996-4, Class A10, 5.649% due 1/15/28 48,981 49,045
Countrywide Home Equity Loan (FRN), Ser. 1997-C, Class A, 5.206% due 9/15/22 313,924 312,289
Countrywide Home Equity Trust (FRN), Ser. 1998-A, Class A, 5.780% due 3/15/24 65,388 65,100
CS First Boston Mortgage Securities Corp., 6.320%, due 2/25/18 71,952 71,720
Discover Card Master Trust (FRN), Ser. 1996-1, Class A, 5.579% due 7/16/03 325,000 324,808
Discover Card Master Trust I, Ser. 1997-1, Class A, 5.499% due 2/16/05 210,000 208,627
Discover Card Trust, Ser. 1997-2, Class A, 6.792% due 4/16/10 255,000 257,772
First USA Cr. Card Trust (FRN), Ser. 1996-2, Class A, 5.590% due 2/10/06 410,000 407,433
First USA Credit Card Trust (FRN), Ser. 1995-5, Class A, 5.858% due 4/15/03 315,000 314,943
Fleet Credit Card Master Trust, Series 1995-F, Class A2, 5.830%, due 8/1/03 320,000 320,016
Ford Credit Auto Owner Trust, Ser. 1996-A, Class A3, 6.500% due 11/15/99 63,067 63,155
Household Affinity Credit Card Trust (FRN), Ser. 1995-1, Class A, 5.559% due 2/15/02 70,000 69,976
MBNA Master Credit Card Trust, Ser. 1994-1, Class A, 5.650% due 3/15/01 293,333 293,351
MBNAM (FRN), Ser. 1996-H, Class A, 5.788% due 1/15/04 320,000 318,822
Merrill Lynch Home Equity Loan (FRN), Ser. 1997-1, Class A, 5.836% due 9/25/27 34,210 34,202
Peoples Bank Credit Card Master Trust (FRN), 5.838% due 11/15/04 325,000 324,425
People's Bank Credit Card Trust (FRN), Ser. 1997-1, Class A, 5.529% due 10/15/04 320,000 318,710
Premier Auto Trust, Ser. 1995-2, Class A6, 7.200% due 10/4/99 297,846 298,817
Premier Auto Trust, Ser. 1997-1, Class A2, 5.900% due 4/6/00 6,236 6,240
------------------
------------------
Total Asset-Backed Securities (Cost - $6,032,127) 6,010,208
------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.6%
Country Wide Mortgage Backed Securities, Inc., 6.000%, due 1/25/09 168,772 168,346
Residential Funding Mortgage Sec. I, Ser. 1996-S7, Class A2, 5.125% due 3/25/26
(Cost - $81,513) 82,013 81,706
------------------
------------------
Total Asset-Backed Securities (Cost - $249,704) 250,052
------------------
CORPORATE OBLIGATIONS - 27.0%
Airlines - 1.7%
American Airlines, 9.710% due 1/2/07 99,870 116,131
Continental Airlines, 6.541% due 3/15/08 340,000 349,058
Continental Airlines, 7.080%, due 11/01/04 170,000 169,433
Jet Equipment Trust Series 1995-B, 7.630%, due 2/15/15 110,906 126,014
------------------
760,636
------------------
Banks - 6.2%
ABN Amro, 7.125% due 10/15/53 190,000 179,897
Bank One Corp, 7.625%, due 10/15/26 200,000 217,620
Branch Banking & Trust (FRN), 5.750%,due 4/28/00 320,000 320,192
Citicorp (FRN), 5.930%, due 8/10/00 395,000 396,039
First Bank N.A., 5.710%, due 4/18/00 180,000 179,820
First USA Bank (FRN), 5.550% due 1/21/00 185,000 185,925
Nations Bank (FRN), 5.450%, due 3/20/00 325,000 324,682
PNC Funding Corp. (MTN), 6.500% due 5/1/08 180,000 185,178
SE Banken (144A), 6.500% due 12/29/49 (Sweden) 405,000 394,525
SocGen Real Estate LLC (144A), 7.640% due 12/29/49 405,000 343,527
------------------
2,727,405
------------------
</TABLE>
<TABLE>
<S> <C> <C>
Brokers - 1.3%
Lehman Brothers Holdings, Inc., 6.000% due 2/26/01 $ 380,000 $ 379,035
Salomon, Inc., 6.750% due 2/15/03 185,000 189,993
------------------
569,028
------------------
Finance - 3.5%
Associates Corp. NA 5.875% Due 7/15/02 90,000 90,728
Chrysler Financial Corp. (FRN), 5.193% due 5/11/00 325,000 323,908
Countrywide Home Loan, 5.620 %, due 10/16/00 250,000 249,087
Enterprise Corp. (144A), 6.950% due 3/1/04 155,000 158,671
General Motors Acceptance Corp. (FRN), 5.668% due 2/3/00 70,000 69,771
Heller Financial, 5.870%, due 11/1/00 295,000 294,745
Household Finance, Inc. (FRN), 5.818% due 9/27/00 330,000 329,769
------------------
1,516,679
------------------
Industrial - 5.4%
Cummins Engine Co. Inc. 7.125% Due 3/1/28 495,000 434,605
General Motors Corp., 8.800% due 3/1/21 160,000 194,341
Kern River Funding Corp. (144A) Ser. B, 6.720% due 9/30/01 310,000 314,936
Land 'O Lakes Cap Trust I (144A), 7.450% due 3/15/28 405,000 376,874
Owens Corning, 7.500% due 8/1/18 285,000 266,334
R&B Falcon Corp., 6.500%, due 4/15/03 330,000 328,362
Union Carbide Corp., 6.250% due 6/15/03 115,000 115,873
Unova, Inc., 6.875% due 3/15/05 315,000 326,106
------------------
------------------
2,357,431
------------------
Industrial-Pipeline - 0.3%
Sithe/ Independence Funding, Ser. A, 9.000% due 12/30/13 120,000 141,360
------------------
Industrial-Railroad - 0.2%
Norfolk Southern Corp, 6.875%, due 5/1/01 85,000 88,177
------------------
Industrial-Retail - 0.8%
Federated Department Stores, 6.79%, due 7/15/27 120,000 125,149
Rite Aid Corp., 6.700% due 12/15/01 110,000 113,717
Shopko Stores, 6.500% due 8/15/03 110,000 113,322
------------------
352,188
------------------
Insurance - 4.6%
Amerus Life Holdings, 6.950% due 6/15/05 145,000 136,994
Farmers Exchange Capital (144A), 7.050%, due 7/15/28 225,000 218,042
Florida Windstorm Underwriting (144A), 6.500% due 8/25/02 300,000 308,065
Lumbermens Mutual Casualty (144A), 9.150% due 7/1/26 225,000 259,494
Mutual Life Insurance Co. - NY (144A), 11.250% due 8/15/24 760,000 1,080,307
------------------
------------------
2,002,902
------------------
Insured Project - 0.3%
Ras Laffan-Lincs (144A), 7.850% due 3/18/14 105,000 122,196
------------------
------------------
Real Estate Investment Trust - 1.8%
Bay Apartment Communities, 6.250% due 1/15/03 25,000 25,171
Developers Diversified Realty Corp., 6.840%, due 12/16/04 165,000 156,886
Liberty Property LP (MTN), 6.950%, due 12/1/06 110,000 102,352
Meditrust, 7.820% due 9/10/26 85,000 81,753
Post Apartment Homes, 6.850% due 3/16/05 50,000 48,028
Susa Partnership LP, 8.200%, due 6/1/17 175,000 161,543
</TABLE>
<TABLE>
<S> <C> <C>
Real Estate Investment Trust - (continued)
Susa Partnership LP, 7.500% due 12/1/27 $ 180,000 $ 149,615
United Dominion Realty Trust, 7.950% due 7/12/06 55,000 58,984
------------------
784,332
------------------
Telecommunications - 0.9%
U.S. West Communications (MTN), 5.340% due 3/25/99 70,000 69,776
MCI Communications Corp., 6.125%, due 4/15/02 325,000 333,849
------------------
------------------
403,625
------------------
Total Corporate Obligations (Cost - $11,871,370) 11,825,959
------------------
MUNICIPAL SECURITIES - 1.9%
Cook County, Series A, 5.000%, due 11/15/22 100,000 97,943
Detroit Michigan Sew., 5.000% , due 7/1/22 75,000 73,970
King County Washington, 5.000%, due 1/1/30 90,000 87,909
Massachusetts Bay Transit Authority, Series A, 5.000%, due 3/1/27 95,000 93,578
Massachusetts State Turnpike Authority Highway, Series A, 5.000%,, due 1/1/37 100,000 97,174
Washington D.C. Convention Center Authority, 5.000%, due 10/1/21 100,000 97,466
Washington State, 5.000%, due 1/1/23 215,000 210,846
Wayne Charter County, 5.000%, due 12/1/28 90,000 86,875
------------------
------------------
Total Municipal Zero Coupon Securities (Cost - $862,856) 845,761
------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 69.3%
U.S. Government Agency Pass-Through Certificates - 34.0%
FHLMC, 5.750%, due 4/15/08 910,000 938,420
FHLMC, 7.500%, due 10/1/28 280,000 286,825
FHLMC, 8.500%, due 6/1/12 762,161 786,550
FNMA (TBA), 6.000%, due 12/15/13 875,000 881,562
FNMA (TBA), 6.500%, due 12/10/28 2,365,000 2,390,140
FNMA (TBA), 6.500%, due 12/15/13 760,000 773,072
FNMA (TBA), 7.000%, due 12/10/28 1,690,000 1,727,518
FNMA (TBA), 7.500%, due 11/12/28 1,830,000 1,886,620
FNMA, 4.625%, due 10/15/01 330,000 329,232
FNMA, 5.250%, due 1/15/03 425,000 429,721
FNMA, 5.750%, due 6/15/05 250,000 258,315
FNMA, 6.000%, due 12/15/13 1,130,000 1,138,829
FNMA, 6.500%, due 1/12/28 905,000 914,620
FNMA, 6.500%, due 10/1/28 929,200 939,077
FNMA, 6.500%, due 9/1/28 1,111,000 1,119,421
FNMA, 7.500%, due 4/17/24 125,000 129,169
------------------
Total U.S. Government Agency Pass-Through Certificates (Cost - $14,895,212) 14,929,092
------------------
U.S. Government Agency Collateralized Mortgage Oblibations - 5.3%
FHLMC, Ser. 8, Class D, 5.850% due 12/25/15 23,280 23,197
FNMA, Ser. 1997-15, Class B, 7.500% due 7/18/25 55,000 57,390
GNMA, 7.500%, due 10/15/28 2,200,000 2,266,689
------------------
Total U.S. Government Agency Collateralized Mortgage Obligations
(Cost - $2,352,263) 2,347,275
------------------
U.S. Treasury Obligations - 30.0%
U.S. Treasury Bond, 6.125% due 11/15/27 1,420,000 1,597,057
U.S. Treasury Bond, 6.500% due 11/15/26 515,000 599,171
U.S. Treasury Bond, 8.750% due 5/15/17 435,000 608,184
U.S. Treasury Bond, 9.250%, due 2/15/16 400,000 577,375
U.S. Treasury Note, 5.375% due 06/30/03 30,000 31,331
U.S. Treasury Note, 5.625% due 10/31/99 1,200,000 1,213,500
U.S. Treasury Note, 5.625% due 5/15/08 $ 915,000 $ 985,627
U.S. Treasury Note, 5.750% due 10/31/00 760,000 780,425
U.S. Treasury Note, 5.750% due 11/15/00 110,000 113,060
U.S. Treasury Note, 5.750% due 8/15/03 925,000 980,212
U.S. Treasury Note, 5.875% due 11/15/05 875,000 947,461
U.S. Treasury Note, 6.000% due 7/31/02 325,000 342,875
U.S. Treasury Note, 6.375% due 9/30/01 1,670,000 1,760,806
U.S. Treasury Note, 6.750% due 4/30/00 2,085,000 2,156,022
U.S. Treasury Note, 7.250% due 8/15/04 80,000 91,125
U.S. Treasury Note, 8.000% due 5/15/01 360,000 391,275
------------------
Total U.S. Treasury Obligations (Cost - $13,032,024) 13,175,506
------------------
Total U.S. Government & Agency Obligations (Cost - $30,279,499) 30,451,873
------------------
REPURCHASE AGREEMENT - 14.0%
Investors Bank & Trust Company Repurchase Agreement, 4.770% due 11/2/98 in the
amount of $6,165,217; Issued 10/30/98 (collateralized by $6,298,450 par of
Federal Home Loan Mortgage Corporation FRN 1671, 6.388% due 12/15/22
with a market value of $6,480,548) (Cost - $6,162,768) 6,162,768 6,162,768
------------------
Total Investments - 126.5% (cost - $55,458,324) 55,546,621
------------------
LIABILITIES, NET OF OTHER ASSETS - (26.5%) (11,647,910)
- ------------------------------------------
------------------
NET ASSETS - 100.0%
Applicable to 4,280,534 outstanding $.001 par value shares
(authorized 2,500,000,000 shares) $ 43,898,711
==================
Net Asset Value, Offering and Redemption Price Per Share $ 10.26
==================
</TABLE>
* See note 2 to the Financial Statements
(144A) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions excempt
from registration, normally to qualified buyers. At October 31,
1998, the aggregate value of the securities is $3,576,637 or 8.1 %
of net assets.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FRN Floating Rate Note
GNMA Government National Mortgage Association
MTN Medium-Term Note
TBA To Be Announced - Security is subject to delayed delivery.
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio Statement of Assets and Liabilities
October 31, 1998
- -------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $49,295,556)(Note 2) $ 49,383,853
Repurchase agreement (cost $6,162,768)(Note 5) 6,162,768
Receivable for securities sold 9,265,357
Interest receivable 522,774
Organizational expenses 79,543
Receivable for shares sold 68,000
Receivable from investment advisor 57,987
-------------
Total Assets 65,540,282
-------------
Liabilities:
Payable for securities purchased 21,586,753
Dividends payable 15,727
Accrued expenses and other liabilities 39,091
-------------
-------------
Total liabilities 21,641,571
-------------
Net Assets (equivalent to $10.26 per share based on 4,280,534 shares
outstanding) $ 43,898,711
=============
Composition of Net Assets
Capital Stock at par value ($.001) $ 4,281
Capital Stock in excess of par value 43,295,599
Undistributed net investment income 37,285
Net accumulated realized gain on investments 473,249
Net unrealized appreciation on investments 88,297
=============
Net assets applicable to capital stock outstanding $ 43,898,711
=============
</TABLE>
- -----------------------------------------------------------------------
See Notes to the Financial Statements
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio . Statement of Operations
For the period from December 30, 1997* to October 31, 1998
- --------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Interest $ 994,785
-------------
Expenses
Investment advisory fees (Note 2) 44,287
Administration fees 41,667
Custodian fees 23,636
Audit fees 23,000
Amortization of organizational costs 15,909
SEC filing Fees 13,091
Insurance expense 8,000
Directors fees and expenses 7,638
Legal fees 3,000
State registration filing fees 600
Transfer agent fees 519
Miscellaneous fees and expenses 643
-------------
Total operating expenses 181,990
Waiver of investment advisory fees and reimbursement of
other expenses (102,274)
-------------
Net expenses 79,716
-------------
Net investment income 915,069
-------------
Net Realized and Unrealized Gain on Investments
Net realized gain on investments 473,249
Net change in unrealized appreciation on investments 88,297
-------------
Net realized and unrealized gain on investments 561,546
-------------
=============
Net increase in net assets resulting from operations $ 1,476,615
=============
</TABLE>
- ---------------------------------------------------------------------
* Commencement of investment operations
See Notes to the Financial Statements
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio - Statement of Changes in Net Assets For the period
from, December 30, 1997* to October 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net Increase in Net Assets Resulting from Operations
Net investment income $ 915,069
Net realized gain from investments 473,249
Net change in unrealized appreciation on investments 88,297
-------------
Net increase in net assets resulting from operations 1,476,615
-------------
Distributions to Shareholders
From net investment income (877,784)
-------------
Capital Share Transactions (Note 6) 43,199,880
-------------
Total increase in net assets 43,798,711
Net Assets
Beginning of period 100,000
-------------
End of period 43,898,711
-------------
Undistributed net investment income, end of period $ 37,285
=============
- -------------------------------------------------------------------------------
</TABLE>
* Commencement of investment operations.
See Notes to the Financial Statements
<TABLE>
<S> <C>
SAMCO Fund, Inc.
SAMCO Fixed Income Portfolio - Financial Highlights Period from
12/30/97*
For a share outstanding throughout the period to 10/31/98
- -----------------------------------------------------------------------------
Per Share Data
Net asset value, beginning of period $10.00
------------
Increases From Investment Operations
Net investment income 0.21
Net realized and unrealized gain on investments 0.46
------------
Total from investment operations 0.67
------------
Less Distributions
From net investment income (0.41)
------------
Net asset value, end of period $10.26
============
Total Return (a) 6.87%
Ratios/Supplemental Data
Net assets, end of period (000's) $43,899
Ratio of expenses to average net assets (b) 0.45%
Ratio of expenses to average net assets before expense waivers
and reimbursement of other expenses (b) 1.03%
Ratio of net investment income to average net assets (b) 5.17%
Portfolio turnover 478%
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements
(a) Not Annualized
(b) Annualized
* Commencement of Investment Operations
SAMCO FUND, INC.
- -------------------------------------------------------------------------------
SAMCO FIXED INCOME PORTFOLIO .NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
1. Organization
The SAMCO Fund, Inc. (the "Company"), a series fund, was organized as a Maryland
corporation on August 4, 1997 and is registered under the Investment Company Act
of 1940, as amended, as an open-end, non-diversified management investment
company. The Company currently has one active portfolio, the SAMCO Fixed Income
Portfolio - Class A (the "Fund"). The unamortized balance of organizational
expenses at October 31, 1998 was $79,543. In the event that any of the initial
10,000 shares (the "Initial Shares") purchased by the Seix Investment Advisors
Inc. (the "Investment Adviser") are redeemed during the amortization period, the
Fund will be reimbursed by the Investment Adviser for any remaining unamortized
costs in the same proportion as the number of Initial Shares redeemed bears to
the total number of Initial Shares outstanding at the time of the redemption.
Investment Objective
The Fund is designed to provide investors with a total return which consistently
exceeds the total return of the broad U.S. investment grade bond market. Total
investment return is the aggregate of dividend and interest income and realized
and unrealized capital gains/losses on investments. The Fund seeks to achieve
its objective through superior security selection and emphasis on current
income, while maintaining a duration neutral posture.
2. Summary of Significant Accounting Policies
Securities
Securities transactions are recorded on a trade date basis. Interest income and
expenses are recorded on an accrual basis. The Fund amortizes discount or
premium using the yield-to-maturity method on a daily basis, except for
securities having a maturity date of less than sixty days at the time of
acquisition. Such securities are amortized on a straight-line basis.
Dividend income is recorded on the ex-dividend date. The Fund uses the specific
identification method for determining gain or loss on sales of securities.
Income Tax
There is no provision for Federal income or excise tax since the Fund intends to
qualify as a regulated investment company ("RIC") by complying with the
requirements of Subchapter M of the Internal Revenue Code applicable to RICs and
to distribute all of its taxable income.
Valuation
Securities for which over-the-counter market quotations are available are valued
at the latest bid price. Securities for which market quotations are not readily
available will be valued in good faith by methods approved by the Board of
Directors. Securities purchased with sixty days or less remaining to maturity
are valued at amortized cost, which approximates market value, unless this
method does not represent fair value.
SAMCO FUND, INC.
- -------------------------------------------------------------------------------
SAMCO FIXED INCOME PORTFOLIO .NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1998
2. Summary of Significant Accounting Policies
(continued)
Dividends to Shareholders
It is the policy of the Fund to declare and pay dividends from net investment
income monthly. Dividends from net short-term capital gains and net long-term
capital gains, if any, are normally declared and paid annually, but the Fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed.
Income and capital gain distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. Undistributed net investment income,
accumulated net investment loss, or distributions in excess of net investment
income may include temporary book and tax differences which may reverse in a
subsequent period.
Organization Expenses
The costs incurred by the Company in connection with the organization and
initial registration of shares are being amortized on a straight-line basis by
the Fund over a sixty-month period beginning with the commencement of its
investment operations on December 30, 1997. On October 29, 1997, the investment
advisor purchased 10,000 shares of common stock of the Fund for an aggregate
purchase price of $100,000.
Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
3. Investment Advisory Agreement and Administration
Agreement
The Company's Board of Directors has approved an investment advisory agreement
with the Investment Adviser. For its services as investment adviser, the Company
pays the Investment Adviser a monthly fee at an annual rate of 0.25% of the
Fund's average daily net assets. Currently, the Investment Adviser is waiving
all of its fees.
Pursuant to its Administration Agreement, Investors Capital Services, Inc. (the
"Administrator"), three employees of which serve as officers of the Company,
earn a fee for providing fund administration services to the Company. The
Company pays the Administrator a monthly fee at the annual rate not to exceed
0.15% of the Fund's average daily net assets and reimbursement for out-of-pocket
expenses pursuant to the Administration Agreement. Pursuant to the
Administration Agreement, the Administrator will be paid a minimum fee of
$50,000 for services provided to the Company for the first twelve months after
the fund commences operations.
The Investment Adviser has agreed to voluntarily waive its fee and to reimburse
the Fund for expenses exceeding 0.45% of average daily net assets. During the
period ended October 31, 1998, the Investment Adviser, voluntarily waived
$44,287 of advisory fees, and reimbursed $57,987 for other expenses which is due
from the Investment Adviser.
Directors' fees of $7,638 were paid by the Fund and paid for the period ended
October 31, 1998 to Directors who are not employees of the Investment Adviser.
Directors who are not employees of the Investment Adviser receive an annual
retainer of $1,000, payable quarterly and $500 per meeting attended.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the period ended October 31, 1998 were as follows:
<TABLE>
<S> <C> <C> <C>
Purchases Purchases Sales Sales
U.S. Government Other Securities U.S. Government Other Securities
- ----------------------- ---------------------- ---------------------- ---------------------
$130,970,836 $41,773,460 $100,119,550 $19,650,041
The components of net unrealized appreciation (depreciation) of investments
based on Federal tax cost at October 31, 1998 for the Fund were as follows:
Cost for Federal
Appreciation Depreciation Net Appreciation Tax Purposes
- --------------------- ---------------------- --------------------- ----------------------
$300,149 ($247,775) $52,375 $55,494,246
</TABLE>
5. Repurchase Agreements
The Fund may enter into repurchase agreements under which a bank or securities
firm that is a primary or reporting dealer in U.S. Government securities agrees,
upon entering into a contract, to sell U.S. Government securities to the Fund
and repurchase such securities from the Fund at a mutually agreed upon price and
date.
The Fund will engage in repurchase transactions with parties selected on the
basis of such party's creditworthiness. The collateral on repurchase agreements
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller. However, in the event of default or bankruptcy by the counterparty
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
6. Capital Share Transactions
As of October 31, 1998, there were 2,500,000,000 shares of $.001 par value
capital stock authorized. Transactions in capital stock were as follows:
For the Period from
12/30/97* to 10/31/98
Shares Amount
---------------- ------------------
Shares Sold 4,192,818 $ 42,406,781
Shares Reinvested 77,716 793,099
---------------- ------------------
Net Increase 4,270,534 $ 43,199,880
================ ==================
- -------------------------------------------------------------------------------
* Commencement of Operations
SAMCO FUND, INC.
- ------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
OCTOBER 31, 1998
Shareholders and Board of Directors
Samco Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Samco Fixed Income Portfolio, a portfolio
of Samco Fund, Inc. as of October 31, 1998, and the related statement of
operations, the statement of changes in net assets and financial highlights for
the period from December 30, 1997 (commencement of investment operations) to
October 31, 1998. 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
audit.
We conducted our audit 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 October 31, 1998, by correspondence with the custodian and others. 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 audit provides 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 the
Samco Fixed Income Portfolio, the results of its operations, and the changes in
its net assets and the financial highlights for the period from December 30,
1997, to October 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
December 3, 1998
SAMCO FUND, INC.
- -------------------------------------------------------------------------------
SAMCO FIXED INCOME PORTFOLIO .NOTES TO FINANCIAL STATEMENTS (CONTINUED) OCTOBER
31, 1998 (UNAUDITED)
The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (October 31,
1998) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all distributions
paid during the fiscal year were derived from net investment income and are
taxable as ordinary income. In addition, 38.35% of the Fund's distributions
during the fiscal year ended October 31, 1998 were earned from U.S. Treasury
obligations. None of the Fund's distributions qualify for the dividends received
deduction available to corporate shareholders.
A notification sent to shareholders with respect to calendar 1998, will reflect
the amounts to be used by calendar year taxpayers on their federal, state and
local income tax returns, was made in conjunction with Form 1099-DIV and will be
mailed in January 1999. Shareholders are advised to consult their own tax
advisors with respect to the tax consequences of their investment in the Fund.
SAMCO FUND, INC.
- -----------------------------------------------------------------------------
SAMCO FIXED INCOME PORTFOLIO
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
OFFICERS AND DIRECTORS INVESTMENT ADVISER
Christina Seix Seix Investment Advisors Inc.
Chairman and Director 300 Tice Blvd.
of the Fund Woodcliff lake, NJ 07675
ADMINISTRATOR
John G. Talty
President and Director Investors Capital Services, Inc.
of the Fund 600 Fifth Avenue, 26th Floor
New York, NY 10020
John R. O'Brien
Director of the Fund DISTRIBUTOR
John E. Manley, Sr. AMT Capital Securities, L.L.C.
Director of the Fund 600 Fifth Avenue, 26th Floor
New York, NY 10020
Peter Bourke
Assistant Secretary and CUSTODIAN AND FUND ACCOUNTING AGENT
Director of the Fund
Investors Bank & Trust Company
William E. Vastardis P.O. Box 9130
Secretary and Treasurer Boston, MA 02117
of the Fund
TRANSFER AND DIVIDEND DISBURSING AGENT
Carla E. Dearing
Assistant Treasurer Investors Bank & Trust Company
of the Fund P.O. Box 9130
Boston, MA 02117
Alissa R. Fox
Assistant Treasurer LEGAL COUNSEL
of the Fund
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001043245
<NAME> SAMCO FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> SAMCO FIXED INCOME FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> DEC-30-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 55458
<INVESTMENTS-AT-VALUE> 55547
<RECEIVABLES> 9856
<ASSETS-OTHER> 137
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65540
<PAYABLE-FOR-SECURITIES> 21587
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54
<TOTAL-LIABILITIES> 21641
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43300
<SHARES-COMMON-STOCK> 43200
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 37
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 473
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 89
<NET-ASSETS> 43899
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 995
<OTHER-INCOME> 0
<EXPENSES-NET> 80
<NET-INVESTMENT-INCOME> 915
<REALIZED-GAINS-CURRENT> 473
<APPREC-INCREASE-CURRENT> 89
<NET-CHANGE-FROM-OPS> 1477
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 877
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42407
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 793
<NET-CHANGE-IN-ASSETS> 43799
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 44
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 182
<AVERAGE-NET-ASSETS> 21200
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
