Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Worldwide Emerging
Markets Fund (formerly known as the Blanchard Emerging Markets Growth & Income
Fund) for the fiscal year ending April 30, 1995.
Since the launch of the Blanchard Worldwide Emerging Markets Fund, the
returns available from global emerging markets have been generally disappointing
and incredibly volatile. Fortunately, past performance is no indication of
future performance. And indeed, the high volatility associated with the world's
emerging markets has in other years led to significant returns for investors.
That being said, here's a closer look at what happened in the emerging
markets and your Blanchard Worldwide Emerging Markets Fund in fiscal 1994, as
well as our outlook for fiscal 1995.
The Year In Review
The world's emerging markets were negatively affected by the change in the
U.S. interest rate environment which began in early February 1994. The
progressive tightening of U.S. monetary policy throughout the year significantly
diminished the flow of U.S. investor dollars into emerging markets. The impact
was initially felt in Asia, and as the year progressed, markets in Central
Europe and Latin America also came under pressure.
In addition to this diminished flow of U.S. investor dollars, a series of
assassinations in Mexico, followed by the clumsy handling of the peso's
devaluation in mid-December, caused the investment climate within Latin America
to deteriorate rapidly. As a result, investors' perception of the risk inherent
in South American investment dramatically increased and caused a sharp decline
in most Latin American markets.
As 1995 began, the world's emerging markets continued the volatile trend
established in 1994. Latin America has experienced a roller-coaster ride, with
The following information was reprint as a line graph.
The Value of a $10,000 Investment in the
Blanchard Worldwide Emerging Markets Fund
from inception 3/1/94 through 4/30/95 as
compared to Morgan Stanley Emerging
Markets Index for the same period
-----------------------------------------
Avg. Annual Returns through 4/30/95
Blanchard Worldwide Emerging Markets Fund*
-----------------------------------------
1 year -19.80%
since inception -17.44%
-----------------------------------------
FYE 4/30/94 FYE 4/30/95
BMBF -0.25% -19.80%
MORGAN STANLEY -7.00% -4.78%
BMBF $ 9,963 $9,938 $7,970
MORGAN STANLEY $10,000 $9,300 $8,855
Reflects deduction of $37.50 acct opening fee
Blanchard Morgan Stanley
Worldwide Emerging Emerging
Markets Fund^ Markets Index(D)
*Total return quoted above reflects reinvestment of distributions, but does not
reflect the deduction of the one-time account opening fee. If deducted, return
would be lower. Past performance is no guarantee of future results.
(D)Source: Morgan Stanley Emerging Markets Index is an unmanaged index comprised
of the average equity market performance of 20 emerging market countries
throughout the world.
^Reflects deduction of one-time account opening fee of $37.50.
This chart is for comparative purposes only and is not meant to reflect future
performance of the Fund or the index.
(over, please)
<PAGE>
both currencies and markets coming under significant pressure. This has led to a
backlash of investor sentiment against emerging markets investing, affecting
several markets in Asia, as well as Central Europe. Generally, investors'
concerns have centered on countries where significant current account deficits
have led to anxiety over currency values.
The portfolio performance of your Blanchard Worldwide Emerging Markets Fund
over the past year was negatively impacted by the high proportion of assets that
were allocated to Latin America at the time of the Mexican devaluation.
Ironically, our underweight position in these markets had affected overall
returns in the summer, and the increased allocation to Latin America was in
anticipation of what we believed would be a buoyant 1995! Investments in Poland
and India also underperformed in 1994.
A Look Ahead
As 1995 has progressed, investor sentiment has gradually improved, faced
with incredible valuation opportunities present in Latin America and,
selectively, in Asia and Central Europe.
Latin American markets, in particular, have bounced back almost to the
levels at which they were standing in late December. The Fund's overweighted
position in Peru has been of particular benefit to total returns.
In other regions, the portfolio's position in Poland has benefited from a
50% run in the market since the end of March, and India has recovered nicely as
well. Also, selective markets in South East Asia have begun to recover, and our
weightings to markets like Thailand have proved rewarding.
A word of caution, however: Confidence remains fragile, and with growth
estimates being pared back in South America and selectively in Asia, overall
returns are likely to continue to be difficult to achieve.
However, there are some bright spots. First, the long-term trend for
investment in these markets is well established and will continue for the
foreseeable future; and second, valuations look significantly attractive in a
number of the areas into which we are investing. Poland, for example, was
selling for less than 6 times 1995 earnings before its recent recovery.
In summary, provided that a long-term view is adopted, we believe it is
still an excellent time to be investing in these rapidly developing markets
where the potential exists for significant returns over time.
Sincerely,
JF:ml James Fairweather
Martin Currie Inc.
Portfolio Managers of the Blanchard Worldwide Emerging Markets Fund
Distributed by Sheffield Investments, Inc. (1551) 08ARSL0695
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS
April 30, 1995
(Left Column)
Shares Value
------ -----
EMERGING MARKETS SECURITIES (92.31%)
ARGENTINA (3.50%)
Consumer Goods & Related (1.83%)
BAESA (ADR).............................. 5,600 $ 154,000
Quilmes Industrial S.A. (Regd)........... 3,600 68,400
-----------
222,400
-----------
Utilities & Related (1.67%)
Compania Naviera Perez Compac "B" Shares. 24,920 101,669
YPF Sociedad Anonima..................... 5,000 101,250
-----------
202,919
-----------
TOTAL ARGENTINA.................... 425,319
-----------
BRAZIL (12.14%)
Basic Industries (6.14%)
Acesita PN (ADR)......................... 13,620 209,250
Compania Vale Do Rio Doce (ADR).......... 4,300 179,852
Usiminas (ADR)........................... 29,500 356,000
-----------
745,102
-----------
Capital Goods (1.31%)
(d)Rhodia Ster (GDR)........................ 11,687 158,986
-----------
Energy Related (1.54%)
*Electrobras.............................. 451,000 124,414
*Electrobras "B" Shares................... 235,000 63,284
-----------
187,698
-----------
Industrial Related (1.64%)
*Cemig (ADS).............................. 8,541 199,584
-----------
Telecommunications (1.51%)
Telebras (ADR)........................... 5,120 183,115
-----------
TOTAL BRAZIL....................... 1,474,485
-----------
CHILE (4.45%)
Basic Industries (1.55%)
Antofagasta Holding...................... 33,500 156,320
*Sociedad Quimica Y Minera (ADR).......... 900 31,388
-----------
187,708
-----------
Capital Goods (2.39%)
Madeco S.A. (ADR)........................ 6,000 174,750
Maderas Y Sinteticos Sociedad (ADS)...... 6,500 113,750
-----------
288,500
-----------
Financial Services (.51%)
Banco O'Higgins (ADS).................... 3,400 62,050
-----------
TOTAL CHILE........................ 538,258
-----------
CHINA (1.24%)
Financial Services (1.24%)
*China North Industries
Investment Ltd........................... 150,000 150,000
-----------
COLOMBIA (3.09%)
Basic Industries (2.13%)
Cementos Diamante (GDS).................. 11,800 258,066
-----------
Financial Services (.96%)
Banco Ganadero S.A. (GDR)................ 6,100 115,900
-----------
TOTAL COLOMBIA..................... 373,966
-----------
(Right Column)
Shares Value
------ -----
ECUADOR (.50%)
Construction (.50%)
La Cemento Nacional de Ecuador (GDR)..... 256 $ 60,160
-----------
HONG KONG (3.30%)
Banking (1.48%)
Dao Heng Bank Group Ltd. ................ 70,000 179,047
-----------
Manufacturing (.29%)
Champion Technology...................... 465,000 35,441
*Star Paging Int'l. Warrants 12/31/96..... 40,000 248
-----------
35,689
-----------
Transportation & Shipping (1.53%)
*Shanghai Haixing Shipping................ 1,000,000 186,022
-----------
TOTAL HONG KONG.................... 400,758
-----------
HUNGARY (1.52%)
Capital Goods (.80%)
*Matav Rt. ............................... 550 97,345
-----------
Consumer Goods & Related (.20%)
*Kekkut Asvanyjz (GDR).................... 2,800 24,284
-----------
Financial Services (.26%)
*Konzum (GDR)............................. 7,600 31,176
-----------
Telecommunications (.26%)
*Hungarian Telephone & Cable Co. ......... 2,700 31,725
-----------
TOTAL HUNGARY...................... 184,530
-----------
INDIA (7.20%)
Basic Industries (2.45%) Principal
Gujarat Ambuja Cements Ltd. ---------
Conv. Bd. 3.50%, 6/30/99............... $80,000 103,000
Shares
------
*Hindalco Industries Ltd. (GDR)........... 3,500 91,000
United Phosphorus (GDR).................. 4,300 104,275
-----------
298,275
-----------
Consumer Goods & Related (1.38%)
*DCW Ltd. (GDR)........................... 4,800 62,400
*Dr. Reddy's Laboratories (GDR)........... 10,000 105,000
-----------
167,400
-----------
Investment Companies (3.37%)
*Himalayan Fund........................... 7,803 106,901
*Himalayan Fund Bonus Wts. 12/31/96....... 1,180 738
*Indian Opportunities Fund Ltd............ 22,807 301,514
-----------
409,153
-----------
TOTAL INDIA........................ 874,828
-----------
INDONESIA (2.74%)
Banking (.79%)
Bank Internasional Indonesia............. 41,000 95,477
-----------
Chemicals (.29%)
*PT Keramika Indonesia Assoc. ............ 41,000 34,886
-----------
Capital Goods (.52%)
*PT Argha Karya Prima..................... 12,000 8,598
PT Indosat (ADR)......................... 1,500 54,187
-----------
62,785
-----------
3
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS
April 30, 1995 (continued)
(Left column)
Shares Value
------ -----
Consumer Goods & Related (1.14%)
PT Andayani Megah........................ 34,000 $ 30,452
PT Concord Benefic Textile Co. .......... 39,000 77,721
*PT Kalbe Farma........................... 8,500 30,262
-----------
138,435
-----------
TOTAL INDONESIA.................... 331,583
-----------
ISRAEL (.34%)
Investment Companies (.23%)
First Israel Fund........................ 2,300 27,600
-----------
Financial Services (.11%)
*Ampal American Israel Cl. A ............. 2,200 14,025
-----------
TOTAL ISRAEL....................... 41,625
-----------
KOREA (8.87%)
Basic Industries (.46%)
Kumho Construction & Energy Co. Pfd. .... 8,000 56,142
-----------
Capital Goods (.83%)
*Anam Industrial Co. Ltd. Pfd. ........... 4,000 50,318
*Dae Woo Heavy Industries Pfd. ........... 6,000 50,764
-----------
101,082
-----------
Consumer Goods & Related (1.99%)
*Midopa Co. .............................. 6,000 74,769
*Samsung Electronics Pfd. ................ 2,036 166,651
-----------
241,420
-----------
Energy Related (.12%) Principal
Ssangyong Oil Refining Co. ---------
3.00% 12/31/04 .................... $20,000 14,050
Shares -----------
Financial Services (1.69%) ------
*Commercial Bank of Korea................. 12,000 124,352
*Hanshin Securities Co. Pfd. ............. 3,000 37,975
*Jin Heung Svgs. & Finance................ 1,500 42,697
-----------
205,024
-----------
Transportation (.34%)
*Dong Bang Forwarding Co. ................ 1,000 40,795
-----------
Utilities & Related (3.44%)
*Korea Electric Power Co. ................ 9,000 329,376
*Yukong Ltd. ............................. 2,000 88,673
-----------
418,049
-----------
TOTAL KOREA........................ 1,076,562
-----------
LUXEMBOURG (1.23%)
Telecommunications (1.23%)
*Millicom International Cellular.......... 6,000 149,250
-----------
MALAYSIA (2.87%)
Basic Industries (1.57%)
Aokam Perdana Ltd. ...................... 42,400 190,465
-----------
Consumer Goods & Related (.41%)
Edaran Otomobile Nasional................ 7,000 49,858
-----------
Financial Services (.89%)
Westmont Berhard......................... 25,000 108,256
-----------
TOTAL MALAYSIA..................... 348,579
-----------
(Right column)
Shares Value
------ -----
MEXICO (3.55%)
Basic Industries (.51%)
Kimberly Clark de Mexico (ADR)........... 3,000 $ 61,976
-----------
Financial Services (3.04%)
*Ceteco (ADR)............................. 9,500 260,965
*Grupo Carso S.A. (ADR)................... 10,000 108,526
-----------
369,491
-----------
TOTAL MEXICO....................... 431,467
-----------
PAKISTAN (.05%)
Basic Industries (.05%)
*D.G. Khan Cement Ltd. ................... 4,620 6,369
-----------
PERU (7.90%)
Capital Goods (1.64%)
Cementos Lima "C" Shares................. 7,800 172,908
Cementos Norte Pacasmayo................. 7,632 26,552
-----------
199,460
-----------
Financial Services (1.84%)
Banco Wiese (ADR)........................ 8,149 73,339
*Banco Wiese " C" Shares.................. 2 4
Banco de Credito del Peru................ 71,785 150,486
-----------
223,829
-----------
Real Estate (2.36%)
*Peru Real Estate S.A. "B" Shares.......... 345,000 286,350
-----------
Telecommunications (2.06%)
*CIA Peruana de Telefonos "B" Shares....... 129,874 217,808
*La Neuva Com de Telefonos................. 39,756 32,273
-----------
250,081
-----------
TOTAL PERU......................... 959,720
-----------
POLAND (4.26%)
Capital Goods (1.21%)
*Bydogoska Fabryka Kabli (PDR)............ 3,000 33,060
*Polifarb Ciezyn (PDR).................... 11,500 63,607
*T. C. Debica (PDR)....................... 4,000 50,666
-----------
147,333
-----------
Consumer Goods & Related (1.44%)
*Irena Huta Szkla Gospodarcz (PDR)........ 1,400 19,625
*Mostostal Exports (PDR).................. 13,775 77,353
Zwyeic Brewing Company (PDR)............. 1,019 77,443
-----------
174,421
-----------
Financial Services (1.61%)
Bank Rozwoju Eksportu S.A. (PDR)......... 9,200 135,565
Elektrim Trading Co. (PDR)............... 15,760 60,220
-----------
195,785
-----------
TOTAL POLAND....................... 517,539
-----------
RUSSIA (.46%)
Telecommunications (.46%)
*Petersburg Long Distance Inc. ........... 11,000 56,375
-----------
SINGAPORE (1.43%)
Capital Goods (1.43%)
Clipsal Industries Holdings Ltd. ........ 48,000 103,680
GP Batteries Int'l. Ltd. ................ 29,000 69,600
-----------
TOTAL SINGAPORE.................... 173,280
-----------
4
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS
April 30, 1995 (continued)
(Left column)
Shares Value
------ -----
SLOVENIA (.51%)
Banking (.51%)
*Slovenia Kredit Bank (IDR)............... 210 $ 61,377
-----------
SOUTH AFRICA (5.34%)
Basic Industries (1.54%)
*Iscor Ltd. .............................. 72,633 90,120
Sasol Ltd. .............................. 10,000 96,718
-----------
186,838
-----------
Consumer Goods & Related (1.08%)
*JD Group................................. 17,000 62,245
South African Breweries Ltd. ............ 2,500 69,085
-----------
131,330
-----------
Financial Services (.60%)
Barlow Rand Ltd. ........................ 3,700 37,320
*Nedcor Ltd. ............................. 2,900 35,461
-----------
72,781
-----------
Real Estate (1.23%)
Safmarine & Rennie Hldgs. Ltd. .......... 48,000 149,223
-----------
Metals & Mining (.89%)
Samancor Ltd. ........................... 7,800 108,311
-----------
TOTAL SOUTH AFRICA................. 648,483
-----------
TAIWAN (6.02%)
Basic Industries (.82%)
*Tuntex Distinct (GDS).................... 8,500 99,875
-----------
Industrial & Related (1.16%) Principal
Pacific Construction Conv. Bond ---------
2.13%, 10/1/98......................... $150,000 140,997
-----------
Shares
Investment Companies (4.04%) ------
*Taiwan Opportunities Fund Ltd. .......... 47,500 490,200
-----------
TOTAL TAIWAN....................... 731,072
-----------
(Right column)
Shares Value
------ -----
THAILAND (9.11%)
Capital Goods (.37%)
*Hana Microelectronics.................... 12,000 $ 45,131
-----------
Financial Services (7.68%)
Bangkok Bank Public Co. Ltd. ............ 20,000 193,535
Dhana Siam Finance & Securities Co. ..... 33,000 140,882
General Finance & Securities............. 46,500 185,282
MDX Corporation Ltd. .................... 31,500 65,318
Nat'l Finance & Securities............... 40,000 136,613
Siam City Bank Ltd. ..................... 140,000 143,728
Siam City Credit Fin. & Securities....... 22,000 67,087
-----------
932,445
-----------
Transportation (1.06%)
Precious Shipping Corp. ................. 12,000 128,807
-----------
TOTAL THAILAND..................... 1,106,383
-----------
URUGUAY (.69%)
Financial Services (.69%)
*Banco Commercial S.A. ................... 6,400 83,200
-----------
TOTAL EMERGING
MARKETS SECURITIES
(IDENTIFIED COST
$12,596,388)..................... 11,205,168
-----------
Principal
SHORT-TERM SECURITIES (2.89%) ---------
U.S. GOVERNMENT OBLIGATIONS (2.89%)
U.S. Treasury Bill 5.50%, 5/4/95
(AMORTIZED COST $349,840).......... $350,000 349,840
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $12,946,228)(a) (95.20%). 11,555,008
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES (4.80%)(b).......... 583,044
-----------
NET ASSETS (100%).................. $12,138,052
===========
(a) The aggregate cost for federal income tax purposes is $13,038,908; the gross
unrealized appreciation is $460,586 and the gross unrealized depreciation is
$1,944,486; resulting in net unrealized depreciation of $1,483,900.
(b) Includes one open forward currency contract as of April 30, 1995. The Fund
sold 15,761 South African Commercial Rand and purchased US $4,360 for
delivery on May 2, 1995. At April 30, 1995, there was no unrealized
appreciation or depreciation on this contract.
* Non-income producing.
(d) Registered under SEC rule 144A; resale restricted as to qualified
institutional buyers, represents 1.31% of net assets.
See notes to financial statements.
5
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND-PORTFOLIO OF INVESTMENTS
April 30, 1995 (continued)
Schedule of Foreign Currency Held as of April 30, 1995
Currency Held Cost Market Value
------------- ---- ------------
Argentina Peso........................ 102,859 $102,864 $102,854
So. African Commercial Rand........... 188,067 52,323 51,970
-------- --------
$155,187 $154,824
======== ========
6
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
Statement of Assets and Liabilities
April 30, 1995
Assets:
Investments in securities, at value
(Identified Cost $12,946,228) (note 1).................. $11,555,008
Cash....................................................... 479,261
Foreign currencies (Identified Cost $155,187).............. 154,824
Receivables for:
Investments sold........................................ 452,347
Shares of beneficial interest sold...................... 158,840
Dividends............................................... 25,083
Interest................................................ 3,652
Foreign withholding tax reclaimable..................... 308
Deferred organizational costs (note 1...................... 116,081
-----------
Total assets...................................... 12,945,404
-----------
Liabilities:
Payables for:
Investments purchased................................... 762,573
Accrued expenses and other liabilities..................... 44,779
-----------
Total liabilities................................. 807,352
-----------
Net assets........................................ $12,138,052
===========
Net assets are comprised of:
Paid in capital (unlimited authorized shares of beneficial
interest, $.01 par value, 1,895,181 shares outstanding). $16,198,715
Accumulated investment loss-net ........................... (115,247)
Accumulated realized loss-net.............................. (2,552,372)
Unrealized net depreciation of investments................. (1,393,044)
-----------
Net assets................................................. $12,138,052
===========
Net asset value per share.................................. $6.40
=====
See notes to financial statements.
7
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
For the Year Ended April 30, 1995
<TABLE>
<CAPTION>
Investment income:
<S> <C>
Interest (net of $3,051 foreign withholding tax)........................ $ 187,123
Dividends (net of $7,632 foreign withholding tax)....................... 122,193
-----------
Total income........................................................ 309,316
-----------
Expenses
Investment management fee (note 2)...................................... $ 174,720
Custodian fees.......................................................... 90,580
Accounting fees......................................................... 73,203
Plan of distribution fees (note 3)...................................... 72,335
Transfer agent fees..................................................... 54,178
Professional fees....................................................... 47,739
Organizational expenses................................................. 29,000
Registration fees....................................................... 27,099
Shareholder reports and notices......................................... 19,067
Trustees' fees, retirement plan curtailment and other expenses (note 5). 16,786
Other................................................................... 1,606
---------
Total expenses...................................................... 606,313
Less: Expenses absorbed by Manager (note 2)......................... (90,297)
---------
Net expenses............................................................ 516,016
-----------
Investment loss - net................................................... (206,700)
-----------
Realized and unrealized gain (loss) - net (note 1):
Investments in securities-net (net of $20,951 foreign capital gains tax) (2,292,242)
Foreign currency contracts and foreign exchange
transactions-net...................................................... (167,440) (2,459,682)
---------
Change in unrealized appreciation on investments-net
and translation of other assets and liabilities
donominated in foreign currencies-net................................. (1,382,453)
-----------
Net realized and unrealized losses...................................... (3,842,135)
-----------
Net decrease in net assets resulting from operations.................... $(4,048,835)
-----------
</TABLE>
See notes to financial statements.
8
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period
March 1, 1994*
For the (commencement of
Year Ended operations) to
April 30, 1995 April 30, 1994
-------------- --------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Investment loss-net.................................................. $ (206,700) $ (707)
Realized loss-net.................................................... (2,459,682) (530)
Change in unrealized appreciation or depreciation-net................ (1,382,453) (10,591)
----------- ----------
Net decrease in net assets resulting from operations................. (4,048,835) (11,828)
----------- ----------
Transactions in shares of beneficial interest-net increase (note 6).... 8,144,318 7,554,397
----------- ----------
Net increase in net assets....................................... 4,095,483 7,542,569
Net assets:
Beginning of year.................................................... 8,042,569 500,000
----------- ----------
End of year (including accumulated investment loss-net of $115,247
and $707, respectively)............................................ $12,138,052 $8,042,569
=========== ==========
<FN>
*Commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
9
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
NOTE 1-Organization and Accounting Policies:
Blanchard Worldwide Emerging Markets Fund (the "Fund"), formerly known as
the Blanchard Emerging Markets Growth & Income Fund, is a series of Blanchard
Funds which was organized as a Massachusetts business trust on January 24, 1986.
The Fund is a registered, open-end non-diversified management investment company
under the Investment Company Act of 1940 (the "Act"). The Fund had no operations
before March 1, 1994 other than the sale of 62,500 shares of beneficial interest
for $500,000 to Sheffield Management Company (the "Manager").
The following is a summary of the significant accounting policies followed
by the Fund:
A. Valuation of Investments-Portfolio securities traded on domestic or
foreign exchanges are valued at the 4 PM EST price on that date, or if no sale
is made on that day, at the closing bid price (or the mean price in cases where
a mean is reported instead of the closing bid). In cases where a security is
traded on more than one exchange, it is valued at the quotation on the exchange
determined to be the primary market for such security by the Trustees or the
Manager. All other portfolio securities for which over-the-counter market
quotations are readily available are valued at the latest available bid prices.
Short-term debt securities which mature in 60 days or less are valued at
amortized cost if their original maturity was 60 days or less. Short-term debt
securities having a maturity date of more than sixty days at the time of
purchase are valued on a mark to market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day. All other
securities and other assets of the Fund are valued at fair value as determined
in good faith by the Trustees. Foreign currency exchange rates are determined
when such rates are made available to the Fund at times prior to the close of
the New York Stock Exchange.
The abilities of the issuers of debt securities held by the Fund to meet
their obligations may be affected by economic or political developments in a
particular country, industry or region.
B. Accounting for Investments and Investment Income Transactions-Security
transactions are accounted for on the trade date (date the order to buy or sell
is executed). Realized gains and losses on security transactions are determined
on the identified cost method. Dividend income and other distributions are
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as soon as the Fund is informed after the ex-dividend
date. Interest income is accrued daily. Premiums or discounts on debt securities
are amortized or accreted as adjustments to interest income over the lives of
such securities.
C. Foreign Currency Contracts & Translation-The books and records of the
Fund are maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, forward currency contracts, and other assets and
liabilities denominated in foreign currencies are translated at the exchange
rates at the end of the period; and (2) purchases, sales, income and expenses
are translated at the rates of exchange prevailing on the respective dates of
such transactions. The Fund does not separately identify that portion of the
results of operations of the Fund that arise as a result of changes in the
exchange rates from the fluctuations that arise from changes in market prices of
equity investments during the year.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the level of governmental supervision and
regulation of foreign securities markets and the possibility of political or
economic instability.
10
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS-(continued)
April 30, 1995
The Fund may enter into forward currency contracts to protect the U.S.
dollar value of securities and related receivables and payables against changes
in future foreign exchange rates. Forward currency contracts are valued based
upon the current forward rates. Fluctuations in the value of such contracts are
recorded as unrealized gains or losses; realized gains or losses include net
gains or losses on contracts which have settled. The Fund generally enters into
a forward currency contract as a hedge against foreign exchange rate fluctuation
upon the purchase or sale of a security denominated in a foreign currency. The
Fund maintains, as collateral, U.S. Government debt obligations in an amount
equal to or greater than its net obligation for forward foreign currency
contracts. Risks may arise as a result of the potential inability of the
counterparts to meet the terms of their contracts.
D. Federal Income Tax Status-It is the Fund's policy 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 is required.
E. Dividends and Distributions to Shareholders-The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal 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 accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income or 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 they exceed net investment income or net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital.
F. Organizational Expenses-The Fund's Manager paid the organizational
expenses of the Fund incurred prior to the public offering of its shares
amounting to $145,001. The Fund is liable to the Manager for these expenses and
has deferred and is amortizing such expenses on the straight-line method over
five years from the date of commencement of the Fund's operations.
G. Other-Certain expenses of the Blanchard Funds are allocated among the
Funds based upon their relative average net assets.
NOTE 2-Investment Management Agreement:
Pursuant to a management agreement (the "Agreement"), the Manager manages
the Fund and the investment of the Fund's assets, subject at all times to the
supervision of the Fund's Trustees. In addition to providing overall business
management and administrative services, the Manager selects, monitors and
evaluates the Portfolio Managers described below. The Manager receives from the
Fund an advisory fee payable monthly at an annual rate of 1.25% of the Fund's
average daily net assets.
Expenses of the Fund, exclusive of taxes, interest, brokerage commissions,
distribution fees, extraordinary expenses and certain other excludable expenses
for which a waiver has been obtained, are subject to the
11
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS-(continued)
April 30, 1995
expense limitation imposed by one state in which shares of the Fund are offered
for sale. For the year ended April 30, 1995, the Fund's expenses did not exceed
the above limitation.
Certain officers and/or Trustees of the Fund are officers and/or directors
of the Manager.
The Manager has sub-advisory agreements with Martin Currie, Inc. (Equities
Sector) and OFFITBANK (Fixed Income Sector) to serve, as the Portfolio Managers
for their respective sectors of the Fund. The Manager has advised the Fund that
the amount of fees paid to the Portfolio Managers was $59,427 and $2,703,
respectively.
The Manager voluntarily waived a portion of its advisory fee, which
amounted to $90,297, for the year ended April 30, 1995.
NOTE 3-Distribution Agreement and Plan:
Pursuant to a Distribution Agreement, Sheffield Investments, Inc. (the
"Distributor"), an affiliated company of the Manager, acts as principal
distributor of the Fund's shares. The Distributor has the exclusive right to
distribute Fund shares directly or through other broker-dealers.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act which provides that the Fund may finance activities which
are primarily intended to result in the sale of the Fund's shares, including but
not limited to advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature, and payments to dealers and shareholder servicing agents who
enter into agreements with the Manager or Distributor.
Pursuant to the plan, the Fund may pay distribution fees not to exceed .50%
per annum of the Fund's average daily net assets. Provided that the Plan
continues in effect, any cumulative expenses incurred by the Distributor on or
after March 1, 1994, but not yet reimbursed by the Fund, may be reimbursed
through future distribution fees from the Fund. The Distributor has advised the
Fund that at April 30, 1995, the unreimbursed distribution expenses amounted to
$1,010,046. If the Plan is terminated or discontinued in accordance with its
terms, the obligation of the Fund to make payments to the Distributor
pursuant
to the Plan will cease and the Fund will not be required to make any payments
past the date the Plan is terminated.
NOTE 4-Acquisition Agreement:
Sheffield Management Company (the "Manager") and Sheffield Investments,
Inc. (the "Distributor"), have entered into an acquisition agreement (the
"Acquisition Agreement") with Signet Banking Corporation and two of its
subsidiaries ("Signet"), dated February 15, 1995, pursuant to which Sheffield
will sell to Signet the assets relating to, and the ability to succeed to
contracts with, the Blanchard Funds, including Blanchard Worldwide Emerging
Market Fund (collectively, the "Funds"). The transactions contemplated by the
Acquisition Agreement which have been approved by the Board of Trustees of the
Funds are conditioned upon the approval of the shareholders of each Fund, of (1)
a new investment management agreement with Signet, (2) a new distribution
agreement with Federated Securities Corp., and (3) certain other conditions.
No material changes are contemplated in the operation of the Funds and no
management or distribution and administration fee increases are being proposed.
12
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS-(continued)
April 30, 1995
NOTE 5-Security Transactions and Transactions with Affiliates:
Purchases and sales of portfolio securities for the year ended April 30,
1995, excluding short-term investments, aggregated $29,004,768 and $16,231,172,
respectively. The Distributor has advised the Fund that it received $17,513 from
shareholders as account opening fees for the year ended April 30, 1995. The
Manager has advised the Fund that, for the same period, it incurred costs, which
were reimbursed by the Fund, amounting to $16,196 for performing internal
accounting and transfer agency functions for the Fund.
The Funds have adopted an unfunded noncontributory pension plan (the
"Plan") covering all independent directors/trustees of the Funds who will have
served as an independent director/trustee for at least five years at the time of
retirement. Benefits under this plan are based on an annual amount equal to 75%
of the director/trustee fee at the time of retirement, plus 5% for each year of
service in excess of five years of service but not in excess of ten years of
service. Net periodic pension expense included in Trustees' fees, retirement
plan curtailment and other expenses in the Statement of Operations for the year
ended April 30, 1995 was $2,615. As indicated in Note 4, the Manager has entered
into an agreement which provides for the acquisition of the Manager by Signet.
Following the acquisition, the independent directors/trustees of the Funds will
not stand for re-election. As a result, the Plan was curtailed and additional
pension expense of $9,250 was recorded to reflect the previously unrecognized
prior service costs of the independent directors/trustees. Included in accrued
expenses and other liabilities at April 30, 1995 is $11,865 of accrued pension
expense.
NOTE 6-Shares of Beneficial Interest:
For the period
March 1, 1994
For the (commencement of
Year Ended operations)
April 30, 1995 to April 30, 1994
---------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sold................. 2,641,403 $21,445,228 1,072,843 $8,573,224
Repurchased.......... (1,754,090) (13,300,910) (127,475) (1,018,827)
--------- ----------- --------- ----------
Net increase......... 887,313 $ 8,144,318 945,368 $7,554,397
========= =========== ========= ==========
NOTE 7-Federal Income Taxes:
Any capital or foreign currency loss incurred after October 31 through the
end of the Fund's taxable year is deemed to arise on the first day of the Fund's
next taxable year, if so elected. The Fund elected to defer a net capital loss
of $2,474,894 and a currency loss of $144,048 incurred during such period in
fiscal 1995.
As of April 30, 1995, the Fund had temporary book/tax differences primarily
attributable to wash sales and post-October capital and currency loss deferrals.
To reflect reclassifications arising from permanent book/tax differences for the
year ended April 30, 1995, accumulated realized loss-net was credited $92,160
and accumulated net loss was debited $92,160.
13
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS-(continued)
April 30, 1995
NOTE 8-Financial Highlights:
Selected ratios and per share data for a share of beneficial interest
outstanding:
<TABLE>
<CAPTION>
For the period
March 1, 1994
For the (commencement
Year Ended of operations)
April 30, 1995 to April 30, 1994
-------------- -----------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year..................................... $7.98 $8.00
----- -----
Income from investment operations:
Net investment income (loss)........................................ (.11) (.00)(3)
Net gains or loss on securities (both realized and unrealized)...... (1.47) (.02)
----- -----
Net (loss) from investment operations............................ (1.58) (.02)
----- -----
Less dividends and distributions:
Dividends from investment income.................................... - -
Distributions from realized gains................................... - -
----- -----
Change in net asset value........................................ (1.58) (.02)
----- -----
Net asset value, end of period......................................... $6.40 $7.98
===== =====
Total return (not annualized).......................................... (19.80%) (.25%)
Ratios/Supplemental Data:
Net assets, end of period ($ Million)............................... $12 $8
Ratio of expenses to average net assets............................. 3.59%(2) 3.07%(1)(2)
Ratio of net investment income (loss) to average net assets......... (1.44%)(2) (.10%)(1)(2)
Portfolio turnover.................................................. 132% 0%
<FN>
- -----------------
(1) Annualized.
(2) The ratios of expenses to average net assets and net investment (loss) to
average net assets would have been 4.22% and (2.07%), respectively, for the
year ended April 30, 1995 and 4.42% and (1.45%), respectively, for the
period ended April 30, 1994, if a portion of the Fund's expenses had not
been voluntarily deferred and absorbed by the Manager (See note 2).
(3) Less than one cent per share.
</FN>
</TABLE>
14
<PAGE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Blanchard Worldwide Emerging Markets Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Blanchard Worldwide Emerging
Markets Fund (the "Fund") at April 30, 1995, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period March 1, 1994
(commencement of operations) through April30, 1994, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (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 April 30, 1995 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.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
June 20, 1995
15
<PAGE>
(Left Column)
Portfolio Advisers
Martin Currie Inc.
Equity Securities
OFFITBANK
Fixed Income Securities
Custodian and Transfer Agent
United States Trust Company
of New York
Independent Accountants
Price Waterhouse LLP
Legal Counsel
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
Blanchard Worldwide
Emerging Markets Fund
41 Madison Ave., 24th Floor
New York, NY 10010-2267
(Right Column)
------------------
Blanchard
Worldwide
Emerging
Markets Fund
------------------
Annual Report
April 30, 1995
Managed by: Sheffield Management Company
41 Madison Ave., 24th Floor
New York, NY 10010-2267
1-800-922-7771
