Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Flexible Tax-Free
Bond Fund for the fiscal year ending April 30, 1995.
Since its inception on August 12, 1993, your Fund has sought to provide
maximum return while seeking a high level of federally tax-free yields.*
While 1994 was a year that saw one of the worst bond markets in history, as
a result of the bond rally that ended this fiscal year, your Fund shows a strong
performance.
We are pleased to report that, as indicated in the chart at left, your Fund
has outperformed the Lehman Brothers Current Municipal Bond Index, an unmanaged
index of municipal bond performance. In addition, for the twelve months ended
April 30, 1995, Lipper Analytical Services has ranked the Fund #2 for total
return, based on total reinvested performance, out of 197 general municipal debt
funds.
For the 1-year which ended the preceding month, March 31, 1995, the Fund
also ranked #2 in that same general municipal bond fund category. But this time,
the category size was slightly smaller at 193 funds.
The Fund is waiving certain management fees that are not reflected in these
rankings from Lipper Analytical Services. If the fees were reflected then the
rankings would change. Please remember, too, that past performance is not a
guarantee of future performance.
The Year In Review
The most severe damage to the fixed-income markets occurred in early 1994,
fueled by the Federal Reserve Board's two increases in short-term rates to 3.5%.
With mounting evidence that the economy was growing faster than expected, the
Fed's action was looked upon as a preemptive strike against inflation.
Through most of the spring and summer of 1994, the fixed-income markets
drifted, suffering from pervasive fears of accelerating inflation _ despite the
string of additional Federal Reserve Board interest rate hikes intended to bring
about the "soft landing" for the U.S. economy. At the end of 1994, the market
dropped again, pro-
(over, please)
The following information was represented as a line graph
- --------------------------------------------------------------------------------
The Value of a $10,000 Investment in the
Blanchard Flexible Tax-Free Bond Fund
from inception 8/12/93 through 4/30/95 as
compared to the Lehman Brothers Current
Municipal Bond Index for the same period
---------------------------------------
Avg. Annual Returns through 4/30/95
Blanchard Flexible Tax-Free Bond Fund*
---------------------------------------
1 year 10.74%
---------------------------------------
since inception 5.83%
---------------------------------------
FYE 4/30/94 FYE 4/30/95
FTFBF -0.48% 10.74%
LEHMAN BROS -1.01% 5.30%
FTFBF $10,000 $9,952 $11,021
LEHMAN BROS $10,000 $9,899 $10,242
Reflects deduction of $75 acct opening fee
Blanchard Lehman Brothers
Flexible Tax-Free Current Municipal
Bond Fund* Bond Index (D)
*The Fund is waiving certain management fees and other expenses. If fees were
not waived, the returns quoted above and the chart values above would be lower.
Total return includes changes in principal value and reinvested distributions.
Past performance is no guarantee of future results.
(D)Source: The Lehman Brothers Current Municipal Bond Index is an unmanaged
index of long-term, investment-grade, tax-exempt municipal bonds.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the Blanchard Flexible Tax-Free Bond Fund or the index.
- --------------------------------------------------------------------------------
<PAGE>
pelled by rising rates, year-end tax considerations, and investors selling out
of mutual funds. Toward the end of the fourth quarter, the market began a
tentative recovery, due in large part to yields that were perceived to be too
high, the short supply of municipal bonds, and a general perception that we were
nearing the end of Federal Reserve interventions.
In early 1995, the market was anticipating another rate increase, and this
had been priced into the forward yield curve. The eventual .50% hike in February
(which was less than many expected), rumblings from Washington that this would
be the last intervention (at least for the near term), and widespread
perceptions that the economy was slowing and that rates had overshot on the
upside caused the fixed-income markets to take off. As with the precipitous
selloff of a year ago, most of the bond market activity occurred within the
ensuing five-week period; this time the Fund was positioned to gain.
Throughout the past fiscal year, the portfolio was invested in a diverse
number of high-quality "essential service" revenue bonds and high-quality state
general obligation bonds. At the start of the fiscal year, as interest rates
were already high, we adopted a defensive posture by shortening maturities and
maintaining up to 25% cash reserves. At the end of 1994, as discount bonds
continued to drop in value, we restructured _ deploying cash reserves to
purchase many of these deeply discounted, or "de-minimized," bonds. In the first
quarter of 1995, as rates dropped, our aggressive positioning paid off, and the
Fund reported a total return of 10.74% for the twelve months ended April 30,
1995.
Naturally, past performance is no guarantee of future results. The Fund's
yield, principal value and investment return will vary with market conditions so
that shares, when redeemed, may be worth more or less than their original cost.
A Look Ahead
For now, the market has priced in economic slowdown and moderate inflation.
Any indications to the contrary could startle the market into a correction. The
wild card is the severely depreciated U.S. dollar, which the market has so far
ignored in favor of focusing on positive news on the domestic front. If the
dollar declines much further, market attention will eventually have to shift,
likely sparking a selloff. Added to these concerns, prices are up sharply. As a
result, we have adopted a slightly more cautious approach _ generally shortening
portfolios _ pending resolution of these near-term concerns.
Shareholders can rest assured that we will continue our search for tax-free
yields and capital gains opportunities in the coming year, maintaining our
high-quality focus while closely monitoring the state of the economy.
Sincerely,
KM:ml Kenneth McAlley
Director of Fixed Income Investments, U.S. Trust Company
Portfolio Managers of the Blanchard Flexible Tax-Free Bond Fund
* Some income may be subject to state and local taxes or to the Federal
Alternative Minimum Tax. Consult your tax advisor as to the tax consequences,
if any, of this Fund.
Distributed by Sheffield Investments, Inc. (1551) 07ARSL0695
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND-PORTFOLIO OF INVESTMENTS
April 30, 1995
(Left Column)
Principal Value
--------- -----
TAX-EXEMPT SECURITIES (87.97%)
Alaska (4.50%)
Valdez Alaska Marine
Terminal 5.50%, 10/01/28 $1,000,000 $ 877,680
----------
Arizona (4.58%)
Salt River Project
Arizona Agriculture
5.00%, 01/01/13 1,000,000 893,870
----------
Florida (4.61%)
Orlando, Florida Utilities
Commission on Water &
Electricity 5.25%,
10/01/23 1,000,000 899,490
----------
Georgia (4.85%)
Fulton County, Georgia
School District 5.625%,
1/01/21 1,000,000 945,460
----------
Maryland (5.01%)
Maryland State Community
Development Admin.
5.80%, 04/01/09 1,000,000 975,720
----------
Massachusetts (5.11%)
Massachusetts Housing
Finance Authority,
6.30%, 10/01/13 1,000,000 995,630
----------
New York (30.44%)
New York State Power
Authority Revenue and
General 5.125%,
01/01/10 2,000,000 1,842,520
----------
New York State
Environmental 6.875%,
06/15/10 1,000,000 1,067,160
----------
New York State Medical Care
Facility Finance Agency
6.50%, 08/15/29 1,000,000 1,026,410
----------
New York State Mortgage
Agency Revenue Series
41-A 6.45%, 10/01/14 1,000,000 1,011,770
----------
Triborough Bridge & Tunnel
Authority Revenue
6.00%, 01/01/13 1,000,000 987,040
5,934,900
----------
(Right Column)
Principal Value
--------- -----
Ohio (5.13%)
(b)Ohio State University
General Receipts Series B
4.75%, 12/01/06 $1,000,000 $ 1,000,000
----------
Texas (4.58%)
San Antonio, Texas Electric
and Gas Refunding
5.00%, 2/01/14 1,000,000 892,360
----------
Utah (4.72%)
Intermountain Power
Agency, Utah Power
5.50%, 07/01/20 1,000,000 919,610
----------
Washington (9.86%)
Washington State Series A
5.75%, 09/01/19 1,000,000 949,750
----------
King County Washington
General Obligation
6.25%, 01/01/34 1,000,000 972,930
1,922,680
Wisconsin (4.58%)
Wisconsin State
Transportation 5.50%,
07/01/22 1,000,000 892,890
----------
TOTAL TAX-EXEMPT
SECURITIES
(IDENTIFIED COST
$16,796,907) 17,150,290
Shares
------
TAX-EXEMPT CASH EQUIVALENT SECURITIES (.54%)
Dreyfus Tax-Exempt Cash
Management Fund 105,885 105,885
-----------
TOTAL TAX-EXEMPT
CASH EQUIVALENT
SECURITIES
(IDENTIFIED COST
$105,885) 105,885
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST
$16,902,792) (a)
(88.51%) 17,256,175
CASH AND OTHER
ASSETS IN
EXCESS OF
LIABILITIES (11.49%) 2,239,387
-----------
NET ASSETS (100%) $19,495,562
===========
(a) The aggregate cost for federal income tax purposes is $16,902,792 the gross
unrealized appreciation is $591,078, the gross unrealized depreciation is
$237,695, resulting in net unrealized appreciation of $353,383.
(b) Variable rate security. Rate shown reflects the current rate as of April 30,
1995.
See notes to financial statements.
3
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
(Left Column)
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995
Assets:
Investments in securities, at value (Identified
Cost $16,902,792) (note 1) ................................... $17,256,175
-----------
Receivables for:
Investments sold ............................................ 1,925,101
Shares of beneficial interest sold .......................... 36,559
Interest .................................................... 253,429
Investment advisor .......................................... 11,369
Deferred organizational expenses (note 1) ..................... 61,211
-----------
Total assets ............................................ 19,543,844
-----------
Liabilities:
Payables for:
Dividends ................................................... 11,902
Accrued expenses and other liabilities ........................ 36,380
-----------
Total liabilities ........................................ 48,282
-----------
Net assets ............................................... $19,495,562
===========
Net assets are comprised of:
Paid in capital (unlimited authorized shares of
beneficial interest, $.01 par value, 3,877,709
shares outstanding) .......................................... $20,737,821
Accumulated overdistributed net investment
income ....................................................... (12,275)
Accumulated realized loss ..................................... (1,583,367)
Unrealized net appreciation of investments 353,383
-----------
Net assets $19,495,562
===========
Net asset value per share $5.03
=====
(Right Column)
STATEMENT OF OPERATIONS
For the Year Ended April 30, 1995
Investment income:
Interest .................................................... $1,244,175
----------
Expenses:
Investment management fee
(note 2) ........................................ $151,593
Accounting fees ................................... 81,015
Plan of distribution (note 3) ..................... 50,537
Transfer agent fees ............................... 48,147
Trustees' fees, retirement plan
curtailment and other
expenses (note 5) ............................... 28,893
Professional fees ................................. 28,599
Registration fees ................................. 22,388
Shareholder reports and notices ................... 19,649
Organizational expenses
(note 1) ........................................ 17,890
Custodian fees .................................... 8,731
Other ............................................. 2,318
--------
Total expenses 459,760
Less: Fees voluntarily waived
and expenses absorbed by
Manager and Distributor
(note 2) (248,019)
--------
Net expenses ................................................. 211,741
----------
Net investment income 1,032,434
----------
Realized and unrealized gain
(loss)-net (note 1):
Realized gain (loss) on
investments in securities
-net ..............................................(1,143,934)
Change in unrealized
appreciation on investments
-net ............................................. 1,890,650
Net realized and unrealized gains ............................ 746,716
----------
Net increase in net assets resulting
from operations ............................................ $1,779,150
==========
See notes to financial statements.
4
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period
August 12,1993*
For the (commencement
Year Ended of operations) to
April 30, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income-net ............................................. $1,032,434 $ 616,713
---------- -----------
Realized loss-net ................................................. (1,143,934) (380,822)
Change in unrealized appreciation or (depreciation)-net ........... 1,890,650 1,537,267)
---------- -----------
Net increase (decrease) in net assets resulting from operations .... 1,779,150 (1,301,376)
---------- -----------
Dividends and distributions to shareholders:
Investment income-net ............................................. (1,032,434) (616,113)
Dividends in excess of investment income-net ...................... (12,875) --
Realized gain on investments-net .................................. - (58,611)
---------- -----------
(1,045,309) (674,724)
---------- -----------
Transactions in shares of beneficial interest-
net increase (decrease) (note 6) .................................. (4,505,338) 22,243,159
---------- -----------
Net increase (decrease) in net assets ............................ (3,771,497) 20,267,059
Net assets:
Beginning of year ................................................. 23,267,059 3,000,000
---------- -----------
End of year (including overdistributed net investment income of
$12,275 and undistributed net investment income of $600,
respectively) .................................................... $19,495,562 $23,267,059
=========== ===========
<FN>
- ----------
*Commencement of operations
</FN>
</TABLE>
See notes to financial statements.
5
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
NOTE 1 - Organization and Accounting Policies:
Blanchard Flexible Tax-Free Bond Fund (the "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, as amended (the "Act"). The Fund had
no operations before August 12, 1993 other than the sale of 600,000 shares of
beneficial interest for $3,000,000 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
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 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.
B. Accounting for Investments and Investment Income-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. 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. 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 and non-taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. 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 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 they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital.
E. Organizational Expenses-The Fund's Manager paid the organizational
expenses of the Fund incurred prior to the public offering of its shares
amounting to $89,448. The Fund reimbursed the Manager
6
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1995
for such 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.
F. 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 Adviser described below. The Manager receives from the
Fund an advisory fee payable monthly at an annual rate of .75% of the Fund's
average daily net assets.
For the year ended April 30, 1995, the Manager and Distributor voluntarily
waived the advisory fee and distribution fee, which amounted to $127,835 and
$50,537, respectively, and absorbed $69,647 of other expenses of the Fund.
Expenses of the Fund, exclusive of taxes, interest, brokerage commissions,
distribution fees, extraordinary expenses and certain other excludable expenses,
are subject to the expense limitations imposed by one of the states in which
shares of the Fund are offered for sale. For the year ended April 30, 1995, the
Fund's expenses did not exceed such limitation.
Certain officers and/or Trustees of the Fund are officers/directors of the
Manager.
The Manager has a sub-advisory agreements with U.S. Trust (the "Portfolio
Adviser"). All fees for such services are paid by the Manager. The Manager has
advised the Fund that the fees paid to the Portfolio Advisor were $34,662 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 .25%
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 August 12, 1993, 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
$508,529. 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.
7
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1995
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 Flexible Tax-Free Bond
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.
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 $35,861,393 and $39,179,733,
respectively. The Manager has advised the Fund that, for the year ended April
30, 1995, it incurred costs, which were absorbed by the Manager, amounting to
$23,624 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 $5,230. As indicated in Note4, 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 $18,499 was recorded to reflect the previously unrecognized
prior service cost of the independent director/trustees. Included in accrued
expenses and other liabilities at April 30, 1995 is $23,729 of accrued pension
expense.
NOTE 6 - Shares of Beneficial Interest:
<TABLE>
<CAPTION>
For the For the Period
Year Ended August 12, 1993* to
April 30, 1995 April 30, 1994
------------------------ -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold .................................. 2,686,852 $12,962,463 7,344,374 $37,526,118
Reinvestment of dividends and
distributions ........................ 171,998 825,614 114,233 575,313
--------- ----------- --------- -----------
2,858,850 13,788,077 7,458,607 38,101,431
Repurchased ........................... (3,854,437) (18,293,415) (2,585,311) (12,858,272)
--------- ----------- --------- -----------
Net increase (decrease) ............... (995,587) (4,505,338) 4,873,296 $25,243,159
======== ========== ========= ===========
<FN>
- ------------
*Commencement of operations.
</FN>
</TABLE>
8
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1995
NOTE 7 - Federal Income Taxes:
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $822,000 during fiscal 1995.
At April 30, 1995, the Fund had a net capital loss carryover of $748,924
which is available through April 30, 2003 to offset future capital gains. To the
extent that these carryover losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed to shareholders.
NOTE 8 - Financial Highlights:
Selected ratios and per share data for a share of beneficial interest
outstanding:
<TABLE>
<CAPTION>
For the period
August 12, 1993
For the (commencement
Year Ended of operations) to
April 30, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period ...................... $4.77 $5.00
----- -----
Income from investment operations:
Net investment income .................................... .24 .18
----- -----
Net gains or losses on securities
(both realized and unrealized) .26 (.20)
Net income (loss) from investment operations .......... .50 (.02)
----- ------
Less dividends and distributions:
Dividends from investment income-net ..................... (.23) (.18)
Dividends in excess of investment income-net ............. (.01) -
Distributions from realized gains-net .................... - (.03)
Change in net asset value ............................. .26 (.23)
----- -----
Net asset value, end of period ............................ $5.03 $4.77
===== =====
Total return (not annualized) ............................. 10.74% (.48%)
Ratios/Supplemental Data:
Net assets, end of period ($ Million) .................... $ 19 $ 23
Ratio of expenses to average net assets .................. 1.00%(2) 0%*(2)(1)
Ratio of net investment income to average net assets ..... .87%(2) 6.79%(2)(1)
Portfolio turnover ........................................ 170% 190%
<FN>
- -----------
(1) Annualized.
(2) The ratios of expenses to average net assets
and net investment income to average net assets would have been 2.17% and
6.04%, respectively, for the year ended April 30, 1995 and 2.22% and 4.57%
(annualized), respectively, for the period ended April 30, 1994, if the
Fund's expenses had not been voluntarily waived and absorbed by the Manager
and Distributor (see notes 2 and 3).
</FN>
</TABLE>
9
<PAGE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Blanchard Flexible Tax-Free Bond 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 Flexible Tax-Free Bond
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 ended April 30, 1995 and for the period August 12, 1993 (commencement
of operations) through April 30, 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, 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
1995 FEDERAL TAX NOTICE (Unaudited)
In accordance with Federal tax law the Fund hereby designates all dividends
paid from investment income-net during the fiscal year ended April 30, 1995 as
"exempt-interest dividends" (not subject to regular Federal personal income
taxes).
10
<PAGE>
Portfolio Adviser
United States Trust Company
of New York
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 Flexible
Tax-Free Bond Fund
41 Madison Ave., 24th Floor
New York, NY 10010-2267
Blanchard
Flexible Tax-Free
Bond 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
