President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Semi-Annual Report for the Blanchard Capital Growth
Fund for the period ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a list of investments included in its portfolio, and a financial
statement for the portfolio.
If you would like the most recent performance update for the Fund, or if you
have other questions, please call Investors' Services at 1-800-829-3863.
Thank you for your confidence in the Blanchard Group of Funds as a way to put
your money to work for you.
We remain committed to delivering the highest level of personal service.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
BLANCHARD CAPITAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in Portfolio, at value $ 1,630,958
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 73,461
- ---------------------------------------------------------------------------------------------------
Deferred organizational expenses 62,192
- --------------------------------------------------------------------------------------------------- -------------
Total assets 1,766,611
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Accrued expenses 65,434
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital 1,325,215
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments in Portfolio 336,381
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments in Portfolio 90,811
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (51,230)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 1,701,177
- --------------------------------------------------------------------------------------------------- -------------
SHARES OUTSTANDING 200,702
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($1,701,177 / 200,702 shares outstanding) $8.48
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD CAPITAL GROWTH FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 9,714
- ----------------------------------------------------------------------------------------------------
Interest 5,117
- ----------------------------------------------------------------------------------------------------
Expenses allocated from Portfolio (4,136)
- ---------------------------------------------------------------------------------------------------- ----------
Total income 10,695
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------
Management fee $ 6,228
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee 14,177
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 13,033
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 872
- -----------------------------------------------------------------------------------------
Auditing fees 8,051
- -----------------------------------------------------------------------------------------
Legal fees 14,357
- -----------------------------------------------------------------------------------------
Distribution services fee 4,448
- -----------------------------------------------------------------------------------------
Share registration costs 6,107
- -----------------------------------------------------------------------------------------
Printing and postage 4,538
- -----------------------------------------------------------------------------------------
Amortization of organizational costs 8,985
- -----------------------------------------------------------------------------------------
Miscellaneous 6,719
- ----------------------------------------------------------------------------------------- ---------
Total expenses 87,515
- -----------------------------------------------------------------------------------------
Waivers/Reimbursements--
- ------------------------------------------------------------------------------
Waiver of management fee ($6,228)
- ------------------------------------------------------------------------------
Reimbursement of other operating expenses (19,362)
- ------------------------------------------------------------------------------ ---------
Total Waivers/Reimbursements (25,590)
- ----------------------------------------------------------------------------------------- ---------
Net expenses 61,925
- ---------------------------------------------------------------------------------------------------- ----------
NET INVESTMENT LOSS (51,230)
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Realized gain from Portfolio investment transactions 90,811
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments in Portfolio 144,230
- ---------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 235,041
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 183,811
- ---------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD CAPITAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------
Net investment loss $ (51,230) $ (58,626)
- ----------------------------------------------------------------------------------
Net realized gain on investments from Portfolio 90,811 54,854
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation of investments
in Portfolio 144,230 192,151
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 183,811 188,379
- ---------------------------------------------------------------------------------- -------------- --------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 1,257,762 6,052,689
- ----------------------------------------------------------------------------------
Cost of shares redeemed (1,451,401) (4,530,063)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from share transactions (193,639) 1,522,626
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets (9,828) 1,711,005
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 1,711,005 --
- ---------------------------------------------------------------------------------- -------------- --------------
End of period $ 1,701,177 $ 1,711,005
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
APRIL 30, OCTOBER 31,
<S> <C> <C>
1996 1995
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.66 $ 7.00
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------
Net investment loss (0.26) (0.26)
- ----------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.08 0.92
- ---------------------------------------------------------------------------------- ------- -------
Total from investment operations 0.82 0.66
- ---------------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.48 $ 7.66
- ---------------------------------------------------------------------------------- ------- -------
TOTAL RETURN (A) 10.70% 9.43%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------
Expenses (b) 6.97% (c) 6.19%
- ----------------------------------------------------------------------------------
Net investment income (5.76%)(c) (4.20%)
- ----------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 2.88% (c) 1.97%
- ----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,701 $1,711
- ----------------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value.
(b) Reflects the Fund's proportionate share of the Portfolio's expenses, the
Portfolio's fee waivers and expense reimbursements by the Fund's Manager.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD CAPITAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Blanchard Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act") as an open-end management investment company. The
Trust consists of eight funds. The financial statements included herein are only
those of Blanchard Capital Growth Fund (the "Fund"). The financial statements of
the other funds are presented separately. The assets of each fund are segregated
and a shareholder's interest is limited to the fund in which shares are held.
The Fund's investment objective is to provide long term capital growth through a
broad portfolio of common stocks. The Fund seeks to achieve its investment
objective by investing all of its investable assets in Capital Growth Portfolio
(the "Portfolio") which is an open-end management investment company having the
same investment objective as the Fund. The Portfolio is managed by Chase
Manhattan Bank, N.A. As of April 30, 1996, the Fund owned 0.15% of the
Portfolio.
These financial statements should be read together with the accompanying
portfolio of investments and financial statements of Capital Growth Portfolio.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund records its investment in the Portfolio at
value. Securities of the Portfolio are recorded at value as more fully
discussed in the Notes to those accompanying Financial Statements.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--The Fund records daily a
pro-rata share of its Portfolio's income, expenses, and realized and
unrealized gains and losses. In addition, the Fund accrues its own expenses
daily. Expenses directly attributable to the Fund are charged to the Fund.
Certain expenses for the Trust are allocated among all the Funds in the
Trust based upon their relative average net assets. Distributions to
shareholders are recorded on the ex-dividend date. The amount of dividends
and distributions from net investment income and net realized capital gains
is determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. Dividends and
distributions which exceed net investment income or distributions in excess
of net realized capital gains for financial reporting purposes, but not for
tax purposes, are reported as distributions in excess of net investment
income or 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 capital.
BLANCHARD CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code (the "Code") applicable to regulated investment
companies and to distribute to shareholders each year substantially all of
its income. Accordingly, no provisions for federal tax are necessary.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to its
organization, including the initial expense of registering its shares, have
been deferred and are being amortized using the straight-line method over a
period of five years from the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
<S> <C> <C>
Shares sold 161,172 808,463
- --------------------------------------------------------------------
Shares redeemed (183,740) (585,193)
- -------------------------------------------------------------------- ---------- ----------
Net change resulting from share transactions (22,568) 223,270
- -------------------------------------------------------------------- ---------- ----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Virtus Capital Management, Inc., the Fund's manager (the
"Manager"), receives for its services an annual management fee equal to 0.70% of
the Fund's average daily net assets. These services include management of the
Fund, certain administrative services and selecting, monitoring, and evaluating
the Portfolio's manager. The Manager may voluntarily choose to waive any portion
of its fee and/or reimburse certain operating expenses of the Fund. The Manager
can modify or terminate this voluntary waiver and/or reimbursement at any time
at its sole discretion
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This fee is based on the
level of average aggregate net assets of the Trust for the period.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses up to 0.50% of the average daily net assets of the Fund, annually, to
reimburse FSC. The distributor may voluntarily choose to waive any portion of
its fee.
BLANCHARD CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund for
which it receives a fee. This fee is based on the size, type, and number of
accounts and transactions made by shareholders.
DIRECTORS/TRUSTEES FEES--Prior to the acquisition of Sheffield Management
Company by Virtus Capital Management, Inc., the independent directors/trustees
for the Trust participated in an unfunded noncontributory pension plan (the
"Plan") covering all independent directors/trustees of the Trust who served as
an independent director/trustee for at least five years at the time of
retirement. Benefits under this plan were based on an annual amount equal to 75%
of the directors/ trustees fees 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. The net pension expense included in the Statement of Operations for the
six months ended April 30, 1996, for the Fund was $583.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
CAPITAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
INVESTMENTS--89.9% ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK--87.5%
--------------------------------------------------------------------------------
AEROSPACE--1.0%
--------------------------------------------------------------------------------
300,000 Sundstrand Corp. $ 11,025,000
-------------------------------------------------------------------------------- ----------------
AGRICULTURE--1.6%
--------------------------------------------------------------------------------
410,000 AGCO Corp. 10,352,500
--------------------------------------------------------------------------------
153,500 Case Corp. 7,751,750
-------------------------------------------------------------------------------- ----------------
Total 18,104,250
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--2.1%
--------------------------------------------------------------------------------
175,000 Dana Corp. 5,818,750
--------------------------------------------------------------------------------
200,000 Lear Seating Corp.* 6,600,000
--------------------------------------------------------------------------------
100,000 Magna International, Inc. Class A 4,637,500
--------------------------------------------------------------------------------
275,000 Masland Corp. 5,603,125
-------------------------------------------------------------------------------- ----------------
Total 22,659,375
-------------------------------------------------------------------------------- ----------------
BANKING--2.4%
--------------------------------------------------------------------------------
100,000 BayBanks, Inc. 10,475,000
--------------------------------------------------------------------------------
250,000 Standard Federal Bancorporation 9,906,250
--------------------------------------------------------------------------------
75,000 Zions Bancorporation 5,587,500
-------------------------------------------------------------------------------- ----------------
Total 25,968,750
-------------------------------------------------------------------------------- ----------------
BUSINESS SERVICES--2.0%
--------------------------------------------------------------------------------
300,000 Equifax, Inc. 7,350,000
--------------------------------------------------------------------------------
100,000 PHH Corp. 5,687,500
--------------------------------------------------------------------------------
250,000 Primark Corp.* 8,875,000
-------------------------------------------------------------------------------- ----------------
Total 21,912,500
-------------------------------------------------------------------------------- ----------------
CHEMICALS--2.2%
--------------------------------------------------------------------------------
625,000 Agrium, Inc. 8,046,875
--------------------------------------------------------------------------------
90,000 Cytec Industries, Inc.* 7,458,750
--------------------------------------------------------------------------------
100,000 Olin Corp. $ 8,850,000
-------------------------------------------------------------------------------- ----------------
Total 24,355,625
-------------------------------------------------------------------------------- ----------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE--CONTINUED
--------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE--4.3%
--------------------------------------------------------------------------------
125,000 Comdisco, Inc. 3,078,125
--------------------------------------------------------------------------------
400,000 Gateway 2000 Inc.* 13,950,000
--------------------------------------------------------------------------------
440,000 SCI Systems, Inc.* 18,865,000
--------------------------------------------------------------------------------
256,000 Solectron Corp.* 11,392,000
-------------------------------------------------------------------------------- ----------------
Total 47,285,125
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--7.1%
--------------------------------------------------------------------------------
300,000 American Management Systems, Inc.* 7,987,500
--------------------------------------------------------------------------------
375,000 Computervision Corp.* 4,546,875
--------------------------------------------------------------------------------
200,000 Comshare, Inc. 4,800,000
--------------------------------------------------------------------------------
314,500 DST Systems, Inc. 11,557,875
--------------------------------------------------------------------------------
200,000 FileNet Corp.* 11,200,000
--------------------------------------------------------------------------------
475,000 Reynolds & Reynolds, Inc., Class A 21,968,750
--------------------------------------------------------------------------------
75,000 Sterling Software, Inc. 5,800,150
--------------------------------------------------------------------------------
750,000 Vanstar Corp.* 10,218,750
-------------------------------------------------------------------------------- ----------------
Total 78,079,900
-------------------------------------------------------------------------------- ----------------
CONSTRUCTION MATERIALS--0.0%
--------------------------------------------------------------------------------
7,100 Texas Industries Inc. 454,400
-------------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--3.9%
--------------------------------------------------------------------------------
250,000 Black & Decker Corp. 10,062,500
--------------------------------------------------------------------------------
150,000 Danaher Corp. 5,906,250
--------------------------------------------------------------------------------
500,000 First Brands Corp. 13,250,000
--------------------------------------------------------------------------------
100,000 Lancaster Colony Corp. 3,375,000
--------------------------------------------------------------------------------
200,000 Leggett & Platt Inc. 5,150,000
--------------------------------------------------------------------------------
150,000 Toro Co. $ 4,781,250
-------------------------------------------------------------------------------- ----------------
Total 42,525,000
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--8.3%
--------------------------------------------------------------------------------
235,000 Adaptec, Inc.* 13,512,500
--------------------------------------------------------------------------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT--CONTINUED
--------------------------------------------------------------------------------
700,000 ADT Ltd.* 11,900,000
--------------------------------------------------------------------------------
152,500 Harman International Industries, Inc. 7,205,625
--------------------------------------------------------------------------------
225,000 Lam Research Corp.* 9,112,500
--------------------------------------------------------------------------------
250,000 Linear Technology Corp. 8,593,750
--------------------------------------------------------------------------------
125,000 Microchip Technology, Inc.* 3,187,500
--------------------------------------------------------------------------------
100,000 Tektronix Inc. 3,962,500
--------------------------------------------------------------------------------
25,000 Teleflex, Inc. 1,159,375
--------------------------------------------------------------------------------
500,000 Teradyne Inc,* 10,250,000
--------------------------------------------------------------------------------
349,500 UCAR International, Inc.* 14,329,500
--------------------------------------------------------------------------------
50,000 Watkins-Johnson 1,687,500
--------------------------------------------------------------------------------
150,000 Xilinx, Inc.* 5,531,250
-------------------------------------------------------------------------------- ----------------
Total 90,432,000
-------------------------------------------------------------------------------- ----------------
ENTERTAINMENT/LEISURE--3.0%
--------------------------------------------------------------------------------
400,000 Bally Entertainment Corp.* 8,350,000
--------------------------------------------------------------------------------
300,000 Carnival Corp., Class A 8,700,000
--------------------------------------------------------------------------------
100,000 Integrity Music, Inc., Class A* 300,000
--------------------------------------------------------------------------------
300,000 International Game Technology 4,650,000
--------------------------------------------------------------------------------
200,000 Mirage Resorts, Inc.* 10,475,000
-------------------------------------------------------------------------------- ----------------
Total 32,475,000
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--3.1%
--------------------------------------------------------------------------------
200,000 Advanta Corp., Class A 11,175,000
--------------------------------------------------------------------------------
100,000 Finova Group, Inc. 5,550,000
--------------------------------------------------------------------------------
350,000 Green Tree Financial Corp. 11,812,500
--------------------------------------------------------------------------------
250,000 SEI Corp. $ 5,906,250
-------------------------------------------------------------------------------- ----------------
Total 34,443,750
-------------------------------------------------------------------------------- ----------------
HEALTH CARE--9.8%
--------------------------------------------------------------------------------
300,000 Beckman Instruments, Inc. 11,100,000
--------------------------------------------------------------------------------
1,000,000 Beverly Enterprises* 12,125,000
--------------------------------------------------------------------------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
HEALTH CARE--CONTINUED
--------------------------------------------------------------------------------
130,000 Foundation Health Corp.* 5,086,250
--------------------------------------------------------------------------------
150,000 Health Systems International, Inc. Class A* 4,631,250
--------------------------------------------------------------------------------
100,000 HealthCare COMPARE* 4,712,500
--------------------------------------------------------------------------------
300,000 HEALTHSOUTH Corp. 11,137,500
--------------------------------------------------------------------------------
550,000 OrNda Healthcorp* 15,125,000
--------------------------------------------------------------------------------
100,000 PhyCor, Inc. 4,925,000
--------------------------------------------------------------------------------
350,000 Sybron International Corp.* 8,837,500
--------------------------------------------------------------------------------
500,000 Tenet Healthcare Corp. 10,250,000
--------------------------------------------------------------------------------
209,500 Universal Health Services, Inc., Class B* 11,627,250
--------------------------------------------------------------------------------
200,000 US Surgical Corp. 7,400,000
-------------------------------------------------------------------------------- ----------------
Total 106,957,250
-------------------------------------------------------------------------------- ----------------
HOME BUILDING CONSTRUCTION--0.8%
--------------------------------------------------------------------------------
200,000 Oakwood Homes Corp. 8,925,000
-------------------------------------------------------------------------------- ----------------
INSURANCE--5.9%
--------------------------------------------------------------------------------
170,000 ACE, Ltd.Pound 7,480,000
--------------------------------------------------------------------------------
200,000 American Re Corp. 8,300,000
--------------------------------------------------------------------------------
150,000 MGIC Investment Corp. 8,137,500
--------------------------------------------------------------------------------
215,000 Mid Ocean, Ltd. (Bermuda) 7,686,250
--------------------------------------------------------------------------------
115,000 Orion Capital Corp. 5,103,125
--------------------------------------------------------------------------------
103,500 PXRE Corp. 2,639,250
--------------------------------------------------------------------------------
325,000 Reliastar Financial Corp. 14,178,125
--------------------------------------------------------------------------------
100,000 SunAmerica, Inc. 5,450,000
--------------------------------------------------------------------------------
90,000 Transatlantic Holdings, Inc. $ 5,895,000
-------------------------------------------------------------------------------- ----------------
Total 64,869,250
-------------------------------------------------------------------------------- ----------------
MANUFACTURING--4.3%
--------------------------------------------------------------------------------
28,300 Albany International Corp., Class A 608,450
--------------------------------------------------------------------------------
75,600 Elsag Bailey Process Automation N.V.* 1,701,000
--------------------------------------------------------------------------------
100,000 JLG Industries, Inc. 5,450,000
--------------------------------------------------------------------------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
MANUFACTURING--CONTINUED
--------------------------------------------------------------------------------
85,000 Johnson Controls 6,077,500
--------------------------------------------------------------------------------
310,000 Kennametal Inc. 11,741,250
--------------------------------------------------------------------------------
157,500 Mark IV Industries 3,268,125
--------------------------------------------------------------------------------
100,000 NACCO Industries, Inc. Class A 6,312,500
--------------------------------------------------------------------------------
150,000 Parker Hannifin Corp. 6,337,500
--------------------------------------------------------------------------------
200,000 Pentair, Inc. 5,450,000
-------------------------------------------------------------------------------- ----------------
Total 46,946,325
-------------------------------------------------------------------------------- ----------------
OIL & GAS--5.9%
--------------------------------------------------------------------------------
250,000 Coflexip SA, ADR 4,812,500
--------------------------------------------------------------------------------
200,000 Diamond ShamrockPound 6,775,000
--------------------------------------------------------------------------------
1 Noble Drilling Corp.* 5
--------------------------------------------------------------------------------
200,000 PanEnergy Corp. 6,525,000
--------------------------------------------------------------------------------
270,000 Seagull Energy Corp.* 6,581,250
--------------------------------------------------------------------------------
780,000 Smith International* 23,205,000
--------------------------------------------------------------------------------
300,000 Tidewater, Inc. 12,750,000
--------------------------------------------------------------------------------
225,000 Union Texas Petroleum Holdings 4,359,375
-------------------------------------------------------------------------------- ----------------
Total 65,008,130
-------------------------------------------------------------------------------- ----------------
PAPER/FOREST PRODUCTS--1.7%
--------------------------------------------------------------------------------
300,000 Boise Cascade Corp. 13,950,000
--------------------------------------------------------------------------------
125,000 Rayonier, Inc. 4,484,375
-------------------------------------------------------------------------------- ----------------
Total 18,434,375
-------------------------------------------------------------------------------- ----------------
REAL ESTATE INVESTMENT TRUST--3.0%
--------------------------------------------------------------------------------
200,000 Avalon Properties, Inc. $ 4,200,000
--------------------------------------------------------------------------------
150,000 Bay Apartment Communities, Inc. 3,768,750
--------------------------------------------------------------------------------
200,000 Equity Residential Properties Trust 6,450,000
--------------------------------------------------------------------------------
150,000 Evans Withycombe Residential, Inc. 3,243,750
--------------------------------------------------------------------------------
222,400 Home Properties of New York, Inc. 4,503,600
--------------------------------------------------------------------------------
200,000 Liberty Property Trust 4,125,000
--------------------------------------------------------------------------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST--CONTINUED
--------------------------------------------------------------------------------
200,000 Oasis Residential, Inc. 4,500,000
--------------------------------------------------------------------------------
100,000 ROC Communities, Inc. 2,362,500
-------------------------------------------------------------------------------- ----------------
Total 33,153,600
-------------------------------------------------------------------------------- ----------------
RESTAURANTS/FOOD SERVICES--0.5%
--------------------------------------------------------------------------------
275,000 Wendy's International, Inc. 5,259,375
-------------------------------------------------------------------------------- ----------------
RETAILING--6.7%
--------------------------------------------------------------------------------
225,000 Casey's General Stores, Inc. 4,851,562
--------------------------------------------------------------------------------
200,000 Circuit City Stores, Inc. 6,350,000
--------------------------------------------------------------------------------
175,000 Dillard Department Stores, Inc., Class A 7,021,875
--------------------------------------------------------------------------------
400,000 Eckerd Corp.* 19,100,000
--------------------------------------------------------------------------------
200,000 Ethan Allen Interiors, Inc.* 5,200,000
--------------------------------------------------------------------------------
150,000 Kroger Co.* 6,168,750
--------------------------------------------------------------------------------
200,000 Mercantile Stores 12,475,000
--------------------------------------------------------------------------------
400,000 TJX Companies, Inc. 11,800,000
-------------------------------------------------------------------------------- ----------------
Total 72,967,187
-------------------------------------------------------------------------------- ----------------
SHIPPING/TRANSPORTATION--0.9%
--------------------------------------------------------------------------------
125,000 Pittston Burlington Group 2,484,375
--------------------------------------------------------------------------------
250,000 Pittston Services Group 6,968,750
-------------------------------------------------------------------------------- ----------------
Total 9,453,125
-------------------------------------------------------------------------------- ----------------
STEEL--1.0%
--------------------------------------------------------------------------------
300,000 AK Steel Holding Corp. 11,475,000
-------------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--2.2%
--------------------------------------------------------------------------------
251,700 Aspect Telecommunications Corp.* $ 14,472,750
--------------------------------------------------------------------------------
30,300 Cincinnati Bell, Inc. 1,492,275
--------------------------------------------------------------------------------
300,000 Network Equipment Technologies, Inc.* 7,650,000
-------------------------------------------------------------------------------- ----------------
Total 23,615,025
-------------------------------------------------------------------------------- ----------------
TEXTILES/TEXTILE MILL PRODUCTS--1.2%
--------------------------------------------------------------------------------
125,000 Springs Industries, Inc., Class A 5,750,000
--------------------------------------------------------------------------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
TEXTILES/TEXTILE MILL PRODUCTS--CONTINUED
--------------------------------------------------------------------------------
110,000 Unifi, Inc. 2,956,250
--------------------------------------------------------------------------------
190,000 Warnaco Group, Inc., Class A 4,987,500
-------------------------------------------------------------------------------- ----------------
Total 13,693,750
-------------------------------------------------------------------------------- ----------------
UTILITIES--2.6%
--------------------------------------------------------------------------------
200,000 CINergy Corp. 5,800,000
--------------------------------------------------------------------------------
400,000 CMS Energy Corp. 11,650,000
--------------------------------------------------------------------------------
400,000 Pinnacle West Capital Corp. 10,650,000
-------------------------------------------------------------------------------- ----------------
Total 28,100,000
-------------------------------------------------------------------------------- ----------------
TOTAL COMMON STOCK (COST $764,872,671) 958,578,067
-------------------------------------------------------------------------------- ----------------
CONVERTIBLE CORPORATE BONDS & NOTES--1.3%
--------------------------------------------------------------------------------
AUTOMOTIVE--0.2%
--------------------------------------------------------------------------------
$ 1,500,000 Titan Wheel International, 4.75%, due 12/01/00 1,965,030
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--0.4%
--------------------------------------------------------------------------------
5,000,000 Softkey International Inc.,Pound 5.50%, due 11/01/00 4,300,250
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.4%
--------------------------------------------------------------------------------
5,000,000 Xilinx Inc., 5.25%, due 11/01/02 4,894,800
-------------------------------------------------------------------------------- ----------------
PHARMACEUTICAL--0.3%
--------------------------------------------------------------------------------
3,000,000 ICN Pharmaceutical, 8.50%, due 11/15/99 3,485,640
-------------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE CORPORATE BONDS & NOTES (COST $14,505,545) 14,645,720
-------------------------------------------------------------------------------- ----------------
VARIABLE RATE NOTES--
--------------------------------------------------------------------------------
FINANCIAL SERVICES--1.1%
--------------------------------------------------------------------------------
$ 12,000,000 Goldman Sachs,Pound 5.38%, due 07/01/96 (COST $12,000,000) $ 11,986,800
-------------------------------------------------------------------------------- ----------------
TOTAL LONG-TERM INVESTMENTS (COST $791,378,216) 985,210,587
-------------------------------------------------------------------------------- ----------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
SHORT-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS--9.2%
- -------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--9.2%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--5.6%
--------------------------------------------------------------------------------
20,000,000 Delaware Funding Corp., 5.30%, due 05/16/96 19,920,500
--------------------------------------------------------------------------------
21,118,000 Household Finance Corp., 5.20%, due 05/01/96 21,118,000
--------------------------------------------------------------------------------
20,000,000 Merrill Lynch & Co., Inc., 5.33%, due 05/15/96 19,914,128
-------------------------------------------------------------------------------- ----------------
Total 60,952,628
-------------------------------------------------------------------------------- ----------------
INSURANCE--1.8%
--------------------------------------------------------------------------------
20,000,000 Triple A-One Funding Corp.,Pound 5.30%, due 05/03/96 19,955,833
-------------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--1.8%
--------------------------------------------------------------------------------
20,000,000 Lucent Technologies Inc., 5.31%, due 05/09/96 19,896,750
-------------------------------------------------------------------------------- ----------------
TOTAL SHORT-TERM INVESTMENTS (COST $100,805,211) 100,805,211
-------------------------------------------------------------------------------- ----------------
TOTAL INVESTMENTS (COST $892,183,427) $ 1,086,015,798
-------------------------------------------------------------------------------- ----------------
</TABLE>
Pound Security may only be sold to qualified institutional buyers.
* Non income producing security.
ADR = American Depositary Receipt.
Note: Rates indicated for floating rate investments are rates in effect at April
30, 1996.
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------
Investment securities, at value (Note 1) $ 2,081,070,186 $ 1,086,015,798
- ---------------------------------------------------------------------
Cash 2,849 921
- ---------------------------------------------------------------------
Receivables:
- ---------------------------------------------------------------------
Investment securities sold 381,875 18,066,185
- ---------------------------------------------------------------------
Interest and dividends 4,358,738 1,003,385
- ---------------------------------------------------------------------
Unamortized organization costs (Note 1) 20,012 20,012
- --------------------------------------------------------------------- ---------------------- -------------------
Total assets 2,085,833,660 1,105,106,301
- --------------------------------------------------------------------- ---------------------- -------------------
LIABILITIES:
- ---------------------------------------------------------------------
Payable for investment securities purchased -- 8,863,084
- ---------------------------------------------------------------------
Variation margin payable on futures contracts 45,000 --
- ---------------------------------------------------------------------
Accrued liabilities: (Note 2)
- ---------------------------------------------------------------------
Administration fees 84,655 44,008
- ---------------------------------------------------------------------
Investment advisory fees 676,243 352,059
- ---------------------------------------------------------------------
Custodian 22,465 16,031
- ---------------------------------------------------------------------
Other 43,269 45,149
- --------------------------------------------------------------------- ---------------------- -------------------
Total liabilities 871,632 9,320,331
- --------------------------------------------------------------------- ---------------------- -------------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 2,084,962,028 $ 1,095,785,970
- --------------------------------------------------------------------- ---------------------- -------------------
Cost of Investments $ 1,733,319,778 $ 892,183,427
- --------------------------------------------------------------------- ---------------------- -------------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------
Dividend $ 18,752,998 $ 5,803,046
- ---------------------------------------------------------------------
Interest 9,259,679 3,087,353
- --------------------------------------------------------------------- ---------------------- -------------------
Total investment income 28,012,677 8,890,399
- --------------------------------------------------------------------- ---------------------- -------------------
EXPENSES: (NOTE 2)
- ---------------------------------------------------------------------
Investment advisory fees 3,956,862 2,077,015
- ---------------------------------------------------------------------
Administration fees 494,608 259,627
- ---------------------------------------------------------------------
Custodian fees 69,245 33,222
- ---------------------------------------------------------------------
Amortization of organization costs (Note 1) 3,984 3,984
- ---------------------------------------------------------------------
Professional fees 31,986 36,590
- ---------------------------------------------------------------------
Trustees fees 52,232 32,205
- ---------------------------------------------------------------------
Other 40,396 49,775
- --------------------------------------------------------------------- ---------------------- -------------------
Total expenses 4,649,313 2,492,418
- --------------------------------------------------------------------- ---------------------- -------------------
Net investment income 23,363,364 6,397,981
- --------------------------------------------------------------------- ---------------------- -------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------
Net realized gain on:
- ---------------------------------------------------------------------
Investments 84,422,937 53,499,241
- ---------------------------------------------------------------------
Futures transactions 11,470,316 --
- ---------------------------------------------------------------------
Change in net unrealized appreciation/depreciation on:
- ---------------------------------------------------------------------
Investments 133,795,108 88,032,120
- ---------------------------------------------------------------------
Futures transactions (2,602,500) --
- --------------------------------------------------------------------- ---------------------- -------------------
Net realized and unrealized gain (loss) on
investments 227,085,861 141,531,361
- --------------------------------------------------------------------- ---------------------- -------------------
Net increase in net assets from operations $ 250,449,225 $ 147,929,342
- --------------------------------------------------------------------- ---------------------- -------------------
</TABLE>
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
11/01/95 YEAR 11/01/95 YEAR
THROUGH ENDED THROUGH ENDED
04/30/96 10/31/95 04/30/96 10/31/95
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
- ---------------------------------------
Net investment income $ 23,363,364 $ 49,161,074 $ 6,397,981 $ 14,034,371
- ---------------------------------------
Net realized gain on
investments and futures
transactions 95,893,253 95,276,889 53,499,241 38,313,408
- ---------------------------------------
Change in net unrealized
appreciation on investments
and futures 131,192,608 154,841,478 88,032,120 83,513,979
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Increase in net assets from
operations 250,449,225 299,279,441 147,929,342 135,861,758
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST:
- ---------------------------------------
Contributions 264,611,335 511,820,403 559,653,226 1,403,653,138
- ---------------------------------------
Withdrawals (284,264,175) (542,453,501) (631,222,317) (1,217,251,104)
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Net increase (decrease) from
transactions in investors'
beneficial interests (19,652,840) (30,633,098) (71,569,091) 186,402,034
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Net increase in net assets 230,796,385 268,646,343 76,360,251 322,263,792
- ---------------------------------------
NET ASSETS:
- ---------------------------------------
Beginning of period 1,854,165,643 1,585,519,300 1,019,425,719 697,161,927
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
End of period $ 2,084,962,028 $ 1,854,165,643 $ 1,095,785,970 $ 1,019,425,719
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Growth and Income Portfolio ("GIP") and Capital Growth Portfolio ("CGP"), (the
"Portfolios") are separately registered under the Investment Company Act of
1940, as amended, as non-diversified, open end management investment companies
organized as trusts under the laws of the State of New York. Each declaration of
trust permits the Trustees to issue beneficial interests in the respective
Portfolios. The GIP and the CGP commenced operations on November 29, 1993.
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.
The following is a summary of significant accounting policies followed by the
Portfolios:
A. VALUATION OF INVESTMENTS--Equity securities, purchased options and futures
are valued at the last sale price on the exchange on which they are
primarily traded, including the NASDAQ National Market. Securities for
which sale prices are not available and other over-the-counter securities
are valued at the last quoted bid price. Bonds and other fixed income
securities (other than short-term obligations), including listed issues,
are valued on the basis of valuations supplied by pricing services or by
matrix pricing systems of a major dealer in bonds. Short-term debt
securities with 61 days or more to maturity at time of purchase are valued,
through the 61st day prior to maturity, at market value based on quotations
obtained from market makers or other appropriate sources; thereafter, the
value on the 61st day is amortized on a straight-line basis over the
remaining number of days to maturity. Short-term investments with 60 days
or less to maturity at time of purchase are valued at amortized cost, which
approximates market. Portfolio securities for which there are no such
quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
B. REPURCHASE AGREEMENTS--It is the Trusts' policy that repurchase agreements
are fully collateralized by U.S. Treasury and Government Agency securities.
All collateral is held by the Trusts' custodian bank, subcustodian, or a
bank with which the custodian bank has entered into a subcustodian
agreement, or is segregated in the Federal Reserve Book Entry System. In
connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Trusts may
be delayed or limited.
C. FUTURES CONTRACTS--When a portfolio enters into a futures contract, it
makes an initial margin deposit in a segregated account, either in cash or
liquid securities. Thereafter, the futures contract is marked to market and
the portfolio makes (or receives) additional cash payments daily to the
broker. Changes in the value of the contract are recorded as unrealized
appreciation/depreciation until the contract is closed or settled.
The GIP invested a portion of its liquid assets in long stock index futures
contracts to more fully participate in the market. Use of futures contracts
subject the Portfolio to risk of loss in excess of amounts shown on the
Statement of Assets and Liabilities, up to the amount of the value of the
contract.
The Portfolio may enter into futures contracts only on exchanges or boards
of trade. The exchange or board of trade acts as the counterparty to each
futures transaction, therefore, the Portfolio's credit risk is limited to
failure of the exchange or board of trade.
D. WRITTEN OPTIONS--When a portfolio writes an option on a futures contract,
an amount equal to the premium received by the portfolio is included in the
portfolio's Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is adjusted daily to
reflect the current market value of the written options and the change is
recorded in a corresponding unrealized gain or loss account. When a written
option expires on its stipulated expiration date, or when a closing
transaction is entered into, the related liability is extinguished and the
portfolio realizes a gain (or loss if the cost of the closing transaction
exceeds the premium received when the option was written).
The GIP writes options on stock index securities futures. These options are
settled for cash and subject the Portfolio to market risk in excess of the
amounts that are reflected in the Statement of Assets and Liabilities. The
Portfolio, however, is not subject to credit risk on written options as the
counterparty has already performed its obligation by paying a premium at
the inception of the contract.
As of April 30, 1996 the Portfolios had no outstanding written options.
E. SECURITY TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Securities gains and losses are calculated on the identified
cost basis. Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
F. ORGANIZATION COSTS--Organization and initial registration costs incurred in
connection with establishing the Portfolios have been deferred and are
being amortized on a straight-line basis over a sixty month period
beginning at the commencement of operations of each Portfolio.
G. FEDERAL INCOME TAXES--The Portfolios intend to qualify as partnerships and
therefore net income and net realized gains are taxed to the partners. The
investor in the Portfolios must take into account their proportionate share
of the Portfolios' income, gains, losses, deductions, credits and tax
preference items in computing their federal income tax liability, without
regard to whether they have received any cash distributions from the
Portfolio. The Portfolios do not intend to distribute to investors their
net investment income or their net realized gains, if any. It is intended
that the Portfolios will be managed in such a way that investors in the
portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code to be taxed as regulated investment companies.
(2) FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEE--Pursuant to separate Investment Advisory
Agreements, The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") acts
as the Investment Adviser to the Portfolios. Chase is a direct wholly-owned
subsidiary of The Chase Manhattan Corporation. As Investment Adviser, Chase
supervises the investments of the Portfolios and for such services is paid
a fee.
The fee is computed daily and paid monthly at an annual rate equal to 0.40%
of the Portfolios' average daily net assets.
B. CUSTODIAL FEES--Chase, as Custodian provides safekeeping services for the
Portfolios' securities. Compensation for such services are presented in the
Statement of Operations as custodian fees.
C. ADMINISTRATION FEE--Pursuant to an Administration Agreement, Chase (the
"Administrator") provides certain administration services to the Trusts.
For these services and facilities, the Administrator receives from each
Portfolio a fee computed at the annual rate equal to 0.05% of the
respective Portfolio's average daily net assets.
D. OTHER--Effective March 29, 1996, The Chase Manhattan Corporation merged
with Chemical Banking Corporation, pursuant to the Agreement and Plan of
Merger signed in August 1995.
(3) INVESTMENT TRANSACTIONS
For the six month period ended April 30, 1996, purchases and sales of
investments (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
GIP CGP
<S> <C> <C>
Purchases (excluding U.S. Government) $ 568,532,694 $ 413,792,258
- ---------------------------------------------------------------------------------
Sales (excluding U.S. Government) 468,419,074 476,316,956
- ---------------------------------------------------------------------------------
</TABLE>
The portfolio turnover rates of GIP and CGP for this period were 26.22% and
43.32%, respectively.
(4) RETIREMENT PLAN
During the year ended October 31, 1995, the Trusts adopted an unfunded
noncontributory defined benefit pension plan covering all independent directors
of the Trusts who have served as an independent director of the Trusts, or other
Vista Portfolios, for at least five years at the time of retirement. Benefits
under this plan are based on compensation and years of service. Management has
determined that the accrual for prior service costs is not material.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Peter E. Madden Executive Vice President and Secretary
Gregor F. Meyer Richard B. Fisher
John E. Murray, Jr. Vice President
Wesley W. Posvar Joseph S. Machi
Marjorie P. Smuts Vice President and Assistant Treasurer
David M. Taylor
Assistant Treasurer
C. Grant Anderson
Assistant Secretary
</TABLE>
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus which contain facts concerning its
objective and policies, management fees, expenses and other information.
PORTFOLIO ADVISER
CHASE MANHATTAN BANK, N.A.
BLANCHARD
CAPITAL GROWTH
FUND
The Blanchard Group of Funds are available through Signet Financial Services,
Inc., and are advised by Virtus Capital Management, Inc., an affiliate of
Signet Financial Services, Inc.
Investment products available through Signet Financial Services, Inc., are not
deposits, obligations of, or guaranteed by Signet Bank, Signet Financial
Services, Inc., any bank or other financial institution, and are not insured
by the FDIC or any Federal Agency. In addition, they involve risk, including
possible loss of principal invested.
Federated Securities Corp. is the distributor of the Fund.
(2020)
CUSIP 093265403
GO1668-01 (6/96)
BLANCHARD
CAPITAL GROWTH
FUND
SEMI-ANNUAL
REPORT
APRIL 30, 1996
Managed by: Virtus Capital Management
President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Semi-Annual Report for the Blanchard Growth & Income
Fund for the period ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a list of investments included in its portfolio, and a financial
statement for the portfolio.
If you would like the most recent performance update for the Fund, or if you
have other questions, please call Investors' Services at 1-800-829-3863.
Thank you for your confidence in the Blanchard Group of Funds as a way to put
your money to work for you.
We remain committed to delivering the highest level of personal service.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
BLANCHARD GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in Portfolio, at value $ 12,813,980
- ---------------------------------------------------------------------------------------------------
Receivable from Manager 83,558
- ---------------------------------------------------------------------------------------------------
Deferred organizational expenses 64,368
- --------------------------------------------------------------------------------------------------- -------------
Total assets 12,961,906
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable to Distributor $ 32,912
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 2,709
- ----------------------------------------------------------------------------------------
Accrued expenses 77,291
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 112,912
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 11,321,888
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments in Portfolios 1,064,129
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments in Portfolios 432,756
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 30,221
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 12,848,994
- --------------------------------------------------------------------------------------------------- -------------
SHARES OUTSTANDING 1,438,145
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------------------------
($12,848,994 / 1,438,145) $8.93
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Dividends $ 86,696
- ------------------------------------------------------------------------------------------------------
Interest 42,546
- ------------------------------------------------------------------------------------------------------
Expenses allocated from Portfolio (21,972)
- ------------------------------------------------------------------------------------------------------ -----------
Total income 107,270
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------
Management fee $ 32,879
- -------------------------------------------------------------------------------------------
Administrative personnel & services fees 2,876
- -------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,680
- -------------------------------------------------------------------------------------------
Directors'/Trustees' fees 965
- -------------------------------------------------------------------------------------------
Auditing fees 7,343
- -------------------------------------------------------------------------------------------
Legal fees 20,801
- -------------------------------------------------------------------------------------------
Distribution services fee 23,485
- -------------------------------------------------------------------------------------------
Share registration costs 7,066
- -------------------------------------------------------------------------------------------
Printing and postage 11,312
- -------------------------------------------------------------------------------------------
Amortization of organizational costs 9,186
- -------------------------------------------------------------------------------------------
Miscellaneous 3,734
- ------------------------------------------------------------------------------------------- ---------
Total expenses 135,327
- -------------------------------------------------------------------------------------------
Waivers/Reimbursements--
- --------------------------------------------------------------------------------
Waiver of management fee $ 56,363
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses 1,915
- -------------------------------------------------------------------------------- ---------
Total Waivers/Reimbursements 58,278
- ------------------------------------------------------------------------------------------- ---------
Net expenses 77,049
- ------------------------------------------------------------------------------------------------------ -----------
Net investment income 30,221
- ------------------------------------------------------------------------------------------------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------------
Realized gain from Portfolio--
- ------------------------------------------------------------------------------------------------------
Net investment transactions 397,220
- ------------------------------------------------------------------------------------------------------
Net financial futures transactions 48,740
- ------------------------------------------------------------------------------------------------------ -----------
Realized gain from Portfolio 445,960
- ------------------------------------------------------------------------------------------------------ -----------
Net change in unrealized appreciation of investments in Portfolio 577,889
- ------------------------------------------------------------------------------------------------------ -----------
Net realized and unrealized gain on investments 1,023,849
- ------------------------------------------------------------------------------------------------------ -----------
Change in net assets resulting from operations $ 1,054,070
- ------------------------------------------------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GROWTH & INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------
Net investment loss $ 30,221 $ (23,610)
- --------------------------------------------------------------------
Net realized gain on investments from Portfolio 445,960 170,017
- --------------------------------------------------------------------
Net change in unrealized appreciation of investments in Portfolio 577,889 486,240
- -------------------------------------------------------------------- ---------------------- --------------------
Change in net assets resulting from operations 1,054,070 632,647
- -------------------------------------------------------------------- ---------------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------
Distributions from net realized gains (153,889) --
- --------------------------------------------------------------------
Distributions in excess of net investment income -- (2,119 )
- -------------------------------------------------------------------- ---------------------- --------------------
Change in net assets from distributions to
shareholders (153,889 ) (2,119 )
- -------------------------------------------------------------------- ---------------------- --------------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------
Proceeds from sale of shares 7,250,452 11,752,782
- --------------------------------------------------------------------
Net asset value af shares issued to shareholders in
payment of distributions declared 143,325 2,024
- --------------------------------------------------------------------
Cost of shares redeemed (1,888,249 ) (5,942,049 )
- -------------------------------------------------------------------- ---------------------- --------------------
Change in net assets resulting from share
transactions 5,505,528 5,812,757
- -------------------------------------------------------------------- ---------------------- --------------------
Change in net assets 6,405,709 6,443,285
- --------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------
Beginning of period 6,443,285 --
- -------------------------------------------------------------------- ---------------------- --------------------
End of period $ 12,848,994 $ 6,443,285
- -------------------------------------------------------------------- ---------------------- --------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.11 $ 7.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income (loss) 0.03 (0.03)
- -------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.95 1.15
- ------------------------------------------------------------------------- ------- -------
Total from investment operations 0.98 1.12
- ------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Distributions from net realized gains (0.16) --
- -------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.01)
- ------------------------------------------------------------------------- ------- -------
Total distributions (0.16) (0.01)
- ------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.93 $ 8.11
- ------------------------------------------------------------------------- ------- -------
TOTAL RETURN (A) 12.24% 16.03%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses (b) 1.63(c) 3.81%
- -------------------------------------------------------------------------
Net investment income 0.64(c) (0.64%)
- -------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.23(c) 0.74%
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,849 $6,443
- -------------------------------------------------------------------------
</TABLE>
(a) Based on net asset value.
(b) Reflects the Fund's proportionate share of the Portfolio's expenses, the
Portfolio's fee waivers and expense reimbursements by the Fund's Manager.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Blanchard Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "Act") as an open-end management investment company. The
Trust consists of eight funds. The financial statements included herein are only
those of Blanchard Growth & Income Fund (the "Fund"). The financial statements
of the other funds are presented separately. The assets of each fund are
segregated and a shareholder's interest is limited to the fund in which shares
are held.
The Fund's investment objective is to provide long term capital appreciation and
to provide dividend income through a broad portfolio of common stocks. The Fund
seeks to achieve its investment objective by investing all of its investable
assets in Growth & Income Portfolio (the "Portfolio") which is an open-end
management investment company having the same investment objective as the Fund.
The Portfolio is advised by Chase Manhattan Bank, N.A. At April 30, 1996, the
Fund owned 0.62% of the Portfolio.
These financial statements should be read together with the accompanying
portfolio of investments and financial statements of the Portfolio.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund records its investment in the Portfolio at
value. Securities of the Portfolio are recorded at value as more fully
discussed in the Notes to those accompanying Financial Statements.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--The Fund records daily its
pro-rata share of its Portfolio's income, expenses, and realized and
unrealized gains and losses. In addition, the Fund accrues its own expenses
daily. Expenses directly attributable to the Fund are charged to the Fund.
Certain expenses for the Trust are allocated among all the Funds in the
Trust based upon their relative average net assets. Distributions to
shareholders are recorded on the ex-dividend date. The amount of dividends
and distributions from net investment income and net realized capital gains
is determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. To the extent these
"book/tax" differences are permanent in nature, (i.e., that they will
result from other than timing recognition-"temporary") such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment. 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 distributions in excess of net investment
income or distributions in excess of net realized capital gains.
BLANCHARD GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code (the "Code") applicable to regulated investment
companies and to distribute to shareholders each year substantially all of
its income. Accordingly, no provisions for federal tax are necessary.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
organizational expenses and registration of its shares in its first fiscal
year, excluding the initial expense of registering its shares, have been
deferred and are being amortized using the straight-line method over a
period of five years from the Fund's commencement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
<S> <C> <C>
Shares sold 855,373 1,584,617
- --------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 10,116 298
- --------------------------------------------------------------------
Shares redeemed (221,829) (790,430)
- -------------------------------------------------------------------- ------------ --------------------
Net change resulting from share transactions 643,660 794,485
- -------------------------------------------------------------------- ------------ --------------------
</TABLE>
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Virtus Capital Management, Inc., the Fund's manager, (the
"Manager"), receives for its services an annual management fee equal to .70 of
1% of the Fund's average daily net assets. The Manager may voluntarily choose to
waive any portion of its fee and/or reimburse certain operating expenses of the
Fund. The Manager can modify or terminate this voluntary waiver and/or
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Trust for the period.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp., ("FSC") the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur
BLANCHARD GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
distribution expenses up to .50 of 1% of the average daily net assets of the
Fund, annually, to reimburse FSC. The distributor may voluntarily choose to
waive any portion of its fee. The distributor can modify or terminate this
voluntary waiver at any time at its sole discretion.
TRANSFER AGENT FEES--Federated Services Company ("FServ"), through its
subsidiary Federated Shareholder Services Company, serves as transfer and
dividend disbursing agent for the Fund for which it receives a fee. This fee is
based on the size, type, and number of accounts and transactions made by
shareholders.
DIRECTORS/TRUSTEES FEES--Prior to the acquisition of Sheffield Management
Company by Virtus Capital Management, Inc., the independent directors/trustees
for the Trust participated in an unfunded noncontributory pension plan (the
"Plan") covering all independent directors/trustees of the Trust who served as
an independent director/trustee for at least five years at the time of
retirement. Benefits under this plan were based on an annual amount equal to 75%
of the directors/ trustees fees 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. The net pension expense included in the Statement of Operations for the
six months ended April 30, 1996 for the Fund was $1,360.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
INVESTMENTS--92.1% ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK--81.6%
--------------------------------------------------------------------------------
AEROSPACE--1.9%
--------------------------------------------------------------------------------
305,000 Allied-Signal, Inc. $ 17,728,125
--------------------------------------------------------------------------------
170,000 General Motors Class H 10,391,250
--------------------------------------------------------------------------------
110,000 United Technologies, Corp. 12,155,000
-------------------------------------------------------------------------------- ----------------
Total 40,274,375
-------------------------------------------------------------------------------- ----------------
AGRICULTURE--2.0%
--------------------------------------------------------------------------------
350,000 AGCO Corp. 8,837,500
--------------------------------------------------------------------------------
355,000 Case Corp. 17,927,500
--------------------------------------------------------------------------------
400,000 Deere & Co. 15,550,000
-------------------------------------------------------------------------------- ----------------
Total 42,315,000
-------------------------------------------------------------------------------- ----------------
AIRLINES--0.3%
--------------------------------------------------------------------------------
63,300 AMR Corp.* 5,649,525
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--2.1%
--------------------------------------------------------------------------------
214,027 Chrysler Corp. 13,430,194
--------------------------------------------------------------------------------
300,000 Dana Corp. 9,975,000
--------------------------------------------------------------------------------
300,000 Echlin, Inc. 10,312,500
--------------------------------------------------------------------------------
200,000 General Motors 10,850,000
-------------------------------------------------------------------------------- ----------------
Total 44,567,694
-------------------------------------------------------------------------------- ----------------
BANKING--4.3%
--------------------------------------------------------------------------------
350,000 Bank of Boston Corp. 16,931,250
--------------------------------------------------------------------------------
225,000 Bank of New York Company, Inc. 10,912,500
--------------------------------------------------------------------------------
145,000 BankAmerica Corp. 10,983,750
--------------------------------------------------------------------------------
175,000 Citicorp 13,781,250
--------------------------------------------------------------------------------
275,000 NationsBank Corp. 21,931,250
--------------------------------------------------------------------------------
400,000 Norwest Corp. 14,450,000
-------------------------------------------------------------------------------- ----------------
Total 88,990,000
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
BIOTECHNOLOGY--0.4%
--------------------------------------------------------------------------------
130,000 Amgen, Inc. $ 7,475,000
-------------------------------------------------------------------------------- ----------------
BROADCASTING--0.3%
--------------------------------------------------------------------------------
350,000 U.S. West Media Group* 6,825,000
-------------------------------------------------------------------------------- ----------------
BUSINESS SERVICES--0.1%
--------------------------------------------------------------------------------
88,000 Browning-Ferris, Inc. (BFI) 2,992,000
-------------------------------------------------------------------------------- ----------------
CHEMICALS--3.6%
--------------------------------------------------------------------------------
189,000 Air Products and Chemicals, Inc. 10,796,625
--------------------------------------------------------------------------------
130,000 Dow Chemical Co. 11,553,750
--------------------------------------------------------------------------------
230,000 duPont (EI) deNemours 18,486,250
--------------------------------------------------------------------------------
185,000 Eastman Chemical Co. 12,441,250
--------------------------------------------------------------------------------
225,000 Praxair, Inc. 8,690,625
--------------------------------------------------------------------------------
290,000 Union Carbide Corp. 13,195,000
-------------------------------------------------------------------------------- ----------------
Total 75,163,500
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--2.0%
--------------------------------------------------------------------------------
160,000 Computer Associates International 11,740,000
--------------------------------------------------------------------------------
180,000 General Motors Corp., Class E 10,147,500
--------------------------------------------------------------------------------
90,000 Microsoft Corp.* 10,203,750
--------------------------------------------------------------------------------
223,000 Reynolds & Reynolds, Inc., Class A 10,313,750
-------------------------------------------------------------------------------- ----------------
Total 42,405,000
-------------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--4.0%
--------------------------------------------------------------------------------
270,000 Comdisco, Inc. 6,648,750
--------------------------------------------------------------------------------
300,000 Compaq Computer* 13,987,500
--------------------------------------------------------------------------------
155,000 Digital Equipment Corp.* 9,261,250
--------------------------------------------------------------------------------
131,000 Hewlett-Packard Co. 13,869,625
--------------------------------------------------------------------------------
100,000 International Business Machines Corp. 10,750,000
--------------------------------------------------------------------------------
150,000 SCI Systems, Inc.* 6,431,250
--------------------------------------------------------------------------------
100,000 Seagate Technology, Inc.* 5,800,000
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE--CONTINUED
--------------------------------------------------------------------------------
300,000 Sun Microsystems, Inc.* $ 16,275,000
-------------------------------------------------------------------------------- ----------------
Total 83,023,375
-------------------------------------------------------------------------------- ----------------
CONSTRUCTION MACHINERY--0.6%
--------------------------------------------------------------------------------
180,000 Caterpillar Inc. 11,520,000
-------------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--4.1%
--------------------------------------------------------------------------------
325,000 Black & Decker Corp. 13,081,250
--------------------------------------------------------------------------------
120,000 Colgate-Palmolive Co. 9,195,000
--------------------------------------------------------------------------------
150,000 Nike, Inc., Class B 13,125,000
--------------------------------------------------------------------------------
215,000 Philip Morris Companies, Inc. 19,376,875
--------------------------------------------------------------------------------
165,000 Procter & Gamble Co. 13,942,500
--------------------------------------------------------------------------------
306,000 RJR Nabisco Holdings Corp. 9,141,750
--------------------------------------------------------------------------------
130,000 Whirlpool Corp. 7,816,250
-------------------------------------------------------------------------------- ----------------
Total 85,678,625
-------------------------------------------------------------------------------- ----------------
DIVERSIFIED--1.4%
--------------------------------------------------------------------------------
130,000 Textron, Inc. 11,147,500
--------------------------------------------------------------------------------
200,000 TRW Inc. 18,775,000
-------------------------------------------------------------------------------- ----------------
Total 29,922,500
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--2.0%
--------------------------------------------------------------------------------
300,000 Analog Devices, Inc.* 7,725,000
--------------------------------------------------------------------------------
130,000 Applied Materials, Inc.* 5,200,000
--------------------------------------------------------------------------------
125,000 Intel Corp. 8,468,750
--------------------------------------------------------------------------------
130,000 Lam Research Corp.* 5,265,000
--------------------------------------------------------------------------------
230,198 Texas Instruments 13,006,187
--------------------------------------------------------------------------------
48,800 Xilinx, Inc.* 1,799,500
-------------------------------------------------------------------------------- ----------------
Total 41,464,437
-------------------------------------------------------------------------------- ----------------
ENTERTAINMENT/LEISURE--1.3%
--------------------------------------------------------------------------------
550,000 Carnival Corp., Class A 15,950,000
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE--CONTINUED
--------------------------------------------------------------------------------
325,000 Trump Hotels & Casino Resorts, Inc.* $ 10,521,875
-------------------------------------------------------------------------------- ----------------
Total 26,471,875
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--2.0%
--------------------------------------------------------------------------------
100,000 Advanta Corp., Class A 5,587,500
--------------------------------------------------------------------------------
220,000 American Express Co. 10,670,000
--------------------------------------------------------------------------------
190,806 Dean Witter, Discover & Co. 10,398,927
--------------------------------------------------------------------------------
520,000 Federal National Mortgage Assoc. 15,925,000
-------------------------------------------------------------------------------- ----------------
Total 42,581,427
-------------------------------------------------------------------------------- ----------------
FOOD/BEVERAGE PRODUCTS--4.1%
--------------------------------------------------------------------------------
570,000 Coca-Cola Enterprises, Inc. 16,815,000
--------------------------------------------------------------------------------
285,000 ConAgra, Inc. 11,008,125
--------------------------------------------------------------------------------
140,000 CPC International, Inc. 9,677,500
--------------------------------------------------------------------------------
225,000 Heinz (H.J.) Co. 7,621,875
--------------------------------------------------------------------------------
275,000 PepsiCo., Inc. 17,462,500
--------------------------------------------------------------------------------
200,000 Seagram Company, Ltd. 6,775,000
--------------------------------------------------------------------------------
115,000 Unilever NV, NY Shares 15,697,500
-------------------------------------------------------------------------------- ----------------
Total 85,057,500
-------------------------------------------------------------------------------- ----------------
HEALTH CARE--3.7%
--------------------------------------------------------------------------------
300,000 Baxter International Inc. 13,275,000
--------------------------------------------------------------------------------
295,000 Columbia/HCA Healthcare Corp. 15,671,875
--------------------------------------------------------------------------------
200,000 FHP International Corp.* 5,900,000
--------------------------------------------------------------------------------
350,000 HEALTHSOUTH Corp. 12,993,750
--------------------------------------------------------------------------------
375,000 Humana, Inc. 9,234,375
--------------------------------------------------------------------------------
170,000 Medtronic, Inc. 9,031,250
--------------------------------------------------------------------------------
500,000 Tenet Healthcare Corp. 10,250,000
-------------------------------------------------------------------------------- ----------------
Total 76,356,250
-------------------------------------------------------------------------------- ----------------
INSURANCE--3.8%
--------------------------------------------------------------------------------
365,110 Allstate Corp. $ 14,193,651
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
INSURANCE--CONTINUED
--------------------------------------------------------------------------------
110,500 American International Group 10,096,938
--------------------------------------------------------------------------------
115,000 Chubb Corp. 10,881,875
--------------------------------------------------------------------------------
40,000 Highlands Insurance Group* 760,000
--------------------------------------------------------------------------------
220,000 Mid Ocean, Ltd. (Bermuda) 7,865,000
--------------------------------------------------------------------------------
350,000 Providian Corp. 16,143,750
--------------------------------------------------------------------------------
140,000 Reliastar Financial Corp. 6,107,500
--------------------------------------------------------------------------------
200,000 St. Paul Companies, Inc. 10,625,000
--------------------------------------------------------------------------------
750 Transport Holdings, Inc., Class A* 31,875
--------------------------------------------------------------------------------
125,000 Travelers/Aetna Property Casualty Corp.* 3,453,125
-------------------------------------------------------------------------------- ----------------
Total 80,158,714
-------------------------------------------------------------------------------- ----------------
MANUFACTURING--3.0%
--------------------------------------------------------------------------------
350,000 Ingersoll-Rand Co. 13,562,500
--------------------------------------------------------------------------------
200,000 Johnson Controls 14,300,000
--------------------------------------------------------------------------------
175,000 Kennametal Inc. 6,628,125
--------------------------------------------------------------------------------
410,000 Parker Hannifin Corp. 17,322,500
--------------------------------------------------------------------------------
275,000 Varity Corp.* 11,721,875
-------------------------------------------------------------------------------- ----------------
Total 63,535,000
-------------------------------------------------------------------------------- ----------------
METALS/MINING--1.3%
--------------------------------------------------------------------------------
245,000 Aluminum Co. of America (ALCOA) 15,281,875
--------------------------------------------------------------------------------
370,000 Inco, Ltd. 12,441,250
-------------------------------------------------------------------------------- ----------------
Total 27,723,125
-------------------------------------------------------------------------------- ----------------
OFFICE/BUSINESS EQUIPMENT--0.6%
--------------------------------------------------------------------------------
85,000 Xerox Corp. 12,452,500
-------------------------------------------------------------------------------- ----------------
OIL & GAS--6.7%
--------------------------------------------------------------------------------
150,000 Amoco Corp. 10,950,000
--------------------------------------------------------------------------------
250,000 Ashland Inc. 10,281,250
--------------------------------------------------------------------------------
350,000 Halliburton Company $ 20,081,250
--------------------------------------------------------------------------------
195,000 Mobil Corp. 22,425,000
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
OIL & GAS--CONTINUED
--------------------------------------------------------------------------------
661,500 PanEnergy Corp. 21,581,438
--------------------------------------------------------------------------------
355,000 Phillips Petroleum Co. 14,732,500
--------------------------------------------------------------------------------
224,200 Smith International* 6,669,950
--------------------------------------------------------------------------------
135,500 Triton Energy Ltd 7,452,500
--------------------------------------------------------------------------------
250,000 Unocal Corp. 8,031,250
--------------------------------------------------------------------------------
320,000 Williams Companies, Inc. 16,360,000
-------------------------------------------------------------------------------- ----------------
Total 138,565,138
-------------------------------------------------------------------------------- ----------------
PAPER/FOREST PRODUCTS--2.0%
--------------------------------------------------------------------------------
150,000 Boise Cascade Corp. 6,975,000
--------------------------------------------------------------------------------
200,000 Champion International Corp. 9,650,000
--------------------------------------------------------------------------------
325,000 Fort Howard Corp.* 7,150,000
--------------------------------------------------------------------------------
150,000 Mead Corp. 8,343,750
--------------------------------------------------------------------------------
150,000 Willamette Industries 9,225,000
-------------------------------------------------------------------------------- ----------------
Total 41,343,750
-------------------------------------------------------------------------------- ----------------
PHARMACEUTICALS--3.2%
--------------------------------------------------------------------------------
150,000 Allergan Inc. 5,306,250
--------------------------------------------------------------------------------
135,000 American Home Products Corp. 14,242,500
--------------------------------------------------------------------------------
530,000 Glaxo Wellcome Plc 12,786,250
--------------------------------------------------------------------------------
140,000 Johnson & Johnson 12,950,000
--------------------------------------------------------------------------------
200,000 Schering-Plough Corp. 11,475,000
--------------------------------------------------------------------------------
200,000 SmithKline Beecham Plc., ADR 10,800,000
-------------------------------------------------------------------------------- ----------------
Total 67,560,000
-------------------------------------------------------------------------------- ----------------
PRINTING & PUBLISHING--1.2%
--------------------------------------------------------------------------------
200,000 Harcourt General, Inc. 8,800,000
--------------------------------------------------------------------------------
200,000 New York Times Company, Class A 6,500,000
--------------------------------------------------------------------------------
150,000 Tribune Co. $ 10,462,500
-------------------------------------------------------------------------------- ----------------
Total 25,762,500
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST--0.7%
--------------------------------------------------------------------------------
150,000 Beacon Properties Corp. 3,843,750
--------------------------------------------------------------------------------
100,000 Equity Residential Properties Trust 3,225,000
--------------------------------------------------------------------------------
280,000 Hospitality Properties Trust 7,140,000
-------------------------------------------------------------------------------- ----------------
Total 14,208,750
-------------------------------------------------------------------------------- ----------------
RESTAURANTS/FOOD SERVICES--0.4%
--------------------------------------------------------------------------------
400,000 Wendy's International, Inc. 7,650,000
-------------------------------------------------------------------------------- ----------------
RETAILING--5.9%
--------------------------------------------------------------------------------
370,000 American Stores Co. 12,348,750
--------------------------------------------------------------------------------
250,000 AutoZone, Inc.* 9,125,000
--------------------------------------------------------------------------------
320,000 Circuit City Stores, Inc. 10,160,000
--------------------------------------------------------------------------------
150,000 Dayton-Hudson Corp. 14,325,000
--------------------------------------------------------------------------------
380,000 Dillard Department Stores, Inc., Class A 15,247,500
--------------------------------------------------------------------------------
432,000 Gap, Inc. 13,014,000
--------------------------------------------------------------------------------
542,500 Kroger Co.* 22,310,313
--------------------------------------------------------------------------------
280,000 May Department Stores 14,280,000
--------------------------------------------------------------------------------
250,000 Sears Roebuck & Co. 12,468,750
-------------------------------------------------------------------------------- ----------------
Total 123,279,313
-------------------------------------------------------------------------------- ----------------
SHIPPING/TRANSPORTATION--2.5%
--------------------------------------------------------------------------------
125,000 Consolidated Railway, Inc. 8,718,750
--------------------------------------------------------------------------------
450,000 CSX Corp. 23,062,500
--------------------------------------------------------------------------------
130,000 Federal Express Corp.* 10,497,500
--------------------------------------------------------------------------------
300,000 Ryder System 8,737,500
-------------------------------------------------------------------------------- ----------------
Total 51,016,250
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
--------------------------------------------------------------------------------
STEEL--0.5%
--------------------------------------------------------------------------------
290,000 USX-US Steel Group, Inc. $ 9,570,000
-------------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--4.3%
--------------------------------------------------------------------------------
120,000 360 Communications Co.* 2,820,000
--------------------------------------------------------------------------------
225,000 AT&T Corp. 13,781,250
--------------------------------------------------------------------------------
300,000 Frontier Corp. 9,487,500
--------------------------------------------------------------------------------
380,000 GTE Corp. 16,482,500
--------------------------------------------------------------------------------
295,000 Loral Space & Communications Ltd.* 4,240,625
--------------------------------------------------------------------------------
150,000 NYNEX Corp. 7,368,750
--------------------------------------------------------------------------------
425,000 Sprint Corp. 17,903,125
--------------------------------------------------------------------------------
450,000 Tele-Communications, Class A* 8,606,250
--------------------------------------------------------------------------------
270,000 U S West, Inc. 8,842,500
-------------------------------------------------------------------------------- ----------------
Total 89,532,500
-------------------------------------------------------------------------------- ----------------
TOYS & GAMES--0.8%
--------------------------------------------------------------------------------
606,250 Mattel, Inc. 15,762,500
-------------------------------------------------------------------------------- ----------------
UTILITIES--4.5%
--------------------------------------------------------------------------------
200,000 CINergy Corp. 5,800,000
--------------------------------------------------------------------------------
375,000 CMS Energy Corp. 10,921,875
--------------------------------------------------------------------------------
142,900 Eastern Utilities Associates 2,911,588
--------------------------------------------------------------------------------
510,000 Entergy Corp. 13,515,000
--------------------------------------------------------------------------------
320,000 FPL Group Inc. 13,800,000
--------------------------------------------------------------------------------
350,000 General Public Utilities 11,112,500
--------------------------------------------------------------------------------
120,000 Northern States Power Co. 5,610,000
--------------------------------------------------------------------------------
150,000 Oklahoma Gas & Electric Co. 5,662,500
--------------------------------------------------------------------------------
309,100 PECO Energy Co. 7,688,862
--------------------------------------------------------------------------------
500,000 Pinnacle West Capital Corp. 13,312,500
--------------------------------------------------------------------------------
115,000 Public Service Co. of Colorado $ 3,809,375
-------------------------------------------------------------------------------- ----------------
Total 94,144,200
-------------------------------------------------------------------------------- ----------------
TOTAL COMMON STOCK (COST $1,378,901,909) 1,700,997,323
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK--CONTINUED
--------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK--4.2%
--------------------------------------------------------------------------------
AIRLINES--0.3%
--------------------------------------------------------------------------------
110,000 Delta Airlines, Ser. C, $3.50 6,971,250
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--0.3%
--------------------------------------------------------------------------------
45,000 Ford Motor Co., Ser. A, 8.4% 5,220,000
-------------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--0.4%
--------------------------------------------------------------------------------
75,000 Ceridian Corp., 5.5% 7,800,000
-------------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--0.8%
--------------------------------------------------------------------------------
960,000 Westinghouse Electric,Pound $1.30 17,280,000
-------------------------------------------------------------------------------- ----------------
ENTERTAINMENT/LEISURE--0.4%
--------------------------------------------------------------------------------
200,000 Time Warner Financing Trust, $1.24 7,300,000
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--0.3%
--------------------------------------------------------------------------------
118,000 American General Delaware, $3.00 6,077,000
-------------------------------------------------------------------------------- ----------------
FOOD/BEVERAGE PRODUCTS--0.2%
--------------------------------------------------------------------------------
700,000 RJR Nabisco Holdings Corp., $0.6012 4,200,000
-------------------------------------------------------------------------------- ----------------
HEALTH CARE--0.3%
--------------------------------------------------------------------------------
225,000 FHP International Corp., Ser. A, 5.0% 6,159,375
-------------------------------------------------------------------------------- ----------------
METALS/MINING--0.1%
--------------------------------------------------------------------------------
145,000 Coeur D'Alene Mines Corp., 7.00%, 03/15/00 Ser. 3,026,875
-------------------------------------------------------------------------------- ----------------
OIL & GAS--0.7%
--------------------------------------------------------------------------------
90,000 Diamond Shamrock, 5%Pound 5,883,750
--------------------------------------------------------------------------------
140,000 Occidental Petroleum, $3.00 9,065,000
-------------------------------------------------------------------------------- ----------------
Total 14,948,750
-------------------------------------------------------------------------------- ----------------
PAPER/FOREST PRODUCTS--0.4%
--------------------------------------------------------------------------------
200,000 International Paper Capital Corp.,Pound 5.25% $ 9,175,000
-------------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE PREFERRED STOCK (COST $74,414,678) 88,158,250
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES--CONTINUED
--------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES--4.4%
--------------------------------------------------------------------------------
AIRLINES--0.3%
--------------------------------------------------------------------------------
$ 5,000,000 AMR, Corp., 6.125%, due 11/01/24 5,648,650
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--0.2%
--------------------------------------------------------------------------------
4,500,000 Magna International Inc., 5.00%, due 10/15/02 4,640,625
-------------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--0.5%
--------------------------------------------------------------------------------
4,000,000 Applied Magnetics Corp.,* 7.00%, due 03/15/06 5,129,360
--------------------------------------------------------------------------------
5,000,000 Quantum Corp., 5.00%, due 03/01/03 5,547,100
-------------------------------------------------------------------------------- ----------------
Total 10,676,460
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--0.3%
--------------------------------------------------------------------------------
7,000,000 Softkey International Inc.,Pound 5.50%, due 11/01/00 6,020,350
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--0.5%
--------------------------------------------------------------------------------
3,850,000 SCI Systems Inc.,Pound 5.00%, due 05/01/06 4,215,750
--------------------------------------------------------------------------------
7,000,000 Xilinx Inc., 5.25% due 11/01/02 6,852,720
-------------------------------------------------------------------------------- ----------------
Total 11,068,470
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--1.0%
--------------------------------------------------------------------------------
2,000,000 Aames Financial Corp., 5.50%, due 03/15/06 2,360,000
--------------------------------------------------------------------------------
5,000,000 First Financial Management, 5.00%, due 12/15/99 9,058,900
--------------------------------------------------------------------------------
6,600,000 South African Pulp & Paper Industries, BVI Finance Ltd., 7.50%, due 08/01/02 6,253,500
--------------------------------------------------------------------------------
2,000,000 UBS Finance of Delaware, 2.00%, due 12/15/00 1,994,980
-------------------------------------------------------------------------------- ----------------
Total 19,667,380
-------------------------------------------------------------------------------- ----------------
HEALTH CARE--0.5%
--------------------------------------------------------------------------------
5,000,000 Healthsource, Inc., 5.00%, due 03/01/96 4,852,100
--------------------------------------------------------------------------------
$ 4,000,000 Tenet Healthcare Corp., 6.00%, due 12/01/05 $ 4,334,240
-------------------------------------------------------------------------------- ----------------
Total 9,186,340
-------------------------------------------------------------------------------- ----------------
MANUFACTURING--0.5%
--------------------------------------------------------------------------------
5,000,000 3 Com Corp.,Pound 10.25%, due 11/01/01 7,737,500
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
LONG-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES--CONTINUED
--------------------------------------------------------------------------------
MANUFACTURING--CONTINUED
--------------------------------------------------------------------------------
3,000,000 Waban Inc., 6.5%, due 07/01/02 3,240,000
-------------------------------------------------------------------------------- ----------------
Total 10,977,500
-------------------------------------------------------------------------------- ----------------
PHARMACEUTICALS--0.4%
--------------------------------------------------------------------------------
3,000,000 Ciba-Geigy AG,Pound 6.25%, due 03/15/16 3,045,000
--------------------------------------------------------------------------------
5,000,000 ICN Pharmaceutical, 8.50%, due 11/15/99 5,809,400
-------------------------------------------------------------------------------- ----------------
Total 8,854,400
-------------------------------------------------------------------------------- ----------------
RETAILING--0.2%
--------------------------------------------------------------------------------
4,000,000 Federated Department Stores, 5.00%, due 10/01/03 4,533,920
-------------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE CORPORATE BONDS & NOTES (COST $80,176,029) 91,274,095
-------------------------------------------------------------------------------- ----------------
VARIABLE RATE NOTE--1.2%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--1.2%
--------------------------------------------------------------------------------
25,000,000 Goldman Sachs Variable Rate Note,Pound 5.38%, due 11/15/99
(COST $25,000,000) 24,972,500
-------------------------------------------------------------------------------- ----------------
U.S. GOVERNMENT OBLIGATIONS--0.7%
--------------------------------------------------------------------------------
12,400,000 U.S. Treasury Bond, 9.25%, due 02/15/16 (COST $14,430,500) 15,271,356
-------------------------------------------------------------------------------- ----------------
TOTAL LONG-TERM INVESTMENTS (COST $1,572,923,116) 1,920,673,524
-------------------------------------------------------------------------------- ----------------
SHORT-TERM INVESTMENTS--7.7%
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.2%
--------------------------------------------------------------------------------
3,200,000 U.S. Treasury Bill, 4.90% due 05/23/96 3,161,254
--------------------------------------------------------------------------------
750,000 U.S. Treasury Bill, 4.97% due 06/13/96 740,635
-------------------------------------------------------------------------------- ----------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $3,901,889) 3,901,889
-------------------------------------------------------------------------------- ----------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--3.3%
--------------------------------------------------------------------------------
35,000,000 Federal Home Loan Bank Discount Note,+ 5.145%, due 06/24/96 34,699,875
--------------------------------------------------------------------------------
$ 35,000,000 Federal National Mortgage Association Discount Note, 5.18%,
due 06/20/96 $ 34,642,436
-------------------------------------------------------------------------------- ----------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $69,342,311) 69,342,311
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ----------------
<CAPTION>
SHORT-TERM INVESTMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER--4.2%
--------------------------------------------------------------------------------
BANKING--1.7%
--------------------------------------------------------------------------------
35,000,000 J.P. Morgan & Co., Inc.,+ 5.31%, due 05/08/96 34,845,125
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--0.8%
--------------------------------------------------------------------------------
17,519,000 Household Finance Corp., 5.20%, due 05/01/96 17,519,000
-------------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--1.7%
--------------------------------------------------------------------------------
35,000,000 Lucent Technologies Inc.,+ 5.31%, due 05/15/96 34,788,337
-------------------------------------------------------------------------------- ----------------
TOTAL COMMERCIAL PAPER (COST $87,152,462) 87,152,462
-------------------------------------------------------------------------------- ----------------
TOTAL SHORT-TERM INVESTMENTS (COST $160,396,662) 160,396,662
-------------------------------------------------------------------------------- ----------------
TOTAL INVESTMENTS (COST $1,733,319,778) $ 2,081,070,186
-------------------------------------------------------------------------------- ----------------
</TABLE>
Pound Security may only be sold to qualified institutional buyers.
* Non income producing security.
+ Some or all of these securities are pledged to cover financial futures
contracts.
ADR = American Depositary Receipt.
Note: Rates indicated for floating rate investments are rates in effect at April
30, 1996.
PURCHASED INDEX FUTURES OUTSTANDING
<TABLE>
<CAPTION>
NUMBER ORIGINAL NOMINAL UNREALIZED
EXPIRATION OF NOMINAL VALUE AT APPRECIATION
DESCRIPTION DATE CONTRACTS VALUE 04/30/96 (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
S&P 500 Future 06/21/96 300 $ 99,467,421 $ 98,227,500 ($1,239,921)
- -----------------------------------
</TABLE>
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------
Investment securities, at value (Note 1) $ 2,081,070,186 $ 1,086,015,798
- ---------------------------------------------------------------------
Cash 2,849 921
- ---------------------------------------------------------------------
Receivables:
- ---------------------------------------------------------------------
Investment securities sold 381,875 18,066,185
- ---------------------------------------------------------------------
Interest and dividends 4,358,738 1,003,385
- ---------------------------------------------------------------------
Unamortized organization costs (Note 1) 20,012 20,012
- --------------------------------------------------------------------- ---------------------- -------------------
Total assets 2,085,833,660 1,105,106,301
- --------------------------------------------------------------------- ---------------------- -------------------
LIABILITIES:
- ---------------------------------------------------------------------
Payable for investment securities purchased -- 8,863,084
- ---------------------------------------------------------------------
Variation margin payable on futures contracts 45,000 --
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Accrued liabilities: (Note 2)
- ---------------------------------------------------------------------
Administration fees 84,655 44,008
- ---------------------------------------------------------------------
Investment advisory fees 676,243 352,059
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Custodian 22,465 16,031
- ---------------------------------------------------------------------
Other 43,269 45,149
- --------------------------------------------------------------------- ---------------------- -------------------
Total liabilities 871,632 9,320,331
- --------------------------------------------------------------------- ---------------------- -------------------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $ 2,084,962,028 $ 1,095,785,970
- --------------------------------------------------------------------- ---------------------- -------------------
Cost of Investments $ 1,733,319,778 $ 892,183,427
- --------------------------------------------------------------------- ---------------------- -------------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------
Dividend $ 18,752,998 $ 5,803,046
- ---------------------------------------------------------------------
Interest 9,259,679 3,087,353
- --------------------------------------------------------------------- ---------------------- -------------------
Total investment income 28,012,677 8,890,399
- --------------------------------------------------------------------- ---------------------- -------------------
EXPENSES: (NOTE 2)
- ---------------------------------------------------------------------
Investment advisory fees 3,956,862 2,077,015
- ---------------------------------------------------------------------
Administration fees 494,608 259,627
- ---------------------------------------------------------------------
Custodian fees 69,245 33,222
- ---------------------------------------------------------------------
Amortization of organization costs (Note 1) 3,984 3,984
- ---------------------------------------------------------------------
Professional fees 31,986 36,590
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Trustees fees 52,232 32,205
- ---------------------------------------------------------------------
Other 40,396 49,775
- --------------------------------------------------------------------- ---------------------- -------------------
Total expenses 4,649,313 2,492,418
- --------------------------------------------------------------------- ---------------------- -------------------
Net investment income 23,363,364 6,397,981
- --------------------------------------------------------------------- ---------------------- -------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------
Net realized gain on:
- ---------------------------------------------------------------------
Investments 84,422,937 53,499,241
- ---------------------------------------------------------------------
Futures transactions 11,470,316 --
- ---------------------------------------------------------------------
Change in net unrealized appreciation/depreciation on:
- ---------------------------------------------------------------------
Investments 133,795,108 88,032,120
- ---------------------------------------------------------------------
Futures transactions (2,602,500) --
- --------------------------------------------------------------------- ---------------------- -------------------
Net realized and unrealized gain (loss) on
investments 227,085,861 141,531,361
- --------------------------------------------------------------------- ---------------------- -------------------
Net increase in net assets from operations $ 250,449,225 $ 147,929,342
- --------------------------------------------------------------------- ---------------------- -------------------
</TABLE>
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
11/01/95 YEAR 11/01/95 YEAR
THROUGH ENDED THROUGH ENDED
04/30/96 10/31/95 04/30/96 10/31/95
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
- ---------------------------------------
Net investment income $ 23,363,364 $ 49,161,074 $ 6,397,981 $ 14,034,371
- ---------------------------------------
Net realized gain on
investments and futures
transactions 95,893,253 95,276,889 53,499,241 38,313,408
- ---------------------------------------
Change in net unrealized appreciation
on investments and futures 131,192,608 154,841,478 88,032,120 83,513,979
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Increase in net assets from
operations 250,449,225 299,279,441 147,929,342 135,861,758
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST:
- ---------------------------------------
Contributions 264,611,335 511,820,403 559,653,226 1,403,653,138
- ---------------------------------------
Withdrawals (284,264,175) (542,453,501) (631,222,317) (1,217,251,104)
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Net increase (decrease) from
transactions in investors'
beneficial interests (19,652,840) (30,633,098) (71,569,091) 186,402,034
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
Net increase in net assets 230,796,385 268,646,343 76,360,251 322,263,792
- ---------------------------------------
NET ASSETS:
- ---------------------------------------
Beginning of period 1,854,165,643 1,585,519,300 1,019,425,719 697,161,927
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
End of period $ 2,084,962,028 $ 1,854,165,643 $ 1,095,785,970 $ 1,019,425,719
- --------------------------------------- ---------------- ---------------- ---------------- -----------------
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Growth and Income Portfolio ("GIP") and Capital Growth Portfolio ("CGP"), (the
"Portfolios") are separately registered under the Investment Company Act of
1940, as amended, as non-diversified, open end management investment companies
organized as trusts under the laws of the State of New York. Each declaration of
trust permits the Trustees to issue beneficial interests in the respective
Portfolios. The GIP and the CGP commenced operations on November 29, 1993.
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.
The following is a summary of significant accounting policies followed by the
Portfolios:
A. VALUATION OF INVESTMENTS--Equity securities, purchased options and futures
are valued at the last sale price on the exchange on which they are
primarily traded, including the NASDAQ National Market. Securities for
which sale prices are not available and other over-the-counter securities
are valued at the last quoted bid price. Bonds and other fixed income
securities (other than short-term obligations), including listed issues,
are valued on the basis of valuations supplied by pricing services or by
matrix pricing systems of a major dealer in bonds. Short-term debt
securities with 61 days or more to maturity at time of purchase are valued,
through the 61st day prior to maturity, at market value based on quotations
obtained from market makers or other appropriate sources; thereafter, the
value on the 61st day is amortized on a straight-line basis over the
remaining number of days to maturity. Short-term investments with 60 days
or less to maturity at time of purchase are valued at amortized cost, which
approximates market. Portfolio securities for which there are no such
quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees.
B. REPURCHASE AGREEMENTS--It is the Trusts' policy that repurchase agreements
are fully collateralized by U.S. Treasury and Government Agency securities.
All collateral is held by the Trusts' custodian bank, subcustodian, or a
bank with which the custodian bank has entered into a subcustodian
agreement, or is segregated in the Federal Reserve Book Entry System. In
connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Trusts may
be delayed or limited.
C. FUTURES CONTRACTS--When a portfolio enters into a futures contract, it
makes an initial margin deposit in a segregated account, either in cash or
liquid securities. Thereafter, the futures contract is marked to market and
the portfolio makes (or receives) additional cash payments daily to the
broker. Changes in the value of the contract are recorded as unrealized
appreciation/depreciation until the contract is closed or settled.
The GIP invested a portion of its liquid assets in long stock index futures
contracts to more fully participate in the market. Use of futures contracts
subject the Portfolio to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities, up to the amount
of the value of the contract.
The Portfolio may enter into futures contracts only on exchanges or boards
of trade. The exchange or board of trade acts as the counterparty to each
futures transaction, therefore, the Portfolio's credit risk is limited to
failure of the exchange or board of trade.
D. WRITTEN OPTIONS--When a portfolio writes an option on a futures contract,
an amount equal to the premium received by the portfolio is included in the
portfolio's Statement of Assets and Liabilities as an asset and
corresponding liability. The amount of the liability is adjusted daily to
reflect the current market value of the written options and the change is
recorded in a corresponding unrealized gain or loss account. When a written
option expires on its stipulated expiration date, or when a closing
transaction is entered into, the related liability is extinguished and the
portfolio realizes a gain (or loss if the cost of the closing transaction
exceeds the premium received when the option was written).
The GIP writes options on stock index securities futures. These options are
settled for cash and subject the Portfolio to market risk in excess of the
amounts that are reflected in the Statement of Assets and Liabilities. The
Portfolio, however, is not subject to credit risk on written options as the
counterparty has already performed its obligation by paying a premium at
the inception of the contract.
As of April 30, 1996 the Portfolios had no outstanding written options.
E. SECURITY TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Securities gains and losses are calculated on the identified
cost basis. Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
F. ORGANIZATION COSTS--Organization and initial registration costs incurred in
connection with establishing the Portfolios have been deferred and are
being amortized on a straight-line basis over a sixty month period
beginning at the commencement of operations of each Portfolio.
G. FEDERAL INCOME TAXES--The Portfolios intend to qualify as partnerships and
therefore net income and net realized gains are taxed to the partners. The
investor in the Portfolios must take into account their proportionate share
of the Portfolios' income, gains, losses, deductions, credits and tax
preference items in computing their federal income tax liability, without
regard to whether they have received any cash distributions from the
Portfolio. The Portfolios do not intend to distribute to investors their
net investment income or their net realized gains, if any. It is intended
that the Portfolios will be managed in such a way that investors in the
portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code to be taxed as regulated investment companies.
(2) FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEE--Pursuant to separate Investment Advisory
Agreements, The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") acts
as the Investment Adviser to the Portfolios. Chase is a direct wholly-owned
subsidiary of The Chase Manhattan Corporation. As
Investment Adviser, Chase supervises the investments of the Portfolios and
for such services is paid a fee.
The fee is computed daily and paid monthly at an annual rate equal to 0.40%
of the Portfolios' average daily net assets.
B. CUSTODIAL FEES--Chase, as Custodian provides safekeeping services for the
Portfolios' securities. Compensation for such services are presented in the
Statement of Operations as custodian fees.
C. ADMINISTRATION FEE--Pursuant to an Administration Agreement, Chase (the
"Administrator") provides certain administration services to the Trusts.
For these services and facilities, the Administrator receives from each
Portfolio a fee computed at the annual rate equal to 0.05% of the
respective Portfolio's average daily net assets.
D. OTHER--Effective March 29, 1996, The Chase Manhattan Corporation merged
with Chemical Banking Corporation, pursuant to the Agreement and Plan of
Merger signed in August 1995.
(3) INVESTMENT TRANSACTIONS
For the six month period ended April 30, 1996, purchases and sales of
investments (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
GIP CGP
<S> <C> <C>
Purchases (excluding U.S. Government) $ 568,532,694 $ 413,792,258
- ---------------------------------------------------------------------------------
Sales (excluding U.S. Government) 468,419,074 476,316,956
- ---------------------------------------------------------------------------------
</TABLE>
The portfolio turnover rates of GIP and CGP for this period were 26.22% and
43.32%, respectively.
(4) RETIREMENT PLAN
During the year ended October 31, 1995, the Trusts adopted an unfunded
noncontributory defined benefit pension plan covering all independent directors
of the Trusts who have served as an independent director of the Trusts, or other
Vista Portfolios, for at least five years at the time of retirement. Benefits
under this plan are based on compensation and years of service. Management has
determined that the accrual for prior service costs is not material.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and Secretary
Peter E. Madden Joseph S. Machi
Gregor F. Meyer Vice President and Assistant Treasurer
John E. Murray, Jr. Richard B. Fisher
Wesley W. Posvar Vice President
Marjorie P. Smuts C. Grant Anderson
Assistant Secretary
</TABLE>
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus which contain facts concerning its
objective and policies, management fees, expenses and other information.
Portfolio Adviser
Chase Manhattan Bank, N.A.
Blanchard
Growth & Income
Fund
The Blanchard Group of Funds are available through Signet Financial Services,
Inc., and are advised by Virtus Capital Management, Inc., an affiliate of
Signet Financial Services, Inc.
Investment products available through Signet Financial Services, Inc., are not
deposits, obligations of, or guaranteed by Signet Bank, Signet Financial
Services, Inc., any bank or other financial institution, and are not insured by
the FDIC or any Federal Agency. In addition, they involve risk, including
possible loss of principal invested.
Federated Securities Corp. is the distributor of the Fund.
(2020)
CUSIP 093265304
G01668-02 (6/96)
Blanchard
Growth & Income
Fund
Semi-Annual
Report
April 30, 1996
Managed by: Virtus Capital Management
