President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Flexible Income Fund
for the fiscal year ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a performance update from OFFITBANK, a list of investments included
in the Fund, and the Fund's financial statement.
If you would like the most recent performance update for your 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,
Edward C. Gonzales
President
Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Flexible Income Fund
for the fiscal year ended April 30, 1996.
After 1994's difficult bond market, 1995 handsomely rewarded fixed income
investors who had kept a long-term perspective for their investments. It
turned out to be one of the better years for bond performance in recent
history.
Your Blanchard Flexible Income Fund benefited from this positive environment,
turning in an excellent 8.06% total return for the fiscal year ended April 30,
1996, and more recently earning a high 4-star Morningstar rating for
risk-adjusted performance for the three years ended 5/31/96 in its category of
874 fixed income funds.*
[GRAPHIC APENDIX OMITTED, SEE APPENDIX C]
Naturally, past performance is no guarantee of future performance. As with any
fixed income fund, investment return, yield and principal value will vary with
changing market conditions so that an investors shares, when redeemed, may be
worth more or less than their original purchase price. Additionally, foreign
investments entail special currency, credit, interest rate and political risks
not associated with domestic investments.
Now, here's a closer look at how we employed the FundOs flexible, multi-sector
investment strategy to provide you with solid monthly yields, a positive total
return and return and share price growth throughout the past fiscal year.
The Year In Review
Interest rates declined throughout 1995 as fears of inflationary economic
growth receded. In the early part of 1996, however, rates began to tick back
up as signs of renewed economic strength appeared.
Your Blanchard Flexible Income Fund took advantage of investments in the
foreign and high-yield market, as these sectors outperformed high-grade U.S.
markets. Specifically, our exposure to the Danish and German bond markets was
of great benefit to the Fund. The high-yield sector also was a strong
contributor over the past year, because as the economy improved, so did the
quality and attractiveness of the underlying companies that offer high-yield,
higher-risk securities. In addition, the Fund benefited from a modest exposure
to interest rate risk in the high-grade U.S. markets.
Longer-term maturity bonds gain more value as interest rates decline, and
conversely, will lose more principal if interest rates rise. Although interest
rates trended down for most of the past year, the Fund took a relatively
conservative approach by focusing on intermediate-term issues in the 5- to
10-years range as opposed to the 15- to 30-year range. Had we focused on
longer-term bonds, we would have had even greater capital appreciation in 1995.
In early 1996 the Fund did benefit from its more conservative stance as
interest rates rose.
Looking Ahead
Looking forward, we have become cautious. We are particularly concerned with
prospects for stronger economic growth globally, and, as the United States
presidential election approaches, we are watching for the pro-growth proposals
of election-year economics to take hold. Both of these scenarios could put
pressure on interest rates globally.
While there are persuasive arguments to support cases for either interest rates
moving lower or higher, we do not believe that it is rewarding to take a major
interest rate risk in the markets at the present time. We feel it is important
to insulate the Fund from the potential of rising interest rates in the near
future.
Based on this belief, the Fund's strategy is threefold:
1) For high-grade investments, those which are affected most by rising interest
rates, we are keeping maturities moderate.
2) Keep a high exposure to high-yield securities as they typically benefit from
an improving economy and improving corporate balance sheets.
3) Limit the Fund's exposure to foreign markets which no longer appear to offer
the excellent values they did in 1995.
As such, we've made the following adjustments to the FundOs portfolio
allocations as of 6/20/96: 61% U.S. fixed income securities, 32% U.S.
high-yield, 5% high-quality foreign, and 2% U.S. cash equivalents. We maintain
our commitment to high quality with an average portfolio quality of "A", and as
mentioned, we're maintaining a more cautious stance with a intermediate-term
average portfolio maturity of 6.93 years.
Thank you for your continued patronage. We look forward to serving you in the
months and years ahead.
Sincerely,
Jack D. Burks
Managing Director of OFFITBANK
Portfolio Manager of the Blanchard
Flexible Income Fund
*Morningstar proprietary ratings reflect risk-adjusted performance through
5/31/96. The ratings are subject to change every month. Past performance is not
a guarantee of future results. Morningstar ratings are calculated from the
FundOs three year returns in excess of 90-day Treasury bill returns, and a risk
factor that reflects Fund performance below 90-day Treasury bill returns. The
one-year rating is calculated using the same methodology, but is not a
component of the overall rating. The Fund received 4 stars for the one- and
three-year periods respectively. It was rated among 1,458 and 874 fixed income
funds for the one- and three-year periods, respectively. Ten percent of the
funds in a rating category receive 5 stars, and the next 22.5% receive 4 stars.
BLANCHARD FLEXIBLE INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
OBLIGATIONS--0.7% ------------------------------------------------------------------------------
$ 1,500,000 (a)Resolution Trust Corp., Series 1994-N2, Class 4, 10.00%,
12/15/2004 (IDENTIFIED COST $1,477,680) $ 1,500,000
----------------------------------------------------------------------------- --------------
CORPORATE BONDS--33.8%
- ------------------------------------------------------------------------------------------------
BASIC INDUSTRY--6.5%
-----------------------------------------------------------------------------
2,000,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 1,995,000
-----------------------------------------------------------------------------
1,500,000 Bethlehem Steel Corp., Sr. Note, 10.375%, 9/1/2003 1,590,000
-----------------------------------------------------------------------------
1,250,000 Fort Howard Corp., Sr. Sub. Note, 9.00%, 2/1/2006 1,218,750
-----------------------------------------------------------------------------
1,000,000 Gaylord Container Corp., Sr. Note, 11.50%, 5/15/2001 1,040,000
-----------------------------------------------------------------------------
1,000,000 Maxxam Group, Inc., Sr. Note, 11.25%, 8/1/2003 1,000,000
-----------------------------------------------------------------------------
1,000,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 980,000
-----------------------------------------------------------------------------
3,000,000 Owens-Illinois, Inc., Note, 10.00%, 8/1/2002 3,090,000
-----------------------------------------------------------------------------
2,500,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 2,390,625
----------------------------------------------------------------------------- --------------
Total 13,304,375
----------------------------------------------------------------------------- --------------
BASIC MATERIALS--1.4%
-----------------------------------------------------------------------------
1,500,000 Doman Industries, Ltd., Sr. Note, 8.75%, 3/15/2004 1,346,250
-----------------------------------------------------------------------------
1,500,000 Earle M. Jorgensen Co., Sr. Note, 10.75%, 3/1/2000 1,498,125
----------------------------------------------------------------------------- --------------
Total 2,844,375
----------------------------------------------------------------------------- --------------
CONSUMER BASICS--0.7%
-----------------------------------------------------------------------------
1,500,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 1,447,500
----------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--0.8%
-----------------------------------------------------------------------------
1,600,000 Revlon Consumer Products Corp., Deb., 10.875%, 7/15/2010 1,620,000
----------------------------------------------------------------------------- --------------
ELECTRONIC TECHNOLOGY--0.5%
-----------------------------------------------------------------------------
1,000,000 Bell & Howell Oper. Co., Sr. Note, 9.25%, 7/15/2000 1,005,000
----------------------------------------------------------------------------- --------------
ENERGY MINERALS--2.1%
-----------------------------------------------------------------------------
1,994,000 CTC Mansfield Funding, Deb., 10.25%, 3/30/2003 2,002,582
-----------------------------------------------------------------------------
</TABLE>
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<S> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
ENERGY MINERALS--CONTINUED
-----------------------------------------------------------------------------
$ 2,500,000 (a)Triton Energy Corp., Sr. Sub. Disc. Note, 9.75%,12/15/2000 $ 2,418,750
----------------------------------------------------------------------------- --------------
Total 4,421,332
----------------------------------------------------------------------------- --------------
FINANCE--4.4%
-----------------------------------------------------------------------------
1,000,000 American Annuity Group, Inc., Sr. Sub. Note, 11.125%, 2/1/2003 1,085,000
-----------------------------------------------------------------------------
3,550,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 3,834,000
-----------------------------------------------------------------------------
1,250,000 Phoenix Re Corp., Sr. Note, 9.75%, 8/15/2003 1,337,500
-----------------------------------------------------------------------------
1,500,000 Presidential Life Corp., Sr. Note, 9.50%, 12/15/2000 1,552,500
-----------------------------------------------------------------------------
1,250,000 Reliance Group Holdings, Inc., Sr. Note, 9.00%, 11/15/2000 1,250,000
----------------------------------------------------------------------------- --------------
Total 9,059,000
----------------------------------------------------------------------------- --------------
FINANCIAL SERVICES--2.6%
-----------------------------------------------------------------------------
1,500,000 Americo Life, Inc., Sr. Sub. Note, 9.25%, 6/1/2005 1,436,250
-----------------------------------------------------------------------------
1,500,000 Bally Park Place Funding, 1st Mtg. Bond, 9.25%, 3/15/2004 1,541,250
-----------------------------------------------------------------------------
1,500,000 Granite Development Partners, Sr. Note, 10.83%, 11/15/2003 1,372,500
-----------------------------------------------------------------------------
1,000,000 Navistar Financial 1995-A Owner Trust, Sr. Sub. Note, 8.875%,
11/15/1998 1,015,000
----------------------------------------------------------------------------- --------------
Total 5,365,000
----------------------------------------------------------------------------- --------------
HOTELS--0.5%
-----------------------------------------------------------------------------
1,000,000 Host Marriot Travel Plaza, Sr. Note, 9.50%, 5/15/2005 975,000
----------------------------------------------------------------------------- --------------
INDUSTRIAL SERVICES--6.8%
-----------------------------------------------------------------------------
533,000 ACF Industries, 12.50%, 2/1/1998 533,666
-----------------------------------------------------------------------------
1,000,000 ADT Operations, Sr. Sub. Note, 9.25%, 8/1/2003 1,047,500
-----------------------------------------------------------------------------
1,500,000 Eletson Holdings, Inc., 1st Mtg. Note, 9.25%, 11/15/2003 1,447,500
-----------------------------------------------------------------------------
1,000,000 HMH Properties, Inc., Sr. Note, Series B, 9.50%, 5/15/2005 976,250
-----------------------------------------------------------------------------
2,250,000 PDV America, Sr. Note, 7.25%, 8/1/1998 2,191,408
-----------------------------------------------------------------------------
1,000,000 Repap New Brunswick, 1st Priority Sr. Secd. Note, 9.875%,
7/15/2000 1,000,000
-----------------------------------------------------------------------------
1,000,000 Repap Wisconsin, Inc., 1st Priority Sr. Secd. Note, 9.25%, 2/1/2002 965,000
-----------------------------------------------------------------------------
$ 1,800,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 $ 1,777,500
-----------------------------------------------------------------------------
</TABLE>
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<S> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--CONTINUED
-----------------------------------------------------------------------------
1,500,000 Stone Consolidated, Sr. Note, 10.25%, 12/15/2000 1,571,250
-----------------------------------------------------------------------------
1,000,000 Storer Communications, Deb., 10.00%, 5/15/2003 1,006,250
-----------------------------------------------------------------------------
1,500,000 UNC, Inc., Sr. Note, 9.125%, 7/15/2003 1,462,500
----------------------------------------------------------------------------- --------------
Total 13,978,824
----------------------------------------------------------------------------- --------------
INSURANCE--0.5%
-----------------------------------------------------------------------------
1,000,000 Penn Central Corp., Sub. Note, 10.625%, 4/15/2000 1,085,000
----------------------------------------------------------------------------- --------------
RETAIL TRADE--0.8%
-----------------------------------------------------------------------------
1,750,000 Penn Traffic Co., Sr. Note, 10.25%, 2/15/2002 1,710,625
----------------------------------------------------------------------------- --------------
SERVICES--0.6%
-----------------------------------------------------------------------------
1,500,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 1,376,250
----------------------------------------------------------------------------- --------------
TECHNOLOGY--1.7%
-----------------------------------------------------------------------------
2,000,000 Sequa Corp., Sr. Note, 8.75%, 12/15/2001 1,940,000
-----------------------------------------------------------------------------
1,500,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 1,605,000
----------------------------------------------------------------------------- --------------
Total 3,545,000
----------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS--0.5%
-----------------------------------------------------------------------------
1,000,000 Cablevision Systems Corp., Sr. Sub. Deb., 10.75%, 4/1/2004 1,052,500
----------------------------------------------------------------------------- --------------
TRANSPORTATION--1.4%
-----------------------------------------------------------------------------
1,389,000 Piedmont Aviation, 10.15%, 3/28/2003 1,347,330
-----------------------------------------------------------------------------
852,000 Piedmont Aviation, 9.90%, 1/15/2001 776,385
-----------------------------------------------------------------------------
896,000 USAir, Inc., 9.90%, 1/15/2001 816,480
----------------------------------------------------------------------------- --------------
Total 2,940,195
----------------------------------------------------------------------------- --------------
UTILITIES--1.5%
-----------------------------------------------------------------------------
1,000,000 Centennial Cellular Corp., Sr. Note, 8.875%, 11/1/2001 952,500
-----------------------------------------------------------------------------
2,218,808 (b)Tucson Electric Power Co., 10.21%, 1/1/2009 2,096,774
----------------------------------------------------------------------------- --------------
Total 3,049,274
----------------------------------------------------------------------------- --------------
</TABLE>
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<S> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
UTILITIES-ELECTRIC--0.5%
-----------------------------------------------------------------------------
$ 1,000,000 Cleveland Electric Illuminating Co., 1st Mtg. Bond, 9.50%,
5/15/2005 $ 985,000
----------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $70,023,430) 69,764,250
----------------------------------------------------------------------------- --------------
CORPORATE NOTES--1.0%
- ------------------------------------------------------------------------------------------------
2,000,000 Maxus Energy Corp., Medium Term Note, 11.02%, 5/15/2001 (IDENTIFIED COST
$2,156,271) 2,040,000
----------------------------------------------------------------------------- --------------
FOREIGN GOVERNMENTS/AGENCIES--6.0%
- ------------------------------------------------------------------------------------------------
CAD 7,000,000 CanadaGovt. of, Deb., 6.50%, 6/1/2004 4,773,619
-----------------------------------------------------------------------------
CAD 4,000,000 Rogers Cablesystems Ltd., Sr. Secd. Note, 9.65%, 1/15/2014 2,552,185
-----------------------------------------------------------------------------
AUD 6,550,000 Treasury Corp. of Victoria, 8.25%, 10/15/2003 5,011,362
----------------------------------------------------------------------------- --------------
TOTAL FOREIGN GOVERNMENTS/AGENCIES (IDENTIFIED COST $12,804,007) 12,337,166
----------------------------------------------------------------------------- --------------
GOVERNMENT AGENCIES--3.4%
- ------------------------------------------------------------------------------------------------
7,000,000 Federal National Mortgage Association 5/20/1996
(IDENTIFIED COST $6,980,900) 6,980,900
----------------------------------------------------------------------------- --------------
MORTGAGE BACKED SECURITIES--19.6%
- ------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC.--19.6%
-----------------------------------------------------------------------------
195,110 Pool 319635, 7.00%, 10/15/2022 189,009
-----------------------------------------------------------------------------
264,230 Pool 322691, 7.00%, 10/15/2022 255,967
-----------------------------------------------------------------------------
112,028 Pool 335505, 7.00%, 11/15/2022 108,525
-----------------------------------------------------------------------------
316,535 Pool 338748, 7.00%, 5/15/2023 306,291
-----------------------------------------------------------------------------
585,013 Pool 344235, 7.00%, 3/15/2023 566,082
-----------------------------------------------------------------------------
183,964 Pool 345994, 7.00%, 12/15/2023 178,011
-----------------------------------------------------------------------------
280,131 Pool 352789, 7.00%, 10/15/2023 271,066
-----------------------------------------------------------------------------
438,916 Pool 357260, 7.00%, 9/15/2023 424,713
-----------------------------------------------------------------------------
260,251 Pool 357473, 7.00%, 8/15/2025 251,010
-----------------------------------------------------------------------------
233,196 Pool 358470, 7.00%, 10/15/2023 225,649
-----------------------------------------------------------------------------
72,545 Pool 359470, 7.00%, 1/15/2024 70,047
-----------------------------------------------------------------------------
$ 86,396 Pool 360371, 7.00%, 7/15/2023 $ 83,600
-----------------------------------------------------------------------------
</TABLE>
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<S> <S> <C>
MORTGAGE BACKED SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC.--CONTINUED
-----------------------------------------------------------------------------
68,521 Pool 361070, 7.00%, 9/15/2023 66,304
-----------------------------------------------------------------------------
118,446 Pool 363475, 7.00%, 12/15/2023 114,613
-----------------------------------------------------------------------------
596,863 Pool 365417, 7.00%, 8/15/2025 575,668
-----------------------------------------------------------------------------
248,671 Pool 365469, 7.00%, 10/15/2025 239,840
-----------------------------------------------------------------------------
372,700 Pool 366782, 7.00%, 5/15/2024 359,867
-----------------------------------------------------------------------------
605,456 Pool 368461, 7.00%, 2/15/2024 584,610
-----------------------------------------------------------------------------
785,101 Pool 370988, 7.00%, 12/15/2023 759,694
-----------------------------------------------------------------------------
602,444 Pool 371706, 7.00%, 3/15/2024 581,701
-----------------------------------------------------------------------------
44,791 Pool 371765, 7.00%, 5/15/2024 43,249
-----------------------------------------------------------------------------
664,786 Pool 374865, 7.00%, 1/15/2024 641,896
-----------------------------------------------------------------------------
338,881 Pool 374869, 7.00%, 1/15/2024 327,213
-----------------------------------------------------------------------------
289,023 Pool 375087, 7.00%, 8/15/2025 278,760
-----------------------------------------------------------------------------
372,839 Pool 376077, 7.00%, 6/15/2024 360,002
-----------------------------------------------------------------------------
219,568 Pool 377888, 7.00%, 11/15/2023 212,463
-----------------------------------------------------------------------------
284,429 Pool 378197, 7.00%, 6/15/2024 274,636
-----------------------------------------------------------------------------
562,442 Pool 378918, 7.00%, 4/15/2024 543,077
-----------------------------------------------------------------------------
170,263 Pool 380834, 7.00%, 1/15/2024 164,400
-----------------------------------------------------------------------------
548,373 Pool 382869, 7.00%, 2/15/2024 529,492
-----------------------------------------------------------------------------
138,461 Pool 383238, 7.00%, 4/15/2024 133,693
-----------------------------------------------------------------------------
205,064 Pool 383501, 7.00%, 2/15/2024 198,003
-----------------------------------------------------------------------------
295,435 Pool 383554, 7.00%, 2/15/2024 285,263
-----------------------------------------------------------------------------
336,250 Pool 389931, 7.00%, 6/15/2024 324,672
-----------------------------------------------------------------------------
231,117 Pool 390243, 7.00%, 5/15/2024 223,160
-----------------------------------------------------------------------------
73,319 Pool 392406, 7.00%, 7/15/2024 70,795
-----------------------------------------------------------------------------
173,023 Pool 393136, 7.00%, 4/15/2024 167,066
-----------------------------------------------------------------------------
355,302 Pool 394477, 7.00%, 9/15/2025 342,685
-----------------------------------------------------------------------------
$ 346,000 Pool 404004, 7.00%, 11/15/2024 $ 334,087
-----------------------------------------------------------------------------
</TABLE>
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<S> <S> <C>
MORTGAGE BACKED SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOC.--CONTINUED
-----------------------------------------------------------------------------
477,113 Pool 404398, 7.00%, 10/15/2025 460,170
-----------------------------------------------------------------------------
508,233 Pool 408479, 7.00%, 8/15/2025 490,185
-----------------------------------------------------------------------------
484,996 Pool 410124, 7.00%, 10/15/2025 467,773
-----------------------------------------------------------------------------
200,291 Pool 414535, 7.00%, 8/15/2025 193,179
-----------------------------------------------------------------------------
493,137 Pool 416973, 7.00%, 9/15/2025 475,626
-----------------------------------------------------------------------------
637,629 Pool 375509, 7.00%, 10/15/2023 616,995
-----------------------------------------------------------------------------
9,565,873 Pool 780011, 10.00%, 7/15/2022 10,528,764
-----------------------------------------------------------------------------
8,049,302 Pool 780146, 10.00%, 6/15/2021 8,859,698
-----------------------------------------------------------------------------
7,000,000 Pool TBA, 7.00%, 6/15/2024 6,739,600
----------------------------------------------------------------------------- --------------
TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $40,780,657) 40,498,869
----------------------------------------------------------------------------- --------------
U.S. TREASURY--34.3%
- ------------------------------------------------------------------------------------------------
U.S. TREASURY BOND--5.4%
-----------------------------------------------------------------------------
10,000,000 8.125%, 8/15/2019 11,159,360
----------------------------------------------------------------------------- --------------
U.S. TREASURY NOTES--28.9%
-----------------------------------------------------------------------------
25,000,000 5.75%, 10/31/2000 24,382,775
-----------------------------------------------------------------------------
10,000,000 5.75%, 8/15/2003 9,509,360
-----------------------------------------------------------------------------
15,000,000 7.25%, 5/15/2004 15,539,040
-----------------------------------------------------------------------------
10,000,000 6.50%, 4/30/1997 10,078,120
----------------------------------------------------------------------------- --------------
Total 59,509,295
----------------------------------------------------------------------------- --------------
TOTAL U.S. TREASURY (IDENTIFIED COST $71,186,341) 70,668,655
----------------------------------------------------------------------------- --------------
(C) REPURCHASE AGREEMENT--3.5%
- ------------------------------------------------------------------------------------------------
7,132,610 Merrill Lynch, Pierce, Fenner and Smith, 5.25%, dated 4/30/96
due 5/1/1996 (at amortized cost) 7,132,610
----------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $212,541,896)(D) $ 210,922,450
----------------------------------------------------------------------------- --------------
</TABLE>
(a) Denotes variable rate securities.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal and International Securities laws. At April 30, 1996, this
security amounted to $2,096,774 which represents 1.0% of net assets. .
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
(c) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(d) The cost of investments for federal tax purposes amounts to $212,912,624.
The net unrealized depreciation of investments on a federal tax basis
amounts to $1,990,174 which is comprised of $1,371,280 appreciation and
$3,361,454 depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($206,235,140) at
April 30, 1996.
The following acronyms are used throughout this portfolio:
AUD--Australian Dollars
CAD--Canadian Dollars
LTD--Limited
TBA--To Be Announced
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $212,541,896
and tax cost $212,912,624) $ 210,922,450
- -------------------------------------------------------------------------------------------------
Income receivable 2,513,433
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 366,821
- -------------------------------------------------------------------------------------------------
Prepaid expenses 43,422
- -------------------------------------------------------------------------------------------------
Net receivable for forward foreign currency exchange contracts sold 615,090
- -------------------------------------------------------------------------------------------------
Deferred expenses 48,042
- ------------------------------------------------------------------------------------------------- --------------
Total assets 214,509,258
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for investments purchased $ 6,815,764
- ----------------------------------------------------------------------------------
Payable for shares redeemed 386,827
- ----------------------------------------------------------------------------------
Income distribution payable 582,859
- ----------------------------------------------------------------------------------
Net payable for forward foreign currency exchange
contracts purchased 192,816
- ----------------------------------------------------------------------------------
Accrued expenses 295,852
- ---------------------------------------------------------------------------------- -------------
Total liabilities 8,274,118
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS FOR 43,152,970 shares outstanding $ 206,235,140
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid in capital $ 227,074,810
- -------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets and liabilities in foreign
currency (1,197,172)
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (18,282,572)
- -------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (1,359,926)
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 206,235,140
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
$206,235,140 / 43,152,970 shares outstanding $ 4.78
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld) $ 2,977
- ---------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld) 18,279,892
- --------------------------------------------------------------------------------------------------- -------------
Total income 18,282,869
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 1,795,137
- -------------------------------------------------------------------------------------
Administrative personnel and services fee 190,752
- -------------------------------------------------------------------------------------
Custodian fees 98,362
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 551,463
- -------------------------------------------------------------------------------------
Directors'/Trustees' fees 71,292
- -------------------------------------------------------------------------------------
Auditing fees 51,303
- -------------------------------------------------------------------------------------
Legal fees 32,037
- -------------------------------------------------------------------------------------
Portfolio accounting fees 104,637
- -------------------------------------------------------------------------------------
Distribution services fee 598,379
- -------------------------------------------------------------------------------------
Share registration costs 24,808
- -------------------------------------------------------------------------------------
Printing and postage 194,521
- -------------------------------------------------------------------------------------
Miscellaneous 30,878
- ------------------------------------------------------------------------------------- ------------
Total expenses 3,743,569
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 14,539,300
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 480,236
- ---------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and liabilities in
foreign currency 5,042,160
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments and foreign currency 5,522,396
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 20,061,696
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 14,539,300 $ 23,667,093
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions 480,236 (25,650,427)
- -------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets
and liabilities in foreign currency 5,042,160 9,037,357
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from operations 20,061,696 7,054,023
- ------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------------
Distributions from net investment income (15,359,777) (178,445)
- -------------------------------------------------------------------------------
Tax return of capital 0 (23,736,224)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from distributions to shareholders (15,359,777) (23,914,669)
- ------------------------------------------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 60,702,516 107,867,527
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 11,757,432 18,885,949
- -------------------------------------------------------------------------------
Cost of shares redeemed (133,349,811) (397,723,871)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from share transactions (60,889,863) (270,970,395)
- ------------------------------------------------------------------------------- --------------- ---------------
Change in net assets (56,187,944) (287,831,041)
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 262,423,084 550,254,125
- ------------------------------------------------------------------------------- --------------- ---------------
End of period $ 206,235,140 $ 262,423,084
- ------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1996 1995 1994 1993(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 4.71 $ 4.85 $ 5.09 $ 5.00
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income 0.28 0.30 0.40 0.21
- ---------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency 0.10 (0.13) (0.17) 0.09
- --------------------------------------------------------------------- --------- --------- --------- -----------
Total from investment operations 0.38 0.17 0.23 0.30
- --------------------------------------------------------------------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Distributions from net investment income (0.31) (0.00) (0.36) (0.21)
- ---------------------------------------------------------------------
Tax return of capital -- (0.31) (0.03) --
- ---------------------------------------------------------------------
Distributions from net realized gain on investments and foreign
currency transactions -- -- (0.08) --
- --------------------------------------------------------------------- --------- --------- --------- -----------
Total distributions (0.31) (0.31) (0.47) (0.21)
- --------------------------------------------------------------------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 4.78 $ 4.71 $ 4.85 $ 5.09
- --------------------------------------------------------------------- --------- --------- --------- -----------
TOTAL RETURN (B) 8.06% 3.74% 4.11% 6.17%
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses 1.56% 1.58% 1.30% 0.20%*
- ---------------------------------------------------------------------
Net investment income 6.06% 6.52% 7.10% 9.02%*
- ---------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted) $206,235 $262,423 $550,254 $315,845
- ---------------------------------------------------------------------
Portfolio turnover 431% 455% 346% 129 %
- ---------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 2, 1992 (commencement of
operations) to April 30, 1993.
(b) Based on net asset value.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial statements included herein are
only those of Blanchard Flexible Income Fund (the "Fund"), a non-diversified
portfolio. The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The fund seeks to
provide high current income while seeking opportunities for capital
appreciation.
(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--U.S. government securities, listed corporate bonds,
other fixed income and asset-backed securities, unlisted and private
placement securities, and other foreign securities are generally valued at
the mean of the latest bid and asked price as furnished by an independent
pricing service. Short-term securities are valued at the prices provided by
an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's manager to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparts
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions. The following reclassifications have been
made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET ACCUMULATED DISTRIBUTIONS IN EXCESS
REALIZED GAIN (LOSS) OF NET INVESTMENT INCOME
<S> <C>
$(203,145) $203,145
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of 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.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding
taxes on foreign dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
At April 30, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $17,047,108, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code ($13,824,044) will expire
in 2003 and $3,223,064 in 2004.
Additionally, the Fund's net capital losses of $120,553 attributable to
security transactions incurred after October 31, 1995 are treated as
arising on May 1, 1996, the first day of the Fund's next taxable year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
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.
FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Risks may arise
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
upon entering into these transactions from the potential inability of
counterparties to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates. The
foreign currency transactions are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the settlement date.
At April 30, 1996, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
CONTRACTS PURCHASED
Deutsche Marks 7/22/96 4,835,000 $ 3,225,742 $ 3,174,482 $ (51,260)
- ----------------------------
Danish Kroner 8/14/96 57,700,000 9,948,276 9,825,931 (122,345)
- ----------------------------
Canadian Dollars 8/22/96 10,250,000 7,561,228 7,542,017 (19,211)
- ---------------------------- --------------- ------------- -----------------
$ 20,735,246 $ 20,542,430 $ (192,816)
--------------- ------------- -----------------
CONTRACTS SOLD
- ----------------------------
Australian Dollars 6/4/96 6,420,000 4,853,520 5,043,205 (189,685)
- ----------------------------
Deutsche Marks 7/22/96 23,360,000 15,949,747 15,337,312 612,435
- ----------------------------
Danish Kroner 8/14/96 57,700,000 10,018,274 9,825,934 192,340
- ---------------------------- --------------- ------------- -----------------
$ 30,821,541 $ 30,206,451 $ 615,090
--------------- ------------- -----------------
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income, and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in market prices of securities held. Such
fluctuations are included within the net realized and unrealized gain or
loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates of securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in
the value of assets and liabilities, other than investments in securities
at fiscal year-end, resulting from changes in the exchange rate.
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
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.
OTHER--Investment transactions are accounted for on the trade date.
(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 (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1996 1995
<S> <C> <C>
Shares sold 12,498,920 22,941,483
- ---------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 2,424,612 4,034,188
- ---------------------------------------------------------------------------------
Shares redeemed (27,527,713) (84,785,272)
- --------------------------------------------------------------------------------- ------------- -------------
Net change resulting from share transactions (12,604,181) (57,809,601)
- --------------------------------------------------------------------------------- ------------- -------------
</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 .75% of
the Fund's average daily net assets.
Virtus Capital Management, Inc. became the Fund's Manager on July 13, 1995.
Prior to July 13, 1995, Sheffield Management Company served as the Fund's
Manager and received for its services an annual management fee equal to .75% of
the Fund's average daily net assets.
For the year ended April 30, 1996, the Managers earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
MANAGER NAME FEE
<S> <C>
Virtus Capital Management, Inc. $ 1,417,999
- ---------------------------------------------------------------------------------------------------
Sheffield Management Company $ 377,138
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
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.
SUB-ADVISORY FEE--OFFITBANK provides the Manager with sub-advisory services for
which it receives a fee from the Manager determined by applying the following
annual rates to the Fund's average daily net assets: .30% of the first $25
million of the Fund's average daily net assets; .25% of
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
the next $25 million of average daily net assets; and .20% of average daily net
assets in excess of $50 million. In addition, OFFITBANK may voluntarily choose
to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period. FAS
may voluntarily choose to waive a portion of its fee.
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 .25% of the average daily net assets of the Fund shares,
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.
FSC became the Fund's distributor on July 13, 1995. Prior to July 13, 1995,
Sheffield Investments, Inc. served as the Fund's distributor and was reimbursed
from the net assets of the Fund to finance activities intended to result in the
sale of the Fund's shares.
For the year ended April 30, 1996, the distributors earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
DISTRIBUTOR FEE EARNED
<S> <C>
Sheffield Investments, Inc. $ 125,713
- ---------------------------------------------------------------------------------------------------
Federated Securities Corp. $ 472,666
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") through its subsidiary, Federated Shareholder Services Company, serves
as transfer and dividend disbursing agent for the Fund. The fee paid to FServ is
based on the size, type, and number of accounts and transactions made by
shareholders.
FServ became the Fund's transfer agent on October 15, 1995. Prior to October 15,
1995, United States Trust Company of New York served as the Fund's transfer
agent for which it received a fee.
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
For the year ended April 30, 1996, the transfer agents earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
TRANSFER AGENT FEE EARNED
<S> <C>
United States Trust Company of New York $ 311,815
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 239,648
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
FServ became the Fund's portfolio accountant on October 15, 1995. Prior to
October 15, 1995, Mutual Fund Services Company served as the Fund's portfolio
accountant for which it received a fee.
For the year ended April 30, 1996, the portfolio accountants earned fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF
PORTFOLIO ACCOUNTANT FEE EARNED
<S> <C>
Mutual Fund Services Company $ 82,021
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 22,616
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian for which it receives a
fee. The fee is based on the level of the Fund's average daily net assets for
the period, plus out-of-pocket expenses.
Signet Trust Company became the Fund's custodian on October 15, 1995. Prior to
October 15, 1995, United States Trust Company of New York served as the Fund's
custodian for which it received a fee.
For the year ended April 30, 1996, the custodians earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
CUSTODIAN FEE EARNED
<S> <C>
United States Trust Company of New York $ 60,446
- ---------------------------------------------------------------------------------------------------
Signet Trust Company $ 37,916
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of
the Fund incurred prior to the public offering of its shares amounting to
approximately $151,712. The Fund has reimbursed the Manager for such expenses
and has deferred and is amortizing such expenses over five years from the date
of commencement of the Fund's operations.
DIRECTORS/TRUSTEES FEES--Prior to the acquisition of the 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/
BLANCHARD FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
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 Directors'/ Trustees' Fees in the Statement of
Operations for the year ended April 30, 1996 for the Fund was $62,169.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended April 30, 1996, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
PURCHASES $ 966,710,284
- ------------------------------------------------------------------------------------------------ ----------------
SALES $ 1,022,275,685
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of BLANCHARD FUNDS and Shareholders of
BLANCHARD FLEXIBLE INCOME FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Blanchard Flexible Income Fund as of April 30,
1996, and the related statements of operations and changes in net assets, and
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended April 30, 1995 and the financial highlights for the three
years in the period ended April 30, 1995 were audited by other auditors, whose
report dated June 20, 1995, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of April 30, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blanchard Flexible Income Fund as of April 30, 1996, the results of its
operations, the changes in its net assets and its financial highlights for the
year then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 19, 1996
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
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
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
OFFITBANK
[LOGO OF BLANCHARD FLEXIBLE INCOME FUND]
Blanchard
Flexible
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.
(2021)
CUSIP 093212306
G01684-05 (6/96)
Blanchard
Flexible
Income Fund
[LOGO OF BLANCHARD FLEXIBLE INCOME FUND]
Annual Report
April 30, 1996
Managed by: Virtus Capital Management
President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Flexible Tax-Free
Bond Fund for the fiscal year ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a performance update from U.S. Trust Company of New York, a list of
investments included in the Fund, and the Fund's financial statements.
If you would like the most recent performance update for your 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
Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Flexible Tax-Free
Bond Fund for the fiscal year ended April 30, 1996.
Since its inception on August 12, 1993, your Fund has sought to provide maximum
return while seeking a high level of Federally tax-free yields.+ Fiscal 1996
proved to be a very good year, with your Blanchard Flexible Tax-Free Bond Fund
gaining a total return of 6.86%.
Naturally, past performance is no guarantee of future performance. As with any
mutual fund, investment return, yield and principal value will vary with
changing market conditions so that shares, when redeemed, may be worth more or
less than their original issue price.
Here's a closer look at the Fund's investment strategy this past fiscal year.
The Value of a $10,000 Investment in the
Blanchard Flexible Tax-Free Bond Fund
inception 8/12/93 through 4/30/96 as compared to the Lehman Brothers Current
Municipal Bond Index for the same period Avg.
Annual Returns through 4/30/96
Blanchard Flexible Tax-Free Bond Fund*
<TABLE>
<CAPTION>
<S> <C>
1 year 6.86%
since inception 6.20%
</TABLE>
[GRAPHIC APPENDIX OMITTED, SEE APPENDIX A]
*The Fund is waiving certain management fees and other expenses. If fees were
not waived, the returns quoted above and the chart values above would be lower.
Total return includes changes in principal value and reinvested distributions.
Past performance is no guarantee of future results.
+Source: Lehman Brothers Current Municipal Bond Index is an unmanaged index of
long-term, investment-grade, tax-exempt municipal bonds. Investments cannot be
made in an index. This chart is for comparative purposes only and is not
intended to reflect on future performance of the Blanchard Flexible Tax-Free
Bond Fund or the index.
The Year In Review
The Fund began the year fully invested in a diverse number of high quality
``essential services'' revenue bonds and state general obligation bonds. During
the second fiscal quarter (early fall 1995) interest rates rose abruptly after
a ``temporary'' inflation scare. Recognizing that this was an aberration given
otherwise moderate economic growth and inflation, the Fund was restructured
moderately with lower coupon issues to enhance investment results. As interest
rates declined sharply for the balance of 1995, the Fund performed
exceptionally well.
The beginning of 1996 saw interest rates rise unexpectedly as market
participants anticipated stronger economic growth and inflation. Since the
Fund's allocations remained as they were in the previous quarter, its
performance was somewhat below average.
However, municipal issues outperformed Treasuries during the quarter,
especially shorter maturities. The rise and essential demise of flat-tax
speculation did not appear to be a major factor. This municipal outperformance
was due essentially to the relative lack of supply.
A Look Ahead
It is our opinion that inflation is likely to continue to drift upward in 1996,
but it is not likely to become a source of major concern for the Federal
Reserve. Indeed, we believe the Fed will be able to reduce short-term interest
rates further probably in the third quarter.
-
Shareholders can rest assured that we will continue our search for tax-free
yields and capital gains opportunities in the coming year, maintaining our
high-quality focus while closely monitoring the state of the economy.
Sincerely,
Kenneth McAlley
Director of Fixed Income Investments
U.S. Trust Company
Portfolio Manager of the Blanchard
Flexible Tax-Free Bond Fund
+ Some income may be subject to state and local taxes or to the Federal
Alternative Minimum Tax. Consult your tax advisor as to the tax consequences,
if any, of this Fund.
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
</TABLE>
<TABLE>
<C> <S> <C> <C>
SECURITIES--97.5% ---------------------------------------------------------------------
ALASKA--4.1%
-------------------------------------------------------------------------
$ 1,000,000 Alaska State Housing Finance Corp., Refunding Revenue Bonds (Series A),
5.40%, 12/1/2013 A+ $ 925,075
------------------------------------------------------------------------- -------------
ARIZONA--4.0%
-------------------------------------------------------------------------
1,000,000 Salt River Project, AZ, Agricultural Improvement & Power District,
(Series C), Revenue Refunding Bonds, 5.00% (Original Issue Yield:
5.239%), 1/1/2013 AA 920,183
------------------------------------------------------------------------- -------------
FLORIDA--20.6%
-------------------------------------------------------------------------
1,000,000 Dade County, FL, Water & Sewer System, Revenue Bonds, 5.50% (FGIC
LOC)/(Original Issue Yield: 5.86%), 10/1/2025 AAA 943,075
-------------------------------------------------------------------------
1,000,000 Florida State Board of Education Administration, GO UT Capital Outlay
Bonds (Series C), 5.40% (Florida State)/ (Original Issue Yield: 5.50%),
6/1/2018 AA 944,547
-------------------------------------------------------------------------
1,000,000 Orlando & Orange County Expressway Authority, FL, Expressway Revenue
Refunding Bonds-Senior Lien, 5.25% (AMBAC INS)/(Original Issue Yield:
5.64%), 7/1/2012 AAA 952,786
-------------------------------------------------------------------------
1,000,000 Orlando, FL, Utilites Commission, Water and Electricity Revenue Bonds,
(Series B) 5.25% (Original Issue Yield: 5.768%), 10/1/2023 AA- 910,887
-------------------------------------------------------------------------
1,000,000 St. Petersburg, FL, Excise Tax, Refunding Revenue Bonds, 5.15% (FGIC
INS), 10/1/2013 AAA 939,709
------------------------------------------------------------------------- -------------
Total 4,691,004
------------------------------------------------------------------------- -------------
ILLINOIS--8.1%
-------------------------------------------------------------------------
1,000,000 Cook County, IL, GO UT Refunding Bonds (Series B), 5.375% (MBIA Insurance
Corporation INS)/(Original Issue Yield: 5.72%), 11/15/2018 AAA 918,047
-------------------------------------------------------------------------
1,000,000 Illinois State Sales Tax, Refunding Revenue Bonds (Series Q), 5.50%
(Original Issue Yield: 6.202%), 6/15/2020 AAA 917,569
------------------------------------------------------------------------- -------------
Total 1,835,616
------------------------------------------------------------------------- -------------
MASSACHUSETTS--4.1%
-------------------------------------------------------------------------
$ 1,000,000 Massachusetts Bay Transit Authority, Revenue Bonds (Series B), 5.375%
(AMBAC INS)/(Original Issue Yield: 5.878%),
3/1/2025 AAA $ 922,988
------------------------------------------------------------------------- -------------
MICHIGAN--4.1%
-------------------------------------------------------------------------
1,000,000 Michigan State Trunk Line, Highway Improvement Revenue Bonds (Series A),
5.50% (Original Issue Yield: 6.198%),
10/1/2021 AA- 924,148
------------------------------------------------------------------------- -------------
NEVADA--4.0%
-------------------------------------------------------------------------
1,000,000 Nevada State, GO LT Refunding Bonds, 5.30% (Colorado River
Community)/(Original Issue Yield: 5.45%), 7/1/2024 AA 910,348
------------------------------------------------------------------------- -------------
NEW JERSEY--4.1%
-------------------------------------------------------------------------
1,000,000 New Jersey State Transportation Trust Fund Agency, Refunding Bonds
(Series A), 5.25% (MBIA Insurance Corporation INS)/(Original Issue Yield:
5.80%), 6/15/2014 AAA 934,490
------------------------------------------------------------------------- -------------
NEW YORK--8.0%
-------------------------------------------------------------------------
1,000,000 New York State Medical Care Facilities Finance Agency, Mortgage Revenue
Refunding Bonds (Series A), 5.50% (Presbyterian Hospital)/(FHA and MBIA
Insurance Corporation INS)/(Original Issue Yield: 5.534%), 8/15/2024 AAA 920,766
-------------------------------------------------------------------------
1,000,000 Port Authority of New York and New Jersey, Revenue Bonds (104th Series),
5.20% (AMBAC INS)/(Original Issue Yield: 5.35%), 7/15/2021 AAA 897,808
------------------------------------------------------------------------- -------------
Total 1,818,574
------------------------------------------------------------------------- -------------
TENNESSEE--4.4%
-------------------------------------------------------------------------
1,000,000 Metropolitan Government Nashville & Davidson County, TN, UT GO Bonds,
6.15% (Original Issue Yield: 6.386%), 5/15/2025 AA 1,004,995
------------------------------------------------------------------------- -------------
TEXAS--4.0%
-------------------------------------------------------------------------
1,000,000 San Antonio, TX, Electric & Gas, Revenue Refunding Bonds, 5.00% (Original
Issue Yield: 5.275%), 2/1/2014 AA 898,653
------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
</TABLE>
<TABLE>
<S> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------------------------
UTAH--11.7%
-------------------------------------------------------------------------
$ 2,000,000 Intermountain Power Agency, UT, Power Supply Refunding Revenue Bonds
(Series 1996D), 5.00% (Original Issue Yield: 5.40%), 7/1/2021 AA- $ 1,727,850
-------------------------------------------------------------------------
1,000,000 Intermountain Power Agency, UT, Power Supply Revenue Refunding Bonds
(Series A), 5.50% (Original Issue Yield: 5.736%), 7/1/2020 AA- 921,016
------------------------------------------------------------------------- -------------
Total 2,648,866
------------------------------------------------------------------------- -------------
WASHINGTON--12.3%
-------------------------------------------------------------------------
1,000,000 Port of Seattle, WA, Revenue Bonds (Series A), 5.50% (FGIC INS)/(Original
Issue Yield: 5.90%), 9/1/2021 AAA 937,680
-------------------------------------------------------------------------
1,000,000 Seattle, WA, Drain & Wastewater Utilities Refunding Revenue Bonds, 5.25%
(MBIA Insurance Corporation INS)/ (Original Issue Yield: 5.375%),
12/1/2025 AAA 887,882
-------------------------------------------------------------------------
1,000,000 Washington State, GO UT Bonds (Series A), 5.75% (Original Issue Yield:
6.25%), 9/1/2019 AA 971,169
------------------------------------------------------------------------- -------------
Total 2,796,731
------------------------------------------------------------------------- -------------
WISCONSIN--4.1%
-------------------------------------------------------------------------
1,000,000 Wisconsin State Transportation, Revenue Bonds (Series B), 5.50% (Original
Issue Yield: 5.912%), 7/1/2022 AA- 933,067
------------------------------------------------------------------------- -------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $22,217,648) 22,164,738
------------------------------------------------------------------------- -------------
MUTUAL FUNDS--1.6%
- ---------------------------------------------------------------------------------------
139,681 Dreyfus Tax Exempt Cash Management 139,681
-------------------------------------------------------------------------
230,000 Nuveen Tax Exempt Money Market Fund 230,000
------------------------------------------------------------------------- -------------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 369,681
------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $22,587,329)(A) $ 22,534,419
------------------------------------------------------------------------- -------------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $22,587,329. The
net unrealized depreciation of investments on a federal tax basis amounts to
$52,910 which is comprised of $183,295 appreciation and $236,205
depreciation at April 30, 1996.
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($22,722,520) at April 30, 1996.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
GO--General Obligation
INS--Insured
LOC--Letter of Credit
LT--Limited Tax
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $22,587,329) $ 22,534,419
- ---------------------------------------------------------------------------------------------------
Cash 1,400
- ---------------------------------------------------------------------------------------------------
Income receivable 361,365
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 87,474
- ---------------------------------------------------------------------------------------------------
Deferred expenses 41,742
- --------------------------------------------------------------------------------------------------- -------------
Total assets 23,026,400
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------
Payable for shares redeemed $ 168,652
- ---------------------------------------------------------------------------------------
Income distribution payable 92,324
- ---------------------------------------------------------------------------------------
Accrued expenses 42,904
- --------------------------------------------------------------------------------------- ----------
Total liabilities 303,880
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 4,404,467 shares outstanding $ 22,722,520
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 23,488,346
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (52,910)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (691,935)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (20,981)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 22,722,520
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
$22,722,520 / 4,404,467 shares outstanding $ 5.16
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $ 1,188,980
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $ 162,655
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 31,841
- ---------------------------------------------------------------------------------------
Custodian fees 12,863
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 41,339
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 6,292
- ---------------------------------------------------------------------------------------
Auditing fees 22,357
- ---------------------------------------------------------------------------------------
Legal fees 21,586
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 70,060
- ---------------------------------------------------------------------------------------
Distribution services fee 54,218
- ---------------------------------------------------------------------------------------
Share registration costs 22,969
- ---------------------------------------------------------------------------------------
Printing and postage 33,214
- ---------------------------------------------------------------------------------------
Insurance premiums 83
- ---------------------------------------------------------------------------------------
Miscellaneous 20,434
- --------------------------------------------------------------------------------------- -----------
Total expenses 499,911
- ---------------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------
Waiver of investment advisory fee $ (162,655)
- --------------------------------------------------------------------------
Waiver of distribution services fee (54,218)
- --------------------------------------------------------------------------
Reimbursement of other operating expenses (54,400)
- -------------------------------------------------------------------------- -----------
Total waivers and reimbursements (271,273)
- --------------------------------------------------------------------------------------- -----------
Net expenses 228,638
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 960,342
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 891,432
- ----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments (406,293)
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments 485,139
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 1,445,481
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------
Net investment income $ 960,342 $ 1,032,434
- ----------------------------------------------------------------------------------
Net realized gain (loss) on investments 891,432 (1,143,934)
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (406,293) 1,890,650
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 1,445,481 1,779,150
- ---------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------
Distributions from net investment income (960,342) (1,032,434)
- ----------------------------------------------------------------------------------
Distributions in excess of net investment income (8,706) (12,875)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (969,048) (1,045,309)
- ---------------------------------------------------------------------------------- -------------- --------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 26,287,368 12,962,463
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 750,232 825,614
- ----------------------------------------------------------------------------------
Cost of shares redeemed (24,287,075) (18,293,415)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from share transactions 2,750,525 (4,505,338)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets 3,226,958 (3,771,497)
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 19,495,562 23,267,059
- ---------------------------------------------------------------------------------- -------------- --------------
End of period $ 22,722,520 $ 19,495,562
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C>
1996 1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.03 $ 4.77 $ 5.00
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------
Net investment income 0.22 0.24 0.18
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.13 0.26 (0.20)
- ------------------------------------------------------------------------------------ --------- --------- -----------
Total from investment operations 0.35 0.50 (0.02)
- ------------------------------------------------------------------------------------ --------- --------- -----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------
Distributions from net investment income (0.22) (0.23) (0.18)
- ------------------------------------------------------------------------------------
Distributions in excess of net investment income (b) (0.00) (0.01) --
- ------------------------------------------------------------------------------------
Distributions from net realized gain on investments -- -- (0.03)
- ------------------------------------------------------------------------------------ --------- --------- -----------
Total distributions (0.22) (0.24) (0.21)
- ------------------------------------------------------------------------------------ --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 5.16 $ 5.03 $ 4.77
- ------------------------------------------------------------------------------------ --------- --------- -----------
TOTAL RETURN (C) 6.86% 10.74% (0.48%)
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------
Expenses 1.05% 1.00% 0%*
- ------------------------------------------------------------------------------------
Net investment income 4.43% 4.87% 6.79%*
- ------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.25% 1.17% 2.22%*
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $22,723 $19,496 $23,267
- ------------------------------------------------------------------------------------
Portfolio turnover 275% 170% 190 %
- ------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Represents period from August 12, 1993 (commencement of operations) to
April 30, 1994.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value.
(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 FLEXIBLE TAX-FREE BOND FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION
The 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 portfolios. The financial statements included herein
are only those of Blanchard Flexible Tax-Free Bond Fund (the "Fund") a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund seeks to provide a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital.
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--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end regulated investment companies are
valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of 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.
At April 30, 1996, the Fund had a capital loss carryforward of $679,214 for
federal tax purposes, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2003.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
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.
OTHER--Investment transactions are accounted for on the trade date.
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 (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
<S> <C> <C>
1996 1995
Shares sold 5,015,985 2,686,852
- ---------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 142,764 171,998
- ---------------------------------------------------------------------------------------
Shares redeemed (4,631,991) (3,854,437)
- --------------------------------------------------------------------------------------- ----------- -----------
Net change resulting from share transactions 526,758 (995,587)
- --------------------------------------------------------------------------------------- ----------- -----------
</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 .75% of
the Fund's average daily net assets.
Virtus Capital Management, Inc. became the Fund's Manager on July 13, 1995.
Prior to July 13, 1995 Sheffield Management Company served as the Fund's
Manager for which it received a fee.
For the year ended April 30, 1996, the Managers earned and waived fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
MANAGER NAME FEE EARNED FEE WAIVED
<S> <C> <C>
Virtus Capital Management, Inc. $ 132,013 $ 132,013
- ----------------------------------------------------------------------------------
Sheffield Management Company $ 30,642 $ 30,642
- ----------------------------------------------------------------------------------
</TABLE>
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
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.
SUB-ADVISORY FEE--United States Trust Company of New York provides the Manager
with sub-advisory services for which it receives a monthly fee at the annual
rate of .20% of the Fund's average daily net assets. In addition, United States
Trust Company of New York may voluntarily choose to reduce its compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period,
subject to a minimum fee of $75,000. FAS may voluntarily choose to waive a
portion of its fee.
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 .25% of the average daily net assets of the Fund's shares,
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.
FSC became the Fund's distributor on July 13, 1995. Prior to July 13, 1995,
Sheffield Investments, Inc. served as the Fund's distributor and was reimbursed
from the net assets of the Fund to finance activities intended to result in the
sale of the Fund's shares.
For the year ended April 30, 1996, the distributors earned and waived fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
DISTRIBUTOR FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Investments, Inc. $ 10,214 $ 10,214
- ----------------------------------------------------------------------------------
Federated Securities Corp. $ 44,004 $ 44,004
- ----------------------------------------------------------------------------------
</TABLE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("Fserv) through its subsidiary, Federated Shareholder Services Company serves
as transfer and dividend disbursing agent for the Fund. The fee paid to FServ is
based on the size, type, and number of accounts and transactions made by
shareholders.
FServ became the Fund's transfer agent on October 15, 1995. Prior to October 15,
1995, United States Trust Company of New York served as the Fund's transfer
agent for which it received a fee.
BLANCHARD FLEXIBLE TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
For the year ended April 30, 1996, the transfer agents earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
TRANSFER AGENT FEE EARNED
<S> <C>
United States Trust Company of New York $ 18,255
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 23,084
- ---------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on level of the Fund's average daily
net assets for the period, plus out-of-pocket expenses.
FServ became the Fund's portfolio accountant on October 15, 1995. Prior to
October 15, 1995, Mutual Fund Services Company served as the Fund's portfolio
accountant for which it received a fee.
For the year ended April 30, 1996, the portfolio accountants earned fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF
PORTFOLIO ACCOUNTANT FEE EARNED
<S> <C>
Mutual Fund Services Company $ 39,365
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 30,695
- ---------------------------------------------------------------------------------------------------
</TABLE>
CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian for which it receives a
fee. The fee is based on the level of the Fund's average daily net assets for
the period, plus out-of-pocket expenses.
Signet Trust Co. became the Fund's custodian on October 15, 1995. Prior to
October 15, 1995, United States Trust Company of New York served as the Fund's
custodian for which it received a fee.
For the year ended April 30, 1996, the custodians earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
CUSTODIAN FEE EARNED
<S> <C>
United States Trust Company of New York $ 3,195
- ---------------------------------------------------------------------------------------------------
Signet Trust Company $ 9,668
- ---------------------------------------------------------------------------------------------------
</TABLE>
ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of
the Fund incurred prior to the public offering of its shares amounting to
$89,448. The Fund reimbursed the Manager for such expenses and has deferred and
is amortizing such expenses on the straight-line method over five years from the
date of commencement of the Fund's operations.
DIRECTORS/TRUSTEES FEES--Prior to the acquisition of the 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 Directors'/Trustees' Fees in
the Statement of Operations for the year ended April 30, 1996 for the Fund was
$3,886.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended April 30, 1996, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 59,483,945
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 54,962,420
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of BLANCHARD FUNDS
and Shareholders of BLANCHARD FLEXIBLE TAX-FREE BOND FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Blanchard Flexible Tax-Free Bond Fund as of
April 30, 1996, and the related statements of operations and changes in net
assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended April 30, 1995 and the financial highlights
for the two years in the period ended April 30, 1995 were audited by other
auditors, whose reports thereon dated June 20, 1995, expressed an unqualified
opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of April 30, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blanchard Flexible Tax-Free Bond Fund as of April 30, 1996, the results of its
operations, the changes in its net assets and its financial highlights for the
year then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 19, 1996
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.
[This Page Intentionally Left Blank]
Portfolio Adviser
United States Trust
Company of New York
Blanchard
Flexible Tax-Free
Bond 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.
(2021)
CUSIP 093212603
G01684-04 (6/96)
Blanchard
Flexible Tax-Free
Bond Fund
Annual Report
April 30, 1996
Managed by: Virtus Capital Management
President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Global Growth Fund
for the fiscal year ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a performance update from Fiduciary Trust International*, a list of
investments included in the Fund, and the FundOs financial statements.
If you would like the most recent performance update for your 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,
Edward C. Gonzales
President
* Effective May 28, 1996, the FundOs sub-manager changed to Mellon Capital
Management Corp.
Dear Shareholders,
Your Blanchard Global Growth Fund showed a total return of 19.68% for its
fiscal year ended April 30, 1996. This return exceeded the average return of
international equity funds, domestic and international bond funds, and lagged
only U.S. equity funds, according to Lipper Analytical Services, Inc. As a
conservative, diversified asset allocation fund, your Blanchard Global Growth
Fund fulfilled its objective and gave a solid absolute return.
Naturally, past performance is no guarantee of future performance. As with all
mutual funds, investment return and principal value will vary with changing
market conditions so that shares, when redeemed, may be worth more or less than
their original cost. Additionally, foreign investments entail special currency,
credit, interest rate and political risks not associated with domestic
investments and equities typically carry higher price volatility than bonds.
Here's a closer look at how we employed the Fund's global asset allocation
strategy to provide you with a positive total return while diversifying risk
throughout the past fiscal year.
The Value of a $10,000 Investment in the
Blanchard Global Growth Fund
inception 6/1/86 through 4/30/96 as compared to
the Standard & PoorOs 500 for the same period.
Avg. Annual Returns through 4/30/96
Blanchard Global Growth Fund*
1 year 19.68%
5 year 8.55%
since inception (6/1/86) 8.75%
[GRAPHIC APPENDIX OMITTED, SEE APPENDIX F]
*The average annual returns quoted reflect reinvestment of distributions, but
do not reflect the deduction of the one-time account opening fee. If reflected,
the returns would be lower. Total return includes changes in principal value.
Average annual return is total return annualized and compounded. Past
performance is no guarantee of future results.
*Reflects deduction of the one-time $75 account opening fee.
+Source: The Standard & Poor's 500 is an unmanaged composite index of the U.S.
Stock Market performance. Investments cannot be made in an index.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the Blanchard Global Growth Fund or the index.
The Year In Review
The Fund's most heavily weighted asset class throughout the year was U.S.
stocks, and these were the primary driver of the Fund's performance. Due to
the desire for diversification, our commitment to U.S. stocks hovered around
50% throughout the year.
Foreign and emerging market equities, which accounted for about 25% of the
portfolio, significantly lagged in 1995, but turned in a solid performance in
1996. U.S. and international fixed income made up about 20% of the portfolio.
They did reasonably well in 1995, but have lagged this year. We stayed with a
tiny position in gold and cash for the entire fiscal year and those were
correct allocations.
A Look Ahead
It has been our pleasure at Fiduciary Trust International to serve as the Chief
Asset Allocation Strategist for your Blanchard Global Growth Fund. However,
after receiving shareholder approval on May 24, 1996, Mellon Capital Management
Corp. of San Francisco has taken over that responsibility for us.
The portfolio management team of your Blanchard Global Growth Fund will now be
led by the very able Charles J. Jacklin, Senior Vice President and Director of
Asset Allocation Strategies for Mellon Capital Management Corp.
Thank you for investing in the Blanchard Global Growth Fund. We wish you the
very best in the months and years ahead.
Sincerely,
Jeremy Biggs
Chief Investment Officer
Fiduciary Trust International
Chief Asset Allocation Strategist of the
Blanchard Global Growth Fund
BLANCHARD GLOBAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
U.S. EQUITY SECURITIES SECTOR--45.3%
--------------------------------------------------------------------------------
AUTOMOTIVE & RELATED--1.8%
--------------------------------------------------------------------------------
15,000 Chrysler Corp. $ 941,250
--------------------------------------------------------------------------------
7,000 Harley Davidson, Inc. 308,875
-------------------------------------------------------------------------------- -------------
Total 1,250,125
-------------------------------------------------------------------------------- -------------
BANKING--4.3%
--------------------------------------------------------------------------------
10,000 Citicorp 787,500
--------------------------------------------------------------------------------
20,000 Mellon Bank Corp. 1,075,000
--------------------------------------------------------------------------------
15,000 NationsBank Corp. 1,196,250
-------------------------------------------------------------------------------- -------------
Total 3,058,750
-------------------------------------------------------------------------------- -------------
CHEMICALS & RELATED--6.1%
--------------------------------------------------------------------------------
10,000 Du Pont (E.I.) de Nemours & Co. 803,750
--------------------------------------------------------------------------------
14,000 Grace (W.R.) & Co. 1,085,000
--------------------------------------------------------------------------------
8,000 Monsanto Co. 1,212,000
--------------------------------------------------------------------------------
35,000 Morton International, Inc. 1,238,125
-------------------------------------------------------------------------------- -------------
Total 4,338,875
-------------------------------------------------------------------------------- -------------
CONSUMER & RELATED--3.3%
--------------------------------------------------------------------------------
25,000 Home Depot, Inc. 1,184,375
--------------------------------------------------------------------------------
15,000 Eastman Kodak Co. 1,147,500
-------------------------------------------------------------------------------- -------------
Total 2,331,875
-------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.3%
--------------------------------------------------------------------------------
15,000 PepsiCo, Inc. 952,500
-------------------------------------------------------------------------------- -------------
ELECTRONICS & ELECTRICAL--3.1%
--------------------------------------------------------------------------------
20,000 Avnet, Inc. 1,055,000
15,000 General Electric Co. 1,162,500
-------------------------------------------------------------------------------- -------------
Total 2,217,500
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
U.S. EQUITY SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE--5.1%
--------------------------------------------------------------------------------
45,000 Carnival Corp., Class A $ 1,305,000
--------------------------------------------------------------------------------
18,000 Disney (Walt) Co. 1,116,000
--------------------------------------------------------------------------------
30,000 Time Warner, Inc. 1,226,250
-------------------------------------------------------------------------------- -------------
Total 3,647,250
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--2.2%
--------------------------------------------------------------------------------
20,000 American Express Co. 970,000
--------------------------------------------------------------------------------
20,000 Capital One Financial Corp. 590,000
-------------------------------------------------------------------------------- -------------
Total 1,560,000
-------------------------------------------------------------------------------- -------------
FOOD, BEVERAGE & TOBACCO--1.9%
--------------------------------------------------------------------------------
15,000 Philip Morris Cos., Inc. 1,351,875
-------------------------------------------------------------------------------- -------------
HEALTH CARE--1.5%
--------------------------------------------------------------------------------
20,000 Columbia/HCA Healthcare Corp. 1,062,500
-------------------------------------------------------------------------------- -------------
INDUSTRIAL & RELATED--1.7%
--------------------------------------------------------------------------------
20,000 Motorola, Inc. 1,225,000
-------------------------------------------------------------------------------- -------------
INSURANCE--1.2%
--------------------------------------------------------------------------------
30,100 Washington National Corp. 831,513
-------------------------------------------------------------------------------- -------------
METALS & MINING--1.5%
--------------------------------------------------------------------------------
11,000 Canyon Resources Corp. 40,562
--------------------------------------------------------------------------------
70,000 Santa Fe Pacific Gold 1,041,250
-------------------------------------------------------------------------------- -------------
Total 1,081,812
-------------------------------------------------------------------------------- -------------
PHARMACEUTICALS--4.3%
--------------------------------------------------------------------------------
20,000 Pfizer, Inc. 1,377,500
--------------------------------------------------------------------------------
20,000 Pharmacia & Upjohn, Inc. 765,000
--------------------------------------------------------------------------------
8,000 Warner-Lambert Co. 894,000
-------------------------------------------------------------------------------- -------------
Total 3,036,500
-------------------------------------------------------------------------------- -------------
TECHNOLOGY--1.3%
--------------------------------------------------------------------------------
20,000 Compaq Computer Corp. 932,500
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
U.S. EQUITY SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.5%
--------------------------------------------------------------------------------
30,000 (a)Airtouch Communications, Inc. $ 937,500
--------------------------------------------------------------------------------
22,000 SBC Communications, Inc. 1,100,000
--------------------------------------------------------------------------------
25,000 (a)Tele-Communications, Inc., Class A 478,125
-------------------------------------------------------------------------------- -------------
Total 2,515,625
-------------------------------------------------------------------------------- -------------
UTILITIES--1.2%
--------------------------------------------------------------------------------
20,000 GTE Corp. 867,500
-------------------------------------------------------------------------------- -------------
TOTAL UNITED STATES (IDENTIFIED COST $30,505,423) 32,261,700
-------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--22.9%
------------------------------------------------------------------------------------------------
AUSTRALIA--0.5%
--------------------------------------------------------------------------------
METALS & MINING--0.3%
--------------------------------------------------------------------------------
30,000 Western Mining Corporation Holdings Ltd. 218,696
-------------------------------------------------------------------------------- -------------
PRINTING & PUBLISHING--0.2%
--------------------------------------------------------------------------------
28,863 News Corporation Ltd., Pfd. 148,510
-------------------------------------------------------------------------------- -------------
TOTAL AUSTRALIA 367,206
-------------------------------------------------------------------------------- -------------
CANADA--4.7%
--------------------------------------------------------------------------------
METALS & MINING--4.7%
--------------------------------------------------------------------------------
80,000 Cambior, Inc. 1,116,416
--------------------------------------------------------------------------------
190,000 Eldorado Corp., Ltd. 1,137,348
--------------------------------------------------------------------------------
135,000 TVX Gold, Inc. 1,070,878
-------------------------------------------------------------------------------- -------------
Total 3,324,642
-------------------------------------------------------------------------------- -------------
TOTAL CANADA 3,324,642
-------------------------------------------------------------------------------- -------------
FRANCE--1.3%
--------------------------------------------------------------------------------
ELECTRONICS & ELECTRICAL--0.2%
--------------------------------------------------------------------------------
600 Legrand 116,691
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.4%
--------------------------------------------------------------------------------
2,500 AXA 148,960
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
FRANCE--CONTINUED
--------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
--------------------------------------------------------------------------------
1,300 Societe Generale, Paris $ 150,943
-------------------------------------------------------------------------------- -------------
Total 299,903
-------------------------------------------------------------------------------- -------------
MULTI-INDUSTRY--0.2%
--------------------------------------------------------------------------------
1,000 Primagaz Cie 107,209
-------------------------------------------------------------------------------- -------------
OIL & RELATED--0.3%
--------------------------------------------------------------------------------
3,200 Total SA-B 217,173
-------------------------------------------------------------------------------- -------------
TEXTILE & APPAREL--0.3%
--------------------------------------------------------------------------------
1,122 Castorama Dubois Investisse 214,738
-------------------------------------------------------------------------------- -------------
TOTAL FRANCE 955,714
-------------------------------------------------------------------------------- -------------
GERMANY--0.8%
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.2%
--------------------------------------------------------------------------------
200 Siemens AG 109,517
-------------------------------------------------------------------------------- -------------
MACHINERY--0.2%
--------------------------------------------------------------------------------
380 Mannesmann AG 129,819
-------------------------------------------------------------------------------- -------------
MEDICAL PRODUCTS & RELATED--0.3%
--------------------------------------------------------------------------------
1,350 Fresenius, Vorzugsaktien 208,995
-------------------------------------------------------------------------------- -------------
UTILITIES & RELATED--0.2%
--------------------------------------------------------------------------------
2,750 Veba AG 136,701
-------------------------------------------------------------------------------- -------------
TOTAL GERMANY 585,032
-------------------------------------------------------------------------------- -------------
HONG KONG--1.6%
--------------------------------------------------------------------------------
CONSTRUCTION--0.1%
--------------------------------------------------------------------------------
35,000 New World Infrastructure 77,823
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.7%
--------------------------------------------------------------------------------
175,932 First Pacific Co. Ltd. 234,258
--------------------------------------------------------------------------------
17,976 HSBC Holdings 268,403
-------------------------------------------------------------------------------- -------------
Total 502,661
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
HONG KONG--CONTINUED
--------------------------------------------------------------------------------
REAL ESTATE--0.6%
--------------------------------------------------------------------------------
30,000 Cheung Kong $ 214,272
--------------------------------------------------------------------------------
23,000 Sun Hung Kai Properties 219,281
-------------------------------------------------------------------------------- -------------
Total 433,553
-------------------------------------------------------------------------------- -------------
RETAIL--0.1%
--------------------------------------------------------------------------------
115,000 Giordano International Ltd. 106,296
-------------------------------------------------------------------------------- -------------
TOTAL HONG KONG 1,120,333
-------------------------------------------------------------------------------- -------------
INDIA--0.2%
--------------------------------------------------------------------------------
HOTELS--0.1%
--------------------------------------------------------------------------------
2,300 Indian Hotels Co. Ltd, GDR 66,700
-------------------------------------------------------------------------------- -------------
TEXTILE & APPAREL--0.1%
--------------------------------------------------------------------------------
4,700 Indian Rayon & Industries Ltd., GDR 72,850
-------------------------------------------------------------------------------- -------------
TOTAL INDIA 139,550
-------------------------------------------------------------------------------- -------------
INDONESIA--0.1%
--------------------------------------------------------------------------------
MACHINERY--0.1%
--------------------------------------------------------------------------------
48,000 PT Bukaka Teknik Utama 82,280
-------------------------------------------------------------------------------- -------------
IRELAND--0.2%
--------------------------------------------------------------------------------
HOUSING & CONSTRUCTION--0.2%
--------------------------------------------------------------------------------
14,089 CRH PLC 126,786
-------------------------------------------------------------------------------- -------------
ITALY--0.3%
--------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.3%
--------------------------------------------------------------------------------
91,000 Telecom Italia Mobile 200,992
-------------------------------------------------------------------------------- -------------
JAPAN--6.6%
--------------------------------------------------------------------------------
CHEMICALS & RELATED--0.7%
--------------------------------------------------------------------------------
28,000 Daicel Chemical Industries 186,836
--------------------------------------------------------------------------------
12,000 Sekisui Chemical Co. 151,427
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
JAPAN--CONTINUED
--------------------------------------------------------------------------------
CHEMICALS & RELATED--CONTINUED
--------------------------------------------------------------------------------
20,000 Sumitomo Bakelite Co., Ltd. $ 160,604
-------------------------------------------------------------------------------- -------------
Total 498,867
-------------------------------------------------------------------------------- -------------
ELECTRONICS & ELECTRICAL EQUIPMENT--1.6%
--------------------------------------------------------------------------------
9,000 Canon Inc. 178,959
--------------------------------------------------------------------------------
7,000 Canon Sales Co., Inc. 196,071
--------------------------------------------------------------------------------
23,000 Hitachi Ltd. 248,458
--------------------------------------------------------------------------------
15,000 Minebea Co. 137,804
--------------------------------------------------------------------------------
3 NTT Data Communications Systems Co. 104,966
--------------------------------------------------------------------------------
2,000 Rohm Co 127,336
--------------------------------------------------------------------------------
6,000 Yamatake-Honeywell 113,570
-------------------------------------------------------------------------------- -------------
Total 1,107,164
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--1.0%
--------------------------------------------------------------------------------
11,000 Daiwa Securities 169,304
--------------------------------------------------------------------------------
134,000 Nikkei 300 Stock Index List Fund 403,518
--------------------------------------------------------------------------------
7,000 Nomura Securities Co. Ltd. 152,574
-------------------------------------------------------------------------------- -------------
Total 725,396
-------------------------------------------------------------------------------- -------------
HOUSING & CONSTRUCTION--0.1%
--------------------------------------------------------------------------------
13,000 Taisei Corp. 100,664
-------------------------------------------------------------------------------- -------------
INDUSTRIAL & RELATED--0.7%
--------------------------------------------------------------------------------
34,000 Mitsubishi Heavy Industries Ltd. 303,580
--------------------------------------------------------------------------------
58,000 NKK Corp. 181,865
-------------------------------------------------------------------------------- -------------
Total 485,445
-------------------------------------------------------------------------------- -------------
INSURANCE--0.4%
--------------------------------------------------------------------------------
28,000 Sumitomo Marine & Fire 266,603
-------------------------------------------------------------------------------- -------------
MACHINERY--0.6%
--------------------------------------------------------------------------------
16,000 Komatsu Ltd. 154,486
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
JAPAN--CONTINUED
--------------------------------------------------------------------------------
MACHINERY--CONTINUED
--------------------------------------------------------------------------------
6,000 Mori Seiki Co. $ 137,087
--------------------------------------------------------------------------------
9,000 Takuma Co., Ltd. 138,521
-------------------------------------------------------------------------------- -------------
Total 430,094
-------------------------------------------------------------------------------- -------------
REAL ESTATE--0.3%
--------------------------------------------------------------------------------
14,000 Mitsubishi Estate Co., Ltd. 196,740
-------------------------------------------------------------------------------- -------------
RETAIL--0.5%
--------------------------------------------------------------------------------
7,000 Credit Saison Co. Ltd. 173,319
--------------------------------------------------------------------------------
11,000 Hankyu Department Stores, Inc. 160,891
-------------------------------------------------------------------------------- -------------
Total 334,210
-------------------------------------------------------------------------------- -------------
TEXTILE & APPAREL--0.5%
--------------------------------------------------------------------------------
11,000 Onward Kashiyama Co. Ltd. 186,129
--------------------------------------------------------------------------------
17,000 Nisshinbo Industries 188,519
-------------------------------------------------------------------------------- -------------
Total 374,648
-------------------------------------------------------------------------------- -------------
TRANSPORTATION--0.2%
--------------------------------------------------------------------------------
40,000 Kawasaki Kisen Kaisha Ltd. 147,603
-------------------------------------------------------------------------------- -------------
TOTAL JAPAN 4,667,434
-------------------------------------------------------------------------------- -------------
KOREA--0.1%
--------------------------------------------------------------------------------
AUTOMOBILE--0.1%
--------------------------------------------------------------------------------
2,066 Hyundai Motor Service Co., Pfd. 50,173
-------------------------------------------------------------------------------- -------------
MEXICO--0.3%
--------------------------------------------------------------------------------
CONSTRUCTION--0.1%
--------------------------------------------------------------------------------
11,000 Empresas ICA Sociedad Controladora S.A., ADR 59,663
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
3,700 Alfa, S.A. de C.V., Class A 54,031
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
MEXICO--CONTINUED
--------------------------------------------------------------------------------
METALS & MINING--0.1%
--------------------------------------------------------------------------------
15,000 Industrias Penoles S.A. $ 63,190
-------------------------------------------------------------------------------- -------------
TOTAL MEXICO 176,884
-------------------------------------------------------------------------------- -------------
NETHERLANDS--1.0%
--------------------------------------------------------------------------------
CONSUMER & RELATED--0.3%
--------------------------------------------------------------------------------
1,000 Heineken NV 209,279
-------------------------------------------------------------------------------- -------------
ELECTRONICS & ELECTRICAL--0.2%
--------------------------------------------------------------------------------
4,375 Philips Electronics 154,472
-------------------------------------------------------------------------------- -------------
INSURANCE--0.2%
--------------------------------------------------------------------------------
3,700 Aegon N.V. 176,201
-------------------------------------------------------------------------------- -------------
RETAIL--0.3%
--------------------------------------------------------------------------------
4,050 Ahold NV 199,723
-------------------------------------------------------------------------------- -------------
TOTAL NETHERLANDS 739,675
-------------------------------------------------------------------------------- -------------
PHILIPPINES--0.1%
--------------------------------------------------------------------------------
BANKING--0.1%
--------------------------------------------------------------------------------
3,500 Metro Bank and Trust Co. 94,287
-------------------------------------------------------------------------------- -------------
SPAIN--0.1%
--------------------------------------------------------------------------------
REAL ESTATE--0.1%
--------------------------------------------------------------------------------
6,000 Vallehermoso SA 108,491
-------------------------------------------------------------------------------- -------------
SWEDEN--0.6%
--------------------------------------------------------------------------------
HOUSING & CONSTRUCTION--0.2%
--------------------------------------------------------------------------------
3,500 Svedala Industri 125,413
-------------------------------------------------------------------------------- -------------
INSURANCE--0.2%
--------------------------------------------------------------------------------
2,600 Scania AB, Class A 72,077
--------------------------------------------------------------------------------
2,600 Scania AB, Class B 71,886
-------------------------------------------------------------------------------- -------------
Total 143,963
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
SWEDEN--CONTINUED
--------------------------------------------------------------------------------
PHARMACEUTICALS--0.2%
--------------------------------------------------------------------------------
3,300 Astra AB, Class A $ 146,713
-------------------------------------------------------------------------------- -------------
TOTAL SWEDEN 416,089
-------------------------------------------------------------------------------- -------------
SWITZERLAND--0.6%
--------------------------------------------------------------------------------
INSURANCE--0.1%
--------------------------------------------------------------------------------
170 Winterthur Schweizerische Versicherungs-Gesellschaft 106,661
-------------------------------------------------------------------------------- -------------
MACHINERY--0.2%
--------------------------------------------------------------------------------
95 BBC Brown Boveri 114,465
-------------------------------------------------------------------------------- -------------
MEDICAL PRODUCTS & RELATED--0.3%
--------------------------------------------------------------------------------
30 Roche Holding AG 235,946
-------------------------------------------------------------------------------- -------------
TOTAL SWITZERLAND 457,072
-------------------------------------------------------------------------------- -------------
UNITED KINGDOM--3.8%
--------------------------------------------------------------------------------
AEROSPACE--0.3%
--------------------------------------------------------------------------------
14,128 British Aerospace PLC 185,134
-------------------------------------------------------------------------------- -------------
BANKING--0.4%
--------------------------------------------------------------------------------
15,915 Bank of Ireland 114,996
--------------------------------------------------------------------------------
18,028 National Westminster Bank PLC 166,222
-------------------------------------------------------------------------------- -------------
Total 281,218
-------------------------------------------------------------------------------- -------------
CONSUMER & RELATED--0.3%
--------------------------------------------------------------------------------
23,400 Compass Group 192,681
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--1.3%
--------------------------------------------------------------------------------
60,000 Hanson PLC, ADR 907,500
-------------------------------------------------------------------------------- -------------
FOOD & BEVERAGE--0.2%
--------------------------------------------------------------------------------
14,300 Allied Domecq PLC 110,538
-------------------------------------------------------------------------------- -------------
HEALTH CARE--0.2%
--------------------------------------------------------------------------------
16,401 Smithkline Beecham Corp., Class A 173,935
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
--------------------------------------------------------------------------------
MACHINERY--0.4%
--------------------------------------------------------------------------------
29,000 Chubb Security $ 166,107
--------------------------------------------------------------------------------
8,800 Siebe PLC 113,792
-------------------------------------------------------------------------------- -------------
Total 279,899
-------------------------------------------------------------------------------- -------------
OIL RELATED--0.0%
--------------------------------------------------------------------------------
277 British Petroleum Co. PLC 2,500
-------------------------------------------------------------------------------- -------------
RETAIL--0.2%
--------------------------------------------------------------------------------
6,380 Thorn EMI 176,955
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--0.3%
--------------------------------------------------------------------------------
27,500 Carlton Communications PLC 192,910
-------------------------------------------------------------------------------- -------------
TRANSPORTATION--0.2%
--------------------------------------------------------------------------------
51,000 British Airways Capital, Conv. Bond, 9.75%, 6/15/2005 170,565
-------------------------------------------------------------------------------- -------------
TOTAL UNITED KINGDOM 2,673,835
-------------------------------------------------------------------------------- -------------
TOTAL FOREIGN SECURITIES SECTOR (IDENTIFIED COST $13,419,834) 16,286,475
-------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--9.4%
------------------------------------------------------------------------------------------------
ARGENTINA--0.3%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--0.1%
--------------------------------------------------------------------------------
1,750 (a)Quilmes Industrial (Quinsa), Societe Ano, ADR 20,781
--------------------------------------------------------------------------------
3,500 Quilmes Industrial SA 42,000
-------------------------------------------------------------------------------- -------------
Total 62,781
-------------------------------------------------------------------------------- -------------
UTILITIES & RELATED--0.2%
--------------------------------------------------------------------------------
19,176 Compania Naviera Perez Companc SA, Class B 119,286
-------------------------------------------------------------------------------- -------------
TOTAL ARGENTINA 182,067
-------------------------------------------------------------------------------- -------------
BRAZIL--1.1%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.5%
--------------------------------------------------------------------------------
7,837 Cia Acos Especiais Itabira-Acesita., ADR 58,777
--------------------------------------------------------------------------------
3,207 Companhia Energetica de Minas Gerais, ADR 83,031
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
BRAZIL--CONTINUED
--------------------------------------------------------------------------------
BASIC INDUSTRY--CONTINUED
--------------------------------------------------------------------------------
7,400 Companhia Vale Do Rio Doce, ADR $ 135,365
--------------------------------------------------------------------------------
2,000 Usiminas USI SD MG, Pfd. 22,990
--------------------------------------------------------------------------------
6,600 Usinas Siderurgicas de Minas Gerais, ADR 75,834
-------------------------------------------------------------------------------- -------------
Total 375,997
-------------------------------------------------------------------------------- -------------
CAPITAL GOODS--0.1%
--------------------------------------------------------------------------------
7,481 (a)(b)Rhodia-Ster S.A., GDR 62,580
-------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--0.0%
--------------------------------------------------------------------------------
1,154,088 Cia Acos Especiais Itabira-Acesita., Pfd. 4,979
-------------------------------------------------------------------------------- -------------
RETAIL--0.1%
--------------------------------------------------------------------------------
8,000,000 (a)Lojas Arapua S.A., Preference 82,250
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--0.4%
--------------------------------------------------------------------------------
5,450 Telecomunicacoes Brasileras, ADR 294,981
-------------------------------------------------------------------------------- -------------
TOTAL BRAZIL 820,787
-------------------------------------------------------------------------------- -------------
CHILE--0.2%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
17,000 Antofagasta Holdings PLC 89,568
-------------------------------------------------------------------------------- -------------
RETAIL & RELATED--0.1%
--------------------------------------------------------------------------------
3,200 (a)Santa Isabel S.A., ADR 92,400
-------------------------------------------------------------------------------- -------------
TOTAL CHILE 181,968
-------------------------------------------------------------------------------- -------------
COLOMBIA--0.2%
--------------------------------------------------------------------------------
BANKING--0.1%
--------------------------------------------------------------------------------
3,000 Banco Industrial Colombiano, ADR 58,875
-------------------------------------------------------------------------------- -------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
3,500 Cementos Diamante S.A., GDR 68,250
-------------------------------------------------------------------------------- -------------
TOTAL COLOMBIA 127,125
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
<C> <S> <C>
ECUADOR--0.1%
--------------------------------------------------------------------------------
CONSTRUCTION--0.1%
--------------------------------------------------------------------------------
514 (b)LA Cemento Nacional C.A., GDR $ 80,698
-------------------------------------------------------------------------------- -------------
HONG KONG--0.0%
--------------------------------------------------------------------------------
MULTI-INDUSTRY--0.0%
--------------------------------------------------------------------------------
60,000 (a)(b)Star Paging International Holding, Ltd. Warrants, 12/31/1996 776
-------------------------------------------------------------------------------- -------------
HUNGARY--0.0%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--0.0%
--------------------------------------------------------------------------------
2,100 (a)(b)Kekut Asvanyiz, GDR 14,858
-------------------------------------------------------------------------------- -------------
INDIA--0.5%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
5,040 Gujarat Ambuja Cements, GDR 58,565
-------------------------------------------------------------------------------- -------------
CONSUMER GOODS & RELATED--0.1%
--------------------------------------------------------------------------------
3,500 (a)(b)DCW, Ltd., GDR 16,625
--------------------------------------------------------------------------------
7,700 (a)Dr. Reddy's Laboratories, GDR 73,150
-------------------------------------------------------------------------------- -------------
Total 89,775
-------------------------------------------------------------------------------- -------------
INVESTMENT COMPANIES--0.3%
--------------------------------------------------------------------------------
5,149 (a)IS Himalayan Fund N.V. 79,809
--------------------------------------------------------------------------------
14,400 (a)Indian Opportunities Fund Ltd. 158,400
-------------------------------------------------------------------------------- -------------
Total 238,209
-------------------------------------------------------------------------------- -------------
TOTAL INDIA 386,549
-------------------------------------------------------------------------------- -------------
INDONESIA--0.7%
--------------------------------------------------------------------------------
BANKING--0.1%
--------------------------------------------------------------------------------
78,750 PT Bank Dagang Nasional 78,463
-------------------------------------------------------------------------------- -------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
62,000 PT Gadjah Tunggal 36,533
-------------------------------------------------------------------------------- -------------
CAPITAL GOODS--0.2%
--------------------------------------------------------------------------------
3,100 (a)PT Indosat, ADR 108,113
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
INDONESIA--CONTINUED
--------------------------------------------------------------------------------
CHEMICALS--0.0%
--------------------------------------------------------------------------------
34,000 Keramika Indonesia Associates $ 24,041
-------------------------------------------------------------------------------- -------------
CONSUMER GOODS & RELATED--0.0%
--------------------------------------------------------------------------------
35,000 (b)PT Concord Benefit Enterprise 14,624
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.3%
--------------------------------------------------------------------------------
60,000 (a)PT Andayani Megah, Foreign Shares 41,140
--------------------------------------------------------------------------------
35,400 PT Bank International Indonesia 174,080
-------------------------------------------------------------------------------- -------------
Total 215,220
-------------------------------------------------------------------------------- -------------
TOTAL INDONESIA 476,994
-------------------------------------------------------------------------------- -------------
ISRAEL--0.1%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
8,600 (a)Ampal-American Israel Corp. Warrants, 01/31/1999 2,687
--------------------------------------------------------------------------------
6,400 (a)Ampal-American Israel Corp., Class A 37,600
-------------------------------------------------------------------------------- -------------
Total 40,287
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--0.0%
--------------------------------------------------------------------------------
1,075 Koor Industries Ltd., ADR 20,156
-------------------------------------------------------------------------------- -------------
TOTAL ISRAEL 60,443
-------------------------------------------------------------------------------- -------------
KOREA--0.8%
--------------------------------------------------------------------------------
CAPITAL GOODS--0.3%
--------------------------------------------------------------------------------
6,336 (a)Anam Industrial Co., Ltd. 144,916
--------------------------------------------------------------------------------
6,000 (a)(b)Daewoo Heavy Industries, Pfd. 42,480
-------------------------------------------------------------------------------- -------------
Total 187,396
-------------------------------------------------------------------------------- -------------
CONSTRUCTION & HOUSING--0.1%
--------------------------------------------------------------------------------
9,000 (a)Kumho Construction & Engineering Co., Pfd. 64,761
-------------------------------------------------------------------------------- -------------
ELECTRONICS & ELECTRICAL--0.0%
--------------------------------------------------------------------------------
14 (a)Samsung Electronics GDS--1/2 NV Com 1,047
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
KOREA--CONTINUED
--------------------------------------------------------------------------------
TRANSPORTATION--0.1%
--------------------------------------------------------------------------------
2,283 (a)(b)Dong Bang Forwarding Co. $ 65,124
-------------------------------------------------------------------------------- -------------
UTILITIES & RELATED--0.3%
--------------------------------------------------------------------------------
3,200 (a)Korea Electric Power Corp. 135,278
--------------------------------------------------------------------------------
2,239 (a)Yukong Ltd. 83,432
-------------------------------------------------------------------------------- -------------
Total 218,710
-------------------------------------------------------------------------------- -------------
TOTAL KOREA 537,038
-------------------------------------------------------------------------------- -------------
LUXEMBOURG--0.1%
--------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.1%
--------------------------------------------------------------------------------
120,000 Siam Sindhorn, Conv. Bond, Series WW, 2.00%, 7/31/2000 99,600
-------------------------------------------------------------------------------- -------------
MALAYSIA--1.0%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.2%
--------------------------------------------------------------------------------
19,000 United Engineers Ltd. 130,309
-------------------------------------------------------------------------------- -------------
CONSUMER GOODS & RELATED--0.1%
--------------------------------------------------------------------------------
10,000 Edaran Otomobil Nasional 85,429
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.5%
--------------------------------------------------------------------------------
24,000 Commerce Asset Holdings Bhd 163,639
--------------------------------------------------------------------------------
47,000 Renong Berhad 81,811
--------------------------------------------------------------------------------
48,000 (a)Westmont Industries Berhad 103,959
-------------------------------------------------------------------------------- -------------
Total 349,409
-------------------------------------------------------------------------------- -------------
RETAIL--0.2%
--------------------------------------------------------------------------------
105,000 LARUT Consolidated Berhad 168,451
-------------------------------------------------------------------------------- -------------
TOTAL MALAYSIA 733,598
-------------------------------------------------------------------------------- -------------
MEXICO--0.8%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.0%
--------------------------------------------------------------------------------
35,200 (a)(b)Cemex SA, Class B, Warrants, 07/26/1996 369
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
MEXICO--CONTINUED
--------------------------------------------------------------------------------
CONSUMER BASICS--0.0%
--------------------------------------------------------------------------------
83,000 (a)(b)Cifra SA de CV Warrants, 03/08/1996 $ 2,117
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.5%
--------------------------------------------------------------------------------
3,200 (a)(b)Ceteco Holdings NV, ADR 135,215
--------------------------------------------------------------------------------
16,200 (a)(b)Grupo Carso SA de CV Warrants, 05/03/1996 486
--------------------------------------------------------------------------------
4,900 (a)Grupo Carso SA de CV, ADR 74,936
--------------------------------------------------------------------------------
38,000 Grupo Financiero Banamex, Class B 87,558
--------------------------------------------------------------------------------
1,140 (a)Grupo Financiero Banamex, Class L 2,341
--------------------------------------------------------------------------------
9,800 (a)Grupo Industrial Durango, S.A. de C.V. Sponsored ADR 75,950
-------------------------------------------------------------------------------- -------------
Total 376,486
-------------------------------------------------------------------------------- -------------
INDUSTRIAL & RELATED--0.3%
--------------------------------------------------------------------------------
11,000 Apasco SA de CV 59,663
--------------------------------------------------------------------------------
18,700 Corporacion Industrial Sanluis, S.A. de C.V.--CPO 109,733
--------------------------------------------------------------------------------
500 Corporacion Industrial Sanluis, S.A. de C.V., ADR 17,625
-------------------------------------------------------------------------------- -------------
Total 187,021
-------------------------------------------------------------------------------- -------------
TOTAL MEXICO 565,993
-------------------------------------------------------------------------------- -------------
NETHERLANDS--0.3%
--------------------------------------------------------------------------------
FOOD & BEVERAGE--0.3%
--------------------------------------------------------------------------------
2,200 Nutricia Vereenigde Bedrijven N.V. 235,086
-------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--0.0%
--------------------------------------------------------------------------------
1,130 IS Himalayan Fund N.V. Warrants, 12/31/1996 429
-------------------------------------------------------------------------------- -------------
TOTAL NETHERLANDS 235,515
-------------------------------------------------------------------------------- -------------
PERU--0.2%
--------------------------------------------------------------------------------
REAL ESTATE--0.1%
--------------------------------------------------------------------------------
260,000 (a)(b)Peru Real Estate S.A. 93,600
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
PERU--CONTINUED
--------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.1%
--------------------------------------------------------------------------------
41,275 Telefonica Del Peru CPT, Class B $ 92,283
-------------------------------------------------------------------------------- -------------
TOTAL PERU 185,883
-------------------------------------------------------------------------------- -------------
PHILIPPINES--0.1%
--------------------------------------------------------------------------------
OIL RELATED--0.1%
--------------------------------------------------------------------------------
700,000 (a)Belle Corp. 102,981
-------------------------------------------------------------------------------- -------------
POLAND--0.7%
--------------------------------------------------------------------------------
BANKING--0.3%
--------------------------------------------------------------------------------
5,310 Bank Rozwoju Eksportu S.A. 126,737
--------------------------------------------------------------------------------
730 Bank Slaski S.A. 54,603
-------------------------------------------------------------------------------- -------------
Total 181,340
-------------------------------------------------------------------------------- -------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
12,824 (a)Mostostal Export 37,597
-------------------------------------------------------------------------------- -------------
CAPITAL GOODS--0.1%
--------------------------------------------------------------------------------
3,000 (a)Debica S.A. 71,039
-------------------------------------------------------------------------------- -------------
CONSUMER GOODS & RELATED--0.1%
--------------------------------------------------------------------------------
785 Zyweic Powowarskiew PLZ 64,913
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
12,000 Elektrim Spolka Akcyina S.A. 76,677
-------------------------------------------------------------------------------- -------------
TOTAL POLAND 431,566
-------------------------------------------------------------------------------- -------------
RUSSIA--0.1%
--------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.1%
--------------------------------------------------------------------------------
10,060 (a)Petersburg Long Distance, Inc. 50,300
-------------------------------------------------------------------------------- -------------
SINGAPORE--0.2%
--------------------------------------------------------------------------------
BANKING--0.1%
--------------------------------------------------------------------------------
200 (a)Slovenia Kredit Bank 41,646
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
SINGAPORE--CONTINUED
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
135,000 (b)China North Industries Investment Ltd. $ 78,300
-------------------------------------------------------------------------------- -------------
TOTAL SINGAPORE 119,946
-------------------------------------------------------------------------------- -------------
SOUTH AFRICA--0.9%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
9,000 Sasol Ltd. 95,000
-------------------------------------------------------------------------------- -------------
ENTERTAINMENT--0.1%
--------------------------------------------------------------------------------
61,000 Sun International (South Africa) Ltd. 76,815
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.2%
--------------------------------------------------------------------------------
6,000 Barlow Limited 69,097
--------------------------------------------------------------------------------
310 (a)Dimension Data Holdings Ltd. 431
--------------------------------------------------------------------------------
4,500 Free State Consolidated Gold Mines Ltd. 48,958
--------------------------------------------------------------------------------
6,000 Malbak Limited 29,167
-------------------------------------------------------------------------------- -------------
Total 147,653
-------------------------------------------------------------------------------- -------------
INDUSTRIAL & RELATED--0.1%
--------------------------------------------------------------------------------
400 Anglo American Coal Corp. Ltd. 30,093
--------------------------------------------------------------------------------
900 Anglo American Industrial Corp., Ltd. 41,042
-------------------------------------------------------------------------------- -------------
Total 71,135
-------------------------------------------------------------------------------- -------------
INSURANCE--0.1%
--------------------------------------------------------------------------------
25,000 LibLife Strategic Investments Ltd. 82,465
-------------------------------------------------------------------------------- -------------
PHARMACEUTICALS--0.1%
--------------------------------------------------------------------------------
3,900 South African Druggists Ltd. 37,014
-------------------------------------------------------------------------------- -------------
RETAIL--0.1%
--------------------------------------------------------------------------------
9,914 (a)JD Group, Ltd. 48,193
-------------------------------------------------------------------------------- -------------
TECHNOLOGY--0.1%
--------------------------------------------------------------------------------
5,300 Q Data Ltd. 67,477
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
SOUTH AFRICA--CONTINUED
--------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.0%
--------------------------------------------------------------------------------
140,000 Telkom Sa Ltd., Deb., Series 7, 13%, 6/30/1996 $ 32,278
-------------------------------------------------------------------------------- -------------
TOTAL SOUTH AFRICA 658,030
-------------------------------------------------------------------------------- -------------
SRI LANKA--0.0%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.0%
--------------------------------------------------------------------------------
1,360 (a)Sri Lanka Growth Fund Warrants, 03/01/1998 272
-------------------------------------------------------------------------------- -------------
TAIWAN--0.0%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.0%
--------------------------------------------------------------------------------
1,904 (a)Tuntex Distinct Corp., GDR 15,470
-------------------------------------------------------------------------------- -------------
THAILAND--0.6%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--0.2%
--------------------------------------------------------------------------------
19,000 (a)Hana Microelectronics Co., Ltd. 109,133
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
40,000 MDX Public Co., Ltd.,--Foreign 62,588
-------------------------------------------------------------------------------- -------------
TRANSPORTATION--0.2%
--------------------------------------------------------------------------------
20,000 Precious Shipping, Ltd. 109,331
-------------------------------------------------------------------------------- -------------
UNASSIGNED--0.1%
--------------------------------------------------------------------------------
16,800 TPI Polene Co., Ltd. 92,503
-------------------------------------------------------------------------------- -------------
TOTAL THAILAND 373,555
-------------------------------------------------------------------------------- -------------
TURKEY--0.3%
--------------------------------------------------------------------------------
BASIC GOODS--0.1%
--------------------------------------------------------------------------------
701,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 76,358
-------------------------------------------------------------------------------- -------------
CONSUMER GOODS & RELATED--0.2%
--------------------------------------------------------------------------------
213 Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A. 53
--------------------------------------------------------------------------------
99,600 Migros Turk 113,783
-------------------------------------------------------------------------------- -------------
Total 113,836
-------------------------------------------------------------------------------- -------------
TOTAL TURKEY 190,194
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
EMERGING MARKETS SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
<C> <S> <C>
URUGUAY--0.1%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
4,200 (a)Banco Comercial S.A., GDR $ 64,050
-------------------------------------------------------------------------------- -------------
TOTAL EMERGING MARKETS SECTOR (IDENTIFIED COST $3,192,025) 6,696,256
-------------------------------------------------------------------------------- -------------
PRECIOUS METALS SECTOR/METAL MINING SECURITIES--1.4%
-----------------------------------------------------------------------------------------------
CANADA--1.4%
--------------------------------------------------------------------------------
137,400 (a)Dayton Mining Corp. 961,800
-------------------------------------------------------------------------------- -------------
TOTAL PRECIOUS METALS SECTOR/METAL MINING SECURITIES
(IDENTIFIED COST $755,789) 961,800
-------------------------------------------------------------------------------- -------------
U.S. FIXED INCOME SECURITIES SECTOR--6.7%
------------------------------------------------------------------------------------------------
GOVERNMENT/AGENCY--6.7%
--------------------------------------------------------------------------------
$ 412,967 FNMA Pool 303630, 6.00%, 11/1/2002 399,670
--------------------------------------------------------------------------------
496,776 GNMA Pool 352309, 6.50%, 3/15/2024 467,004
--------------------------------------------------------------------------------
303,063 GNMA Pool 386475, 6.50%, 5/15/2024 284,900
--------------------------------------------------------------------------------
320,000 United States Treasury Bond, 10.75%, 05/15/2003 393,900
--------------------------------------------------------------------------------
350,000 United States Treasury Bond, 10.75%, 08/15/2005 187,362
--------------------------------------------------------------------------------
375,000 United States Treasury Bond, 7.50%, 11/15/2024 396,210
--------------------------------------------------------------------------------
700,000 United States Treasury Note, 5.125%, 11/30/1998 683,067
--------------------------------------------------------------------------------
510,000 United States Treasury Note, 5.625%, 10/31/1997 508,088
--------------------------------------------------------------------------------
130,000 United States Treasury Note, 5.75%, 10/31/2000 126,790
--------------------------------------------------------------------------------
100,000 United States Treasury Note, 6.125%, 05/15/1998 100,125
--------------------------------------------------------------------------------
400,000 United States Treasury Note, 6.25%, 02/15/2003 393,000
--------------------------------------------------------------------------------
130,000 United States Treasury Note, 6.25%, 05/31/2000 129,431
--------------------------------------------------------------------------------
160,000 United States Treasury Note, 7.125%, 09/30/1999 164,000
--------------------------------------------------------------------------------
380,000 United States Treasury Note, 7.875%, 08/15/2001 403,988
--------------------------------------------------------------------------------
350,000 United States Treasury Receipt IO Strip, 02/15/2005 194,594
-------------------------------------------------------------------------------- -------------
TOTAL U.S. FIXED INCOME SECURITIES SECTOR (IDENTIFIED COST
$4,992,123) 4,832,129
-------------------------------------------------------------------------------- -------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN FIXED INCOME SECURITIES SECTOR--9.2%
-----------------------------------------------------------------------------------------------
<C> <S> <C>
AUSTRALIA--0.2%
--------------------------------------------------------------------------------
150,000 Australian Government, Bond, 7.50%, 7/15/2005 $ 109,256
-------------------------------------------------------------------------------- -------------
DENMARK--0.8%
--------------------------------------------------------------------------------
3,310,000 Denmark--Bullet, Bond, 8.00%, 3/15/2006 591,560
-------------------------------------------------------------------------------- -------------
FRANCE--2.2%
--------------------------------------------------------------------------------
230,000 France O.A.T., Deb., 9.50%, 4/25/2000 320,292
--------------------------------------------------------------------------------
5,100,000 French Treasury Bill, 5.75%, 3/12/1998 1,010,910
--------------------------------------------------------------------------------
1,200,000 French Treasury Bill, 7.00%, 11/12/1999 246,827
-------------------------------------------------------------------------------- -------------
Total 1,578,029
-------------------------------------------------------------------------------- -------------
GERMANY--1.6%
--------------------------------------------------------------------------------
1,140,000 Deutschland Republic, Bond, 6.00%, 1/5/2006 727,235
--------------------------------------------------------------------------------
550,000 Deutschland Republic, Deb., 6.25%, 1/4/2024 323,267
--------------------------------------------------------------------------------
165,000 Germany (Fed Republic), 6.50%, 7/15/2003 111,013
-------------------------------------------------------------------------------- -------------
Total 1,161,515
-------------------------------------------------------------------------------- -------------
ITALY--1.1%
--------------------------------------------------------------------------------
880,000,000 Buoni Poliennali Del Tes, Deb., 10.5%, 4/15/1998 579,775
--------------------------------------------------------------------------------
310,000,000 Italy (Republic of), Deb., 10.50%, 4/1/2005 208,605
-------------------------------------------------------------------------------- -------------
Total 788,380
-------------------------------------------------------------------------------- -------------
SPAIN--1.3%
--------------------------------------------------------------------------------
104,600,000 Bonos Y Oblig. Del Estado, 12.25%, 3/25/2000 926,927
-------------------------------------------------------------------------------- -------------
SWEDEN--0.4%
--------------------------------------------------------------------------------
1,600,000 Sweden (Kingdom of), 10.25%, 5/5/2000 259,467
-------------------------------------------------------------------------------- -------------
UNITED KINGDOM--1.6%
--------------------------------------------------------------------------------
280,000 UK Treasury, 8.00%, 12/7/2000 431,507
--------------------------------------------------------------------------------
190,000 UK Treasury, 9.75%, 8/27/2002 314,438
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR
AMOUNT OR
CONTRACTS VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- -------------
FOREIGN FIXED INCOME SECURITIES SECTOR--CONTINUED
-----------------------------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
--------------------------------------------------------------------------------
280,000 United Kingdom Treasury, 6.75%, 11/26/2004 $ 390,147
-------------------------------------------------------------------------------- -------------
Total 1,136,092
-------------------------------------------------------------------------------- -------------
TOTAL FOREIGN FIXED INCOME SECURITIES SECTOR
(IDENTIFIED COST $6,761,921) 6,551,226
-------------------------------------------------------------------------------- -------------
OPTIONS--0.0%
------------------------------------------------------------------------------------------------
1,206,900 (a)Euro Style Put option on Denmark, expires 7/2/1996 strike at 1.49 (IDENTIFIED
COST $11,892) 23,336
-------------------------------------------------------------------------------- -------------
(C)REPURCHASE AGREEMENT--4.6%
-----------------------------------------------------------------------------------------------
3,239,218 Merrill Lynch, Pierce, Fenner and Smith, Inc., 5.25%,
dated 4/30/1996, due 5/1/1996 (AT AMORTIZED COST) 3,239,218
-------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $62,878,225)(D) $ 70,852,140
-------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal and International Securities laws. At the end of the period,
these securities amounted to $607,852 which represents 0.9% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $63,064,217. The
net unrealized appreciation of investments on a federal tax basis amounts to
$7,787,923 which is comprised of $10,608,516 appreciation and $2,820,593
depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($71,181,571) at April 30, 1996.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
ADR--American Depositary Receipt
FNMA--Federal National Mortgage Association
GDR--Global Depository Receipts
GNMA--Government National Mortgage Association
IO--Interest Only
LTD--Limited
PLC--Public Limited Company
STRIP--Separate Trading of Registered Interest & Principal of Securities
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GLOBAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $62,878,225
and tax cost $63,064,217) $ 70,852,140
- --------------------------------------------------------------------------------------------------
Cash 1,035,794
- --------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at cost, $4,280) 4,280
- --------------------------------------------------------------------------------------------------
Income receivable 350,548
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 1,588,619
- --------------------------------------------------------------------------------------------------
Receivable for shares sold 56,200
- --------------------------------------------------------------------------------------------------
Net receivable for forward foreign currency exchange contracts sold 29,903
- -------------------------------------------------------------------------------------------------- -------------
Total assets 73,917,484
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Payable for investments purchased $ 2,322,252
- -----------------------------------------------------------------------------------
Payable for shares redeemed 145,107
- -----------------------------------------------------------------------------------
Payable for foreign taxes withheld 9,368
- -----------------------------------------------------------------------------------
Net payable for forward foreign currency exchange contracts purchased 51,260
- -----------------------------------------------------------------------------------
Accrued expenses 207,926
- ----------------------------------------------------------------------------------- -------------
Total liabilities 2,735,913
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS FOR 6,171,216 shares outstanding $ 71,181,571
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid in capital $ 57,826,852
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 7,936,892
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 5,518,509
- --------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (100,682)
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 71,181,571
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
$71,181,571 / 6,171,216 shares outstanding $11.53
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GLOBAL GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $48,141) $ 1,333,099
- ---------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $14,614) 953,991
- --------------------------------------------------------------------------------------------------- -------------
Total income 2,287,090
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Management fee $ 783,420
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 70,488
- ---------------------------------------------------------------------------------------
Custodian fees 129,589
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 165,518
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 19,217
- ---------------------------------------------------------------------------------------
Auditing fees 37,322
- ---------------------------------------------------------------------------------------
Legal fees 17,601
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 87,019
- ---------------------------------------------------------------------------------------
Distribution services fee 586,707
- ---------------------------------------------------------------------------------------
Share registration costs 12,884
- ---------------------------------------------------------------------------------------
Printing and postage 78,742
- ---------------------------------------------------------------------------------------
Insurance premiums 415
- ---------------------------------------------------------------------------------------
Miscellaneous 2,308
- --------------------------------------------------------------------------------------- ----------
Total expenses 1,991,230
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 295,860
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 8,019,815
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 5,636,916
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments and foreign currency 13,656,731
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 13,952,591
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GLOBAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 295,860 $ 745,393
- -----------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions
($5,881,028 net gain and $293,056 net loss, respectively, as computed for
federal tax purposes) 8,019,815 (3,163,377)
- -----------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 5,636,916 786,906
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 13,952,591 (1,631,078)
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------
Distributions from net investment income (295,860) --
- -----------------------------------------------------------------------------
Distributions in excess of net investment income (274,732) --
- -----------------------------------------------------------------------------
Distributions in excess of net realized gains on investments
and foreign currency transactions -- (2,156,307)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from
distributions to shareholders (570,592) (2,156,307)
- ----------------------------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 5,765,409 17,005,687
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 548,261 2,049,709
- -----------------------------------------------------------------------------
Cost of shares redeemed (35,601,975) (37,985,576)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions (29,288,305) (18,930,180)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets (15,906,306) (22,717,565)
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 87,087,877 109,805,442
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 71,181,571 $ 87,087,877
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GLOBAL GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.71 $ 10.04 $ 10.00 $ 9.92 $ 9.64 $ 9.62 $ 10.11 $ 9.68 $ 10.51
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.04 0.08 0.03 0.25 0.33 0.30 0.30 0.22 0.14
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.86 (0.19) 1.29 0.32 0.26 0.14 0.09 0.49 (0.21)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 1.90 (0.11) 1.32 0.57 0.59 0.44 0.39 0.71 (0.07)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income (0.04) -- -- (0.30) (0.31) (0.21) (0.38) (0.10) (0.12)
- ------------------------------
Distributions in excess of
net investment income(b) (0.04) -- -- -- -- -- -- -- --
- ------------------------------
Distributions from net
realized gains and foreign
currency transactions -- -- (1.28) (0.19) -- (0.21) (0.50) (0.18) (0.64)
- ------------------------------
Distributions in excess of
net realized gains and
foreign currency
transactions(b) -- (0.22) -- -- -- -- -- -- --
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.08) (0.22) (1.28) (0.49) (0.31) (0.42) (0.88) (0.28) (0.76)
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.53 $ 9.71 $ 10.04 $ 10.00 $ 9.92 $ 9.64 $ 9.62 $ 10.11 $ 9.68
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(C) 19.68% (1.04%) 12.91% 6.08% 6.24% 4.61% 3.74% 7.54% (0.57%)
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 2.54% 2.51% 2.61% 2.40% 2.31% 2.36% 2.28% 2.29% 2.28%
- ------------------------------
Net investment income 0.38% 0.76% 0.67% 1.72% 2.31% 2.84% 2.86% 2.27% 1.42%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $71,182 $87,088 $109,805 $84,780 $128,047 $193,593 $233,300 $244,048 $246,569
- ------------------------------
Portfolio turnover 91% 221% 166% 138% 109% 78% 88% 85% 120%
- ------------------------------
<CAPTION>
<S> <C>
1987(A)
NET ASSET VALUE, BEGINNING OF
PERIOD $ 8.00
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.01
- ------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 2.50
- ------------------------------ -----------
Total from investment
operations 2.51
- ------------------------------ -----------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income --
- ------------------------------
Distributions in excess of
net investment income(b) --
- ------------------------------
Distributions from net
realized gains and foreign
currency transactions --
- ------------------------------
Distributions in excess of
net realized gains and
foreign currency
transactions(b) --
- ------------------------------ -----------
Total distributions --
- ------------------------------ -----------
NET ASSET VALUE, END OF PERIOD $ 10.51
- ------------------------------ -----------
TOTAL RETURN(C) 31.38%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 3.10%
- ------------------------------
Net investment income 0.34%*
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted)
$149,018
- ------------------------------
Portfolio turnover 70%
- ------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Represents period from June 1, 1986 (commencement of the Fund's operations)
to April 30, 1987.
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD GLOBAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial statements included herein are
only those of Blanchard Global Growth Fund (the "Fund"), a non-diversified
portfolio. The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The Fund's
investment objective is long-term capital growth.
(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--U.S. government securities, listed corporate bonds,
other fixed income and asset-backed securities, and unlisted and private
placement securities are generally valued at the mean of the latest bid and
asked price as furnished by an independent pricing service. Foreign
government and corporate bonds are valued at the last sales price reported
on a national exchange. If the last sales price is not available the
securities are valued at the mean of the latest bid and ask price as
furnished by an independent pricing service. Listed foreign and domestic
equity securities are valued at the last sale price reported on a national
securities exchange. Short-term foreign and domestic securities are valued
at the prices provided by an independent pricing service. However,
short-term foreign and domestic securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in open-end regulated
investment companies are valued at net asset value. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date. Certain dividends from foreign securities may be recorded after the
ex-dividend date based upon when information becomes available to the Fund.
Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, options, passive foreign investment company
adjustments, and forward contracts. The following reclassifications have
been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S> <C> <C>
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
$(126,092) $ 1,596,742 $ (1,470,650)
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of 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.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--The Fund invests in securities of non-U.S.
issuers. The political or economic developments within a particular country
or region may have an adverse effect on the ability of domiciled issuers to
meet their obligations. Additionally, political or economic developments
may have an effect on the liquidity and volatility of portfolio securities
and currency holdings.
FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts to meet
the terms of their commitments and from unanticipated movements in security
prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any
gains or losses are recorded for financial statement purpose as unrealized
until the settlement date.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
At April 30, 1996, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE AT APPRECIATION
DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
CONTRACTS PURCHASED
French Franc 4/30/96 1,133,013 220,968 219,258 (1,710)
- ---------------------------
Pound Sterling 5/1/96 100,313 151,223 151,007 (216)
- ---------------------------
Pound Sterling 5/7/96 76,506 115,486 115,168 (318)
- ---------------------------
Austrian Schilling 5/15/96 1,241,000 123,606 115,401 (8,205)
- ---------------------------
Austrian Schilling 5/15/96 1,186,000 114,556 110,286 (4,270)
- ---------------------------
Australian Dollar 5/16/96 87,000 65,362 68,277 2,915
- ---------------------------
Canadian Dollar 6/18/96 793,000 579,678 582,941 3,263
- ---------------------------
Deutsche Mark 5/20/96 880,000 584,329 575,475 (8,854)
- ---------------------------
Deutsche Mark 5/20/96 1,537,000 1,020,991 1,005,120 (15,871)
- ---------------------------
Deutsche Mark 5/20/96 92,000 60,033 60,164 131
- ---------------------------
Danish Krone 5/13/96 1,248,000 216,272 211,582 (4,690)
- ---------------------------
Danish Krone 5/13/96 1,575,000 271,941 267,002 (4,919)
- ---------------------------
Spanish Peseta 7/11/96 42,660,000 342,830 334,002 (8,828)
- ---------------------------
Spanish Peseta 7/11/96 12,500,000 99,000 97,867 (1,133)
- ---------------------------
Spanish Peseta 7/11/96 16,593,000 131,201 129,913 (1,288)
- ---------------------------
French Franc 6/17/96 3,773,000 741,257 731,705 (9,552)
- ---------------------------
French Franc 6/17/96 2,719,000 532,084 527,302 (4,782)
- ---------------------------
Pound Sterling 7/9/96 142,000 216,266 213,528 (2,738)
- ---------------------------
Pound Sterling 7/9/96 105,000 159,148 157,890 (1,258)
- ---------------------------
Italian Lira 7/19/96 1,422,755,000 896,675 903,945 7,270
- ---------------------------
Japanese Yen 5/9/96 92,926,000 867,154 889,483 22,329
- ---------------------------
Swedish Krona 6/11/96 60,000 8,995 8,835 (160)
- ---------------------------
European
Currency Unit 5/13/96 277,000 348,710 340,334 (8,376)
- --------------------------- --------------- ------------ -----------------
$ 7,867,765 $ 7,816,505 $ (51,260)
--------------- ------------ -----------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE AT APPRECIATION
DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
CONTRACTS SOLD
Australian Dollar 5/6/96 148,727 $ 116,751 $ 116,833 $ (82)
- -------------------------
Deutsche Mark 4/30/96 91,914 59,898 60,039 (141)
- -------------------------
French Franc 4/30/96 496,715 97,481 96,123 1,358
- -------------------------
Japanese Yen 5/7/96 9,709,211 92,363 92,818 (455)
- -------------------------
South African Rand 5/9/96 146,021 33,460 33,801 (341)
- -------------------------
Austrian Schilling 5/15/96 1,186,000 120,528 110,285 10,243
- -------------------------
Canadian Dollar 6/18/96 280,000 204,768 205,830 (1,062)
- -------------------------
Deutsche Mark 5/20/96 3,066,000 2,036,898 2,005,009 31,889
- -------------------------
Deutsche Mark 5/20/96 1,128,000 749,303 737,656 11,647
- -------------------------
Danish Krone 5/13/96 1,364,000 238,837 231,248 7,589
- -------------------------
Danish Krone 5/13/96 2,043,000 357,762 346,364 11,398
- -------------------------
Spanish Peseta 7/11/96 144,622,000 1,151,999 1,132,302 19,697
- -------------------------
French Franc 6/17/96 5,457,000 1,074,213 1,058,288 15,925
- -------------------------
French Franc 6/17/96 5,230,000 1,023,463 1,014,264 9,199
- -------------------------
Pound Sterling 7/9/96 347,000 528,481 521,790 6,691
- -------------------------
Pound Sterling 7/9/96 245,000 370,262 368,411 1,851
- -------------------------
Pound Sterling 7/9/96 100,000 150,590 150,372 218
- -------------------------
Italian Lira 7/19/96 1,185,178,000 744,085 753,002 (8,917)
- -------------------------
Japanese Yen 7/9/96 195,580,000 1,842,487 1,887,448 (44,961)
- -------------------------
Japanese Yen 7/9/96 211,478,800 1,991,326 2,040,879 (49,553)
- -------------------------
Swedish Krona 6/11/96 993,000 147,231 146,220 1,011
- -------------------------
Swedish Krona 6/11/96 954,000 141,093 140,477 616
- -------------------------
European
Currency Unit 5/13/96 277,000 346,416 340,333 6,083
- ------------------------- --------------- ------------- -----------------
$ 13,619,695 $ 13,589,792 $ 29,903
--------------- ------------- -----------------
</TABLE>
OPTIONS CONTRACTS--The Fund may write option contracts. A written option
obligates the Fund to deliver (a call), or to receive (a put), the contract
amount upon exercise by the holder of the option. The value of the option
contract is recorded as a liability and unrealized gain or loss is measured
by the difference between the current value and the premium received. For
the period ended April 30, 1996, the Fund had a realized loss of $89,540 on
written options.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
The following is a summary of the Fund's written option activity:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
CONTRACTS CONTRACTS FACE VALUE
<S> <C> <C>
Outstanding at April 30, 1995 -- $ --
- -----------------------------------------------------------------------------------
Contracts opened 1,932,125 11,065
- -----------------------------------------------------------------------------------
Contracts closed 1,932,125 11,065
- ----------------------------------------------------------------------------------- ------------- -------------
Outstanding at April 30, 1996 -- $ --
- ----------------------------------------------------------------------------------- ------------- -------------
</TABLE>
The Funds may purchase put options on foreign currencies to increase a
Fund's gross income and for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be
acquired. The risk associated with purchasing an option is that the Fund
pays a premium whether or not the option is execised. Additionally, the
Fund bears the risk of loss of premium and change in market value should
the counterparty not perform under the contract. Put options purchased are
accounted for in the same manner as portfolio securities.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal or international securities laws
or in transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for resale,
at the issuer's expense either upon demand by the Fund or in connection
with another registered offering of the securities. Many restricted
securities may be resold in the secondary market in transactions exempt
from registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Trustees. The Fund will
not incur any registration costs upon such resales.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
Additional information on each restricted security held at April 30, 1996
is as follows:
<TABLE>
<CAPTION>
Security Acquisition Date(s) Acquisition Cost
<S> <C> <C>
Cemex SA, Class B, Warrants 9/18/95 $ 84,499
Ceteco Holdings NV, ADR 7/1/94-8/18/94 74,423
China North Industries
Investment Ltd. 10/3/94 140,576
Cifra SA De CV Warrants 8/3/94 64,989
Daewoo Heavy Industries, Pfd. 9/15/95 49,952
DCW, Ltd., GDR 10/24/94-10/27/94 71,500
Dong Bang Forwarding Co. 2/3/95-5/29/95 74,380
Grupo Carso SA de CV Warrants 4/15/95-9/15/94 43,548
Kekut Asranyiz, GDR 9/18/95 110,580
LA Cemento Nacional C.A., GDR 9/24/94 91,503
Peru Real Estate S.A. 3/15/95-4/19/95 198,449
PT Concord Benefit Enterprise 9/19/95 57,798
Rhodia-Ster S.A. 12/20/94-9/25/95 91,642
Star Paging International Holding,
Ltd. Warrants 9/19/95 3,877
</TABLE>
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.
OTHER--Investment transactions are accounted for on the trade date.
(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 (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
Shares sold 559,635 1,720,511
- -----------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 52,311 219,892
- -----------------------------------------------------------------------------
Shares redeemed (3,413,086) (3,905,000)
- ----------------------------------------------------------------------------- ---------------- ----------------
Net change resulting from share transactions (2,801,140) (1,964,993)
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
(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
1.00% of the Fund's first $150 million of average daily net assets, 0.875%
of the Fund's average daily net assets in excess of $150 million but not
exceeding $300 million and 0.75% of the Fund's average daily net assets in
excess of $300 million.
Virtus Capital Management Inc. became the Fund's manager on July 12, 1995.
Prior to
July 12, 1995, Sheffield Management Company served as the Fund's investment
adviser and received for its services an annual management fee equal to
1.00% of the Fund's first $150 million of average daily net assets, 0.875%
of the Fund's average daily net assets in excess of $150 million but not
exceeding $300 million and 0.75% of the Fund's average daily net assets in
excess of $300 million.
For the period ended April 30, 1996, the managers earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
MANAGER NAME FEE EARNED
Sheffield Management Company $ 171,279
<S> <C>
- ----------------------------------------------------------------------------------------------
Virtus Capital Management Inc. $ 612,141
- -----------------------------------------------------------------------------------------------
</TABLE>
Under the terms of a sub-advisory agreement between the Manager and Shuffro Rose
& Ehrman (U.S. Equity Sector), Fiduciary Trust International, Inc. (Foreign
Equities Sector and Foreign Fixed Income Sector), Investment Advisors, Inc.
(U.S. Fixed Income Sector), Cavelti Capital Management, Ltd. (Precious Metals
Securities and Bullion Sector), and Martin Currie Inc. (Emerging Markets
Sector), (the "Portfolio Advisers"). The Portfolio Advisers receive an annual
fee from the Adviser equal to approximately 35% of the advisory fee paid to the
Manager by the Fund.
As of May 24, 1996, Mellon Capital Management Corp. became the Fund's sole
sub-advisor.
For the year ended April 30, 1996, the Fund paid brokerage commissions of
$40,660 to Shufro, Rose and Ehrman.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period. FAS
may voluntarily choose to waive a portion of its fee.
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 Fund shares. The Plan provides that the Fund may incur
distribution expenses up to 0.75% of the average daily net assets of the Fund,
annually, to reimburse FSC.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
FSC became the Fund's principal distributor on July 12, 1995. Prior to July 12,
1995. Sheffield Investments, Inc. served as the Funds principal distributor and
received for its services an annual distribution fee equal to 0.75% of the
Fund's average daily net assets.
<TABLE>
<CAPTION>
AMOUNT OF
DISTRIBUTOR NAME FEE EARNED
<S> <C>
Sheffield Investments, Inc. $ 128,620
- ---------------------------------------------------------------------------------------------------
Federated Securities Corp. 458,087
- ---------------------------------------------------------------------------------------------------
</TABLE>
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company serves as transfer and dividend disbursing agent for the Fund. The fee
paid to FServ is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ became the Fund's transfer agent on October 15, 1995. Prior to October 15,
1995, United States Trust Company of New York served as the Fund's transfer
agent for which it received a fee.
For the year ended April 30, 1996, the transfer agents earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
TRANSFER AGENT FEE EARNED
<S> <C>
United States Trust Company of New York $ 147,968
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 17,550
- ---------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
FServ became the Fund's portfolio accountant on October 15, 1995. Prior to
October 15, 1995, Mutual Fund Services Company served as the Fund's portfolio
accountant for which it received a fee.
For the year ended April 30, 1996, the portfolio accountants earned fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF
PORTFOLIO ACCOUNTANT FEE EARNED
<S> <C>
Mutual Funds Services Company $ 47,045
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 39,974
- ---------------------------------------------------------------------------------------------------
</TABLE>
CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee is based on
the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
Signet Trust Company became the Fund's custodian on October 15, 1995. Prior to
October 15, 1995, United States Trust Company of New York served as the Fund's
custodian for which it received a fee.
BLANCHARD GLOBAL GROWTH FUND
- --------------------------------------------------------------------------------
For the year ended April 30, 1996, the custodians earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
CUSTODIAN FEE EARNED
<S> <C>
United States Trust Company of New York $ 94,981
- ---------------------------------------------------------------------------------------------------
Signet Trust Company $ 34,608
- ---------------------------------------------------------------------------------------------------
</TABLE>
DIRECTORS'/TRUSTEES' FEES--Prior to the acquisition of the 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 Directors'/ Trustees' Fees in the
Statement of Operations for the year ended April 30, 1996 was $15,542.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
April 30, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 69,972,176
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 108,282,076
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of BLANCHARD FUNDS
and the Shareholders of BLANCHARD GLOBAL GROWTH FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Blanchard Global Growth Fund as of April 30,
1996, and the related statements of operations and changes in net assets, and
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended April 30, 1995 and the financial highlights for the nine
years in the period ended April 30, 1995 were audited by other auditors, whose
reports thereon dated June 20, 1995, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of April 30, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blanchard Global Growth Fund as of
April 30, 1996, the results of its operations, the changes in its net assets and
its financial highlights for the year then ended in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 19, 1996
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.
[This Page Intentionally Left Blank]
Portfolio Adviser
Mellon Capital
Management Corp.*
Blanchard
Global
Growth Fund
*Effective May 28, 1996.
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.
(2021)
CUSIP 093265106
G01684-01 (6/96)
Blanchard
Global
Growth Fund
Annual Report
April 30, 1996
Managed by: Virtus Capital Management
President's Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Short-Term Flexible
Income Fund* for the fiscal year ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a performance update from OFFITBANK, a list of investments included
in the Fund, and the Fund's financial statements.
If you would like the most recent performance update for your 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,
Edward C. Gonzales
President
*Formerly the Blanchard Short-Term Bond Fund.
Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Short-Term Flexible
Income Fund for the fiscal year ended April 30, 1996.
After 1994's difficult bond market, 1995 handsomely rewarded fixed income
investors who had kept a long-term perspective for their investments. It
turned out to be one of the better years for bond performance in recent
history.
Your Blanchard Short-Term Flexible Income Fund benefited from this positive
environment, turning in an excellent 7.47% total return for the fiscal year
ended April 30, 1996, and maintaining a relatively stable share price.
More recently, the Fund was awarded Morningstar's highest 5-star rating for
risk-adjusted performance for the three years ended 5/31/96 in its category of
874 fixed income funds.*
The Value of a $10,000 Investment in the
Blanchard Short-Term Flexible Income Fund
from inception 4/16/93 through 4/30/96 as compared to the Merrill Lynch
Short-Term Government Corporate Index for the same period
Avg. Annual Returns through 4/30/96
Blanchard Short-Term Flexible
Income Fund*
1 year 7.47%
since inception (4/16/93) 5.47%
[GRAPHIC APPENDIX OMITTED, SEE APPENDIX E]
*The average annual returns quoted above reflect reinvestment of distributions.
If reflected, the return would be lower. Total return includes changes in
principal value. The average annual return is total return annualized and
compounded. Past performance is no guarantee of future results.
+Source: Merrill Lynch Short-Term Government Corporate Index is an unmanaged
index of corporate and government issues with maturities from 1 to 4.99 years.
Investments cannot be made in an index.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the Short-Term Flexible Income Fund, or the index.
Naturally, past performance is no guarantee of future performance. As with any
fixed income fund, investment return, yield and principal value will vary with
changing market conditions so that an investor's shares, when redeemed, may be
worth more or less than their original purchase price. Additionally, foreign
investments entail special currency, credit, interest rate and political risks
not associated with domestic investments.
Now, here's a closer look at how we employed the Fund's flexible, multi-sector
investment strategy to provide you with solid monthly yields, a positive total
return and relative share price stability throughout the past fiscal year.
The Year In Review
Interest rates declined throughout 1995 as fears of inflationary economic
growth receded. In the early part of 1996, however, rates began to tick back
up as news of renewed economic strength appeared.
Your Blanchard Short-Term Flexible Income Fund took advantage of investments in
the high-yield market, because as the economy improved, so did the quality and
attractiveness of the underlying companies that offer high-yield, higher-risk
securities. At the same time, we kept the average portfolio maturity short to
keep your share prices relatively stable and your principal investment safe.
What could we have done better? Hindsight being 20/20, if we had maintained a
longer maturity, the Fund would have benefited from additional share price
appreciation during 1995. In early 1996, the Fund did benefit from its more
conservative stance as interest rates rose. In addition, the Fund could have
benefited from a higher exposure to foreign markets, although we see very
little incentive to have foreign exposure in the Fund today.
Looking Ahead
Looking forward, we have become cautious. We think that interest rates have
the potential to rise globally over the coming year. With that forecast, we
feel that it is prudent to position the Fund in a conservative, insular manner.
Specifically, we will increase our exposure to the high-yield market, maintain
no exposure to the European markets, and keep the high grade portion of the
portfolio with a short duration. In other words, we are looking to insulate
shareholders from a potential interest rate increase in 1996.
We believe that your Blanchard Short-Term Flexible Income Fund is an
intelligent choice for investors seeking to outperform the returns offered by
fixed-price money market funds and other cash investments, who are willing to
accept some principal fluctuation.
Based on the Fund's objective and our outlook for the coming year, we've made
the following adjustments to the portfolio as of 6/20/96: 82% U.S. fixed income
securities, 16% U.S. high-yield, 0% foreign, and 2% U.S. cash equivalents. We
maintain our commitment to quality with an average portfolio quality of "A",
and as mentioned, we're maintaining a conservative average portfolio maturity
of 2.45 years.
Thank you for your continued patronage. We look forward to serving you in the
months and years ahead.
Sincerely,
Jack D. Burks
Managing Director of OFFITBANK
Portfolio Manager of the Blanchard
Short-Term Flexible Income Fund
*Morningstar proprietary ratings reflect risk-adjusted performance
through 5/31/96. The ratings are subject to change every month. Past
performance is not a guarantee of future results. Morningstar ratings are
calculated from the Fund's three year returns in excess of 90-day Treasury bill
returns, and a risk factor that reflects Fund performance below 90-day Treasury
bill returns. The one-year rating is calculated using the same methodology,
but is not a component of the overall rating. The Fund received 5 stars for
the one- and three-year periods respectively. It was rated among 1,458 and 874
fixed income funds for the one- and three-year periods, respectively. Ten
percent of the funds in a rating category receive 5 stars. The Fund's rating
does not reflect certain management fees which were waived during the period.
If reflected, they may have impacted the rating.
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
OR PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ---------------
FOREIGN FIXED INCOME--11.2%
- -------------------------------------------------------------------------------------------------
DENMARK--2.8%
--------------------------------------------------------------------------------
GOVERNMENT/AGENCY--2.8%
--------------------------------------------------------------------------------
26,500,000 Denmark, Foreign Gov't. Guarantee, 9.00%, 11/15/1998 $ 4,921,942
-------------------------------------------------------------------------------- ---------------
NETHERLANDS--5.0%
--------------------------------------------------------------------------------
GOVERNMENT/AGENCY--5.0%
--------------------------------------------------------------------------------
14,500,000 Netherlands Dutch Government, Foreign Gov't. Guarantee,
6.25%, 7/15/1998 8,883,630
-------------------------------------------------------------------------------- ---------------
GERMANY--1.7%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--1.7%
--------------------------------------------------------------------------------
2,000,000 Bayerische-Bayer Hypotheken-Und Wechsel-Bank Ag, Unsub.,
7.00%, 12/21/1998 2,997,516
-------------------------------------------------------------------------------- ---------------
UNITED KINGDOM--1.7%
--------------------------------------------------------------------------------
GOVERNMENT/AGENCY--1.7%
--------------------------------------------------------------------------------
2,052,000 United Kingdom Treasury, 7.25%, 3/30/1998 3,119,855
-------------------------------------------------------------------------------- ---------------
TOTAL FOREIGN FIXED INCOME (IDENTIFIED COST $20,611,177) 19,922,943
-------------------------------------------------------------------------------- ---------------
U.S. FIXED INCOME--37.9%
- -------------------------------------------------------------------------------------------------
AIRLINES--0.1%
--------------------------------------------------------------------------------
$ 200,000 USAir, Inc., 9.80%, 1/15/2000 194,250
-------------------------------------------------------------------------------- ---------------
BASIC INDUSTRY--0.4%
--------------------------------------------------------------------------------
700,000 Uniroyal Chemical Corp., Sr. Note, 9.00%, 9/1/2000 705,250
-------------------------------------------------------------------------------- ---------------
BASIC MATERIALS--0.5%
--------------------------------------------------------------------------------
500,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.25%, 4/1/1999 512,500
--------------------------------------------------------------------------------
400,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 417,000
-------------------------------------------------------------------------------- ---------------
Total 929,500
-------------------------------------------------------------------------------- ---------------
</TABLE>
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ---------------
U.S. FIXED INCOME--CONTINUED
- -------------------------------------------------------------------------------------------------
COMPUTER RELATED--0.4%
--------------------------------------------------------------------------------
$ 500,000 Unisys Corp., Deb., 9.50%, 7/15/1998 $ 491,250
--------------------------------------------------------------------------------
300,000 Unisys Corp., Sr. Note, 10.625%, 10/1/1999 301,125
-------------------------------------------------------------------------------- ---------------
Total 792,375
-------------------------------------------------------------------------------- ---------------
CONSUMER RELATED--1.9%
--------------------------------------------------------------------------------
500,000 Revlon Consumer Products Corp., Note, 9.375%, 4/1/2001 500,000
--------------------------------------------------------------------------------
500,000 Revlon Consumer Products Corp., Sr. Note, 9.50%, 6/1/1999 512,500
--------------------------------------------------------------------------------
2,530,000 RJR Nabisco, Inc., Note, 8.75%, 7/15/2007 2,462,479
-------------------------------------------------------------------------------- ---------------
Total 3,474,979
-------------------------------------------------------------------------------- ---------------
ELECTRICAL UTILITIES--0.6%
--------------------------------------------------------------------------------
1,000,000 Long Island Lighting Co., Deb., 7.30%, 7/15/1999 987,911
-------------------------------------------------------------------------------- ---------------
ENERGY & OIL RELATED--0.4%
--------------------------------------------------------------------------------
150,000 Texas New Mexico Power, 1st Mtg. Bond, 9.25%, 9/15/2000 155,824
--------------------------------------------------------------------------------
500,000 Triton Energy Corp., Sr. Sub. Disc. Note, 9.75%, 12/15/2000 483,750
-------------------------------------------------------------------------------- ---------------
Total 639,574
-------------------------------------------------------------------------------- ---------------
ENTERTAINMENT--2.6%
--------------------------------------------------------------------------------
1,000,000 Caesars World, Inc., Sr. Sub. Note, 8.875%, 8/15/2002 1,020,000
--------------------------------------------------------------------------------
2,500,000 Harrah's Operations, Inc., Sr. Sub. Note, 8.75%, 3/15/2000 2,562,500
--------------------------------------------------------------------------------
1,000,000 Time Warner Entertainment Corp. L.P., Note, 9.625%, 5/1/2002 1,104,527
-------------------------------------------------------------------------------- ---------------
Total 4,687,027
-------------------------------------------------------------------------------- ---------------
FINANCE--RETAIL--0.3%
--------------------------------------------------------------------------------
500,000 Scotsman Industries, Inc., Sr. Note, 9.50%, 12/15/2000 500,000
-------------------------------------------------------------------------------- ---------------
FINANCIAL SERVICES--8.4%
--------------------------------------------------------------------------------
2,094,357 CMC Securities Corp., Series 1993-A, Class A2, 7.50%, 2/25/2023 2,093,708
--------------------------------------------------------------------------------
718,317 Contimortgage, Series 1995-1, Class A1, 8.75%, 4/15/2007 718,317
--------------------------------------------------------------------------------
3,065,964 GE Capital Mortgage Services, Series 1992-12A, Class A4, 7.50%,
11/25/2018 3,069,796
--------------------------------------------------------------------------------
1,000,000 Lehman Brothers Holdings, Inc., Medium Term Note, 8.63%,
2/26/1999 1,045,357
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ---------------
U.S. FIXED INCOME--CONTINUED
- -------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
--------------------------------------------------------------------------------
$ 1,617,033 Merrill Lynch Mtg. Investors, Series 1990-I, Class A, 9.20%,
1/15/2011 $ 1,657,200
--------------------------------------------------------------------------------
500,000 Navistar Financial 1995-A Owner Trust, Sr. Sub. Note, 8.875%,
11/15/1998 507,500
--------------------------------------------------------------------------------
500,000 Presidential Life Corp., Sr. Note, 9.50%, 12/15/2000 517,500
--------------------------------------------------------------------------------
1,000,000 Reliance Group Holdings, Inc., Sr. Note, 9.00%, 11/15/2000 1,000,000
--------------------------------------------------------------------------------
2,027,564 The Money Store HEL Trust, Series 1995-A1, Class A1, 8.00%,
9/15/2005 2,033,262
--------------------------------------------------------------------------------
2,000,000 U.S. Leasing International, Sr. Note, 8.75%, 12/1/2001 2,159,758
-------------------------------------------------------------------------------- ---------------
Total 14,802,398
-------------------------------------------------------------------------------- ---------------
GOVERNMENT/AGENCY--13.9%
--------------------------------------------------------------------------------
10,000,000 (b)Federal Home Loan Mortgage, Discount Notes, 5.26%, 6/17/1996 9,932,360
--------------------------------------------------------------------------------
1,435,242 Federal National Mortgage Association, 9.50%, 11/1/2021 1,530,254
--------------------------------------------------------------------------------
2,007,596 Government National Mortgage Association, 10.00%, 6/15/2021 2,209,718
--------------------------------------------------------------------------------
3,283,948 Resolution Trust Corp., Series 1991-M7, Class A2, 8.15%, 1/25/2021 3,389,658
--------------------------------------------------------------------------------
2,794,812 (a)Resolution Trust Corp., Series 1992-3, Class A2, 7.02%, 9/25/2019 2,785,197
--------------------------------------------------------------------------------
1,738,795 (a)Resolution Trust Corp., Series 1992-3, Class A3, 6.98%, 5/25/2021 1,707,288
--------------------------------------------------------------------------------
1,945,980 (a)Resolution Trust Corp., Series 1992-6, Class A4, 7.49%, 11/25/2025 1,952,070
--------------------------------------------------------------------------------
1,098,746 Resolution Trust Corp., Series 1992-C1, Class A1, 8.80%, 8/25/2023 1,104,580
--------------------------------------------------------------------------------
27,592 (a)Resolution Trust Corp., Series 1992-M4, Class A2, 6.68%, 9/25/2021 27,385
-------------------------------------------------------------------------------- ---------------
Total 24,638,510
-------------------------------------------------------------------------------- ---------------
INDUSTRY RELATED--3.0%
--------------------------------------------------------------------------------
850,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 847,875
--------------------------------------------------------------------------------
700,000 Gaylord Container Corp., Sr. Note, 11.50%, 5/15/2001 728,000
--------------------------------------------------------------------------------
500,000 PDV America, Sr. Note, 7.25%, 8/1/1998 486,980
--------------------------------------------------------------------------------
500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 493,750
--------------------------------------------------------------------------------
500,000 Sequa Corp., Sr. Note, 8.75%, 12/15/2001 485,000
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ---------------
U.S. FIXED INCOME--CONTINUED
- -------------------------------------------------------------------------------------------------
INDUSTRY RELATED--CONTINUED
--------------------------------------------------------------------------------
$ 250,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 239,062
--------------------------------------------------------------------------------
200,000 Stone Container Corp., Sr. Sub. Note, 11.00%, 8/15/1999 201,000
--------------------------------------------------------------------------------
2,000,000 USX Corp., 5.75%, 7/1/2001 1,835,000
-------------------------------------------------------------------------------- ---------------
Total 5,316,667
-------------------------------------------------------------------------------- ---------------
INSURANCE--0.1%
--------------------------------------------------------------------------------
250,000 Penn Central Corp., Sub. Note, 10.625%, 4/15/2000 271,250
-------------------------------------------------------------------------------- ---------------
OTHER--0.2%
--------------------------------------------------------------------------------
400,000 SIFTO Canada, Inc., Sr. Note, 8.50%, 7/15/2000 394,000
-------------------------------------------------------------------------------- ---------------
PAPER PRODUCTS--0.5%
--------------------------------------------------------------------------------
500,000 Repap New Brunswick, 1st Priority Sr. Secd. Note, 9.875%, 7/15/2000 500,000
--------------------------------------------------------------------------------
500,000 Repap Wisconsin, Inc., 1st Priority Sr. Secd. Note, 9.25%, 2/1/2002 482,500
-------------------------------------------------------------------------------- ---------------
Total 982,500
-------------------------------------------------------------------------------- ---------------
SERVICES--0.4%
--------------------------------------------------------------------------------
750,000 Rogers Cablesystems Ltd., Note, 9.625%, 8/1/2002 759,375
-------------------------------------------------------------------------------- ---------------
STEEL--0.3%
--------------------------------------------------------------------------------
500,000 Wheeling Pittsburgh Corp., Sr. Note, 9.375%, 11/15/2003 472,500
-------------------------------------------------------------------------------- ---------------
TELECOMMUNICATIONS--2.4%
--------------------------------------------------------------------------------
750,000 Centennial Cellular Corp., Sr. Note, 8.875%, 11/1/2001 714,375
--------------------------------------------------------------------------------
2,500,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 2,668,750
--------------------------------------------------------------------------------
868,800 SCI Television, Inc., Note, 7.50%, 6/30/1998 873,144
-------------------------------------------------------------------------------- ---------------
Total 4,256,269
-------------------------------------------------------------------------------- ---------------
UNASSIGNED--1.5%
--------------------------------------------------------------------------------
500,000 AAF-McQuay, Inc., Sr. Note, 8.875%, 2/15/2003 483,750
--------------------------------------------------------------------------------
500,000 Clark R&M Holdings, Inc., Sr. Note, 11.00% accrual, 2/15/2000 342,500
--------------------------------------------------------------------------------
500,000 G-I Holdings, Inc., Sr. Disc. Note, 11.375% accrual, 10/1/1998 399,375
--------------------------------------------------------------------------------
300,000 Harris Chemical North America, Inc., Sr. Secd. Disc. Note, 10.25%, 7/15/2001 301,500
--------------------------------------------------------------------------------
500,000 Stone Consolidated, Sr. Note, 10.25%, 12/15/2000 523,750
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
- --------------- -------------------------------------------------------------------------------- ---------------
U.S. FIXED INCOME--CONTINUED
- -------------------------------------------------------------------------------------------------
UNASSIGNED--CONTINUED
--------------------------------------------------------------------------------
$ 600,000 World Color Press, Sr. Sub. Note, 9.125%, 3/15/2003 $ 597,000
-------------------------------------------------------------------------------- ---------------
Total 2,647,875
-------------------------------------------------------------------------------- ---------------
TOTAL U.S. FIXED INCOME (IDENTIFIED COST $66,600,929) 67,452,210
-------------------------------------------------------------------------------- ---------------
SHORT-TERM SECURITIES--11.2%
- -------------------------------------------------------------------------------------------------
20,000,000 (b)Federal National Mortgage Association, 5.24%, 5/20/1996 19,945,428
-------------------------------------------------------------------------------- ---------------
TOTAL SHORT-TERM SECURITIES (IDENTIFIED COST $19,945,428) 19,945,428
-------------------------------------------------------------------------------- ---------------
U.S. TREASURY SECURITIES--33.6%
- -------------------------------------------------------------------------------------------------
20,000,000 5.50%, 11/15/1998 19,687,500
--------------------------------------------------------------------------------
20,000,000 5.75%, 10/31/1997 19,956,240
--------------------------------------------------------------------------------
20,000,000 6.50%, 4/30/1997 20,156,240
-------------------------------------------------------------------------------- ---------------
TOTAL U.S. TREASURY SECURITIES (IDENTIFIED COST $59,978,774) 59,799,980
-------------------------------------------------------------------------------- ---------------
(C) REPURCHASE AGREEMENT--4.9%
- -------------------------------------------------------------------------------------------------
8,669,052 Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.25%, dated 4/30/1996, due
5/1/1996 (AT AMORTIZED COST) 8,669,052
-------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $175,805,360)(D) $ 175,789,613
-------------------------------------------------------------------------------- ---------------
</TABLE>
(a) Denotes variable rate securities which show current rate and next demand
date.
(b) Discount rate at time of purchase.
(c) The repurchase agreement is fully collateralized by U.S.
Treasury/government and/or agency obligations based on market prices at the
date of the portfolio.
(d) The cost of investments for federal tax purposes amounts to $175,805,360.
The net unrealized depreciation of investments on a federal tax basis
amounts to $15,747 which is comprised of $1,065,482 appreciation and
$1,081,229 depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($177,766,469) at April 30, 1996.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $175,805,360) $ 175,789,613
- -------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at cost, $790) 764
- -------------------------------------------------------------------------------------------------
Income receivable 2,304,130
- -------------------------------------------------------------------------------------------------
Net receivable for forward foreign currency exchange contracts sold 1,144,732
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 111,826
- -------------------------------------------------------------------------------------------------
Deferred expenses 36,704
- ------------------------------------------------------------------------------------------------- --------------
Total assets 179,387,769
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Payable for shares redeemed $ 623,073
- -------------------------------------------------------------------------------------
Net payable for forward foreign currency exchange contracts purchased 475,356
- -------------------------------------------------------------------------------------
Income distribution payable 159,816
- -------------------------------------------------------------------------------------
Payable to bank 132,615
- -------------------------------------------------------------------------------------
Payable for foreign taxes withheld 3,764
- -------------------------------------------------------------------------------------
Accrued expenses 226,676
- ------------------------------------------------------------------------------------- ----------
Total liabilities 1,621,300
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS 59,529,291 shares outstanding $ 177,766,469
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid in capital $ 187,290,247
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 577,797
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (9,659,884)
- -------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (441,691)
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 177,766,469
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------------------------
$177,766,469 / 59,529,291 shares outstanding $ 2.99
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $ 3,899,852
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------
Management fee $ 421,853
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 81,964
- --------------------------------------------------------------------------------------
Custodian fees 31,735
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 128,084
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 12,766
- --------------------------------------------------------------------------------------
Auditing fees 42,188
- --------------------------------------------------------------------------------------
Legal fees 22,798
- --------------------------------------------------------------------------------------
Portfolio accounting fees 80,782
- --------------------------------------------------------------------------------------
Distribution services fee 140,612
- --------------------------------------------------------------------------------------
Share registration costs 15,525
- --------------------------------------------------------------------------------------
Printing and postage 40,111
- --------------------------------------------------------------------------------------
Insurance premiums 126
- --------------------------------------------------------------------------------------
Miscellaneous 17,247
- -------------------------------------------------------------------------------------- ------------
Total expenses 1,035,791
- --------------------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------
Waiver of management fee $ (187,797)
- -------------------------------------------------------------------------
Waiver of distribution services fee (36,364)
- ------------------------------------------------------------------------- -----------
Total waivers (224,161)
- -------------------------------------------------------------------------------------- ------------
Net expenses 811,630
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 3,088,222
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 511,538
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 767,013
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and foreign currency 1,278,551
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 4,366,773
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ 3,088,222 $ 1,502,880
- ---------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions
($627,438 net gain and $247,141 net loss, respectively, as computed for federal
tax purposes) 511,538 (572,264)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 767,013 443,090
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 4,366,773 1,373,706
- --------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------
Distributions from net investment income (3,088,222) (1,502,880)
- ---------------------------------------------------------------------------------
Distributions in excess of net investment income (4,918) (18,912)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (3,093,140) (1,521,792)
- --------------------------------------------------------------------------------- -------------- --------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------------
Proceeds from sale of shares 13,369,396 21,020,411
- ---------------------------------------------------------------------------------
Proceeds from shares issued in connection with the acquisition of Blanchard
Short-Term Global Income Fund 174,188,041 --
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 2,652,603 1,341,339
- ---------------------------------------------------------------------------------
Cost of shares redeemed (37,161,711) (41,150,317)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from share transactions 153,048,329 (18,788,567)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets 154,321,962 (18,936,653)
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 23,444,507 42,381,160
- --------------------------------------------------------------------------------- -------------- --------------
End of period $ 177,766,469 $ 23,444,507
- --------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C> <C>
1996 1995 1994 1993(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 2.94 $ 2.93 $ 3.00 $ 3.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.22 0.15 0.17 0.00(e)
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions -- -- (0.06) 0.00(e)
- ------------------------------------------------------------------------ --------- --------- --------- -----------
Total from investment operations 0.22 0.15 0.11 0.00(e)
- ------------------------------------------------------------------------ --------- --------- --------- -----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Distributions from net investment income (0.17) (0.14) (0.17) (0.00)(e)
- ------------------------------------------------------------------------
Distributions in excess of net investment income (b) (0.00)(e) (0.00)(e) -- --
- ------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency -- -- (0.01) (0.00)(e)
- ------------------------------------------------------------------------ --------- --------- --------- -----------
Total distributions (0.17) (0.14) (0.18) (0.00)(e)
- ------------------------------------------------------------------------ --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 2.99 $ 2.94 $ 2.93 $ 3.00
- ------------------------------------------------------------------------ --------- --------- --------- -----------
TOTAL RETURN (C) 7.47% 5.34% 3.72% 0.15%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.44% 1.38% 0.63% 3.03%*
- ------------------------------------------------------------------------
Net investment income 5.49% 4.80% 5.64% 3.89%*
- ------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.40% 0.75% 1.42% --
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $177,766 $23,445 $42,381 $2,000
- ------------------------------------------------------------------------
Portfolio turnover 291% 84% 212% 36%
- ------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 16, 1993 (commencement of
operations) to April 30, 1993.
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Less than one cent per share.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(FORMERLY, BLANCHARD SHORT-TERM BOND FUND)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial statements included herein are
only those of Blanchard Short-Term Flexible Income Fund (the "Fund"), a
non-diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund seeks to provide high current income while seeking opportunities for
capital appreciation.
Effective October 10, 1995, the shareholders approved a change in the name of
the Fund from Blanchard Short-Term Bond Fund to Blanchard Short-Term Flexible
Income Fund.
On February 12, 1996, the Fund acquired all the net assets of Blanchard
Short-Term Global Income Fund pursuant to a plan of reorganization approved by
Blanchard Short-Term Global Income Fund's shareholders on February 9, 1996. The
acquisition was accomplished by a tax-free exchange of 102,463,593 shares of the
Blanchard Short-Term Global Income Fund for 57,869,781 shares of the Fund valued
at $174,188,041. Blanchard Short-Term Global Income Fund's net assets at that
date ($174,188,041, included $2,707,873 of unrealized appreciation. Immediately
following the acquisition the Fund had net assets of $193,217,808.
(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--Foreign and domestic listed corporate bonds and U.S.
government securities, are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
foreign and domestic securities are valued at the prices provided by an
independent pricing service. However, short-term foreign and domestic
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions and straddle losses. The following
reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S> <C> <C>
DISTRIBUTIONS IN
ACCUMULATED NET EXCESS OF
PAID-IN CAPITAL REALIZED GAIN/LOSS NET INVESTMENT INCOME
$8,417 $ 369,660 $ (378,077)
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of 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.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.
The Fund acquired a capital loss carryforward of $9,885,574, which will
expire 2003, from Blanchard Short-Term Global Income Fund as a result of
the merger on February 12, 1996.
At April 30, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $9,659,884, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2002 $ 9,258,136
2003 $ 401,748
</TABLE>
Additionally, net capital losses of $459,156 for foreign currency losses
attributable to security transactions incurred after October 31, 1995 are
treated as arising on the first day of the Fund's next taxable year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
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.
CONCENTRATION OF CREDIT RISK--The Fund invests in securities of non-U.S.
issuers. The political or economic developments within a particular country
or region may have an adverse effect on the ability of domiciled issuers to
meet their obligations. Additionally, political or economic developments
may have an effect on the liquidity and volatility of portfolio securities
and currency holdings.
FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts to meet
the terms of their commitments and from unanticipated movements in security
prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any
gains or losses are recorded for financial statement purpose as unrealized
until the settlement date.
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
At April 30, 1996, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
CONTRACTS PURCHASED
- --------------------------
Danish Krone 05/14/96 27,700,000 $ 4,868,446 $ 4,696,397 $ (172,049)
- --------------------------
Netherlands Guilder 05/14/96 13,000,000 7,898,078 7,594,771 (303,307)
- -------------------------- --------------- ------------- -----------------
$ 12,766,524 $ 12,291,168 $ (475,356)
--------------- ------------- -----------------
CONTRACTS SOLD
- --------------------------
Danish Krone 05/14/96 57,629,550 $ 10,118,791 $ 9,770,804 $ 347,987
- --------------------------
Netherlands Guilder 05/14/96 28,747,250 17,503,197 16,794,522 708,675
- --------------------------
Pound Sterling 05/14/96 3,032,838 4,652,374 4,564,304 88,070
- -------------------------- --------------- ------------- -----------------
Total $ 32,274,362 $ 31,129,630 $ 1,144,732
- -------------------------- --------------- ------------- -----------------
</TABLE>
OPTIONS CONTRACTS--The Fund purchases over-the-counter put options on U.S.
government securities to hedge fluctuations in the market value of certain
portfolio securities. The risk associated with purchasing an option is that
the Fund pays a premium whether or not the option is exercised.
Additionally, the Fund bears the risk of loss of premium and change in
market value should the counterparty not perform under the contract. Put
options purchased are accounted for in the same manner as portfolio
securities. For the year ended April 30, 1996, the Fund had no outstanding
option contracts.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
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.
OTHER--Investment transactions are accounted for on the trade date.
(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 (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
Shares sold 4,477,310 7,207,260
- ------------------------------------------------------------------------------------
Shares issued in connection with the acquisition of Blanchard
Short-Term Global Income Fund 57,869,781 --
- ------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 888,044 460,620
- ------------------------------------------------------------------------------------
Shares redeemed (11,691,202) (14,143,317)
- ------------------------------------------------------------------------------------ ------------- -------------
Net change resulting from share transactions 51,543,933 (6,475,437)
- ------------------------------------------------------------------------------------ ------------- -------------
</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 0.75% of
the Fund's average daily net assets.
Virtus Capital Management, Inc. became the Fund's manager on July 12, 1995.
Prior to July 12, 1995, Sheffield Management Company served as the Fund's
manager and received for its services an annual management fee equal to 0.75% of
the Fund's average daily net assets. For the year ended April 30, 1996, the
managers earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
MANAGER FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Management Company $ 32,746 $ 23,550
- ---------------------------------------------------------------------------------- ------------- --------------
Virtus Capital Management, Inc. $ 389,107 $ 164,247
- ---------------------------------------------------------------------------------- ------------- --------------
</TABLE>
The Manager may voluntarily choose to waive any portion of its fee. The Manager
can modify or terminate this voluntary waiver at any time at its sole
discretion.
SUB-ADVISORY FEE--OFFITBANK provides the manager with sub-advisory services for
which it receives a fee from the Manager equal to 0.25% of the Fund's average
daily net assets. In addition, OFFITBANK may voluntarily choose to reduce its
compensation.
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Fund 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 0.25% of the average daily net assets of the Fund shares,
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.
FSC became the Fund's principal distributor on July 12, 1995. Prior to July 12,
1995, Sheffield Investments, Inc. served as the Fund's principal distributor and
received for its services an annual distribution fee equal to 0.25 of 1% of the
Fund's average daily net assets. For the year ended
April 30, 1996, the distributors earned and waived fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
DISTRIBUTOR FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Investments, Inc. $ 10,915 $ 0
- ---------------------------------------------------------------------------------- ------------- --------------
Federated Securities Corp. $ 129,697 $ 36,364
- ---------------------------------------------------------------------------------- ------------- --------------
</TABLE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company,
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FServ is based on the size, type, and number of accounts and transactions made
by shareholders.
FServ became the Fund's transfer agent on October 15, 1995. Prior to October 15,
1995, United States Trust Company of New York served as the Fund's transfer
agent for which it received a fee. For the year ended April 30, 1996, the
transfer agents earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
TRANSFER AGENT FEE EARNED
<S> <C>
United States Trust Company of New York $ 25,716
- --------------------------------------------------------------------------------------------------- -------------
Federated Services Company $ 102,368
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
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 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
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
- --------------------------------------------------------------------------------
not in excess of ten years of service. The net pension expense included in
Directors'/Trustees' Fees in the Statement of Operations for the year ended for
the Fund April 30, 1996 was $5,828.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
FServ became the Fund's portfolio accountant on October 15, 1995. Prior to
October 15, 1995, Mutual Fund Services Company served as the Fund's portfolio
accountant for which it received a fee. For the year ended April 30, 1996, the
portfolio accountants earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
PORTFOLIO ACCOUNTANT FEE EARNED
<S> <C>
Mutual Fund Services Company $ 38,524
- --------------------------------------------------------------------------------------------------- -------------
Federated Services Company $ 42,258
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee is based on
the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
Signet Trust Company became the Fund's custodian on October 15, 1995. Prior to
October 15, 1995, United States Trust Company of New York served as the Fund's
custodian for which it received a fee. For the year ended April 30, 1996, the
custodians earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
CUSTODIAN FEE EARNED
<S> <C>
United States Trust Company of New York $ 9,142
- --------------------------------------------------------------------------------------------------- -------------
Signet Trust Company $ 22,593
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of
the Fund incurred prior to the public offering of its shares amounting to
$80,724. The Fund reimbursed the Manager for these expenses and has deferred and
is amortizing such expenses on the straight-line method over five years from the
date of commencement of the Fund's operations.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
April 30, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 158,155,852
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 91,900,217
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of BLANCHARD FUNDS and Shareholders of
BLANCHARD SHORT-TERM FLEXIBLE INCOME FUND
(formerly Blanchard Short-Term Bond Fund):
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Blanchard Short-Term Flexible Income Fund
(formerly Blanchard Short-Term Bond Fund) as of April 30, 1996, and the related
statements of operations and changes in net assets, and financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended April 30, 1995
and the financial highlights for the three years in the period ended April 30,
1995 were audited by other auditors, whose reports thereon dated June 20, 1995,
expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of April 30, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blanchard Short-Term Flexible Income Fund (formerly Blanchard Short-Term Bond
Fund) as of April 30, 1996, the results of its operations, the changes in its
net assets and its financial highlights for the year then ended in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 19, 1996
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 Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. Joseph S. Machi
Wesley W. Posvar Vice President and Assistant Treasurer
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
OFFITBANK
Blanchard
Short-Term
Flexible 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.
(2021)
CUSIP 093212405
G01684-03 (6/96)
Blanchard
Short-Term
Flexible Income
Fund*
*formerly Blanchard
Short-Term Bond Fund
Annual Report
April 30, 1996
Managed by: Virtus Capital Management
Presidents Message
July 1, 1996
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Worldwide Emerging
Markets Fund for the fiscal year ended April 30, 1996.
This report provides you with complete financial information for the Fund,
including a performance update from Martin Currie Inc., a list of investments
included in the Fund, and the Fund's financial statements.
If you would like the most recent performance update for your 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
Dear Shareholders,
Enclosed please find the Annual Report for your Blanchard Worldwide Emerging
Markets Fund for the fiscal year ended April 30, 1996.
While these markets underperformed our expectations in the last twelve months,
the outlook remains positive for investors with a long-term perspective.
Valuations are attractive when set against other world markets, and those
analysts that were forecasting the demise of the emerging markets sector in the
wake of the Mexican devaluation have been proved wrong.
Here's a closer look at those events which affected emerging market
investors in the past fiscal year.
THE VALUE OF A $10,000 INVESTMENT IN THE
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
from inception 3/1/94 through 4/30/96 as compared to the Morgan Stanley
Emerging Markets Index for the same period.
Avg. Annual Returns through 4/30/96
Blanchard Worldwide Emerging Markets Fund*
1 year 3.10%
since inception (3/1/94) -8.56%
[Graphic appendix omitted, see Appendix B]
*The average annual returns quoted above reflect reinvestment of
distributions but do not reflect the deduction of the
one-time account opening fee. If the fee was reflected, the return would
be lower. Total return includes changes in principal value. Average annual
return is total return annualized and compounded. Past performance is no
guarantee of future results.
/Reflects deduction of the one-time $37.50 account opening fee.
+Source: The Morgan Stanley Emerging Markets Index is an unmanaged index
comprised of the average equity market performance of 20 emerging
market countries throughout the world. Investments cannot be made in an index.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the Blanchard Worldwide Emerging Markets Fund or the
index. Your investment return and principal value will fluctuate so, when
shares are redeemed, they may be worth more or less than the original cost.
The Year in Review
Over the past twelve months, South American markets have recovered, South
Africa has been strong, and returns from much of Asia have been disappointing.
Confidence returned to Latin America, even though growth is not expected
to recover to any great extent until 1997. The modest recovery in growth was
enough to settle international investors' nerves.
The relatively tight monetary background in Asia has held markets back.
Even low valuations, by historical comparison, did not tempt investors.
Political worries in South Korea and India, and strained Chinese/Taiwanese
relations, were all bad for investor sentiment.
In South Africa, the market benefited from its inclusion in the global
emerging markets indices. Its accelerating economic growth, falling interest
rates, and an apparently benign political background also appealed to
investors. As a result, South Africa was one of the top performers in calendar
1995.
A Look Ahead
The vast majority of the world's population lives and works in what are
described as emerging markets, and they are benefiting from an increasingly
open and liberal economic environment. It is our firm belief that this will
create rewarding investment opportunities for patient investors willing to
accept a higher degree of volatility, as well as currency and political risks,
in exchange for the exceptional growth potential these markets offer over time.
Thank you for your continued patronage and support.
Sincerely,
James Fairweather
James Fairweather
Martin Currie Inc.
Portfolio Manager of the
Blanchard Worldwide Emerging
Markets Fund
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--86.5%
- --------------------------------------------------------------------------------------------------
ARGENTINA--3.1%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--1.1%
--------------------------------------------------------------------------------
2,450 (a)Quilmes Industrial (Quinsa), Societe Ano, ADR $ 29,094
--------------------------------------------------------------------------------
4,900 Quilmes Industrial SA 58,800
-------------------------------------------------------------------------------- ------------
Total 87,894
-------------------------------------------------------------------------------- ------------
MULTI-INDUSTRY--2.0%
--------------------------------------------------------------------------------
24,996 Compania Naviera Perez Companc SA, Class B 155,491
-------------------------------------------------------------------------------- ------------
TOTAL ARGENTINA 243,385
-------------------------------------------------------------------------------- ------------
BRAZIL--6.0%
--------------------------------------------------------------------------------
BASIC INDUSTRY--2.4%
--------------------------------------------------------------------------------
5,416 Cia Acos Especiais Itabira-Acesita., ADR 40,620
--------------------------------------------------------------------------------
8,000 Companhia Vale Do Rio Doce, ADR 146,341
-------------------------------------------------------------------------------- ------------
Total 186,961
-------------------------------------------------------------------------------- ------------
ENERGY RELATED--1.2%
--------------------------------------------------------------------------------
3,641 Companhia Energetica de Minas Gerais, ADR 94,268
-------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS--2.4%
--------------------------------------------------------------------------------
3,520 Telecomunicacoes Brasileras, ADR 190,520
-------------------------------------------------------------------------------- ------------
TOTAL BRAZIL 471,749
-------------------------------------------------------------------------------- ------------
CANADA--0.7%
--------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.7%
--------------------------------------------------------------------------------
11,000 (a)Petersburg Long Distance, Inc. 55,000
-------------------------------------------------------------------------------- ------------
CHILE--2.2%
--------------------------------------------------------------------------------
BASIC INDUSTRY--1.2%
--------------------------------------------------------------------------------
17,500 Antofagasta Holdings PLC 92,202
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
CHILE--CONTINUED
--------------------------------------------------------------------------------
RETAIL--1.0%
--------------------------------------------------------------------------------
2,800 (a)Santa Isabel S.A., ADR $ 80,850
-------------------------------------------------------------------------------- ------------
TOTAL CHILE 173,052
-------------------------------------------------------------------------------- ------------
COLOMBIA--1.8%
--------------------------------------------------------------------------------
BASIC INDUSTRY--1.0%
--------------------------------------------------------------------------------
4,000 Cementos Diamante S.A., GDR 78,000
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--0.8%
--------------------------------------------------------------------------------
3,400 Banco Industrial Colombiano, ADR 66,725
-------------------------------------------------------------------------------- ------------
TOTAL COLOMBIA 144,725
-------------------------------------------------------------------------------- ------------
ECUADOR--0.5%
--------------------------------------------------------------------------------
CONSTRUCTION--0.5%
--------------------------------------------------------------------------------
256 LA Cemento Nacional C.A., GDR 40,192
-------------------------------------------------------------------------------- ------------
HONG KONG--1.3%
--------------------------------------------------------------------------------
ENGINEERING--1.3%
--------------------------------------------------------------------------------
45,000 (a)New World Infrastructure 100,058
-------------------------------------------------------------------------------- ------------
MANUFACTURING--0.0%
--------------------------------------------------------------------------------
40,000 (a)(b)Star Paging International Holding, Ltd. Warrants, 12/31/1996 517
-------------------------------------------------------------------------------- ------------
TOTAL HONG KONG 100,575
-------------------------------------------------------------------------------- ------------
HUNGARY--0.3%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--0.2%
--------------------------------------------------------------------------------
2,800 (a)(b)Kekut Asvanyiz, GDR 19,810
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--0.1%
--------------------------------------------------------------------------------
3,100 (a)(b)Konzum Ker ES Ipari RT 7,631
-------------------------------------------------------------------------------- ------------
TOTAL HUNGARY 27,441
-------------------------------------------------------------------------------- ------------
INDIA--2.3%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.8%
--------------------------------------------------------------------------------
5,880 Gujarat Ambuja Cements, GDR 68,326
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
INDIA--CONTINUED
--------------------------------------------------------------------------------
CONSUMER --1.5%
--------------------------------------------------------------------------------
4,800 DCW, Ltd., GDR $ 22,800
--------------------------------------------------------------------------------
10,000 Dr. Reddy's Laboratories, GDR 95,000
-------------------------------------------------------------------------------- ------------
Total 117,800
-------------------------------------------------------------------------------- ------------
TOTAL INDIA 186,126
-------------------------------------------------------------------------------- ------------
INDONESIA--7.5%
--------------------------------------------------------------------------------
BANKING--3.8%
--------------------------------------------------------------------------------
105,000 PT Bank Dagang Nasional 104,617
--------------------------------------------------------------------------------
41,000 PT Bank International Indonesia 201,618
-------------------------------------------------------------------------------- ------------
Total 306,235
-------------------------------------------------------------------------------- ------------
CHEMICALS--0.4%
--------------------------------------------------------------------------------
41,000 Keramika Indonesia Associates 28,991
-------------------------------------------------------------------------------- ------------
CONSUMER GOODS & RELATED--1.4%
--------------------------------------------------------------------------------
68,000 PT Andayani Megah 46,625
--------------------------------------------------------------------------------
39,000 (b)PT Concord Benefit Enterprise 16,295
--------------------------------------------------------------------------------
84,000 PT Gadjah Tunggal 49,496
-------------------------------------------------------------------------------- ------------
Total 112,416
-------------------------------------------------------------------------------- ------------
ENGINEERING & CONSTRUCTION--1.2%
--------------------------------------------------------------------------------
55,000 (a)PT Bukaka Teknik Utama 94,279
-------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS--0.7%
--------------------------------------------------------------------------------
1,500 PT Indosat, ADR 52,313
-------------------------------------------------------------------------------- ------------
TOTAL INDONESIA 594,234
-------------------------------------------------------------------------------- ------------
ISRAEL--0.4%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.4%
--------------------------------------------------------------------------------
2,200 (a)Ampal-American Israel Corp., Class A 12,925
--------------------------------------------------------------------------------
1,000 Koor Industries Ltd., ADR 18,750
-------------------------------------------------------------------------------- ------------
TOTAL ISRAEL 31,675
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
KOREA--4.7%
--------------------------------------------------------------------------------
TRANSPORTATION--0.5%
--------------------------------------------------------------------------------
1,342 (b)Dong Bang Forwarding Co. $ 38,281
-------------------------------------------------------------------------------- ------------
UTILITIES--4.2%
--------------------------------------------------------------------------------
6,000 Korea Electric Power Corp. 253,646
--------------------------------------------------------------------------------
2,239 Yukong, Ltd. 83,432
-------------------------------------------------------------------------------- ------------
Total 337,078
-------------------------------------------------------------------------------- ------------
TOTAL KOREA 375,359
-------------------------------------------------------------------------------- ------------
LUXEMBOURG--0.7%
--------------------------------------------------------------------------------
CAPITAL GOODS--0.7%
--------------------------------------------------------------------------------
7,087 Rhodia-Ster S.A., GDR 59,284
-------------------------------------------------------------------------------- ------------
MALAYSIA--11.3%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--1.2%
--------------------------------------------------------------------------------
11,000 Edaran Otomobil Nasional 93,972
-------------------------------------------------------------------------------- ------------
ENGINEERING--1.9%
--------------------------------------------------------------------------------
22,000 United Engineers, Ltd. 150,884
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--5.5%
--------------------------------------------------------------------------------
31,000 Commerce Asset Holdings Bhd 211,366
--------------------------------------------------------------------------------
55,000 Renong Berhad 95,737
--------------------------------------------------------------------------------
60,000 (a)Westmont Industries Berhad 129,948
-------------------------------------------------------------------------------- ------------
Total 437,051
-------------------------------------------------------------------------------- ------------
RETAIL--2.7%
--------------------------------------------------------------------------------
133,000 LARUT Consolidated Berhad 213,372
-------------------------------------------------------------------------------- ------------
TOTAL MALAYSIA 895,279
-------------------------------------------------------------------------------- ------------
MEXICO--8.5%
--------------------------------------------------------------------------------
AUTO PARTS--1.7%
--------------------------------------------------------------------------------
500 Corporacion Industrial San Luis, S.A. de C.V., ADR 17,625
--------------------------------------------------------------------------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
MEXICO--CONTINUED
--------------------------------------------------------------------------------
AUTO PARTS--CONTINUED
--------------------------------------------------------------------------------
20,000 Corporacion Industrial Sanluis, S.A. de C.V., CPO $ 117,362
-------------------------------------------------------------------------------- ------------
Total 134,987
-------------------------------------------------------------------------------- ------------
BANKING--1.3%
--------------------------------------------------------------------------------
43,000 Grupo Financiero Banamex, Class B 99,079
--------------------------------------------------------------------------------
1,290 (a)(b)Grupo Financiero Banamex, Class L 2,649
-------------------------------------------------------------------------------- ------------
Total 101,728
-------------------------------------------------------------------------------- ------------
BUILDING MATERIALS--0.8%
--------------------------------------------------------------------------------
11,900 Apasco S.A. de CV 64,545
-------------------------------------------------------------------------------- ------------
ENGINEERING--0.8%
--------------------------------------------------------------------------------
4,700 Empresas ICA Sociedad Controladora S.A., ADR 65,212
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--1.1%
--------------------------------------------------------------------------------
5,600 (b)Grupo Carso S.A. de CV, ADR 85,641
-------------------------------------------------------------------------------- ------------
FOREST PRODUCTS--1.1%
--------------------------------------------------------------------------------
11,400 (a)Grupo Industrial Durango, S.A. de C.V., ADR 88,350
-------------------------------------------------------------------------------- ------------
MINING--1.0%
--------------------------------------------------------------------------------
18,000 Industrial Penoles, S.A. 75,828
-------------------------------------------------------------------------------- ------------
MULTI-INDUSTRY--0.7%
--------------------------------------------------------------------------------
4,000 Alfa, S.A. de C.V., Class A 58,412
-------------------------------------------------------------------------------- ------------
TOTAL MEXICO 674,703
-------------------------------------------------------------------------------- ------------
NETHERLANDS--1.7%
--------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.7%
--------------------------------------------------------------------------------
3,200 (b)Ceteco Holdings N.V., ADR 135,215
--------------------------------------------------------------------------------
1,180 (a)IS Himalayan Fund N.V., Warrants 448
-------------------------------------------------------------------------------- ------------
TOTAL NETHERLANDS 135,663
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
PERU--2.8%
--------------------------------------------------------------------------------
REAL ESTATE--1.6%
--------------------------------------------------------------------------------
345,000 (a)(b)Peru Real Estate S.A. $ 124,200
-------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS--1.2%
--------------------------------------------------------------------------------
43,874 Telefonica Del Peru, CPT, Class B 98,094
-------------------------------------------------------------------------------- ------------
TOTAL PERU 222,294
-------------------------------------------------------------------------------- ------------
PHILIPPINES--2.7%
--------------------------------------------------------------------------------
BANKING--1.3%
--------------------------------------------------------------------------------
3,800 Metro Bank and Trust Co. 102,369
-------------------------------------------------------------------------------- ------------
OIL/GAS/EXPLORATION--1.4%
--------------------------------------------------------------------------------
750,000 (a)Belle Corporation 110,336
-------------------------------------------------------------------------------- ------------
TOTAL PHILIPPINES 212,705
-------------------------------------------------------------------------------- ------------
POLAND--8.5%
--------------------------------------------------------------------------------
CAPITAL GOODS--2.3%
--------------------------------------------------------------------------------
3,000 (a)Bydgoska Fabryka Kabli S.A. 83,443
--------------------------------------------------------------------------------
4,000 Debica S.A. 94,719
-------------------------------------------------------------------------------- ------------
Total 178,162
-------------------------------------------------------------------------------- ------------
CONSUMER GOODS & RELATED--1.9%
--------------------------------------------------------------------------------
1,400 Huta Szkla Gospodarczego Irena 14,681
--------------------------------------------------------------------------------
18,550 (a)Mostostal Export 54,384
--------------------------------------------------------------------------------
1,019 Zyweic Powowarskiew PLZ 84,262
-------------------------------------------------------------------------------- ------------
Total 153,327
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--4.3%
--------------------------------------------------------------------------------
7,200 Bank Rozwoju Eksportu S.A. 171,847
--------------------------------------------------------------------------------
895 Bank Slaski S.A. 66,944
--------------------------------------------------------------------------------
15,760 Elektrim Towarzystwo Handlowe S.A. 100,703
-------------------------------------------------------------------------------- ------------
Total 339,494
-------------------------------------------------------------------------------- ------------
TOTAL POLAND 670,983
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
SOUTH AFRICA--9.0%
--------------------------------------------------------------------------------
BASIC INDUSTRY--1.3%
--------------------------------------------------------------------------------
10,000 Sasol, Ltd. $ 105,556
-------------------------------------------------------------------------------- ------------
CONSUMER GOODS & RELATED--0.7%
--------------------------------------------------------------------------------
11,242 JD Group, Ltd. 54,649
-------------------------------------------------------------------------------- ------------
ENTERTAINMENT--1.0%
--------------------------------------------------------------------------------
66,000 Sun International, Ltd. 83,111
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--1.4%
--------------------------------------------------------------------------------
6,500 Barlow Limited 74,855
--------------------------------------------------------------------------------
7,000 Malbak Limited 34,028
-------------------------------------------------------------------------------- ------------
Total 108,883
-------------------------------------------------------------------------------- ------------
INDUSTRIAL--0.6%
--------------------------------------------------------------------------------
1,000 Anglo American Industrial Corp., Ltd. 45,602
-------------------------------------------------------------------------------- ------------
INVESTMENT COMPANIES--1.1%
--------------------------------------------------------------------------------
27,000 Liberty Life Strategic Investments, Ltd. 89,063
-------------------------------------------------------------------------------- ------------
MINING--0.5%
--------------------------------------------------------------------------------
500 Anglo American Coal Corp., Ltd 37,616
-------------------------------------------------------------------------------- ------------
METALS & MINING--0.7%
--------------------------------------------------------------------------------
5,500 Free State Consolidated Gold Mines, Ltd. 59,838
-------------------------------------------------------------------------------- ------------
PHARMACEUTICALS--0.7%
--------------------------------------------------------------------------------
5,500 South African Druggists, Ltd. 52,199
-------------------------------------------------------------------------------- ------------
RETAIL--1.0%
--------------------------------------------------------------------------------
6,300 Q Data, Ltd. 80,208
-------------------------------------------------------------------------------- ------------
CAPITAL GOODS--0.0%
--------------------------------------------------------------------------------
380 (a)Dimension Data Holdings, Ltd. 528
-------------------------------------------------------------------------------- ------------
TOTAL SOUTH AFRICA 717,253
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
TAIWAN--0.2%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.2%
--------------------------------------------------------------------------------
1,700 (a)Tuntex Distinct Corp., GDR $ 13,813
-------------------------------------------------------------------------------- ------------
THAILAND--5.9%
--------------------------------------------------------------------------------
CAPITAL GOODS--2.3%
--------------------------------------------------------------------------------
12,000 Hana Microelectronics Co., Ltd. 68,926
--------------------------------------------------------------------------------
21,000 TPI Polene Co., Ltd. 115,629
-------------------------------------------------------------------------------- ------------
Total 184,555
-------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--1.9%
--------------------------------------------------------------------------------
21,000 Krung Thai Bank PLC 103,151
--------------------------------------------------------------------------------
31,500 MDX Public Co., Ltd. 49,288
-------------------------------------------------------------------------------- ------------
Total 152,439
-------------------------------------------------------------------------------- ------------
TRANSPORTATION--1.7%
--------------------------------------------------------------------------------
24,000 Precious Shipping, Ltd. 131,197
-------------------------------------------------------------------------------- ------------
TOTAL THAILAND 468,191
-------------------------------------------------------------------------------- ------------
TURKEY--2.9%
--------------------------------------------------------------------------------
CONSUMER GOODS & RELATED--1.7%
--------------------------------------------------------------------------------
122,400 Migros Turk 139,830
-------------------------------------------------------------------------------- ------------
IRON/STEEL--1.2%
--------------------------------------------------------------------------------
860,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 93,676
-------------------------------------------------------------------------------- ------------
TOTAL TURKEY 233,506
-------------------------------------------------------------------------------- ------------
UNITED STATES--0.6%
--------------------------------------------------------------------------------
BANKING--0.6%
--------------------------------------------------------------------------------
210 Slovenia Kredit Bank 43,728
-------------------------------------------------------------------------------- ------------
URUGUAY--0.9%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--0.9%
--------------------------------------------------------------------------------
4,700 Banco Comercial S.A., GDR 71,675
-------------------------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $6,940,767) 6,862,590
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY PAR VALUE
AMOUNT OR IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
PREFERRED STOCKS--4.7%
- --------------------------------------------------------------------------------------------------
BRAZIL--2.7%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.1%
--------------------------------------------------------------------------------
1,995,000 Cia Acos Especiais Itabira-Acesita., Pfd. $ 8,606
-------------------------------------------------------------------------------- ------------
MANUFACTURING--1.4%
--------------------------------------------------------------------------------
9,800 Usiminas USI Sd Mg, Pfd. 112,651
-------------------------------------------------------------------------------- ------------
RETAIL--1.2%
--------------------------------------------------------------------------------
9,000,000 (a)Lojas Arapua S.A., Preference 92,529
-------------------------------------------------------------------------------- ------------
TOTAL BRAZIL 213,786
-------------------------------------------------------------------------------- ------------
KOREA--2.0%
--------------------------------------------------------------------------------
BASIC INDUSTRY--0.7%
--------------------------------------------------------------------------------
8,000 (b)Kumho Construction & Engineering Co., Pfd. 57,565
-------------------------------------------------------------------------------- ------------
CAPITAL GOODS--1.3%
--------------------------------------------------------------------------------
5,092 Anam Industrial Co., Ltd., Pfd. 57,643
--------------------------------------------------------------------------------
6,000 (b)Daewoo Heavy Industries, Pfd. 42,480
-------------------------------------------------------------------------------- ------------
Total 100,123
-------------------------------------------------------------------------------- ------------
CONSUMER GOODS & RELATED--0.0%
--------------------------------------------------------------------------------
2 (a)Samsung Electronics Co., Pfd. 163
-------------------------------------------------------------------------------- ------------
TOTAL KOREA 157,851
-------------------------------------------------------------------------------- ------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $409,701) 371,637
-------------------------------------------------------------------------------- ------------
CONVERTIBLE SECURITIES--1.9%
- --------------------------------------------------------------------------------------------------
THAILAND--1.9%
--------------------------------------------------------------------------------
INDUSTRIAL--1.9%
--------------------------------------------------------------------------------
180,000 (a)Siam Sindhorn, Conv. Bond, Series WW, 2.00%, 7/31/2000
(IDENTIFIED COST $180,000) 149,400
-------------------------------------------------------------------------------- ------------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY PAR VALUE
AMOUNT OR IN U.S.
SHARES DOLLARS
<C> <S> <C>
- ---------------- -------------------------------------------------------------------------------- ------------
MUTUAL FUND ISSUES--6.4%
- --------------------------------------------------------------------------------------------------
CHINA--1.1%
--------------------------------------------------------------------------------
FINANCIAL SERVICES--1.1%
--------------------------------------------------------------------------------
150,000 (a)China North Industries Investment, Ltd. $ 87,000
-------------------------------------------------------------------------------- ------------
INDIA--5.3%
--------------------------------------------------------------------------------
INVESTMENT COMPANIES--5.3%
--------------------------------------------------------------------------------
7,803 (a)IS Himalayan Fund N.V. 119,971
--------------------------------------------------------------------------------
27,307 (a)Indian Opportunities Fund, Ltd. 300,381
-------------------------------------------------------------------------------- ------------
TOTAL INDIA 420,352
-------------------------------------------------------------------------------- ------------
TOTAL MUTUAL FUND ISSUES (IDENTIFIED COST $754,674) 507,352
-------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $8,285,142)(C) $ 7,890,979
-------------------------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal and International Securities laws. At April 30, 1996, these
securities amounted to $530,284 which represents 6.7% of net assets.
(c) The cost of investments for federal tax purposes amounts to $8,236,811. The
net unrealized depreciation of investments on a federal tax basis amounts
to $345,832 which is comprised of $1,039,817 appreciation and $1,385,649
depreciation at April 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($7,937,428) at April 30, 1996.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository Receipts
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified $8,285,142 and
tax cost $8,236,811) $ 7,890,979
- ---------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at cost, $4,459) 4,450
- ---------------------------------------------------------------------------------------------------
Income receivable 34,797
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 149,505
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 50,039
- ---------------------------------------------------------------------------------------------------
Deferred expenses 86,098
- --------------------------------------------------------------------------------------------------- -------------
Total assets 8,215,868
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 4,317
- ---------------------------------------------------------------------------------------
Payable for shares redeemed 6,690
- ---------------------------------------------------------------------------------------
Payable to Bank 206,002
- ---------------------------------------------------------------------------------------
Payable for foreign taxes withheld 2,099
- ---------------------------------------------------------------------------------------
Accrued expenses 59,332
- --------------------------------------------------------------------------------------- ----------
Total liabilities 278,440
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS FOR 1,213,145 shares outstanding $ 7,937,428
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 12,076,082
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and translations of assets and liabilities in foreign
currency (394,898)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (3,188,028)
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (555,728)
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 7,937,428
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
$7,937,428 / 1,213,145 shares outstanding $6.54
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $48,524) $ 98,386
- -----------------------------------------------------------------------------------------------------
Interest 8,877
- ----------------------------------------------------------------------------------------------------- -----------
Total income 107,263
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Management fee $ 122,549
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee 60,343
- ----------------------------------------------------------------------------------------
Custodian fees 52,310
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 39,487
- ----------------------------------------------------------------------------------------
Directors'/Trustees' fees 2,344
- ----------------------------------------------------------------------------------------
Auditing fees 30,414
- ----------------------------------------------------------------------------------------
Legal fees 22,397
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 77,910
- ----------------------------------------------------------------------------------------
Distribution services fee 49,104
- ----------------------------------------------------------------------------------------
Share registration costs 11,623
- ----------------------------------------------------------------------------------------
Printing and postage 23,107
- ----------------------------------------------------------------------------------------
Miscellaneous 30,619
- ---------------------------------------------------------------------------------------- -----------
Total expenses 522,207
- ----------------------------------------------------------------------------------------
Waivers and reimbursements--
- ---------------------------------------------------------------------------
Waiver of management fee $ (122,549)
- ---------------------------------------------------------------------------
Waiver of administrative personnel and services fee (33,396)
- ---------------------------------------------------------------------------
Reimbursement of other operating expenses (14,100)
- --------------------------------------------------------------------------- -----------
Total waivers and reimbursements (170,045)
- ---------------------------------------------------------------------------------------- -----------
Net expenses 352,162
- ----------------------------------------------------------------------------------------------------- -----------
Net operating loss (244,899)
- ----------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (619,467)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 998,146
- ----------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments and foreign currency 378,679
- ----------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 133,780
- ----------------------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net operating loss $ (244,899) $ (206,700)
- -----------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($2,835,112 net loss and $218,605 gain, respectively, as
computed for federal tax purposes) (619,467) (2,459,682)
- -----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 998,146 (1,382,453)
- ----------------------------------------------------------------------- ---------------------- ----------------
Change in net assets resulting from operations 133,780 (4,048,835)
- ----------------------------------------------------------------------- ---------------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------
Distributions in excess of net investment income (57,171) --
- ----------------------------------------------------------------------- ---------------------- ----------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------
Proceeds from sale of shares 6,111,143 21,445,228
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 54,289 --
- -----------------------------------------------------------------------
Cost of shares redeemed (10,442,665) (13,300,910)
- ----------------------------------------------------------------------- ---------------------- ----------------
Change in net assets resulting from share transactions (4,277,233) 8,144,318
- ----------------------------------------------------------------------- ---------------------- ----------------
Change in net assets (4,200,624) 4,095,483
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period 12,138,052 8,042,569
- ----------------------------------------------------------------------- ---------------------- ----------------
End of period $ 7,937,428 $ 12,138,052
- ----------------------------------------------------------------------- ---------------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C> <C>
1996 1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.40 $ 7.98 $ 8.00
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------
Net operating loss (0.28) (0.11) 0.00(b )
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency
transactions 0.46 (1.47) (0.02)
- ----------------------------------------------------------------------------- ------ --------- -----------
Total from investment operations 0.18 (1.58) (0.02)
- ----------------------------------------------------------------------------- ------ --------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------
Distributions in excess of net investment income (0.04) -- --
- ----------------------------------------------------------------------------- ------ --------- -----------
Distributions from net realized gain on investments and foreign currency
transactions -- -- --
- ----------------------------------------------------------------------------- ------ --------- -----------
Total distributions (0.04) -- --
- ----------------------------------------------------------------------------- ------ --------- -----------
NET ASSET VALUE, END OF PERIOD $ 6.54 $ 6.40 $ 7.98
- ----------------------------------------------------------------------------- ------ --------- -----------
TOTAL RETURN (C) 3.10% (19.80%) (0.25 %)
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------
Expenses 3.59% 3.59% 3.07%*
- -----------------------------------------------------------------------------
Net investment income (loss) (2.50%) (1.44%) (0.10%)*
- -----------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.73% 0.63% 1.35%*
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $7,937 $12,138 $8,043
- -----------------------------------------------------------------------------
Portfolio turnover 200% 132% 0%
- -----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 1, 1994 (date of initial
public investment) to April 30, 1994.
(b) Less than one cent per share.
(c) Based on net asset value.
(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 WORLDWIDE EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial statements included herein are
only those of Blanchard Worldwide Emerging Markets Fund (the "Fund"), a
non-diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is capital appreciation and current income.
(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--Listed foreign and domestic equity securities are
valued at the last sale price reported on a national securities exchange.
Short-term foreign and domestic securities are valued at the prices
provided by an independent pricing service. However, short-term foreign and
domestic securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Investments in open-end regulated investments companies are
valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date. Certain dividends from foreign securities may be recorded after the
ex-dividend date based upon when information becomes available to the Fund.
Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
market discount, foreign currency transactions, non-taxable dividends, net
operating losses, expiring capital loss carryforwards, wash sales, futures
and options, post-October losses. The following reclassifications have been
made to the financial statements.
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S> <C> <C>
ACCUMULATED ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
$154,600 ($16,189) $ 138,411
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of 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.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding
taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
At April 30, 1995 the Fund, for federal tax purposes, had a capital loss
carryforward of $2,835,112, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2003 $ 2,835,112
</TABLE>
Additionally, net capital losses of $308,569 and $4,647 attributable to
security and foreign currency transactions, respectively, incurred after
October 31, 1995 are treated as arising on the first day of the Fund's next
taxable year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--The Fund invests in securities of non-U.S.
issuers. The political or economic developments with a particular country
or region may have an adverse effect on the ability of domiciled issuers to
meet their obligations. Additionally, political or economic developments
may have an effect on the liquidity and volatility of portfolio securities
and currency holdings.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
and are being amortized using the straight-line method over a period of
five years from the Fund's commencement date.
FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts to meet
the terms of their commitments and from unanticipated movements in security
prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any
gains or losses are recorded for financial statement purpose as unrealized
until the settlement date. At April 30, 1996, the Fund had outstanding
foreign currency commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT DATE CONTRACTS TO CONTRACTS APPRECIATION
UNSETTLED TRANSACTIONS DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
5/3/96 142,070 Brazilian Real $ 143,201 $ 143,042 $ (159)
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal and international securities laws
or in transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for resale,
at the issuer's expense either upon demand by the Fund or in connection
with another registered offering of the securities. Many restricted
securities may be resold in the secondary market in transactions exempt
from registration. Such restricted securities may be determined to be
liquid under criteria established by the Board of Directors. The Fund will
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
not incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee. Additional information on each
restricted security held at April 30, 1996 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Star Paging Int'l. Holdings Ltd. Warrants 6/9/94 $ 2,585
KeKut Asvanyiz, GDR 12/13/94 24,948
Konzum Ker ESIpan, RT 6/14/94 22,134
PT Concond Benefit Enterprise 4/14/94 82,255
Dong Bang Forwarding Co. 2/3/95 45,864
Grupo Financiero Banamey, Class L 4/22/96 0
Grupo Carso S.A. de CV, ADR 3/10/95-8/17/95 61,875
Ceteco Holdings N.V. ADR 5/25/94-9/23/94 83,652
Peru Real Estate S.A. 3/15/95 262,400
Kumho Construction & Engineering Co., Pfd. 4/12/95-4/19/95 55,062
Daewoo Heavy Industries, Pfd. 2/3/95-4/12/95 49,931
</TABLE>
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.
OTHER--Investment transactions are accounted for on the trade date.
(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 (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
1996 1995
Shares sold 970,744 2,641,403
- --------------------------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 9,312 --
- --------------------------------------------------------------------------------------
Shares redeemed (1,662,092) (1,754,090)
- -------------------------------------------------------------------------------------- ----------- -----------
Net change resulting from share transactions (682,036) 887,313
- -------------------------------------------------------------------------------------- ----------- -----------
</TABLE>
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
(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 investment advisory fee equal to
1.25% of the Fund's average daily net assets.
Virtus Capital Management Inc. became the Fund's Manager on July 12, 1995. Prior
to July 12, 1995, Sheffield Management Company served as the Fund's Manager and
received for its services an annual management fee equal to 1.25% of the Fund's
average daily net assets.
For the period ended April 30, 1996 the managers earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
MANAGERS NAME FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Management Company $ 28,045 $ 28,045
- ----------------------------------------------------------------------------------
Virtus Capital Management, Inc. $ 94,504 $ 94,504
- ----------------------------------------------------------------------------------
</TABLE>
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.
Under the terms of a sub-advisory agreement between the Manager and Martin
Currie, Inc. (Equities Sector), Martin Curie Inc., receives an annual fee from
the Manager equal to 0.50% of the first $150 million of the equity sector's
average daily net assets and 0.40% of the sector's average daily net assets in
excess of $150 million. Under the terms of a sub-advisory agreement between the
Manager and OFFITBANK (Fixed Income Sector), OFFITBANK receives an annual fee
from the Manager equal to 0.45% of the first $150 million of the fixed income
sector's average daily net assets and 0.35% of the sector's average daily net
assets in excess of $150 million. In addition, Martin Currie Inc. and OFFITBANK
may voluntarily choose to reduce their compensation.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period. FAS
may voluntarily choose to waive a portion of its fee.
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.
FSC became the Fund's principal distributor on July 12, 1995. Prior to July 12,
1995, Sheffield Investments, Inc. served as the Fund's principal distributor and
received for its services an annual distribution fee equal to 0.50% of the
Fund's average daily net assets.
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
For the year ended April 30, 1996, the distributors earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
DISTRIBUTOR NAME FEE EARNED
<S> <C>
Sheffield Investments, Inc. $ 12,087
- ---------------------------------------------------------------------------------------------------
Federated Securities Corp. $ 37,017
- ---------------------------------------------------------------------------------------------------
</TABLE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ"), through its subsidiary, Federated Shareholder Services Company serves
as transfer and dividend disbursing agent for the Fund. The fee paid to FServ is
based on the size, type, and number of accounts and transactions made by
shareholders.
FServ became the Fund's transfer agent on October 15, 1995. Prior to October 15,
1995, United States Trust Company of New York served as the Fund's transfer
agent for which it received a fee.
For the year ended April 30, 1996, the transfer agents earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
TRANSFER AGENT FEE EARNED
<S> <C>
United States Trust Company of New York $ 15,322
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 24,165
- ---------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses. FServ became the
Fund's portfolio accountant on October 15, 1995. Prior to October 15, 1995,
Mutual Fund Services Company served as the Fund's portfolio accountant for which
it received a fee.
For the year ended April 30, 1996, the portfolio accountants earned fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF
PORTFOLIO ACCOUNTANTS FEE EARNED
<S> <C>
Mutual Funds Services Company $ 44,992
- ---------------------------------------------------------------------------------------------------
Federated Services Company $ 32,918
- ---------------------------------------------------------------------------------------------------
</TABLE>
CUSTODIAN FEES--Signet Trust Co. is the Fund's custodian. The fee is based on
the level of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
Signet Trust Company became the Fund's custodian on October 15, 1995. Prior to
October 15, 1995, United States Trust Company of New York served as the Fund's
custodian for which it received a fee.
BLANCHARD WORLDWIDE EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
For the year ended April 30, 1996, the custodians earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
CUSTODIANS FEE EARNED
<S> <C>
United States Trust Company of New York $ 40,542
- ---------------------------------------------------------------------------------------------------
Signet Trust Company $ 11,768
- ---------------------------------------------------------------------------------------------------
</TABLE>
ORGANIZATIONAL EXPENSES--The Fund's Manager paid the organizational expenses of
the Fund incurred prior to the public offering of its shares amounting to
$145,001. The Fund is liable to the Manager for these expenses and has deferred
and is amortizing such expenses on the straight-line method over five years from
the date of commencement of the Fund's operations.
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 Directors'/ Trustees' Fees in the
Statement of Operations for the period ended April 30, 1996 was $1,943.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
April 30, 1996, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 18,879,199
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 23,246,620
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of BLANCHARD FUNDS
and Shareholders of BLANCHARD WORLDWIDE EMERGING MARKETS FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Blanchard Worldwide Emerging Markets Fund as of
April 30, 1996, and the related statements of operations and changes in net
assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended April 30, 1995 and the financial highlights for
the two years in the period ended April 30, 1995 were audited by other auditors,
whose reports thereon dated June 20, 1995, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of April 30, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Blanchard Worldwide Emerging Markets Fund as of April 30, 1996, the results of
its operations, the changes in its net assets and its financial highlights for
the year then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 19, 1996
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
OFFITBANK
Income Securities
Martin Currie Inc.
Equity Securities
Blanchard
Worldwide
Emerging
Markets 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.
(2021)
CUSIP 093212702
GO1684-06 (6/96)
Blanchard
Worldwide
Emerging
Markets Fund
Annual Report
April 30, 1996
Managed by: Virtus Capital Management
Blanchard Group of Funds
Annual Report Graphic Appendix
A. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Flexible Tax-Free Bond Fund are
represented by a broken line. The Lehman Brothers Current Municipal
Bond Index is represented by a solid line. The line graph is a visual
representation of a comparison of change in value of a hypothetical
investment of $10,000 in Shares of the Blanchard Flexible Tax-Free
Bond Fund and Lehman Brothers Current Municipal Bond Index for the
period from August 12, 1993 (dated of inception) to April 30, 1996.
The `y'' axis reflects the cost of investment. The ``x'' axis
reflects computation periods from August 12, 1993 (date of inception)
to April 30, 1994. The right margin of the chart reflects the ending
value of the hypothetical investment in the Shares of the Fund as
compared to Lehman Brothers Current Municipal Bond Index. The ending
values are $11,776 and $11,171, respectively.
B. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Worldwide Emerging Markets Fund are
represented by a broken line. The Morgan Stanley Emerging Markets
Index is represented by a solid line. The line graph is a visual
representation of a comparison of change in value of a hypothetical
investment of $10,000 in Shares of the Blanchard Worldwide Emerging
Markets Fund and Morgan Stanley Emerging Markets Index for the period
from March 1, 1994 (date of inception) to April 30, 1996. The `y''
axis reflects the cost of investment. The `x'' axis reflects
computation periods from March 1, 1994 (date of inception) to April
30, 1994. The right margin of the chart reflects the ending value of
the hypothetical investment in the Shares of the Fund as compared to
Morgan Stanley Emerging Markets Index. The ending values are $8,205
and $9,962, respectively.
C. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Flexible Income Fund are represented by a
broken line. The Merrill Lynch Aggregate Bond Index is represented by
a solid line. The line graph is a visual representation of a
comparison of change in value of a hypothetical investment of $10,000
in Shares of the Blanchard Flexible Income Fund and Merrill Lynch
Aggregate Bond Index for the period from November 2, 1992 (date of
inception) to April 30, 1996. The `y'' axis reflects the cost of
investment. The `x'' axis reflects computation periods from March 1,
1994 (date of inception) to April 30, 1994. The right margin of the
chart reflects the ending value of the hypothetical investment in the
Shares of the Fund as compared to Merrill Lynch Aggregate Bond Index.
The ending values are $12,298 and 12,561, respectively.
D. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Precious Metals Fund are represented by a
broken line. The Toronto Stock Exchange Gold & Silver Index is
represented by a solid line. The line graph is a visual
representation of a comparison of change in value of a hypothetical
investment of $10,000 in Shares of the Blanchard Precious Metals Fund
and Toronto Stock Exchange Gold & Silver Index for the period from
June 23, 1988 (date of inception) to April 30, 1996. The `y'' axis
reflects the cost of investment. The `x'' axis reflects computation
periods from June 23, 1988 (date of inception) to April 30, 1994. The
right margin of the chart reflects the ending value of the
hypothetical investment in the Shares of the Fund as compared to
Toronto Stock Exchange Gold & Silver Index. The ending values are
$14,462 and $18,838, respectively.
E. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Short-Term Flexible Income Fund are
represented by a broken line. The Merrill Lynch Short-Term Government
Corporate Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in value of a
hypothetical investment of $10,000 in Shares of the Blanchard Short-
Term Flexible Income Fund and Merrill Lynch Short-Term Government
Index for the period from April 16, 1993 (date of inception) to April
30, 1996. The `y'' axis reflects the cost of investment. The ``x''
axis reflects computation periods from April 16, 1993 (date of
inception) to April 30, 1994. The right margin of the chart reflects
the ending value of the hypothetical investment in the Shares of the
Fund as compared to Merrill Lynch Short-Term Government Corporate
Index. The ending values are $11,761 and $11,576, respectively.
F. The graphic representation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath.
The Shares of the Blanchard Global Growth Fund are represented by a
broken line. The Standard & Poor's 500 Index is represented by a
solid line. The line graph is a visual representation of a comparison
of change in value of a hypothetical investment of $10,000 in Shares
of the Blanchard Global Growth Fund and Standard & Poor's 500 Index
for the period from June 1, 1987 (date of inception) to April 30,
1996. The `y'' axis reflects the cost of investment. The ``x'' axis
reflects computation periods from June 1, 1987 (date of inception) to
April 30, 1994. The right margin of the chart reflects the ending
value of the hypothetical investment in the Shares of the Fund as
compared to Standard & Poor's 500 Index. The ending values are
$22,804 and $35,911, respectively.
