President's Message
December 15, 1995
Dear Shareholder,
I'm pleased to present the Annual Report for the Blanchard Growth & Income Fund
and the Blanchard Capital Growth Fund for the fiscal year ending October 31,
1995.
This report provides you with complete financial information for each
Fund, including performance updates from the Investment Management Team, a list
of investments included in each portfolio, and a financial statement for each
portfolio.
If you would like the most recent performance update for either
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 first Annual Report for your Blanchard Growth &
Income Fund for the fiscal year ending October 31, 1995.
During its initial year, your Fund benefited from a generally positive
economic environment for the U.S. stock market. For the fiscal year ended
October 31, 1995, the Fund had a total return of 16.03%.*
Naturally, past performance is no guarantee of future performance. As
with all mutual funds, principal value and return will vary with market
conditions so that shares, when redeemed, may be worth more or less than their
original cost.
In late 1994, the U.S. stock market was at a crossroads as economic
signals were mixed. That is, some sectors were showing solid growth while
others were slowing as a result of recent rate hikes by the Federal Reserve. By
the end of the first quarter, however, stocks had climbed into the record books
as conditions for the stock market improved: inflation was under control, the
dollar firmed and first quarter earnings were better than expected.
The Value of a $10,000 Investment in the Blanchard Growth & Income Fund
from inception of the Chase Growth & Income Portfolio 9/30/87 through 10/31/95
as compared to the Lipper Growth & Income Fund Index for the same period**
Avg. Annual Returns through 10/31/95
Blanchard Growth & Income Fund*
1 year 16.03%
5 year 20.15%
since inception 21.77%
See Appendix A.1 for graphic explaination.
*The average annual returns quoted above assumes the reinvestment of
distributions but does not reflect the deduction of the account opening fee.
If fee was 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.
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Blanchard Growth & Income Fund seeks to meet its investment
objectives by investing 100% of its assets in an institutional Chase Growth &
Income Fund Portfolio managed by Chase Manhattan Bank, N.A. The Fund's
performance, therefore, depends on the portfolio of that Chase Portfolio. As
the Fund had no performance history prior to November 1, 1994, all performance
information prior to that date reflects that of the Chase Growth & Income
Portfolio and its predecessor Fund.
**On 11/1/94 the Fund commenced operations by investing in the Chase Growth &
Income Portfolio.
+Source: The Lipper Growth & Income Fund Index is an equally weighted
performance index of the 30 largest funds in Lipper's Growth and Income Fund
category, adjusted for capital gains, distributions and income dividends. This
index is unmanaged.
^Reflects deduction of the one-time $50 account opening fee.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the BGIF or the index.
The market continued its ascent to new highs in the second and third
quarters of 1995, sparked by continued declines in interest rates and a benign
inflation outlook. Strong economic reports dampened fears that the economy was
entering a recession, and helped bolster the market's performance. The market
was further helped as the dollar stabilized against major foreign currencies.
After equities posted solid gains for the first nine months of the
fiscal period, cyclical issues began to turn lower in July on expectations of a
weakening economy while the defensive sector gained. The fiscal period ended on
a negative note for equities on weaker than expected third-quarter earnings
results in the cyclical area, and continued mixed economic data.
For the period under review, the Fund benefited from its significant
investments in basic industry, capital goods and financial companies, which
performed well.
Going forward, we see the most promise in the basic industry, capital
goods, technology, transportation and financial sectors; we also like some
consumer staples and health care issues.
We expect technology stocks to remain volatile as investors with large
weightings and solid gains take some profits and those who missed the rally
begin buying on downturns. We plan to continue to maintain a 10% cash position.
This will give us the opportunity to take advantage of attractive investment
opportunities in the months ahead.
Sincerely,
The Investment Management Team
at Chase Manhattan Bank, N.A.
Portfolio Advisers to the Blanchard
Growth & Income Fund
Dear Shareholders,
Enclosed please find the first Annual Report for your Blanchard Capital
Growth Fund for the fiscal year ending October 31, 1995.
The Blanchard Capital Growth Fund turned in strong returns during its
initial year, in a very positive period for U.S. stocks. The Fund's total
return for the 12 months ended October 31, 1995, was 9.43%.*
Naturally, past performance is no guarantee of future performance. As with
all mutual funds, principal value and return will vary with market conditions
so that shares, when redeemed, may be worth more or less than their original
cost.
In late 1994, uncertainty dominated the stock market as economic signals
remained unclear. Economic conditions soon began to improve, however,
characterized by low inflation, solid corporate earnings results and a firmer
U.S. dollar.
In the second and third quarters of 1995, the market climbed to record
highs as the threat of inflation dissipated and short-term interest rates
dropped. Cyclical issues soared on economic news, while technology issues
outperformed on very strong earnings results.
The Value of a $10,000 Investment in the
Blanchard Capital Growth Fund
from inception of the Chase Capital Growth Portfolio
9/30/87 through 10/31/95 as compared to the
Lipper Mid Cap Fund Index for the same period**
Avg. Annual Returns through 10/31/95
Blanchard Capital Growth Fund*
1 year 9.43%
5 year 23.89%
since inception 18.76%
See A-2 For graphic explaination.
*The average annual returns quoted above assumes the reinvestment
of distributions but does not reflect the deduction of the account
opening fee. If fee was 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.
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Blanchard Capital Growth Fund seeks to meet its investment
objectives by investing 100% of its assets in an institutional Chase Capital
Growth Fund Portfolio managed by Chase Manhattan Bank, N.A. The Fund's
performance, therefore, depends on the portfolio of that Chase Portfolio. As
the Fund had no performance history prior to November 1, 1994, all performance
information prior to that date reflects that of the Chase Capital Growth
Portfolio and its predecessor Fund.
**On 11/1/94 the Fund commenced operations by investing in the Chase Capital
Growth Portfolio.
+Source: The Lipper Mid Cap Fund Index is an equally weighted performance index
of the 30 largest funds in Lipper's Mid Cap Fund category, adjusted for capital
gains, distributions and income dividends. This index is unmanaged.
^Reflects deduction of the one-time $50 account opening fee.
This chart is for comparative purposes only and is not intended to reflect on
future performance of the BCGF or the index.
The market was further helped as the dollar stabilized against major
foreign currencies. The fiscal period ended on a negative note for equities,
with disappointing third-quarter earnings results in the cyclical area and mixed
economic data.
For the period under review, the Fund's total return benefited from timely
stock selection and sector weighting decisions, including an emphasis on the
financial, consumer cyclical and technology sectors.
Going forward, we see the most promise in the basic industry, capital
goods, technology and transportation sectors; we also like some consumer
cyclical and financial issues. Given current stock valuations, we will continue
to hold about 10% of the Fund in cash - a position we will adjust in order to
take advantage of opportunities. Overall, we believe that the Fund is
positioned to benefit from any growth potential in the months ahead as economic
conditions remain positive for growth stocks.
Sincerely,
The Investment Management Team
at Chase Manhattan Bank, N.A.
Portfolio Advisers to the Blanchard
Capital Growth Fund
BLANCHARD FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLANCHARD BLANCHARD
GROWTH & CAPITAL
INCOME FUND GROWTH FUND
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------
Investments in Portfolios, at value $ 6,329,723 $ 1,823,051
- ----------------------------------------------------------------------------
Receivable for shares sold 60,776 --
- ----------------------------------------------------------------------------
Receivable from Manager 15,864 26,783
- ----------------------------------------------------------------------------
Prepaid expense -- 2,495
- ----------------------------------------------------------------------------
Deferred organizational expenses 73,554 71,186
- ----------------------------------------------------------------------------
Deferred registration costs 12,070 12,198
- ---------------------------------------------------------------------------- ---------------- -----------------
Total assets 6,491,987 1,935,713
- ---------------------------------------------------------------------------- ---------------- -----------------
LIABILITIES:
- ----------------------------------------------------------------------------
Payable for shares redeemed 1,491 185,727
- ----------------------------------------------------------------------------
Accrued expenses 47,211 38,981
- ---------------------------------------------------------------------------- ---------------- -----------------
Total liabilities 48,702 224,708
- ---------------------------------------------------------------------------- ---------------- -----------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------
Paid in capital 5,816,360 1,518,854
- ----------------------------------------------------------------------------
Net unrealized appreciation of investments in Portfolios 486,240 192,151
- ----------------------------------------------------------------------------
Accumulated net realized gain on investments in Portfolios 140,685 --
- ---------------------------------------------------------------------------- ---------------- -----------------
Net Assets $ 6,443,285 $ 1,711,005
- ---------------------------------------------------------------------------- ---------------- -----------------
Shares Outstanding 794,485 223,270
- ---------------------------------------------------------------------------- ---------------- -----------------
NET ASSET VALUE, Offering and Redemption Price Per Share:
(net assets / shares outstanding) $8.11 $7.66
- ---------------------------------------------------------------------------- ---------------- -----------------
</TABLE>
See Notes which are an integral part of the Financial Statements
BLANCHARD FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLANCHARD BLANCHARD
GROWTH & CAPITAL
INCOME FUND GROWTH FUND
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIOS:
- --------------------------------------------------------------------------------
Dividends $ 64,278 $ 16,716
- --------------------------------------------------------------------------------
Interest 52,969 11,066
- --------------------------------------------------------------------------------
Expenses allocated from Portfolios (17,164) (6,628)
- -------------------------------------------------------------------------------- -------------- ----------------
Net investment income allocated from Portfolios 100,083 21,154
- -------------------------------------------------------------------------------- -------------- ----------------
EXPENSES:
- --------------------------------------------------------------------------------
Management fee 21,099 7,941
- --------------------------------------------------------------------------------
Administrative personnel and services fee 23,014 23,014
- --------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 9,692 4,292
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 10,065 4,475
- --------------------------------------------------------------------------------
Auditing fees 9,396 9,396
- --------------------------------------------------------------------------------
Legal fees 22,726 22,831
- --------------------------------------------------------------------------------
Distribution services fee 18,300 6,950
- --------------------------------------------------------------------------------
Share registration costs 3,018 3,049
- --------------------------------------------------------------------------------
Printing and postage 16,511 7,109
- --------------------------------------------------------------------------------
Amortization of organizational costs 18,249 18,215
- -------------------------------------------------------------------------------- -------------- ----------------
Total expenses 152,070 107,272
- -------------------------------------------------------------------------------- -------------- ----------------
Waivers/Reimbursements--
- --------------------------------------------------------------------------------
Waiver of management fee (21,099) (7,941)
- --------------------------------------------------------------------------------
Waiver of distribution services fee (6,097) (3,845)
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses (1,181) (15,706)
- -------------------------------------------------------------------------------- -------------- ----------------
Total Waivers/Reimbursements (28,377) (27,492)
- -------------------------------------------------------------------------------- -------------- ----------------
Net expenses 123,693 79,780
- -------------------------------------------------------------------------------- -------------- ----------------
Net investment loss (23,610) (58,626)
- -------------------------------------------------------------------------------- -------------- ----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM PORTFOLIOS:
- --------------------------------------------------------------------------------
Net realized gain on investment transactions 127,206 54,854
- --------------------------------------------------------------------------------
Net realized gain on financial futures contracts transactions 42,811 --
- -------------------------------------------------------------------------------- -------------- ----------------
Net realized gain from Portfolios 170,017 54,854
- --------------------------------------------------------------------------------
Net change in unrealized appreciation of investments in Portfolios 486,240 192,151
- -------------------------------------------------------------------------------- -------------- ----------------
Net realized and unrealized gain on investments 656,257 247,005
- -------------------------------------------------------------------------------- -------------- ----------------
Change in net assets resulting from operations $ 632,647 $ 188,379
- -------------------------------------------------------------------------------- -------------- ----------------
</TABLE>
See Notes which are an integral part of the Financial Statements
BLANCHARD FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
BLANCHARD BLANCHARD
GROWTH & CAPITAL
INCOME FUND GROWTH FUND
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment loss $ (23,610) $ (58,626)
- -----------------------------------------------------------------------------
Net realized gain on investments from Portfolios 170,017 54,854
- -----------------------------------------------------------------------------
Net change in unrealized appreciation of investments
in Portfolios 486,240 192,151
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 632,647 188,379
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------
Distributions in excess of net investment income (2,119) --
- ----------------------------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 11,752,782 6,052,689
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 2,024 --
- -----------------------------------------------------------------------------
Cost of shares redeemed (5,942,049) (4,530,063)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions 5,812,757 1,522,626
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 6,443,285 1,711,005
- ----------------------------------------------------------------------------- ---------------- ----------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period -- --
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 6,443,285 $ 1,711,005
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
See Notes which are an integral part of the Financial Statements
BLANCHARD FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
BLANCHARD BLANCHARD
GROWTH & CAPITAL
INCOME FUND GROWTH FUND
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.00 $ 7.00
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------
Net investment loss (0.03) (0.26)
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.15 0.92
- ----------------------------------------------------------------------------- ------- -------
Total from investment operations 1.12 0.66
- ----------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------
Distributions in excess of net investment income (0.01) --
- ----------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.11 $ 7.66
- ----------------------------------------------------------------------------- ------- -------
TOTAL RETURN 16.03% 9.43%
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------
Expenses (a) 3.81% 6.19%
- -----------------------------------------------------------------------------
Net investment loss (0.64%) (4.20%)
- -----------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.77% 1.97%
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,443 $1,711
- -----------------------------------------------------------------------------
</TABLE>
(a) Reflects the Funds' proportionate share of the respective Portfolios'
expenses and the Funds' fee waivers and expense reimbursements by the
Funds' Manager and Distributor.
(b) This voluntary expense decrease is reflected in both the expense and net
investment loss ratios shown above.
See Notes which are an integral part of the Financial Statements
BLANCHARD FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
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 was organized as a Massachusetts business trust on January 24, 1986. The
Trust consists of ten series of shares. The following series comprise the Trust:
<TABLE>
<CAPTION>
SERIES NAME DIVERSIFICATION
<S> <C>
Blanchard Global Growth Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard 100% Treasury Money Market Fund diversified
- ---------------------------------------------------------------------------------------------
Blanchard Short-Term Global Income Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard American Equity Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Flexible Income Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Short-Term Flexible Income Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Flexible Tax-Free Bond Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Emerging Markets Growth & Income Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Growth & Income Fund non-diversified
- ---------------------------------------------------------------------------------------------
Blanchard Capital Growth Fund non-diversified
- ---------------------------------------------------------------------------------------------
</TABLE>
The financial statements of the following series (individually referred to as
the "Fund", or collectively as the "Funds") are presented herein:
SERIES NAME
- --------------------------------------------------------------------------
Blanchard Growth & Income Fund ("Growth & Income Fund") and
- --------------------------------------------------------------------------
Blanchard Capital Growth Fund ("Capital Growth Fund") ("The Funds")
- --------------------------------------------------------------------------
The Funds commenced operations on November 1, 1994.
The financial statements of the other series are presented separately in other
reports. The assets of each series are segregated and a shareholder's interest
is limited to the series in which shares are held.
Growth & Income Fund and Capital Growth Fund seek to achieve their investment
objectives by investing substantially all of their investable assets in the
Growth & Income Portfolio and the Capital Growth Portfolio (the "Portfolios")
respectively, which are open-end management investment companies having the same
investment objectives as the Funds. The Funds, the Portfolios in which they
invest, and the percentage of each Portfolio owned by the respective Fund at
October 31, 1995 are shown below. The Portfolios are advised by Chase Manhattan
Bank, N.A..
BLANCHARD FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUNDS' PERCENTAGE INTEREST IN THE
FUND PORTFOLIO PORTFOLIO AT OCTOBER 31, 1995
<S> <C> <C>
Growth & Income Fund Growth & Income Portfolio 0.34%
- --------------------------------------
Capital Growth Fund Capital Growth Portfolio 0.18%
- --------------------------------------
</TABLE>
These financial statements should be read together with the accompanying
portfolio of investments and financial statements of the Growth & Income
Portfolio and the Capital Growth Portfolio.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Funds record their investments in the Portfolios
at value. Securities of the Portfolio are recorded at value as more fully
discussed in the Notes to those accompanying Financial Statements.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--The Funds record daily their
pro-rata shares of their respective Portfolio's income, expenses, and
realized and unrealized gains and losses. In addition, the Funds accrue
their own expenses daily as incurred. Expenses directly attributable to the
Funds are charged directly to the Funds. Certain expenses for the Trust are
allocated among all the Funds in the Trust based upon their relative
average net assets. Distributions to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains is determined in
accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. Dividends and distributions which
exceed net investment income or net realized capital gains for financial
reporting purposes, but not for tax purposes, are reported as distributions
in excess of net investment income or net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of capital.
FEDERAL TAXES--It is each Fund's policy to comply with the provisions of
the Internal Revenue Code (the "Code") applicable to regulated investment
companies and to distribute to shareholders each year substantially all of
its income. Accordingly, no provisions for federal tax are necessary.
DEFERRED EXPENSES--Organizational expenses for the Growth & Income Fund and
the Capital Growth Fund of $90,813 and $88,861 respectively, were initially
borne by Sheffield Management Company. The costs incurred by the Funds with
respect to their organization, including the initial expense of registering
its shares, have been deferred and are being amortized using the
straight-line method over a period of five years from each Fund's
commencement date.
BLANCHARD FUNDS
- --------------------------------------------------------------------------------
RECLASSIFICATION--In accordance with Statement of Position 93-2
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies
("SOP 93-2"). Accordingly, permanent book and tax differences have been
reclassified to paid-in capital. These differences primarily are due to net
investment operating losses. Amounts as of October 31, 1995 have been
reclassified to reflect the following:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED ACCUMULATED
DISTRIBUTIONS IN NET REALIZED GAIN
PAID-IN EXCESS OF NET ON INVESTMENTS
FUND NAME CAPITAL INVESTMENT INCOME IN PORTFOLIOS
<S> <C> <C> <C>
Growth & Income Fund $3,603 $ 25,729 $ (29,332)
-------------------------------------------------- ----------- ---------- ----------
Capital Growth Fund ( $3,772) $ 58,626 $ (54,854)
-------------------------------------------------- ----------- ---------- ----------
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
GROWTH & CAPITAL
INCOME FUND GROWTH FUND
<S> <C> <C>
Shares sold 1,584,617 808,463
- -----------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 298 --
- -----------------------------------------------------------------------------
Shares redeemed (790,430) (585,193)
- ----------------------------------------------------------------------------- ---------------- ----------------
Net change resulting from share transactions 794,485 223,270
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Virtus Capital Management, Inc., the Funds' manager, (the
"Manager"), receives for its services an annual management fee equal to .70 of
1% of each Funds' average daily net assets. These services include management of
the Fund, certain administrative services and selecting, monitoring, and
evaluating the Portfolios' manager. The Manager may voluntarily choose to waive
any portion of its fee and/or reimburse certain operating expenses of each Fund.
The Manager can modify or terminate this voluntary waiver and/or reimbursement
at any time at its sole discretion.
BLANCHARD FUNDS
- --------------------------------------------------------------------------------
Virtus Capital Management, Inc. became the Funds' Manager on July 13, 1995.
Prior to July 13, 1995, Sheffield Management Company served as the Funds'
Manager for which it received a fee.
For the year ended October 31, 1995, the advisers earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
GROWTH AND INCOME FUND FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Management Company $ 14,683 $ 14,683
- ---------------------------------------------------------------------------------- ------------- --------------
Virtus Capital Management, Inc. $ 6,416 $ 6,416
- ---------------------------------------------------------------------------------- ------------- --------------
<CAPTION>
AMOUNT OF AMOUNT OF
CAPITAL GROWTH FUND FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Management Company $ 5,526 $ 5,526
- ---------------------------------------------------------------------------------- ------------- --------------
Virtus Capital Management, Inc. $ 2,415 $ 2,415
- ---------------------------------------------------------------------------------- ------------- --------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This fee is based on the
level of average aggregate net assets of the Trust for the period.
DISTRIBUTION SERVICES FEE--The Funds have adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Funds will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Funds to finance activities intended to
result in the sale of the Funds' shares. The Plan provides that the Fund may
incur distribution expenses up to 0.50 of 1% of the average daily net assets of
the Funds' 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 Funds' distributor on July 13, 1995. Prior to July 13, 1995,
Sheffield Investments, Inc. served as the Funds' distributor and was reimbursed
from the net assets of the Funds to finance activities intended to result in the
sale of the Funds' shares.
For the year ended October 31, 1995, the distributors earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
GROWTH & INCOME FUND FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Investments, Inc. $ 12,735 $ 4,243
- ---------------------------------------------------------------------------------- ------------- -------
Federated Securities Corp. $ 5,565 $ 1,854
- ---------------------------------------------------------------------------------- ------------- -------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
CAPITAL GROWTH FUND FEE EARNED FEE WAIVED
<S> <C> <C>
Sheffield Investments, Inc. $ 4,836 $ 2,676
- ---------------------------------------------------------------------------------- ------------- -------
Federated Securities Corp. $ 2,114 $ 1,169
- ---------------------------------------------------------------------------------- ------------- -------
</TABLE>
BLANCHARD FUNDS
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Funds for
which it receives a fee. This fee is based on the size, type, and number of
accounts and transactions made by shareholders.
FServ became the Funds' transfer and dividend disbursing agent on October 15,
1995. Prior to October 15, 1995, United States Trust Company of New York served
as the Funds' transfer and dividend disbursing agent for which it received a
fee.
For the year ended October 31, 1995, the transfer and dividend disbursing agents
earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF
GROWTH & INCOME FUND FEE EARNED
<S> <C>
United States Trust Company of New York $ 9,241
- --------------------------------------------------------------------------------------------------- -------------
Federated Services Company $ 451
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF
CAPITAL GROWTH FUND FEE EARNED
<S> <C>
United States Trust Company of New York $ 4,092
- --------------------------------------------------------------------------------------------------- -------------
Federated Services Company $ 200
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
DIRECTORS/TRUSTEES FEES--Prior to the acquisition of the Manager by Signet, 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. Following the acquisition the
Plan was curtailed. The net pension expense included in Directors'/ Trustees'
Fees in the Statement of Operations for the year ended October 31, 1995 for
Growth and Income Fund and Capital Growth Fund was $9,665 and $4,075,
respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of FServ and FSC.
BLANCHARD FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Blanchard Capital Growth Fund
and Blanchard Growth & Income Fund
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Blanchard Capital Growth Fund and Blanchard Growth & Income Fund (two of the
funds in the series constituting Blanchard Funds, hereafter referred to as the
"Funds") at October 31, 1995, and the results of their operations, the changes
in each of their net assets, and the financial highlights for the period
November 1, 1994 (commencement of operations) through October 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 22, 1995
GROWTH AND INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--86.4%
- -----------------------------------------------------------------------------------------------
COMMON STOCK--73.3%
- -----------------------------------------------------------------------------------------------
AEROSPACE--1.9%
--------------------------------------------------------------------------------
300,000 General Motors Class H $ 12,600,000
--------------------------------------------------------------------------------
320,000 Loral Corp. 9,480,000
--------------------------------------------------------------------------------
150,000 United Technologies, Corp. 13,312,500
-------------------------------------------------------------------------------- ----------------
35,392,500
-------------------------------------------------------------------------------- ----------------
AGRICULTURAL PRODUCTION/SERVICES--1.7%
--------------------------------------------------------------------------------
175,000 AGCO Corp. 7,831,250
--------------------------------------------------------------------------------
375,000 Case Corp. 14,296,875
--------------------------------------------------------------------------------
100,000 Deere & Co. 8,937,500
-------------------------------------------------------------------------------- ----------------
31,065,625
-------------------------------------------------------------------------------- ----------------
APPAREL/TEXTILES--0.2%
--------------------------------------------------------------------------------
75,000 V.F. Corp. 3,590,625
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--2.6%
--------------------------------------------------------------------------------
214,027 Chrysler Corp. 11,049,144
--------------------------------------------------------------------------------
300,000 Dana Corp. 7,687,500
--------------------------------------------------------------------------------
400,000 Echlin, Inc. 14,300,000
--------------------------------------------------------------------------------
200,000 General Motors 8,750,000
--------------------------------------------------------------------------------
100,000 TRW Inc. 6,575,000
-------------------------------------------------------------------------------- ----------------
48,361,644
-------------------------------------------------------------------------------- ----------------
BANKING--3.3%
--------------------------------------------------------------------------------
375,000 Bank of New York Company, Inc. 15,750,000
--------------------------------------------------------------------------------
265,000 Citicorp 17,191,875
--------------------------------------------------------------------------------
150,000 First Bank System Inc. 7,462,500
--------------------------------------------------------------------------------
125,000 NationsBank Corp. 8,218,750
--------------------------------------------------------------------------------
415,000 Norwest Corp. 12,242,500
-------------------------------------------------------------------------------- ----------------
60,865,625
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
CHEMICALS--2.7%
--------------------------------------------------------------------------------
200,000 Air Products & Chemicals, Inc. $ 10,325,000
--------------------------------------------------------------------------------
90,000 Dow Chemical Co. 6,176,250
--------------------------------------------------------------------------------
300,000 duPont (EI) deNemours 18,712,500
--------------------------------------------------------------------------------
225,000 Praxair, Inc. 6,075,000
--------------------------------------------------------------------------------
235,000 Union Carbide Corp. 8,900,625
-------------------------------------------------------------------------------- ----------------
50,189,375
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--1.5%
--------------------------------------------------------------------------------
200,000 Computer Associates International 11,000,000
--------------------------------------------------------------------------------
200,000 General Motors Corp., Class E 9,425,000
--------------------------------------------------------------------------------
223,000 Reynolds & Reynolds, Inc., Class A 7,944,375
-------------------------------------------------------------------------------- ----------------
28,369,375
-------------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--4.1%
--------------------------------------------------------------------------------
210,000 Apple Computer Inc. 7,625,625
--------------------------------------------------------------------------------
180,000 Comdisco, Inc. 5,490,000
--------------------------------------------------------------------------------
400,000 Compaq Computer* 22,300,000
--------------------------------------------------------------------------------
75,000 International Business Machines Corp. 7,293,750
--------------------------------------------------------------------------------
250,000 Read-Rite Corp. 8,718,750
--------------------------------------------------------------------------------
200,000 SCI Systems, Inc.* 7,025,000
--------------------------------------------------------------------------------
225,000 Sun Microsystems, Inc.* 17,550,000
-------------------------------------------------------------------------------- ----------------
76,003,125
-------------------------------------------------------------------------------- ----------------
CONSTRUCTION MACHINERY--0.8%
--------------------------------------------------------------------------------
250,000 Caterpillar Inc. 14,031,250
-------------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--1.7%
--------------------------------------------------------------------------------
300,000 Black & Decker Corp. 10,162,500
--------------------------------------------------------------------------------
100,000 Procter & Gamble Co. 8,100,000
--------------------------------------------------------------------------------
195,000 Shaw Industries 2,486,250
--------------------------------------------------------------------------------
120,000 Toro Co. 3,465,000
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--CONTINUED
--------------------------------------------------------------------------------
130,000 Whirlpool Corp. $ 6,890,000
-------------------------------------------------------------------------------- ----------------
31,103,750
-------------------------------------------------------------------------------- ----------------
DIVERSIFIED--0.7%
--------------------------------------------------------------------------------
200,000 Textron, Inc. 13,750,000
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--1.9%
--------------------------------------------------------------------------------
200,000 Analog Devices Inc. 7,225,000
--------------------------------------------------------------------------------
250,198 Texas Instruments 17,076,014
--------------------------------------------------------------------------------
225,000 Xilinx, Inc.* 10,350,000
-------------------------------------------------------------------------------- ----------------
34,651,014
-------------------------------------------------------------------------------- ----------------
ELECTRONICS DISTRIBUTOR--0.4%
--------------------------------------------------------------------------------
150,000 Arrow Electronics, Inc.* 7,612,500
-------------------------------------------------------------------------------- ----------------
ENTERTAINMENT--0.6%
--------------------------------------------------------------------------------
325,000 Trump Hotels & Casino Resorts, Inc. 5,525,000
--------------------------------------------------------------------------------
125,763 Viacom, Inc. Class B* 6,288,150
-------------------------------------------------------------------------------- ----------------
11,813,150
-------------------------------------------------------------------------------- ----------------
ENVIRONMENTAL SERVICES--0.4%
--------------------------------------------------------------------------------
250,000 Browning-Ferris Industries, Inc. 7,281,250
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--2.7%
--------------------------------------------------------------------------------
100,000 Advanta Corp., Class A 3,875,000
--------------------------------------------------------------------------------
200,000 American Express Co. 8,125,000
--------------------------------------------------------------------------------
450,000 American General Delaware 14,793,750
--------------------------------------------------------------------------------
207,806 Dean Witter, Discover & Co. 10,338,349
--------------------------------------------------------------------------------
130,000 Federal National Mortgage Assoc. 13,633,750
-------------------------------------------------------------------------------- ----------------
50,765,849
-------------------------------------------------------------------------------- ----------------
FOOD/BEVERAGE PRODUCTS--4.1%
--------------------------------------------------------------------------------
400,000 Coca-Cola Enterprises, Inc. 10,650,000
--------------------------------------------------------------------------------
225,000 ConAgra, Inc. 8,690,625
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS--CONTINUED
--------------------------------------------------------------------------------
100,000 CPC International, Inc.* $ 6,637,500
--------------------------------------------------------------------------------
140,000 IBP, Inc. 8,382,500
--------------------------------------------------------------------------------
250,000 PepsiCo., Inc. 13,187,500
--------------------------------------------------------------------------------
175,000 Philip Morris Companies, Inc. 14,787,500
--------------------------------------------------------------------------------
250,000 RJR Nabisco Holdings Corp. 7,687,500
--------------------------------------------------------------------------------
200,000 Seagram Company, Ltd. 7,200,000
-------------------------------------------------------------------------------- ----------------
77,223,125
-------------------------------------------------------------------------------- ----------------
HEALTH CARE--2.6%
--------------------------------------------------------------------------------
400,000 Baxter International Inc. 15,450,000
--------------------------------------------------------------------------------
235,000 Columbia/HCA Healthcare Corp. 11,544,375
--------------------------------------------------------------------------------
200,000 FHP International Corp.* 4,850,000
--------------------------------------------------------------------------------
225,000 Humana, Inc.* 4,753,125
--------------------------------------------------------------------------------
125,000 Manor Care, Inc. 4,093,750
--------------------------------------------------------------------------------
415,000 Tenet Healthcare Corp.* 7,418,125
-------------------------------------------------------------------------------- ----------------
48,109,375
-------------------------------------------------------------------------------- ----------------
INSURANCE--4.1%
--------------------------------------------------------------------------------
278,110 Allstate Corp. 10,220,543
--------------------------------------------------------------------------------
142,500 American International Group 12,023,438
--------------------------------------------------------------------------------
150,000 Chubb Corp. 13,481,250
--------------------------------------------------------------------------------
170,000 Mid Ocean, Ltd.* 6,013,750
--------------------------------------------------------------------------------
140,000 Reliastar Financial Corp. 5,845,000
--------------------------------------------------------------------------------
200,000 St. Paul Companies, Inc. 10,150,000
--------------------------------------------------------------------------------
150,000 Transamerica Corp. 10,162,500
--------------------------------------------------------------------------------
750 Transport Holdings, Inc., Class A* 29,437
--------------------------------------------------------------------------------
150,000 Travelers, Inc. 7,575,000
-------------------------------------------------------------------------------- ----------------
75,500,918
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
MANUFACTURING--2.3%
--------------------------------------------------------------------------------
150,000 Eaton Corp. $ 7,687,500
--------------------------------------------------------------------------------
275,000 Johnson Controls 16,018,750
--------------------------------------------------------------------------------
175,000 Kennametal Inc. 5,446,875
--------------------------------------------------------------------------------
400,000 Varity Corp.* 14,500,000
-------------------------------------------------------------------------------- ----------------
43,653,125
-------------------------------------------------------------------------------- ----------------
METALS/MINING--1.6%
--------------------------------------------------------------------------------
200,000 Aluminum Co. of America (ALCOA) 10,200,000
--------------------------------------------------------------------------------
375,000 Inco, Ltd. 12,890,625
--------------------------------------------------------------------------------
100,000 Phelps Dodge Corp. 6,337,500
-------------------------------------------------------------------------------- ----------------
29,428,125
-------------------------------------------------------------------------------- ----------------
OFFICE/BUSINESS EQUIPMENT--0.4%
--------------------------------------------------------------------------------
55,000 Xerox Corp. 7,136,250
-------------------------------------------------------------------------------- ----------------
OIL & GAS--6.2%
--------------------------------------------------------------------------------
150,000 Amoco Corp. 9,581,250
--------------------------------------------------------------------------------
250,000 Ashland Inc. 7,906,250
--------------------------------------------------------------------------------
449,000 Halliburton Company 18,633,500
--------------------------------------------------------------------------------
125,000 Mobil Corp. 12,593,750
--------------------------------------------------------------------------------
650,000 Panhandle Eastern Corp. 16,412,500
--------------------------------------------------------------------------------
355,000 Phillips Petroleum Co. 11,448,750
--------------------------------------------------------------------------------
194,200 Smith International* 3,107,200
--------------------------------------------------------------------------------
250,000 Triton Energy Corp. 11,656,250
--------------------------------------------------------------------------------
200,000 Ultramar Corp. 4,875,000
--------------------------------------------------------------------------------
250,000 Unocal Corp. 6,562,500
--------------------------------------------------------------------------------
300,000 Williams Companies, Inc. 11,587,500
-------------------------------------------------------------------------------- ----------------
114,364,450
-------------------------------------------------------------------------------- ----------------
PAPER/FOREST PRODUCTS--3.1%
--------------------------------------------------------------------------------
150,000 Boise Cascade Corp. 5,437,500
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--CONTINUED
--------------------------------------------------------------------------------
370,000 Champion International Corp. $ 19,795,000
--------------------------------------------------------------------------------
400,000 Fort Howard Corp.* 6,700,000
--------------------------------------------------------------------------------
170,000 Mead Corp. 9,796,250
--------------------------------------------------------------------------------
261,000 Willamette Industries 15,138,000
-------------------------------------------------------------------------------- ----------------
56,866,750
-------------------------------------------------------------------------------- ----------------
PHARMACEUTICALS--2.4%
--------------------------------------------------------------------------------
150,000 Allergan Inc. 4,406,250
--------------------------------------------------------------------------------
100,000 American Home Products Corp. 8,862,500
--------------------------------------------------------------------------------
300,000 Glaxo Wellcome Plc 8,137,500
--------------------------------------------------------------------------------
250,000 Schering-Plough Corp. 13,406,250
--------------------------------------------------------------------------------
175,000 Smithkline Beecham Plc, ADR 9,078,125
-------------------------------------------------------------------------------- ----------------
43,890,625
-------------------------------------------------------------------------------- ----------------
PRINTING & PUBLISHING--1.1%
--------------------------------------------------------------------------------
200,000 Harcourt General, Inc. 7,925,000
--------------------------------------------------------------------------------
300,000 The News Corporation, Ltd, ADR 5,962,500
--------------------------------------------------------------------------------
125,000 Tribune Co. 7,890,625
-------------------------------------------------------------------------------- ----------------
21,778,125
-------------------------------------------------------------------------------- ----------------
REAL ESTATE INVESTMENT TRUST--0.3%
--------------------------------------------------------------------------------
181,000 Hospitality Properties Trust 4,751,250
-------------------------------------------------------------------------------- ----------------
RESTAURANTS/FOOD SERVICES--0.3%
--------------------------------------------------------------------------------
325,000 Wendy's International, Inc. 6,459,375
-------------------------------------------------------------------------------- ----------------
RETAILING--5.0%
--------------------------------------------------------------------------------
485,000 American Stores Co. 14,489,375
--------------------------------------------------------------------------------
420,000 Circuit City Stores, Inc. 14,017,500
--------------------------------------------------------------------------------
250,000 Dayton-Hudson Corp. 17,187,500
--------------------------------------------------------------------------------
654,000 Kroger Co.* 21,827,250
--------------------------------------------------------------------------------
400,000 May Department Stores 15,700,000
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
RETAILING--CONTINUED
--------------------------------------------------------------------------------
300,000 Sears Roebuck & Co. $ 10,200,000
-------------------------------------------------------------------------------- ----------------
93,421,625
-------------------------------------------------------------------------------- ----------------
SHIPPING/TRANSPORTATION--3.3%
--------------------------------------------------------------------------------
100,000 Burlington Northern, Inc. 8,387,500
--------------------------------------------------------------------------------
200,000 Consolidated Railway, Inc. 13,750,000
--------------------------------------------------------------------------------
200,000 CSX Corp. 16,750,000
--------------------------------------------------------------------------------
100,000 Federal Express Corp.* 8,212,500
--------------------------------------------------------------------------------
300,000 Ryder System 7,237,500
--------------------------------------------------------------------------------
155,000 XTRA Corp. 6,800,625
-------------------------------------------------------------------------------- ----------------
61,138,125
-------------------------------------------------------------------------------- ----------------
STEEL--0.8%
--------------------------------------------------------------------------------
300,000 LTV Corp.* 4,200,000
--------------------------------------------------------------------------------
340,000 USX-US Steel Group, Inc. 10,157,500
-------------------------------------------------------------------------------- ----------------
14,357,500
-------------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--3.4%
--------------------------------------------------------------------------------
225,000 AT&T Corp. 14,400,000
--------------------------------------------------------------------------------
200,000 Frontier Corp. 5,400,000
--------------------------------------------------------------------------------
400,000 GTE Corp. 16,500,000
--------------------------------------------------------------------------------
275,000 Sprint Corp. 10,587,500
--------------------------------------------------------------------------------
350,000 Tele-Communications, Class A* 5,950,000
--------------------------------------------------------------------------------
200,000 U S West, Inc. 9,525,000
-------------------------------------------------------------------------------- ----------------
62,362,500
-------------------------------------------------------------------------------- ----------------
TOYS & GAMES--0.4%
--------------------------------------------------------------------------------
250,000 Mattel, Inc. 7,187,500
-------------------------------------------------------------------------------- ----------------
UTILITIES--4.7%
--------------------------------------------------------------------------------
200,000 CINergy Corp. 5,675,000
--------------------------------------------------------------------------------
375,000 CMS Energy Corp. 10,359,375
--------------------------------------------------------------------------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
--------------------------------------------------------------------------------
200,000 Eastern Utilities Associates $ 4,700,000
--------------------------------------------------------------------------------
285,000 FPL Group Inc. 11,934,375
--------------------------------------------------------------------------------
300,000 General Public Utilities 9,375,000
--------------------------------------------------------------------------------
205,000 Nipsco Industries Inc. 7,482,500
--------------------------------------------------------------------------------
150,000 Oklahoma Gas & Electric Co. 6,000,000
--------------------------------------------------------------------------------
259,100 PECO Energy Co. 7,578,675
--------------------------------------------------------------------------------
700,000 Pinnacle West Capital Corp. 19,250,000
--------------------------------------------------------------------------------
115,000 Public Service Co. of Colorado 3,924,375
-------------------------------------------------------------------------------- ----------------
86,279,300
-------------------------------------------------------------------------------- ----------------
TOTAL COMMON STOCK (COST $1,168,160,359) 1,358,754,700
-------------------------------------------------------------------------------- ----------------
CONVERTIBLE PREFERRED STOCK--5.0%
- -----------------------------------------------------------------------------------------------
AIRLINES--
--------------------------------------------------------------------------------
150,000 Delta Airlines, Ser. C, $3.50 8,306,250
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--
--------------------------------------------------------------------------------
80,000 Ford Motor Co., Ser. A, 8.4% 7,520,000
-------------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--
--------------------------------------------------------------------------------
120,000 Ceridian Corp., 5.5% 11,700,000
-------------------------------------------------------------------------------- ----------------
ENTERTAINMENT--
--------------------------------------------------------------------------------
200,000 Time Warner Financing Trust, $1.24 6,400,000
-------------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--
--------------------------------------------------------------------------------
800,000 Westinghouse Electric, Ser. C, $1.30 10,981,600
-------------------------------------------------------------------------------- ----------------
ENVIRONMENTAL SERVICES--
--------------------------------------------------------------------------------
88,000 Browning-Ferris, Inc., 7.25% 2,893,000
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--
--------------------------------------------------------------------------------
118,000 American General Delaware, Ser. A, $3.00 6,106,500
-------------------------------------------------------------------------------- ----------------
FOOD/BEVERAGE PRODUCTS--
--------------------------------------------------------------------------------
700,000 RJR Nabisco Holdings Corp., Ser. C, $0.6012 4,375,000
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK--CONTINUED
- -----------------------------------------------------------------------------------------------
HEALTH CARE--
--------------------------------------------------------------------------------
225,000 FHP International Corp., Ser. A, 5.0% $ 5,343,750
-------------------------------------------------------------------------------- ----------------
OIL & GAS--
--------------------------------------------------------------------------------
120,000 Diamond Shamrock, 5.0%# 6,540,000
--------------------------------------------------------------------------------
140,000 Occidental Petroleum, $3.00 7,910,000
-------------------------------------------------------------------------------- ----------------
14,450,000
-------------------------------------------------------------------------------- ----------------
PAPER/FOREST PRODUCTS--
--------------------------------------------------------------------------------
200,000 International Paper Capital Corp.# 5.25% 8,783,800
-------------------------------------------------------------------------------- ----------------
PRINTING & PUBLISHING--
--------------------------------------------------------------------------------
200,000 The News Corporation ADR, $.11 3,650,000
-------------------------------------------------------------------------------- ----------------
STEEL--
--------------------------------------------------------------------------------
48,500 WHX Corp., Ser. B, $3.75 2,037,000
-------------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE PREFERRED STOCK (COST $82,938,090) 92,546,900
-------------------------------------------------------------------------------- ----------------
FLOATING RATE NOTES--1.3%
- -----------------------------------------------------------------------------------------------
FINANCIAL SERVICES--
--------------------------------------------------------------------------------
$ 25,000,000 Goldman Sachs#, 5.85% @, due 7/1/96 (Cost $25,000,000) 24,812,500
-------------------------------------------------------------------------------- ----------------
CONVERTIBLE CORPORATE NOTES AND BONDS--5.9%
- -----------------------------------------------------------------------------------------------
AIRLINES--
--------------------------------------------------------------------------------
10,000,000 AMR, Corp., 6.125%, due 11/1/24 9,623,400
-------------------------------------------------------------------------------- ----------------
AUTOMOTIVE--
--------------------------------------------------------------------------------
4,500,000 Magna International Inc., 5.0%, due 10/15/02 4,584,375
-------------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--
--------------------------------------------------------------------------------
7,000,000 Softkey International Inc.#, 5.5%, due 11/1/00 5,929,280
-------------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--
--------------------------------------------------------------------------------
2,850,000 Grand Metropoliton Placing#, 6.5%, due 1/31/00 3,216,367
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE NOTES AND BONDS--CONTINUED
- -----------------------------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT--
--------------------------------------------------------------------------------
$ 10,000,000 National Semiconductor, 6.5%, due 10/1/02 $ 9,591,500
--------------------------------------------------------------------------------
2,000,000 Sanmina Corp.#, 5.5%, due 8/15/02 2,224,440
-------------------------------------------------------------------------------- ----------------
11,815,940
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--
--------------------------------------------------------------------------------
5,000,000 First Financial Management, 5%, due 12/15/99 7,687,250
--------------------------------------------------------------------------------
5,000,000 MBL International Finance Bermuda, 3%, due 11/30/02 5,222,500
--------------------------------------------------------------------------------
6,600,000 South African Pulp & Paper Industries, BVI Finance Ltd, 7.5%, due 8/1/02 6,814,500
-------------------------------------------------------------------------------- ----------------
19,724,250
-------------------------------------------------------------------------------- ----------------
INSURANCE--
--------------------------------------------------------------------------------
8,500,000 Aegon NV#, 4.75%, due 11/1/04 11,177,500
-------------------------------------------------------------------------------- ----------------
MANUFACTURING--
--------------------------------------------------------------------------------
6,750,000 3 Com Corp.#, 10.25%, due 11/1/01 11,036,992
--------------------------------------------------------------------------------
3,000,000 Coeur D'Alene Mines Corp., 6.0%, due 6/10/02 2,677,500
--------------------------------------------------------------------------------
5,000,000 ICN Pharmaceutical, 8.5%, due 11/15/99 5,577,800
--------------------------------------------------------------------------------
3,000,000 Waban Inc., 6.5%, due 7/1/02 2,797,500
-------------------------------------------------------------------------------- ----------------
22,089,792
-------------------------------------------------------------------------------- ----------------
OIL & GAS--
--------------------------------------------------------------------------------
5,000,000 Apache Corp.#, 6%, due 1/15/02 5,381,350
-------------------------------------------------------------------------------- ----------------
PHARMACEUTICALS--
--------------------------------------------------------------------------------
3,000,000 Ciba-Geigy AG#, 6.25%, due 3/15/16 3,015,000
-------------------------------------------------------------------------------- ----------------
PRINTING & PUBLISHING--
--------------------------------------------------------------------------------
8,349,550 Time Warner, Inc., 8.75%, due 1/10/15 8,714,843
-------------------------------------------------------------------------------- ----------------
RETAILING--
--------------------------------------------------------------------------------
4,000,000 Federated Department Stores, 5%, due 10/1/03 3,866,760
-------------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE CORPORATE NOTES AND BONDS (COST $97,167,708) 109,138,857
-------------------------------------------------------------------------------- ----------------
</TABLE>
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUER VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.9%
- -----------------------------------------------------------------------------------------------
$ 12,400,000 U.S. Treasury Bond, 9.25%, due 02/15/16 (COST $14,430,500) $ 16,399,000
-------------------------------------------------------------------------------- ----------------
TOTAL LONG-TERM INVESTMENTS (COST $1,387,696,657) 1,601,651,957
-------------------------------------------------------------------------------- ----------------
SHORT-TERM INVESTMENTS--12.9%
- -----------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.2%
- -----------------------------------------------------------------------------------------------
3,200,000 U.S. Treasury Bill, due 11/24/95@@ (COST $3,189,011) 3,189,011
-------------------------------------------------------------------------------- ----------------
U.S. GOVERNMENT AGENCY SPONSORED OBLIGATIONS--1.9%
- -----------------------------------------------------------------------------------------------
35,000,000 Federal National Mortgage Association, 5.5%, due 11/29/95
(COST $34,850,005) 34,850,005
-------------------------------------------------------------------------------- ----------------
COMMERCIAL PAPER--10.8%
- -----------------------------------------------------------------------------------------------
CHEMICALS--
--------------------------------------------------------------------------------
35,000,000 duPont (El) deNemours, 5.71%, due 11/2/95 34,994,449
-------------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--
--------------------------------------------------------------------------------
20,000,000 Federal Home Loan Bank, 5.64%, due 11/2/95 19,996,867
--------------------------------------------------------------------------------
41,042,000 Household Finance Corp., 5.8%, due 11/1/95 41,042,000
--------------------------------------------------------------------------------
35,000,000 JP Morgan, 5.72%, due 11/9/95 34,955,511
--------------------------------------------------------------------------------
35,000,000 Receivables Capital Corp.#, 5.75%, due 11/15/95 34,921,736
--------------------------------------------------------------------------------
35,000,000 Svenska Handelsbanken, 5.75%, due 11/3/95 34,988,819
-------------------------------------------------------------------------------- ----------------
165,904,933
-------------------------------------------------------------------------------- ----------------
TOTAL COMMERCIAL PAPER (COST $200,899,382) 200,899,382
-------------------------------------------------------------------------------- ----------------
TOTAL SHORT-TERM INVESTMENTS (COST $238,938,398) 238,938,398
-------------------------------------------------------------------------------- ----------------
99.3% TOTAL INVESTMENTS (COST $1,626,635,055) $ 1,840,590,355
-------------------------------------------------------------------------------- ----------------
</TABLE>
@ Rate shown is the rate in effect at 10/31/95.
* Non income producing security.
# Security may only be sold to qualified institutional investors.
@@ This security is pledged to cover financial futures contracts.
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Purchased Index Futures Outstanding
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF NOMINAL VALUE UNREALIZED
DESCRIPTION (A) DATE CONTRACTS AT 10/31/95 APPRECIATION
<S> <C> <C> <C> <C>
S & P 500 Futures Dec 95 300 $87,577,500 $1,362,579
- ---------------------------------------------
</TABLE>
(A) One contract equals 500 shares.
See notes to financial statements.
CAPITAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--88.6%
- --------------------------------------------------------------------------------------------
COMMON STOCK--86.3%
- --------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS/SERVICES--5.0%
-----------------------------------------------------------------------------
435,000 AGCO Corp. $ 19,466,250
-----------------------------------------------------------------------------
60,000 Agrium, Inc. 2,460,000
-----------------------------------------------------------------------------
153,500 Case Corp. 5,852,188
-----------------------------------------------------------------------------
100,000 IMC Global, Inc. 7,000,000
-----------------------------------------------------------------------------
200,000 Mississippi Chemical 4,825,000
-----------------------------------------------------------------------------
500,000 Terra Industries, Inc. 6,312,500
-----------------------------------------------------------------------------
110,000 Vigoro Corp. 4,771,250
----------------------------------------------------------------------------- ----------------
50,687,188
----------------------------------------------------------------------------- ----------------
AUTOMOTIVE--2.0%
-----------------------------------------------------------------------------
115,000 Echlin, Inc. 4,111,250
-----------------------------------------------------------------------------
160,000 Lear Seating Corp. 4,440,000
-----------------------------------------------------------------------------
100,000 Magna International, Inc. Class A 4,325,000
-----------------------------------------------------------------------------
350,000 Masland Corp. 4,900,000
-----------------------------------------------------------------------------
20,000 Strattec Security Corp. 335,000
-----------------------------------------------------------------------------
127,500 Titan Wheel International, Inc. 1,848,750
----------------------------------------------------------------------------- ----------------
19,960,000
----------------------------------------------------------------------------- ----------------
BANKING--4.4%
-----------------------------------------------------------------------------
175,000 BayBanks, Inc. 14,175,000
-----------------------------------------------------------------------------
200,000 Dime Bancorp, Inc.* 2,125,000
-----------------------------------------------------------------------------
50,000 Midlantic Corp., Inc. 2,650,000
-----------------------------------------------------------------------------
450,000 Standard Federal Bancorporation 15,975,000
-----------------------------------------------------------------------------
150,000 Zions Bancorporation 10,387,500
----------------------------------------------------------------------------- ----------------
45,312,500
----------------------------------------------------------------------------- ----------------
BROADCASTING--0.2%
-----------------------------------------------------------------------------
87,740 People's Choice TV Corp.* 1,820,605
----------------------------------------------------------------------------- ----------------
</TABLE>
28
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
BUSINESS SERVICES--0.7%
-----------------------------------------------------------------------------
125,000 Equifax, Inc. $ 4,875,000
-----------------------------------------------------------------------------
50,000 PHH Corp. 2,187,500
----------------------------------------------------------------------------- ----------------
7,062,500
----------------------------------------------------------------------------- ----------------
CHEMICALS--0.9%
-----------------------------------------------------------------------------
150,000 Hanna (M.A.) Co. 3,843,750
-----------------------------------------------------------------------------
200,000 Material Sciences Corp.* 3,325,000
-----------------------------------------------------------------------------
100,000 The Geon Company 2,487,500
----------------------------------------------------------------------------- ----------------
9,656,250
----------------------------------------------------------------------------- ----------------
COMPUTER SOFTWARE--3.9%
-----------------------------------------------------------------------------
150,000 American Management Systems, Inc.* 4,331,250
-----------------------------------------------------------------------------
125,000 BMC Software, Inc. 4,453,125
-----------------------------------------------------------------------------
300,000 Computervision Corp.* 3,525,000
-----------------------------------------------------------------------------
190,000 FileNet Corp.* 8,621,250
-----------------------------------------------------------------------------
500,000 Reynolds & Reynolds, Inc., Class A 17,812,500
-----------------------------------------------------------------------------
50,000 Symantec Corp.* 1,215,625
----------------------------------------------------------------------------- ----------------
39,958,750
----------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--4.5%
-----------------------------------------------------------------------------
350,000 Comdisco, Inc. 10,675,000
-----------------------------------------------------------------------------
60,000 Cornerstone Imaging, Inc.* 1,350,000
-----------------------------------------------------------------------------
41,650 Inference Corp., Class A 505,006
-----------------------------------------------------------------------------
100,000 Micros Systems, Inc.* 3,725,000
-----------------------------------------------------------------------------
250,000 Read-Rite Corp. 8,718,750
-----------------------------------------------------------------------------
400,000 SCI Systems, Inc.* 14,050,000
-----------------------------------------------------------------------------
175,000 Solectron Corp.* 7,043,750
----------------------------------------------------------------------------- ----------------
46,067,506
----------------------------------------------------------------------------- ----------------
CONSTRUCTION MATERIALS--1.7%
-----------------------------------------------------------------------------
500,000 Manville Corp.* 5,812,500
-----------------------------------------------------------------------------
</TABLE>
29
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--CONTINUED
-----------------------------------------------------------------------------
100,000 Texas Industries Inc. $ 5,262,500
-----------------------------------------------------------------------------
200,000 USG Corp. 5,825,000
----------------------------------------------------------------------------- ----------------
16,900,000
----------------------------------------------------------------------------- ----------------
CONSUMER PRODUCTS--4.7%
-----------------------------------------------------------------------------
250,000 Black & Decker Corp. 8,468,750
-----------------------------------------------------------------------------
300,000 Danaher Corp. 9,300,000
-----------------------------------------------------------------------------
100,000 First Brands Corp. 4,575,000
-----------------------------------------------------------------------------
250,000 Fleetwood Enterprises, Inc. 5,125,000
-----------------------------------------------------------------------------
125,000 Lancaster Colony Corp. 4,156,250
-----------------------------------------------------------------------------
200,000 Leggett & Platt Inc. 4,800,000
-----------------------------------------------------------------------------
400,000 Toro Co. 11,550,000
----------------------------------------------------------------------------- ----------------
47,975,000
----------------------------------------------------------------------------- ----------------
DIVERSIFIED--0.4%
-----------------------------------------------------------------------------
200,000 Albany International Corp., Class A 4,150,000
----------------------------------------------------------------------------- ----------------
ELECTRONICS/ELECTRICAL EQUIPMENT--7.3%
-----------------------------------------------------------------------------
150,000 Adaptec, Inc. 6,675,000
-----------------------------------------------------------------------------
400,000 ADT Ltd. 5,600,000
-----------------------------------------------------------------------------
125,000 AVX Corp. 3,890,625
-----------------------------------------------------------------------------
116,000 Belden, Inc. 2,798,500
-----------------------------------------------------------------------------
105,000 Harman International Industries, Inc. 4,843,125
-----------------------------------------------------------------------------
275,000 Integrated Device Technology, Inc.* 5,225,000
-----------------------------------------------------------------------------
40,000 ITI Technologies, Inc.* 1,010,000
-----------------------------------------------------------------------------
90,000 Lam Research Corp.* 5,478,750
-----------------------------------------------------------------------------
75,000 Linear Technology Corp. 3,281,250
-----------------------------------------------------------------------------
200,000 LTX Corp.* 2,475,000
-----------------------------------------------------------------------------
250,000 Mentor Graphics Corp. 5,250,000
-----------------------------------------------------------------------------
125,000 Microchip Technology, Inc.* 4,960,937
-----------------------------------------------------------------------------
</TABLE>
30
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT--CONTINUED
-----------------------------------------------------------------------------
100,000 Tektronix Inc. $ 5,925,000
-----------------------------------------------------------------------------
130,000 Teradyne Inc.* 4,338,750
-----------------------------------------------------------------------------
50,600 Vishay Intertechnology, Inc. 1,783,650
-----------------------------------------------------------------------------
100,000 Watkins-Johnson 4,812,500
-----------------------------------------------------------------------------
125,000 Xilinx, Inc.* 5,750,000
----------------------------------------------------------------------------- ----------------
74,098,087
----------------------------------------------------------------------------- ----------------
ELECTRONICS DISTRIBUTORS--1.5%
-----------------------------------------------------------------------------
137,800 Arrow Electronics, Inc.* 6,993,350
-----------------------------------------------------------------------------
225,000 Marshall Industries* 7,931,250
----------------------------------------------------------------------------- ----------------
14,924,600
----------------------------------------------------------------------------- ----------------
ENTERTAINMENT--1.1%
-----------------------------------------------------------------------------
500,000 Bally Entertainment Corp.* 5,500,000
-----------------------------------------------------------------------------
200,000 Integrity Music, Inc., Class A* 475,000
-----------------------------------------------------------------------------
175,000 Mirage Resorts, Inc.* 5,731,250
----------------------------------------------------------------------------- ----------------
11,706,250
----------------------------------------------------------------------------- ----------------
FINANCIAL SERVICES--3.3%
-----------------------------------------------------------------------------
200,000 Advanta Corp., Class A 7,750,000
-----------------------------------------------------------------------------
174,500 DST Systems, Inc.* 3,664,500
-----------------------------------------------------------------------------
100,000 Finova Group, Inc. 4,525,000
-----------------------------------------------------------------------------
450,000 Green Tree Financial Corp. 11,981,250
-----------------------------------------------------------------------------
300,000 National Auto Credit, Inc.* 4,875,000
-----------------------------------------------------------------------------
62,200 SEI Corp. 1,321,750
----------------------------------------------------------------------------- ----------------
34,117,500
----------------------------------------------------------------------------- ----------------
FOOD/BEVERAGE PRODUCTS--1.6%
-----------------------------------------------------------------------------
275,000 IBP, Inc. 16,465,625
----------------------------------------------------------------------------- ----------------
HEALTH CARE--4.5%
-----------------------------------------------------------------------------
60,000 Apria Healthcare Group, Inc.* 1,297,500
-----------------------------------------------------------------------------
</TABLE>
31
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
HEALTH CARE--CONTINUED
-----------------------------------------------------------------------------
200,000 Beckman Instruments, Inc. $ 6,625,000
-----------------------------------------------------------------------------
350,000 Beverly Enterprises 4,112,500
-----------------------------------------------------------------------------
175,000 HealthCare COMPARE* 6,475,000
-----------------------------------------------------------------------------
250,000 Horizon/CMS Healthcare Corp. 5,062,500
-----------------------------------------------------------------------------
500,000 OrNda Healthcorp* 8,812,500
-----------------------------------------------------------------------------
130,000 Sybron International Corp.* 5,525,000
-----------------------------------------------------------------------------
200,000 Universal Health Services, Inc., Class B* 7,500,000
----------------------------------------------------------------------------- ----------------
45,410,000
----------------------------------------------------------------------------- ----------------
HOME BUILDING CONSTRUCTION--0.6%
-----------------------------------------------------------------------------
150,000 Oakwood Homes Corp. 5,625,000
----------------------------------------------------------------------------- ----------------
INSURANCE--6.1%
-----------------------------------------------------------------------------
170,000 ACE, Ltd. # 5,780,000
-----------------------------------------------------------------------------
150,000 American Re Corp. 5,737,500
-----------------------------------------------------------------------------
175,000 Mid Ocean, Ltd.* 6,190,625
-----------------------------------------------------------------------------
50,000 PartnerRe Holdings, Ltd. 1,331,250
-----------------------------------------------------------------------------
103,500 PXRE Corp. 2,639,250
-----------------------------------------------------------------------------
300,000 Reliance Group Holdings, Inc. 2,212,500
-----------------------------------------------------------------------------
325,000 Reliastar Financial Corp. 13,568,750
-----------------------------------------------------------------------------
175,000 SunAmerica, Inc. 10,893,750
-----------------------------------------------------------------------------
200,000 TIG Holdings Inc. 5,075,000
-----------------------------------------------------------------------------
80,000 Transatlantic Holdings, Inc. 5,390,000
-----------------------------------------------------------------------------
200,000 USF&G Corp. 3,350,000
----------------------------------------------------------------------------- ----------------
62,168,625
----------------------------------------------------------------------------- ----------------
MACHINERY & ENGINEERING EQUIPMENT--0.7%
-----------------------------------------------------------------------------
75,000 Blount Inc., Class A 3,253,125
-----------------------------------------------------------------------------
100,000 Precision Castparts Corp. 3,575,000
----------------------------------------------------------------------------- ----------------
6,828,125
----------------------------------------------------------------------------- ----------------
</TABLE>
32
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
MANUFACTURING--5.7%
-----------------------------------------------------------------------------
100,000 Duriron, Inc. $ 2,675,000
-----------------------------------------------------------------------------
283,000 Elsag Bailey Process Automation N.V.* ADR 7,711,750
-----------------------------------------------------------------------------
125,000 Furon Co. 1,937,500
-----------------------------------------------------------------------------
200,000 JLG Industries, Inc. 4,700,000
-----------------------------------------------------------------------------
85,000 Johnson Controls 4,951,250
-----------------------------------------------------------------------------
385,000 Kennametal Inc. 11,983,125
-----------------------------------------------------------------------------
200,000 Mark IV Industries 3,900,000
-----------------------------------------------------------------------------
350,000 Modine Manufacturing Co. 9,625,000
-----------------------------------------------------------------------------
100,000 NACCO Industries, Inc. Class A 5,725,000
-----------------------------------------------------------------------------
125,000 Varity Corp.* 4,531,250
----------------------------------------------------------------------------- ----------------
57,739,875
----------------------------------------------------------------------------- ----------------
METALS/MINING--0.8%
-----------------------------------------------------------------------------
200,000 Amcast Industrial Corp. 3,400,000
-----------------------------------------------------------------------------
75,000 Cleveland-Cliffs, Inc. 2,803,125
-----------------------------------------------------------------------------
125,000 Commonwealth Aluminum Corp. 2,015,625
----------------------------------------------------------------------------- ----------------
8,218,750
----------------------------------------------------------------------------- ----------------
OIL & GAS--4.2%
-----------------------------------------------------------------------------
200,000 Diamond Shamrock # 5,150,000
-----------------------------------------------------------------------------
27,097 Noble Drilling Corp. 189,681
-----------------------------------------------------------------------------
200,000 Panhandle Eastern Corp. 5,050,000
-----------------------------------------------------------------------------
700,000 Smith International* 11,200,000
-----------------------------------------------------------------------------
500,000 Total Petroleum of North America 5,062,500
-----------------------------------------------------------------------------
110,000 Triton Energy Corp. 5,128,750
-----------------------------------------------------------------------------
225,000 Union Texas Petroleum Holdings 4,050,000
-----------------------------------------------------------------------------
300,000 Weatherford Enterra, Inc. 7,237,500
----------------------------------------------------------------------------- ----------------
43,068,431
----------------------------------------------------------------------------- ----------------
</TABLE>
33
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS--1.3%
-----------------------------------------------------------------------------
125,000 Boise Cascade Corp. $ 4,531,250
-----------------------------------------------------------------------------
100,000 Bowater, Inc. 4,425,000
-----------------------------------------------------------------------------
125,000 Rayonier, Inc. 4,687,500
----------------------------------------------------------------------------- ----------------
13,643,750
----------------------------------------------------------------------------- ----------------
PRINTING & PUBLISHING--0.4%
-----------------------------------------------------------------------------
100,000 Pulitzer Publishing 4,525,000
----------------------------------------------------------------------------- ----------------
REAL ESTATE INVESTMENT TRUST--2.8%
-----------------------------------------------------------------------------
200,000 Avalon Properties, Inc. 3,900,000
-----------------------------------------------------------------------------
150,000 Bay Apartment Communities, Inc. 3,093,750
-----------------------------------------------------------------------------
50,000 Developers Diversified Realty 1,425,000
-----------------------------------------------------------------------------
150,000 Evans Withycombe Residential, Inc. 2,831,250
-----------------------------------------------------------------------------
222,400 Home Properties of New York, Inc. 3,753,000
-----------------------------------------------------------------------------
200,000 Liberty Property Trust 4,050,000
-----------------------------------------------------------------------------
200,000 Oasis Residential, Inc. 4,350,000
-----------------------------------------------------------------------------
100,000 ROC Communities, Inc. 2,250,000
-----------------------------------------------------------------------------
100,000 Storage Trust Realty 1,962,500
-----------------------------------------------------------------------------
65,000 Walden Residential Properties, Inc. 1,194,375
----------------------------------------------------------------------------- ----------------
28,809,875
----------------------------------------------------------------------------- ----------------
RETAILING--6.6%
-----------------------------------------------------------------------------
150,000 Baker (J.), Inc. 862,500
-----------------------------------------------------------------------------
212,000 Big B Inc. 3,127,000
-----------------------------------------------------------------------------
225,000 Casey's General Stores, Inc. 5,175,000
-----------------------------------------------------------------------------
200,000 Circuit City Stores, Inc. 6,675,000
-----------------------------------------------------------------------------
350,000 Dillard Department Stores, Inc., Class A 9,493,750
-----------------------------------------------------------------------------
300,000 Eckerd Corp.* 11,887,500
-----------------------------------------------------------------------------
471,000 Ethan Allen Interiors, Inc.* 9,302,250
-----------------------------------------------------------------------------
280,000 General Nutrition Companies, Inc. 6,965,000
-----------------------------------------------------------------------------
</TABLE>
34
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
RETAILING--CONTINUED
-----------------------------------------------------------------------------
150,000 Kroger Co.* $ 5,006,250
-----------------------------------------------------------------------------
200,000 Mercantile Stores 8,975,000
----------------------------------------------------------------------------- ----------------
67,469,250
----------------------------------------------------------------------------- ----------------
SHIPPING/TRANSPORTATION--2.7%
-----------------------------------------------------------------------------
200,000 Consolidated Freightways 4,650,000
-----------------------------------------------------------------------------
200,000 GATX Corp. 9,500,000
-----------------------------------------------------------------------------
250,000 Pittston Services Group 6,875,000
-----------------------------------------------------------------------------
100,000 XTRA Corp. 4,387,500
-----------------------------------------------------------------------------
65,000 Landstar System, Inc.* 1,706,250
----------------------------------------------------------------------------- ----------------
27,118,750
----------------------------------------------------------------------------- ----------------
STEEL--0.5%
-----------------------------------------------------------------------------
400,000 LTV Corp.* 5,600,000
----------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--1.3%
-----------------------------------------------------------------------------
350,000 Aspect Telecommunications Corp.* 12,031,250
-----------------------------------------------------------------------------
65,000 Mobilemedia Corp. 1,706,250
----------------------------------------------------------------------------- ----------------
13,737,500
----------------------------------------------------------------------------- ----------------
TEXTILE MILL PRODUCTS--1.0%
-----------------------------------------------------------------------------
125,000 Springs Industries, Inc., Class A 5,359,375
-----------------------------------------------------------------------------
190,000 Warnaco Group, Inc., Class A 4,417,500
----------------------------------------------------------------------------- ----------------
9,776,875
----------------------------------------------------------------------------- ----------------
UTILITIES--3.9%
-----------------------------------------------------------------------------
200,000 CINergy Corp. 5,675,000
-----------------------------------------------------------------------------
400,000 CMS Energy Corp. 11,050,000
-----------------------------------------------------------------------------
300,000 DQE, Inc. 8,250,000
-----------------------------------------------------------------------------
300,000 Pinnacle West Capital Corp. 8,250,000
-----------------------------------------------------------------------------
</TABLE>
35
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
COMMON STOCK--CONTINUED
- --------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
-----------------------------------------------------------------------------
200,000 Public Service Co. of Colorado $ 6,825,000
----------------------------------------------------------------------------- ----------------
40,050,000
----------------------------------------------------------------------------- ----------------
TOTAL COMMON STOCK (COST $775,067,805) 880,652,167
----------------------------------------------------------------------------- ----------------
PREFERRED STOCK--0.1%
- --------------------------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT--
-----------------------------------------------------------------------------
3,758 Comptronix, Ser. A, 6% 6,577
----------------------------------------------------------------------------- ----------------
TELECOMMUNICATIONS--
-----------------------------------------------------------------------------
10,000 LCI International, Inc., 5% 478,750
----------------------------------------------------------------------------- ----------------
TOTAL PREFERRED STOCK (COST $250,000) 485,327
----------------------------------------------------------------------------- ----------------
WARRANTS--0.1%
- --------------------------------------------------------------------------------------------
OIL & GAS--
-----------------------------------------------------------------------------
60,000 BJ Services Co., Expires 1/15/15, strike price, $30.00 (Cost $600) 270,000
----------------------------------------------------------------------------- ----------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS & NOTES--1.0%
- --------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--
-----------------------------------------------------------------------------
$ 5,000,000 Softkey International Inc.#, 5.5%, due 11/1/00 4,235,200
----------------------------------------------------------------------------- ----------------
COMPUTERS/COMPUTER HARDWARE--
-----------------------------------------------------------------------------
250,000 Quantum Corp.#, 6.375%, due 4/1/00 265,000
----------------------------------------------------------------------------- ----------------
HEALTH CARE--
-----------------------------------------------------------------------------
3,000,000 ICN Pharmaceutical, 8.5%, due 11/15/99 3,346,680
-----------------------------------------------------------------------------
3,033 Surgical Laser Technology, Inc., 8.00%, due 7/30/99 1,820
-----------------------------------------------------------------------------
300,000 Shuler Homes, 6.5%, due 1/15/03 252,375
----------------------------------------------------------------------------- ----------------
3,600,875
----------------------------------------------------------------------------- ----------------
RESTAURANTS/FOOD SERVICES--
-----------------------------------------------------------------------------
100,000 Flagstar Companies, Inc., 10%, due 11/1/14 61,167
----------------------------------------------------------------------------- ----------------
</TABLE>
CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUER VALUE
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM INVESTMENTS--CONTINUED
- --------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS & NOTES--CONTINUED
- --------------------------------------------------------------------------------------------
TIRE & RUBBER--
-----------------------------------------------------------------------------
$ 1,500,000 Titan Wheel International, 4.75%, due 12/1/00 $ 1,800,000
----------------------------------------------------------------------------- ----------------
TOTAL CONVERTIBLE CORPORATE BONDS & NOTES (COST $10,140,800) 9,962,242
----------------------------------------------------------------------------- ----------------
VARIABLE RATE NOTES--1.1%
- --------------------------------------------------------------------------------------------
12,000,000 Goldman Sachs #, 5.85%, due 7/1/96@ (COST $12,000,000) 11,889,720
----------------------------------------------------------------------------- ----------------
TOTAL LONG-TERM INVESTMENTS (COST $797,459,205) 903,259,456
----------------------------------------------------------------------------- ----------------
SHORT-TERM INVESTMENTS--10.4%
- --------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--3.9%
- --------------------------------------------------------------------------------------------
20,000,000 Federal Home Loan Bank, Discount Note, due 12/04/95 19,897,517
----------------------------------------------------------------------------- ----------------
20,000,000 Federal National Mortgage Association, Discount Note, due
11/15/95 19,956,133
----------------------------------------------------------------------------- ----------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $39,853,650) 39,853,650
----------------------------------------------------------------------------- ----------------
COMMERCIAL PAPER--6.5%
- --------------------------------------------------------------------------------------------
26,325,000 Household Finance Corp., 5.80%, due 11/01/95 26,325,000
-----------------------------------------------------------------------------
20,000,000 Merrill Lynch, 5.73%, due 11/10/95 19,971,350
-----------------------------------------------------------------------------
20,000,000 Receivables Capital Corp., 5.75%, due 11/15/95# 19,955,278
----------------------------------------------------------------------------- ----------------
TOTAL COMMERCIAL PAPER (COST $66,251,628) 66,251,628
----------------------------------------------------------------------------- ----------------
TOTAL SHORT-TERM INVESTMENTS (COST $106,105,278) 106,105,278
----------------------------------------------------------------------------- ----------------
99.0% TOTAL INVESTMENTS (COST $903,564,483) $ 1,009,364,734
----------------------------------------------------------------------------- ----------------
</TABLE>
* Non-income producing security.
# Security may only be sold to qualified Institutional investors.
@ Rate shown is the rate in effect at 10/31/95
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH &
INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------
Investment securities, at value (Note 1) $ 1,840,590,355 $ 1,009,364,734
- ---------------------------------------------------------------------------
Cash 152 152,545
- ---------------------------------------------------------------------------
Receivable for investment securities sold 10,829,363 19,865,046
- ---------------------------------------------------------------------------
Dividends and interest receivable 4,017,526 776,763
- ---------------------------------------------------------------------------
Unamortized organization costs (Note 1) 23,996 23,996
- ---------------------------------------------------------------------------
Other assets -- 26,895
- --------------------------------------------------------------------------- ---------------- -------------------
Total Assets 1,855,461,392 1,030,209,979
- --------------------------------------------------------------------------- ---------------- -------------------
LIABILITIES:
- ---------------------------------------------------------------------------
Payable for investment securities purchased -- 10,213,300
- ---------------------------------------------------------------------------
Accrued Liabilities:
- ---------------------------------------------------------------------------
Advisory fees (Note 2) 638,362 348,151
- ---------------------------------------------------------------------------
Administration fees (Note 2) 79,795 43,520
- ---------------------------------------------------------------------------
Organization costs payable 40,000 40,000
- ---------------------------------------------------------------------------
Other accrued expenses 110,092 139,289
- ---------------------------------------------------------------------------
Variation margin payable on futures contracts 427,500 --
- --------------------------------------------------------------------------- ---------------- -------------------
Total Liabilities 1,295,749 10,784,260
- --------------------------------------------------------------------------- ---------------- -------------------
Net Assets Applicable to Investors' Beneficial Interests $ 1,854,165,643 $ 1,019,425,719
- --------------------------------------------------------------------------- ---------------- -------------------
Cost of Investments $ 1,626,635,055 $ 903,564,483
- --------------------------------------------------------------------------- ---------------- -------------------
</TABLE>
See notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
INVESTMENT INCOME: (NOTE 1):
- -------------------------------------------------------------------------
Interest $ 26,372,528 $ 7,285,147
- -------------------------------------------------------------------------
Dividends 30,917,914 11,074,210
- -------------------------------------------------------------------------
Foreign taxes withheld (121,509) (3,018)
- ------------------------------------------------------------------------- -------------------- -----------------
Total investment income 57,168,933 18,356,339
- ------------------------------------------------------------------------- -------------------- -----------------
EXPENSES:
- -------------------------------------------------------------------------
Advisory fees (Note 2) 6,815,197 3,563,194
- -------------------------------------------------------------------------
Administration fees (Note 2) 851,900 445,399
- -------------------------------------------------------------------------
Accounting fees 83,003 81,003
- -------------------------------------------------------------------------
Custodian fees (Note 2) 134,266 103,147
- -------------------------------------------------------------------------
Professional fees 70,000 68,769
- -------------------------------------------------------------------------
Trustee fees 8,000 8,001
- -------------------------------------------------------------------------
Miscellaneous expense 37,503 44,465
- -------------------------------------------------------------------------
Amortization of organization costs (Note 1) 7,990 7,990
- ------------------------------------------------------------------------- -------------------- -----------------
Total expenses 8,007,859 4,321,968
- ------------------------------------------------------------------------- -------------------- -----------------
Net investment income 49,161,074 14,034,371
- ------------------------------------------------------------------------- -------------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
- -------------------------------------------------------------------------
Net realized gain (loss) on:
- -------------------------------------------------------------------------
Investments 79,876,783 38,313,408
- -------------------------------------------------------------------------
Futures transactions 15,400,050 --
- -------------------------------------------------------------------------
Foreign currency transactions 56 --
- ------------------------------------------------------------------------- -------------------- -----------------
Net realized gain (loss) 95,276,889 38,313,408
- ------------------------------------------------------------------------- -------------------- -----------------
Change in net unrealized appreciation (depreciation) on:
- -------------------------------------------------------------------------
Investments 153,073,852 83,513,979
- -------------------------------------------------------------------------
Futures contracts 1,767,626 --
- ------------------------------------------------------------------------- -------------------- -----------------
Change in net unrealized appreciation (depreciation) 154,841,478 83,513,979
- ------------------------------------------------------------------------- -------------------- -----------------
Net realized and unrealized gain (loss) 250,118,367 121,827,387
- ------------------------------------------------------------------------- -------------------- -----------------
Net increase (decrease) in net assets resulting from operations $ 299,279,441 $ 135,861,758
- ------------------------------------------------------------------------- -------------------- -----------------
</TABLE>
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME CAPITAL GROWTH
PORTFOLIO PORTFOLIO
YEAR 11/29/93* YEAR 11/29/93*
ENDED THROUGH ENDED THROUGH
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------
FROM OPERATIONS--
- ----------------------------------------------------
Net investment income $ 49,161,074 $ 30,288,120 $ 14,034,371 $ 5,544,732
- ----------------------------------------------------
Net realized gain (loss) on investments and foreign
currency 95,276,889 (4,034,603) 38,313,408 14,244,098
- ----------------------------------------------------
Change in net unrealized appreciation on
investments, futures and foreign currency
translations 154,841,478 9,175,252 83,513,979 4,750,804
- ---------------------------------------------------- ------------- ------------- ------------- -------------
Increase in net assets resulting from operations 299,279,441 35,428,769 135,861,758 24,539,634
- ---------------------------------------------------- ------------- ------------- ------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
- ----------------------------------------------------
Contributions 511,820,403 1,858,407,526 1,403,653,138 1,071,735,107
- ----------------------------------------------------
Withdrawals (542,453,501) (308,316,995) (1,217,251,104) (399,112,814)
- ---------------------------------------------------- ------------- ------------- ------------- -------------
Net increase (decrease) from transactions in
investors' beneficial interests (30,633,098) 1,550,090,531 186,402,034 672,622,293
- ---------------------------------------------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets 268,646,343 1,585,519,300 322,263,792 697,161,927
- ----------------------------------------------------
NET ASSETS:
Beginning of period 1,585,519,300 -- 697,161,927 --
- ---------------------------------------------------- ------------- ------------- ------------- -------------
End of period $1,854,165,643 $1,585,519,300 $1,019,425,719 $ 697,161,927
- ---------------------------------------------------- ------------- ------------- ------------- -------------
</TABLE>
* Commencement of operations.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Growth and Income Portfolio ("GIP") and Capital Growth Portfolio ("CGP") (the
"Portfolios") are separately registered under the Investment Company Act of
1940, as amended, as non-diversified, open end management investment companies
organized as trusts under the laws of the State of New York. Each declaration of
trust permits the Trustees to issue beneficial interests in the respective
Portfolios. The GIP and CGP Portfolios commenced operations on November 29,
1993.
The following is a summary of significant accounting policies followed by the
Portfolios:
A. VALUATION OF INVESTMENTS--Equity securities, purchased options and futures
are valued at the last sale price on the exchange on which they are
primarily traded, including the NASDAQ National Market. Securities for
which sale prices are not available and other over-the-counter securities
are valued at the last quoted bid price. Bonds and other fixed income
securities (other than short-term obligations), including listed issues,
are valued on the basis of valuations furnished by a pricing service. In
making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-sized trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance
upon quoted prices. Short-term obligations are valued at amortized cost if
acquired with fewer than 61 days to maturity, or at value based on quoted
exchange or over-the-counter prices, until the 61st day prior to maturity
and thereafter by amortizing the value on the 61st day to par at maturity.
Portfolio securities for which there are no such quotations or valuations
are valued at fair value as determined in good faith by or at the direction
of the Trustees.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Securities gains and losses are calculated on the identified
cost basis. Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date.
C. REPURCHASE AGREEMENTS--It is the Trusts' policy that repurchase agreements
are fully collateralized by U.S. Treasury and Government agency securities.
All collateral is held by the Trust's custodian bank, sub-custodian or a
bank with which the custodian bank has entered into a sub-custodian
agreement or is segregated in the Federal Reserve Book Entry System. In
connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters
into an insolvency proceeding, realization of the collateral by the Trust
may be delayed or limited.
D. FUTURES CONTRACTS--When a portfolio enters into a futures contract, it
makes an initial margin deposit in a segregated account, either in cash or
liquid securities. Thereafter, the deposit is marked to market based upon
changes in the value of the futures contract and the portfolio makes (or
receives) additional cash payments daily to the broker. Changes in the
value of the contract are recorded as unrealized appreciation/depreciation
until the contract is closed or settled.
The Growth and Income Portfolio invested a portion of its liquid assets in
long stock index futures contracts to more fully participate in the market.
Use of futures contracts subject the Portfolio to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities, up to the amount
of the value of the contract.
The Portfolio may enter into futures contracts only on exchanges or boards
of trade. The exchange or board of trade acts as the counterparty to each
futures transaction, therefore, the Portfolio's credit risk is limited to
failure of the exchange or board of trade.
E. FOREIGN CURRENCY TRANSLATIONS--The books and records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the official exchange rates, or at the mean of the current
bid and asked prices, of such currencies against the U.S. dollar as quoted
by a major bank, on the following basis:
(a) Market value of investment securities and other assets and liabilities:
at the closing rate of exchange at the balance sheet date.
(b) Purchases and sales of investment securities, income and expenses: at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets of the Portfolio are presented at the foreign
exchange rates and market values at the close of the year, the Portfolio
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of the securities held at year
end. Similarly, the Portfolio does not isolate the effect of changes in
foreign exchange rates from the fluctuations arising from changes in the
market prices of securities sold during the year. Accordingly, realized
foreign currency gains (losses) are included in the reported net realized
losses on security transactions.
Reported realized foreign exchange gains or losses arise from disposition
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded
on the Portfolios' books on the transaction date and the U.S. dollar
equivalent of the amounts actually received or paid. Unrealized foreign
exchange gains and losses arise from changes (due to the changes in the
exchange rate) in the value of foreign currency and other assets and
liabilities denominated in foreign currencies which are held at period end.
F. FEDERAL INCOME TAXES AND DISTRIBUTIONS TO INVESTORS--The Portfolios intend
to qualify as partnerships and therefore net income and net realized gains
are taxed to the partners. The investors in the Portfolios must take into
account their proportionate share of the Portfolios' income, gains, losses,
deductions, credits and tax preference items in computing their federal
income tax liability, without regard to whether they have received any cash
distributions from the Portfolio. The Portfolios do not intend to
distribute to investors their net investment income or their net realized
gains, if any. It is intended that the Portfolios will be managed in such a
way that investors in the portfolio will be able to satisfy the
requirements of subchapter M of the Internal Revenue Code to be taxed as
regulated investment companies.
G. ORGANIZATION COSTS--Organization and initial registration costs incurred in
connection with establishing each of the Portfolios have been deferred and
are being amortized on a straight-line basis over a sixty-month period
beginning with the commencement of operations of each Portfolio.
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEES--The Chase Manhattan Bank, N.A. ("Chase"), a
direct wholly-owned subsidiary of The Chase Manhattan Corporation, is the
Portfolios' investment adviser (the "Adviser") and custodian (the
"Custodian"). The Adviser manages the assets of the Portfolios pursuant to
an Advisory Agreement, and for such services, is paid an annual fee
computed daily and paid monthly based on an annual rate equal to .40% of
the GIP's and CGP's average daily net assets.
B. CUSTODIAL FEES--Chase, as Custodian, provides safekeeping services for the
Portfolios' securities. Compensation for such services are presented in the
Statement of Operations as custodian fees.
C. ADMINISTRATION FEE--Pursuant to an Administration Agreement, effective
October 16, 1995, Chase ("the Administrator"), and prior thereto The Chase
Manhattan Trust Corporation Limited, provides certain administration
services to the Portfolios. For these services, the Administrator, and the
predecessor administrator, receives from each Portfolio a fee computed at
an annual rate equal to 0.05% of the respective Portfolio's average daily
net assets.
D. OTHER--The Portfolios' organizational costs payable are comprised of
liabilities owed to the Funds' Distributor, Vista Broker Dealer Services
(VBDS).
On August 27, 1995, the Chase Manhattan Corporation and Chemical Banking
Corporation announced an agreement in principle to merge, which was
approved by shareholders of both corporations on December 11, 1995, subject
to the approval of regulators.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) for the
year ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>
GIP CGP
<S> <C> <C>
Purchases (excluding U.S. Government) $ 1,097,535,211 $ 855,989,009
- -------------------------------------------------------------------------------
Sales (excluding U.S. Government) 899,470,573 673,232,243
- -------------------------------------------------------------------------------
Purchases of U.S. Government 19,583,924 --
- -------------------------------------------------------------------------------
Sales of U.S. Government 113,064,899 --
- -------------------------------------------------------------------------------
</TABLE>
The portfolio turnover rates of GIP and CGP Portfolios for this period were 71%
and 86%, respectively.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Beneficial Interest Holders of
Growth and Income Portfolio
Capital Growth Portfolio
In our opinion, the accompanying statement of assets of liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets present fairly, in all material respects, the financial
position of Growth and Income Portfolio and Capital Growth Portfolio (the
"Portfolios") at October 31, 1995, the results of each of their operations for
the year then ended and the changes in each of their net assets for the periods
presented, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1995 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 15, 1995
Portfolio Adviser
Chase Manhattan Bank, N.A.
Blanchard
Capital Growth Fund
and
Blanchard
Growth & Income Fund
The Blanchard Group of Funds are available through Signet Financial
Services, Inc., and are advised by Virtus Capital Management, Inc.,
an affiliate of Signet Financial Services, Inc.
Products offered through Signet Financial Services, Inc., are not
deposits, obligations of, or guaranteed by 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.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the Funds' prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
CUSIP 093265403/304
G01485-09 (12/95)
Blanchard
Capital Growth Fund
and
Blanchard
Growth & Income
Fund
Annual Report
October 31, 1995
