TCI PORTFOLIOS, INC.
TCI Advantage
Semiannual Report
JUNE 30,
1996
[company logo]
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TABLE OF CONTENTS
Our Message to You .................................................... 1
Investment Review ..................................................... 2
Schedule of Investments ............................................... 4
Statement of Assets and Liabilities ................................... 7
Statement of Operations ............................................... 8
Statements of Changes in Net Assets ................................... 9
Notes to Financial Statements ......................................... 10
Financial Highlights .................................................. 13
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INDICES USED FOR PERFORMANCE COMPARISON
The indices listed below are used throughout this report to serve as a
comparison for the performance of the fund.
THE S&P 500 INDEX -- An index created by Standard & Poor's Corporation that is
considered to represent the performance of the stock market generally. It is not
an investment product available for purchase.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX -- An index made up of more than 855
issues with an average maturity of 3.8 years and an average yield of 7.1%.
Approximately 87% of the index is U.S. Treasury issues--the other 13% is U.S.
government agency issues--and the average credit rating is AAA.
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June 30, 1996
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OUR MESSAGE TO YOU
A retreat to defensive stocks in June as investors anticipated
disappointing earnings reports weakened returns in TCI Advantage. In this
environment, the growth stocks in TCI Advantage's stock portfolio underperformed
the U.S. stock market in general. TCI Advantage posted a total return of 3.76%
for the six months ended June 30, 1996, compared to 4.53% for the blended index
that is its benchmark. The benchmark index is made up of the S&P 500 Index, the
Lehman Intermediate Government Bond Index and the three-month Treasury Bill
Index.
[photo of James E. Stowers and James E. Stowers III on left side of page]
TCI Advantage is a blended portfolio. Its approximate 40% stock position is
compiled using Twentieth Century's focus on accelerating earnings and revenue
growth and is managed to provide long-term opportunities for capital growth.
Income is derived from an approximate 40% stake inintermediate-term government
bonds. Finally, share price consistency is aided by a near 20% weighting in
money market securities. The goal of this mix is to provide income to
conservative investors while still providing the long-term share-price growth
investors need to outpace inflation.
TCI Advantage found recent earnings growth in pharmaceutical and energy
stocks. Profits in the pharmaceutical sector have been boosted recently by a
stream of new, usually patent-protected, products. Energy companies benefited
from strong commodity prices, higher production volumes and increased
exploration activity.
The fund's bond portion reflected recent declines in U.S. bond prices.
During the first six months of 1996, bonds traded up to their highest prices
since this latest interest rate cycle began, then reversed course. Bond prices
at the beginning of the year had anticipated the deflationary benefits of a
federal balanced-budget agreement and an easier monetary policy stance by the
Federal Reserve. Neither happened, and bond prices fell. During declining
markets, the management team typically shortens the duration of the fund's bond
portfolio, a defensive move. Accordingly, the team shortened the duration of the
bond portfolio after February and kept it short throughout the rest of the
period.
TCI Advantage continues to pursue its goal: to provide shareholders with
the opportunity to invest in conservative government bonds and money market
securities, and a portfolio of stocks with earnings and revenue acceleration
designed to outpace the rate of inflation.
Sincerely,
/s/James E. Stowers /s/James E. Stowers III
James E. Stowers James E. Stowers III
Chairman of the Board and Founder President
1
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INVESTMENT REVIEW
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AVERAGE ANNUAL TOTAL RETURNS (as of June 30, 1996)
Lehman
Blended S&P 500 Intr.Govt.
TCI Advantage Index**+ Index Bond Index+
--------------- ------------ ---------- --------------
6 months* 3.76% 4.53% 10.07% -0.01%
1 year 10.32% 13.42% 25.92% 4.93%
3 year 8.08% 9.71% 17.22% 4.75%
Inception 7.60% 9.73% 5.01% 7.27%
8/1/91-6/30/96
*Actual
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$10,000 Over Life of Fund (as of June 30, 1996)
[mountain graph]
Value on 6/30/96: $14,323 TCI Advantage
$19,864 S&P 500 Index
$16,033 Blended Index**+
$14,122 Lehman Intr. Govt. Bond Index+
[graph data] Lehman
TCI Blended S&P 500 Intr. Govt.
ADVANTAGE Index**+ Index Bond Index+
Aug 1, 91 $10,000 $10,000 $10,000 $10,000
Dec 31, 91 11,381 10,749 10,940 10,862
Jun 30, 92 10,571 10,879 10,868 11,165
Dec 31, 92 10,953 11,453 11,773 11,615
Jun 30, 93 11,350 11,981 12,343 12,286
Dec 31, 93 11,702 12,369 12,954 12,564
Jun 30, 94 11,519 12,113 12,520 12,263
Dec 31, 94 11,823 12,443 13,130 12,345
Jun 30, 95 12,983 14,011 15,775 13,459
Dec 31, 95 13,803 15,248 18,049 14,124
6/30/96 14,323 16,033 19,864 14,122
Past performance is not predictive of future performance.
+Source: Lipper Analytical Services, Inc.
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Quick Fund Facts
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TCI ADVANTAGE
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STRATEGY:
Current income and capital growth
through investments in U.S.
Government bonds, U.S.
Government money market
securities and equity securities.
INCEPTION DATE:
August 1, 1991
SIZE:
$24.3 million(as of June 30, 1996)
INVESTMENT APPROACH:
Current Income and Capital Growth
**Because the assets of TCI Advantage are invested in a mix of three distinct
types of assets, we have created a Blended Index that, in addition to the
Standard & Poor's 500 Index (S&P 500), can serve as a comparison for the
performance of the fund. The Blended Index averages three widely known indices
in the proportions of the asset mix of the fund. Accordingly, 40% of the
Blended Index represents the Lehman Intermediate Government Bond Index, which
reflects the 40% of the fund's assets invested in bonds and other fixed income
securities. Twenty percent of the Blended Index represents the three-month
Treasury Bill Index, which reflects the 20% of the fund's assets invested in
U.S. Government money market securities. The remaining 40% of the Blended
Index represents the S&P 500,which reflects the 40% of the fund assets
invested in common stocks. The Blended Index and the Lehman Intermediate
Government Bond Index for 7/31/91, the date closest to the inception date
(8/1/91) of the fund for which the indices are available, have been used for
the starting points for these indices in the graph and average annual total
returns.
No expenses or fees are reflected in the S&P 500, Blended Index or the Lehman
Intermediate Government Bond Index. All performance illustrations for TCI
Advantage are shown net of fees and assume reinvestment of all distributions.
2
June 30, 1996 (Unaudited)
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QUALITY DIVERSIFICATION FOR FIXED INCOME INVESTMENTS (as of June 30, 1996)
(Moody's ratings) % of fixed income investments
AAA 100%
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AVERAGE PORTFOLIO MATURITY FOR FIXED INCOME INVESTMENTS (as of June 30, 1996)
Years 4.8
Average years to maturity indicates the average time until the principal on the
Fund's bonds is expected to be repaid, weighted by dollar amount.
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DURATION FOR FIXED INCOME INVESTMENTS (as of June 30, 1996)
Years 3.7
Duration is a measure of the sensitivity of a portfolio to changes in interest
rates. As the duration of a fund increases, the impact of a change in interest
rates on the value of its portfolio also increases.
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TOP 10 EQUITY HOLDINGS*(as of June 30, 1996)
% of fund's
investments in
% of fund's these stocks
investments** six months ago**
HFS, Inc. 4.9% 2.9%
Boeing Co. 3.0% 1.4%
Johnson & Johnson 2.9% 2.0%
NIKE, Inc. 2.8% 2.0%
Global Marine Inc. 2.8% 1.2%
Microsoft Corp. 2.7% 2.0%
Oracle Systems Corp. 2.6% 2.3%
United Technologies Corp. 2.6% 2.2%
Pfizer, Inc. 2.5% 2.1%
Diamond Offshore Drilling, Inc. 2.4% --
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ASSET ALLOCATION (as of June 30, 1996)
[pie chart]
Percent of fund investments
Mortgage-Backed Securities 4%
Short-term Cash Investments 24%
Common Stocks 39%
U.S. Treasury Securities 33%
TOP FIVE INDUSTRIES FOR EQUITY INVESTMENTS*
(as of June 30, 1996)
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% of fund's
investments in
% of fund's these industries
investments** six months ago**
Computer Software & Services 11.8% 12.6%
Pharmaceuticals 11.6% 4.7%
Energy (Services) 9.7% 3.9%
Energy (Production & Marketing) 7.5% 6.3%
Banking 6.5% 4.1%
INVESTMENTS BY COUNTRY* (as of June 30, 1996)
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% of fund's
investments
Japan 0.5%
Mexico 0.3%
Switzerland 0.5%
United Kingdom 0.5%
United States 98.2%
-----
100.0%
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* The composition of the portfolio may change over time.
** These percentages reflect the composition of the common stock portion of TCI
Advantage and do not relate to the bond portion of the fund.
3
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SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
TCI ADVANTAGE
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Shares Value
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COMMON STOCKS
Aerospace & Defense -- 2.4%
3,200 Boeing Co. $ 278,800
900 Lockheed Martin Corp. 75,600
2,100 United Technologies Corp. 241,500
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595,900
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Automobiles & Auto Parts -- 1.1%
2,400 Chrysler Corp. 148,800
14,000 Nissan Motor Company ORD 124,288
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273,088
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Banking -- 2.5%
2,600 Bank of New York Co., Inc. 133,250
2,000 BankAmerica Corp. 151,500
2,024 Chase Manhattan Corp. 142,945
2,300 Citicorp 190,037
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617,732
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Biotechnology -- 0.7%
3,300 Amgen Inc. 1 177,787
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Broadcasting -- 0.3%
2,500 Grupo Televisa ADR1 76,875
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Business Services & Supplies -- 2.1%
1,900 DST Systems, Inc. 1 60,800
6,600 HFS, Inc. 1 462,000
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522,800
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Communications Equipment -- 0.9%
2,500 U.S. Robotics Corp. 1 213,437
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Communications Services -- 1.1%
5,000 MCI Communications Corp. 127,812
7,600 Nextel Communications Inc. 1 144,875
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272,687
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Computer Software & Services -- 4.6%
4,300 American Management
Systems, Inc. 1 $ 126,313
1,700 BMC Software, Inc. 1 101,363
2,068 First Data Corp. 164,664
2,100 Microsoft Corp. 1 252,131
6,300 Oracle Systems Corp. 1 248,456
5,100 Parametric Technology Corp. 1 220,894
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1,113,821
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Computer Systems -- 0.8%
1,900 Hewlett-Packard Co. 189,288
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Electrical & Electronic Components -- 0.9%
900 Atmel Corp.1 27,169
1,900 Intel Corp. 139,531
1,000 Rockwell International Corp. 57,250
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223,950
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Energy (Production & Marketing) -- 2.9%
2,100 Anadarko Petroleum Corp. 121,800
1,114 British Petroleum Co.
p.l.c. ADR 119,059
7,500 Enron Oil & Gas Co. 209,063
2,100 Sonat Inc. 94,500
1,900 Texaco Inc. 159,362
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703,784
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Energy (Services) -- 3.7%
3,900 Diamond Offshore
Drilling, Inc. 1 223,275
8,200 Falcon Drilling Company, Inc. 1 221,913
18,800 Global Marine Inc. 1 260,850
3,700 Halliburton Co. 205,350
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911,388
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Financial Services -- 0.7%
1,300 Lehman Brothers Holdings, Inc. 32,175
4,200 United Companies Financial Corp. 143,325
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175,500
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Food & Beverage -- 0.8%
4,200 Coca-Cola Company (The) 205,275
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See Notes to Financial Statements
4
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Shares/ Principal Amount Value
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Healthcare -- 1.2%
3,500 Baxter International, Inc. $ 165,375
1,800 Cardinal Health, Inc. 129,825
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295,200
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Insurance -- 0.7%
900 CIGNA Corp. 106,088
600 Marsh & McLennan Cos., Inc. 57,900
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163,988
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Leisure -- 0.5%
4,000 Promus Companies Inc. 1 118,500
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Office Equipment -- 0.7%
3,000 Xerox Corp. 160,500
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Pharmaceuticals -- 4.5%
100 Ciba-Geigy AG ORD 121,756
5,600 Johnson & Johnson 277,200
1,300 Lilly (Eli) & Co. 84,500
2,300 Merck & Co., Inc. 148,638
3,300 Pfizer, Inc. 235,538
7,100 U.S. Bioscience, Inc. 1 96,737
2,400 Warner-Lambert Co. 132,000
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1,096,369
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Publishing -- 0.6%
3,300 Times Mirror Co. 143,550
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Retail (Apparel) -- 1.1%
2,600 NIKE, Inc. 267,150
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Retail (General Merchandise) -- 2.2%
4,000 Federated Department Stores, Inc. 1 136,500
3,800 Kohl's Corp. 1 139,175
1,000 Mercantile Stores Co., Inc. 58,625
3,900 Sears, Roebuck & Co. 189,638
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523,938
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Retail (Specialty) -- 0.9%
3,800 TJX Companies, Inc. 128,250
3,400 Toys "R" Us, Inc. 1 96,900
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225,150
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Tobacco -- 0.7%
1,600 Philip Morris Companies Inc. 166,400
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Total Common Stocks-- 38.6% $ 9,434,057
(Cost $7,227,000) ----------
FIXED INCOME SECURITIES
U.S. TREASURY SECURITIES
$1,250,000 U.S. Treasury Notes,
6.125%, 3-31-98 1,251,800
100,000 U.S. Treasury Notes,
5.875%, 4-30-98 99,674
700,000 U.S. Treasury Notes,
5.125%, 11-30-98 683,627
1,000,000 U.S. Treasury Notes,
7.75%, 1-31-00 1,043,180
1,000,000 U.S. Treasury Notes,
5.75%, 10-31-00 974,530
200,000 U.S. Treasury Notes,
5.625%, 11-30-00 193,810
1,150,000 U.S. Treasury Notes,
5.75%, 8-15-03 1,095,686
500,000 U.S. Treasury Notes,
7.875%, 11-15-04 537,785
2,000,000 U.S. Treasury Notes,
6.50%, 8-15-05 1,972,820
200,000 U.S. Treasury Notes,
5.875%, 11-15-05 188,500
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Total U.S. Treasury
Securities-- 32.9% 8,041,412
(Cost $8,190,804) ----------
MORTGAGE-BACKED SECURITIES*
649,388 FHLMC Series 1465-BPAC
REMIC, 4.50%, 3-15-97 645,257
401,669 FNMA Series G92-64-CPAC
REMIC, 4.50%, 12-25-96 399,351
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Total Mortgage-Backed
Securities-- 4.3% 1,044,608
(Cost $1,029,885) ----------
See Notes to Financial Statements
5
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SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
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Principal Amount Value
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SHORT-TERM CASH INVESTMENTS
$1,100,000 par value
FHLMC Discount Note,
5.275%, 7-3-96 $ 1,099,677
$3,000,000 par value
FNMA Discount Note,
9.00%, 7-18-96 2,992,633
Repurchase Agreement
(Goldman Sachs & Co., Inc.),
5.35%, due 7-1-96; collateralized by
$1,170,000 par value U.S. Treasury
Bonds, 7.50%, due 11-15-16
(Delivery value $1,200,535) 1,200,000
600,000 Units of Participation in
Provident Institutional Funds
(Fed-Fund Portfolio) 600,000
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Total Short-term
Cash Investments-- 24.2% 5,892,310
(Cost $5,892,310) ----------
Total Investment
Securities-- 100.0% $ 24,412,387
(Cost $22,339,999) ==========
FORWARD FOREIGN CURRENCY CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain
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8,060,952 JPY 7/31/96 $73,868 $48
====== ==
(Value on Settlement Date $73,916)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
JPY = Japanese Yen
ORD = Foreign Ordinary Shares
1 Non-income producing.
* Expected remaining maturity is indicated and used for purposes of calculating
the weighted average portfolio maturity.
See Notes to Financial Statements
6
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
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ASSETS
Investment securities, at value
(identified cost of $22,339,999) (Note 3).................... $ 24,412,387
Receivable for forward foreign currency
exchange contracts........................................... 48
Receivable for investments sold................................... 56,384
Receivable for capital shares sold................................ 3,640
Dividends and interest receivable................................. 162,027
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24,634,486
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LIABILITIES
Disbursements in excess of demand deposit cash.................... 253,923
Payable for investments purchased................................. 19,670
Payable for capital shares redeemed............................... 17,061
Accrued management fees (Note 2).................................. 19,738
Other liabilities................................................. 25
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310,417
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NET ASSETS APPLICABLE
TO OUTSTANDING SHARES............................................. $ 24,324,069
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CAPITAL SHARES, $.01 PAR VALUE
Authorized........................................................ 200,000,000
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Outstanding....................................................... 4,038,413
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NET ASSET VALUE PER SHARE......................................... $ 6.02
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NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)........................... $ 21,660,018
Undistributed net investment income............................... 3,608
Accumulated undistributed net realized gain
from investments and foreign currency transactions........... 588,086
Net unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies (Note 3).......................................... 2,072,357
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$ 24,324,069
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See Notes to Financial Statements
7
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STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
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INVESTMENT INCOME
Income:
Interest................................................... $440,427
Dividends (net of foreign taxes withheld of $1,283)........ 53,716
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494,143
----------
Expenses:
Management fees (Note 2)................................... 113,986
Directors' fees and expenses............................... 102
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114,088
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NET INVESTMENT INCOME........................................... 380,055
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REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY (Note 3)
Net realized gain during the period on:
Investments................................................ 577,226
Foreign currency transactions.............................. 20,384
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597,610
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Change in net unrealized appreciation (depreciation)
during the period on:
Investments................................................ (67,747)
Translation of assets and liabilities
in foreign currencies................................... (2,431)
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(70,178)
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NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY................................ 527,432
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................................... $907,487
==========
See Notes to Financial Statements
8
<TABLE>
<CAPTION>
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STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
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INCREASE IN NET ASSETS 1996 1995
<S> <C> <C>
OPERATIONS
Net investment income................................... $ 380,055 $ 761,374
Net realized gain on investments
and foreign currency transactions................... 597,610 1,257,216
Change in net unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies................... (70,178) 1,502,164
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Net increase in net assets resulting from operations.... 907,487 3,520,754
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income.............................. (395,295) (762,109)
From net realized gains from investment transactions.... (1,133,859) --
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(Decrease) in net assets from distributions............. (1,529,154) (762,109)
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CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold............................... 674,820 1,177,622
Proceeds from reinvestment of distributions............. 1,529,154 762,109
Payments for shares redeemed............................ (1,295,525) (3,074,036)
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Net increase (decrease) in net assets
from capital share transactions...................... 908,449 (1,134,305)
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NET INCREASE IN NET ASSETS................................. 286,782 1,624,340
NET ASSETS
Beginning of period..................................... 24,037,287 22,412,947
---------- ----------
End of period........................................... $24,324,069 $24,037,287
========== ==========
Undistributed net investment income..................... $ 3,608 $ 18,848
========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold.................................................... 110,900 201,029
Issued in reinvestment of distributions................. 257,390 127,772
Redeemed................................................ (213,246) (535,680)
---------- ----------
Net increase (decrease)................................. 155,044 (206,879)
========== ==========
See Notes to Financial Statements
</TABLE>
9
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NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization --
TCI Portfolios, Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Five series of shares are currently issued as TCI Growth, TCI Balanced, TCI
Advantage, TCI International and TCI Value. With the exception of shares issued
for the initial capitalization of a series of the Corporation, shares may be
purchased only byinsurance companies to fund the benefits of variable annuity or
variable life insurance policies. The investment objective of TCI Advantage (the
Fund) is current income and capital growth. The following significant accounting
policies related to the Fund are in accordance with accounting policies
generally accepted in the investment company industry.
Security Valuations --
Portfolio securities traded primarily on a principal securities exchange
are valued at the last reported sales price, or the mean between the latest bid
and asked prices where no last sales price is available. Securities traded
over-the-counter are valued at the mean of the latest bid and asked prices or,
in the case of certain foreign securities, at the last reported sales price.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the mean of the most
recent bid and asked prices. Short-term securities are valued at amortized cost,
which approximates value. When valuations are not readily available, securities
are valued at fair value as determined in good faith by the board of directors.
Security Transactions --
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income --
Dividend income less foreign taxes withheld (if any) is recorded as of the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. Interest income is recognized on the accrual basis
and includes amortization of discounts and premiums.
Foreign Currency Transactions --
The accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of assets and
liabilities other than portfolio securities at the end of the reporting period,
resulting from changes in the exchange rates.
10
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1. Organization and Summary of Significant Accounting Policies (Continued)
Forward Foreign Currency Exchange Contracts --
The Fund may enter into forward foreign currency exchange contracts for the
purpose of settling specific purchases or sales of securities denominated in a
foreign currency or to hedge the Fund's exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Repurchase Agreements --
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Fund monitors the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status --
It is the policy of the Fund to distribute all taxable income and capital
gains to shareholders and to otherwise qualify as a regulated investment company
under provisions of the Internal Revenue Code. Accordingly, no provision has
been made for federal or state taxes.
Distributions to Shareholders --
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net invest-ment income are declared and paid quarterly.
Distributions from net realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differing
treatments for foreign currency transactions and wash sales.
Supplementary Information --
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of theCorporation's investment manager, Investors
Research Corporation (IRC).
11
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NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 1996 (Unaudited)
2. Management Agreement
The Management Agreement with IRC provides for a monthly management fee
computed by multiplying the applicable fee for the Fund by the average daily
closing value of the Fund's net assets during the previous month. The Agreement
further provides that all expenses of the Fund, except brokerage commissions,
taxes, interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The agreement may be
terminated by either party upon 60 days' written notice.
The current annual management fee for the Fund is 1%.
3. Investment Transactions
The aggregate cost of investment securities purchased (excluding short-term
investments) for the six months ended June 30, 1995, totaled $3,668,836 for
common stocks and $5,088,703 for U.S. Treasury and Agency obligations.
Investment Securities sold totaled $4,527,905 for common stocks and $5,379,833
for U.S. Treasury and Agency obligations. At June 30, 1995, accumulated net
unrealized appreciation on investments, based on the aggregate cost of
investments of $20,826,179 for federal income tax purposes, was $1,948,766,
consisting of $2,020,669 unrealized appreciation and $71,903 unrealized
depreciation.
12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
Six Months Years Ended December 31, August 1, 1991
Ended June 30, -------------------------------------------------- (Inception) through
1996 (Unaudited) 1995 1994 1993 1992 December 31, 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $6.19 $5.48 $5.57 $5.32 $5.64 $5.00
----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income .10 1 .20 .15 .11 .11 .05
Net Realized and
Unrealized Gains (Losses) .12 .71 (.09) .25 (.32) .64
----- ----- ----- ----- ----- -----
Total from
Investment Operations .22 .91 .06 .36 (.21) .69
----- ----- ----- ----- ----- -----
DISTRIBUTIONS
From Net
Investment Income (.10) (.20) (.15) (.11) (.11) (.05)
From Net Realized Gains
on Investment Transactions (.29) -- -- -- -- --
----- ----- ----- ----- ----- -----
Total Distributions (.39) (.20) (.15) (.11) (.11) (.05)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $6.02 $6.19 $5.48 $5.57 $5.32 $5.64
===== ===== ===== ===== ===== =====
TOTAL RETURN 3.76%2 16.75%2 1.03%2 6.82%2 (3.75%)2 33.14%3
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets .95%3 .95% 1.00% 1.00% 1.00% 1.00%3
Ratio of Net Investment Income
(Loss) to Average Net Assets 3.16%3 3.32% 2.65% 2.07% 2.32% 3.14%3
Portfolio Turnover Rate 41% 99% 57% 77% 85% 5%
Average Commission
Paid per Share Traded $.0340 $.0410 --4 --4 --4 --4
Net Assets, End
of Period (in thousands) $24,324 $24,037 $22,413 $20,959 $16,580 $3,069
- --------------------------------------------------------------------------------------------------------------------------
1 Computed using average shares outstanding for the period.
2 Total returns for periods less than one year are not annualized. Total return
assumes reinvestment of dividends and capital gains distributions, if any.
3 Annualized.
4 Not computed for period indicated.
</TABLE>
See Notes to Financial Statements
13
TCI Advantage TCI PORTFOLIOS, INC.
TCI Advantage
Investment Manager Semiannual Report
INVESTORS RESEARCH CORPORATION June 30, 1996
Kansas City, Missouri
This report and the financial statements
contained herein are submitted for the
general information of our shareholders.
The report is not authorized for
distribution to prospective investors unless
preceded or accompanied by an
effective prospectus.
[company logo]
=============================
- -----------------------------
TCI PORTFOLIOS, INC.
- -----------------------------
Part of the Twentieth Century
Family of Funds
- ------------------------------------------
P.O. Box 419385
Kansas City, Missouri
64141-6385
- ------------------------------------------
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
- ------------------------------------------
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
- ------------------------------------------
Fax: 816-340-4360
- ------------------------------------------
Internet: http://www.twentieth-century.com
- ------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-5400 [recycled logo]
9608 Recycled
<PAGE>
TCI PORTFOLIOS, INC.
TCI Balanced
Semiannual Report
June 30,
1996
[company logo]
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Our Message to You .................................................. 1
Investment Review ................................................... 2
Schedule of Investments ............................................. 4
Statement of Assets and Liabilities ................................. 9
Statement of Operations ............................................. 10
Statements of Changes in Net Assets ................................. 11
Notes to Financial Statements ....................................... 12
Financial Highlights ................................................ 15
- --------------------------------------------------------------------------------
INDICES USED FOR PERFORMANCE COMPARISON
The indices listed below are used throughout this report to serve as a
comparison for the performance of the fund.
THE S&P 500 INDEX is an index created by Standard & Poor's Corporation that
is considered to represent the performance of the stock market generally.
It is not an investment product available for purchase.
LEHMAN INTERMEDIATE GOVT./CORP. INDEX includes the Lehman Government and
Corporate Bond Indices, including U.S. government Treasury and agency
securities, corporate and Yankee bonds with one- to 10 - year maturities.
- --------------------------------------------------------------------------------
<PAGE>
June 30, 1996
- --------------------------------------------------------------------------------
OUR MESSAGE TO YOU
TCI Balanced compiled a 5.19% total return for the six-month period ended
June 30, 1996, trailing its benchmark blended index, which posted a 5.97%
return. The blended index combines the S&P 500 and the Lehman Intermediate
Government/Corporate Index.
TCI Balanced is a blended portfolio. Its approximate 60% stock position is
compiled using Twentieth Century's focus on earnings and revenue acceleration
and is managed to provide long-term opportunities for capital growth. Income is
derived from an approximate 40% stake in government and corporate bonds.
[photo of James E. Stowers and James E. Stowers III on left side of page]
The equity portion of the fund has been hurt by its orientation away from
the defensive stocks that the market favored in June. As investors anticipated
disappointing corporate earnings reports, they moved to stocks with steady
earnings, not the accelerating growth stocks the fund's management team prefers.
We believe, however, that over time companies with above-average earnings growth
should perform well.
Our search for companies that meet our earnings growth criteria led us to
energy stocks, which were the largest contributor to total return. The
portfolio's holdings of energy stocks increased over the six months ending June
30, 1996. The energy industry has increased exploration activity significantly,
resulting in an extremely strong market for drilling rigs and other oil service
equipment. Oil and gas producing companies also benefited from strong commodity
prices and higher production volumes.
The path of accelerating earnings also led the fund's management team to
increase the fund's pharmaceutical stock holdings. Profits in the pharmaceutical
sector have been boosted recently by a stream of new products, which in general
provide more effective treatments than existing remedies and are usually
patent-protected, yielding strong profit margins.
The fund's bond portion reflected recent declines in U.S. bond prices.
During the first six months of 1996, bonds traded up to their highest prices
since this latest interest rate cycle began, then reversed course. Bond prices
at the beginning of the year had anticipated the deflationary benefits of a
federal balanced-budget agreement and an easier monetary policy stance by the
Federal Reserve. Neither happened, and bond prices fell. During declining
markets the management team typically shortens the duration of the fund's bond
portfolio, a defensive move. Accordingly, the team shortened the duration of the
bond portfolio after February and kept it short throughout the rest of the
period.
TCI Balanced continues to pursue its original goal of providing
shareholders with the opportunity to invest in a portfolio of growth stocks that
offer capital growth potential, and bonds to reduce share-price fluctuations.
Sincerely,
/s/James E. Stowers /s/James E. Stowers III
James E. Stowers James E. Stowers III
Chairman of the Board and Founder President
1
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (as of June 30, 1996)
Lehman
Blended S&P 500 Intr.Govt./
TCI Balanced Index**+ Index Corp.Index+
------------ -------- ------- -----------
6 months* 5.19% 5.97% 10.07% -0.21%
1 year 13.17% 17.59% 25.92% 5.01%
3 year 9.98% 12.30% 17.22% 4.95%
Inception 9.91% 12.05% 14.82% 7.54%
(5/1/91-6/30/96)
*Actual
- --------------------------------------------------------------------------------
$10,000 OVER LIFE OF FUND (as of June 30, 1996)
[mountain graph]
Value on 6/30/96: $16,283 TCI Balanced
$20,397 S&P 500 Index
$18,206 Blended Index**+
$14,555 Lehman Intr. Govt./Corp. Index+
$10,000 investment made 5/1/91
Blended S&P Lehman Intr.
TCI BALANCED Index**+ 500 Index Govt./Corp. Index+
Aug 1, 91 $10,000 $10,000 $10,000 $10,000
Dec 31, 91 12,554 11,241 11,234 11,060
Jun 30, 92 11,349 11,329 11,160 11,394
Dec 31, 92 11,795 12,077 12,089 11,854
Jun 30, 93 12,246 12,729 12,675 12,590
Dec 31, 93 12,702 13,231 13,302 12,895
Jun 30, 94 12,379 12,823 12,856 12,558
Dec 31, 94 12,780 13,238 13,482 12,646
Jun 30, 95 14,388 15,375 16,198 13,861
Dec 31, 95 15,479 17,084 18,531 14,586
6/30/96 16,283 18,206 20,397 14,555
Past performance is not predictive of future performance.
+Source: Lipper Analytical Services, Inc.
- --------------------------------------------------------------------------------
QUICK FUND FACTS
----------
TCI Balanced
----------
STRATEGY:
A mix of growth stocks and
intermediate bonds, with
approximately 60% allocated
to stocks.
INCEPTION DATE:
May 1, 1991
SIZE:
$188.9 million
(as of June 30, 1996)
INVESTMENT APPROACH:
Capital Growth and Current Income
**Because the assets of TCI Balanced are invested in a mix of two distinct types
of assets, we have created a Blended Index that, in addition to the Standard &
Poor's 500 Index (S&P 500), can serve as a comparison for the performance of
the fund. The Blended Index averages two widely known indices in the
proportions of the asset mix of the fund. Accordingly, 60% of the Blended
Index represents the S&P 500, which reflects the 60% of the fund's total
assets invested in common stocks. The remaining 40% of the Blended Index
represents the Lehman Intermediate Government/Corporate Index, which reflects
the 40% of the fund's total assets invested in bonds and other fixed income
securities. The Blended Index and the Lehman Intermediate Government/Corporate
Index for 4/30/91, the date closest to the inception date (5/1/91) of the fund
for which the indices are available, have been used for the starting points
for these indices in the graph and average annual total returns.
No expenses or fees are reflected in the S&P 500, Blended Index or the Lehman
Intermediate Government/Corporate Index. All performance illustrations for TCI
Balanced are shown net of fees and assume reinvestment of all distributions.
2
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
QUALITY DIVERSIFICATION FOR FIXED INCOME INVESTMENTS
(as of June 30, 1996)
(Moody's ratings) % of fixed income investments
AAA 48%
AA 13%
A 27%
BBB 12%
---
100%
===
- --------------------------------------------------------------------------------
AVERAGE PORTFOLIO MATURITY FOR FIXED INCOME INVESTMENTS
(as of June 30, 1996)
Years 6.3
Average years to maturity indicates the average time until the principal on the
Fund's bonds is expected to be repaid, weighted by dollar amount.
- --------------------------------------------------------------------------------
DURATION FOR FIXED INCOME INVESTMENTS
(as of June 30, 1996)
Years 3.7
Duration is a measure of the sensitivity of a portfolio to changes in interest
rates. As the duration of a fund increases, the impact of a change in interest
rates on the value of its portfolio also increases.
- --------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS*
(as of June 30, 1996)
% of fund's
investments in
% of fund's these stocks
investments** six months ago**
HFS, Inc. 4.9% 3.1%
Boeing Co. 3.0% 1.5%
Johnson & Johnson 3.0% 2.1%
NIKE, Inc. 2.9% 2.0%
Global Marine Inc. 2.8% 1.2%
Oracle Systems Corp. 2.7% 2.4%
Microsoft Corp. 2.6% 2.0%
United Technologies Corp. 2.6% 2.3%
Pfizer, Inc. 2.4% 2.1%
Parametric Technology Corp. 2.4% --
- --------------------------------------------------------------------------------
ASSET ALLOCATION (as of June 30, 1996)
[pie chart]
Percent of fund investments
Other Asset-Backed Securities 2%
Mortgage-Backed Securities 3%
Temporary Cash Investments 5%
Sovereign Governments & Agencies 4%
U.S. Treasury Securities 12%
Common Stocks 57%
Corporate Bonds 17%
TOP FIVE INDUSTRIES FOR EQUITY INVESTMENTS*
(as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments in
% of fund's these industries
investments** six months ago**
Computer Software & Services 11.9% 12.5%
Pharmaceuticals 11.6% 4.9%
Energy (Services) 9.6% 3.8%
Energy (Production & Marketing) 7.5% 6.2%
Banking 6.5% 4.0%
INVESTMENTS BY COUNTRY*(as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments
Canada 1.6%
Hong Kong 0.7%
Japan 0.7%
Mexico 0.4%
Spain 0.8%
Switzerland 0.8%
United Kingdom 0.7%
United States 94.3%
-----
100.0%
=====
*The composition of the portfolio may change over time.
**These percentages reflect the composition of the common stock portion of TCI
Balanced and do not relate to the bond portion of the fund.
3
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
TCI BALANCED
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS
Aerospace & Defense -- 3.6%
36,200 Boeing Co. $3,153,925
10,000 Lockheed Martin Corp. 840,000
24,200 United Technologies Corp. 2,783,000
----------
6,776,925
----------
Automobiles & Auto Parts -- 1.6%
27,800 Chrysler Corp. 1,723,600
151,000 Nissan Motor Company ORD 1,340,538
----------
3,064,138
----------
Banking -- 3.7%
28,800 Bank of New York Co., Inc. 1,476,000
22,800 BankAmerica Corp. 1,727,100
24,280 Chase Manhattan Corp. 1,714,775
24,500 Citicorp 2,024,313
----------
6,942,188
----------
Biotechnology -- 1.1%
37,900 Amgen Inc.1 2,041,863
----------
Broadcasting -- 0.4%
25,000 Grupo Televisa ADR1 768,750
----------
Business Services & Supplies -- 3.2%
25,400 DST Systems, Inc.1 812,800
74,300 HFS, Inc.1 5,201,000
----------
6,013,800
----------
Communications Equipment -- 1.3%
28,000 U.S. Robotics Corp.1 2,390,500
----------
Communications Services -- 1.6%
57,200 MCI Communications Corp. 1,462,175
84,500 Nextel Communications Inc.1 1,610,781
----------
3,072,956
----------
Computer Software & Services -- 6.8%
50,400 American Management
Systems, Inc.1 1,480,500
21,600 BMC Software, Inc.1 1,287,900
21,801 First Data Corp. 1,735,905
23,200 Microsoft Corp.1 2,785,450
71,500 Oracle Systems Corp.1 2,819,781
57,900 Parametric Technology Corp.1 2,507,794
----------
12,617,330
----------
Computer Systems -- 1.1%
20,300 Hewlett-Packard Co. 2,022,388
----------
Electrical & Electronic Components -- 1.4%
10,600 Atmel Corp.1 319,987
21,600 Intel Corp. 1,586,250
13,100 Rockwell International Corp. 749,975
----------
2,656,212
----------
Energy (Production & Marketing) -- 4.3%
23,000 Anadarko Petroleum Corp. 1,334,000
13,134 British Petroleum Co. p.l.c. ADR 1,403,696
84,100 Enron Oil & Gas Co. 2,344,288
24,800 Sonat Inc. 1,116,000
21,000 Texaco Inc. 1,761,375
----------
7,959,359
----------
Energy (Services) -- 5.4%
43,500 Diamond Offshore Drilling, Inc.1 2,490,375
91,900 Falcon Drilling Company, Inc.1 2,487,044
211,300 Global Marine Inc.1 2,931,787
40,500 Halliburton Co. 2,247,750
----------
10,156,956
----------
Financial Services -- 1.1%
15,300 Lehman Brothers Holdings, Inc. 378,675
48,900 United Companies Financial Corp. 1,668,712
----------
2,047,387
----------
Food & Beverage -- 1.3%
49,800 Coca-Cola Company (The) 2,433,975
----------
Healthcare -- 1.8%
38,300 Baxter International, Inc. 1,809,675
20,100 Cardinal Health, Inc. 1,449,712
----------
3,259,387
----------
Insurance -- 1.0%
9,800 CIGNA Corp. 1,155,175
6,500 Marsh & McLennan Cos., Inc. 627,250
----------
1,782,425
----------
See Notes to Financial Statements
4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Leisure -- 0.7%
41,450 Promus Companies Inc.1 $1,227,956
----------
Office Equipment -- 0.9%
32,100 Xerox Corp. 1,717,350
----------
Pharmaceuticals -- 6.6%
1,200 Ciba-Geigy AG ORD 1,461,078
63,400 Johnson & Johnson 3,138,300
13,700 Lilly (Eli) & Co. 890,500
24,500 Merck & Co., Inc. 1,583,313
35,900 Pfizer, Inc. 2,562,362
89,411 U.S. Bioscience, Inc.1 1,218,225
27,000 Warner-Lambert Co. 1,485,000
----------
12,338,778
----------
Publishing -- 0.9%
36,600 Times Mirror Co. 1,592,100
----------
Retail (Apparel) -- 1.6%
29,500 NIKE, Inc. 3,031,125
----------
Retail (General Merchandise) -- 3.2%
44,000 Federated Department
Stores, Inc.1 1,501,500
42,800 Kohl's Corp.1 1,567,550
12,700 Mercantile Stores Co., Inc. 744,538
42,300 Sears, Roebuck & Co. 2,056,837
----------
5,870,425
----------
Retail (Specialty) -- 1.4%
44,100 TJX Companies, Inc. 1,488,375
38,400 Toys "R" Us, Inc.1 1,094,400
----------
2,582,775
----------
Tobacco -- 1.0%
18,200 Philip Morris Companies Inc. 1,892,800
----------
Total Common Stocks-- 57.0% 106,259,848
(Cost $84,764,236) ----------
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
FIXED INCOME SECURITIES
U.S. TREASURY SECURITIES
$ 2,000,000 U.S. Treasury Notes,
6.875%, 10-31-96 $ 2,009,720
2,000,000 U.S. Treasury Notes,
7.50%, 1-31-97 2,021,940
7,150,000 U.S. Treasury Notes,
6.125%, 3-31-98 7,160,296
800,000 U.S. Treasury Notes,
5.875%, 4-30-98 797,392
1,000,000 U.S. Treasury Notes,
5.50%, 11-15-98 984,910
2,000,000 U.S. Treasury Notes,
6.375%, 5-15-99 2,004,720
500,000 U.S. Treasury Notes,
6.25%, 8-31-00 496,700
1,000,000 U.S. Treasury Notes,
6.125%, 9-30-00 989,060
1,700,000 U.S. Treasury Notes,
5.75%, 10-31-00 1,656,701
2,050,000 U.S. Treasury Notes,
5.625%, 11-30-00 1,986,553
1,000,000 U.S. Treasury Notes,
6.375%, 8-15-02 992,180
750,000 U.S. Treasury Notes,
5.75%, 8-15-03 714,577
500,000 U.S. Treasury Notes,
6.50%, 8-15-05 493,205
800,000 U.S. Treasury Notes,
5.875%, 11-15-05 754,000
----------
Total U.S. Treasury Securities-- 12.4% 23,061,954
(Cost $23,334,426) ----------
MORTGAGE-BACKED SECURITIES*
401,669 FNMA Series G92-64-CPAC REMIC,
4.50%, 12-25-96 399,351
1,692,015 FNMA Pool #248679,
5.50%, 10-25-08 1,581,070
1,818,000 FNMA Pool #250627,
8.00%, 5-25-26 1,829,930
1,992,477 GNMA Pool #2202,
7.00%, 2-20-26 1,902,417
----------
Total Mortgage-Backed
Securities-- 3.1% 5,712,768
(Cost $5,772,156) ----------
See Notes to Financial Statements
5
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
OTHER ASSET-BACKED SECURITIES*
$1,000,000 AMRESCO Residential
Securities Mortgage Loan
Trust, Series 1996-3 Cl A5,
7.55%, 2-25-23 $1,006,300
2,000,000 Premier Auto Trust,
Series 1996-2 Cl A4,
6.575%, 10-6-00 2,003,880
1,000,000 Standard Credit Card Trust,
Series 1995-2 Cl A,
8.625%, 12-7-99 1,019,800
----------
Total Other Asset-Backed Securities-- 2.2% 4,029,980
(Cost $3,998,529) ----------
CORPORATE BONDS
Automobiles & Auto Parts -- 0.5%
1,000,000 General Motors Corp.,
7.00%, 6-15-03 992,500
----------
Banking -- 3.6%
1,500,000 Banco Santander, S.A.,
7.00%, 4-1-06 1,456,875
1,000,000 Chase Manhattan Corp.,
8.80%, 2-1-00 1,015,000
1,250,000 Citicorp,
7.125%, 5-15-06 1,228,125
1,000,000 First Union Corp.,
8.77%, 11-15-04 1,051,250
1,000,000 NationsBank Corp.,
6.875%, 2-15-05 972,500
1,000,000 Republic New
York Corporation,
7.25%, 7-15-02 1,012,500
----------
6,736,250
----------
Communications Services -- 1.1%
1,000,000 GTE Southwest Inc.,
5.82%, 12-1-99 975,000
1,000,000 Tele-Communications, Inc.,
8.25%, 1-15-03 1,011,250
----------
1,986,250
----------
Diversified Companies -- 0.5%
1,000,000 Hanson Overseas BV,
6.75%, 9-15-05 961,250
----------
Energy (Production & Marketing)-- 1.1%
1,000,000 Consolidated Natural Gas Co.,
9.375%, 2-1-97 1,018,750
1,000,000 Dresser Industries, Inc.,
6.25%, 6-1-00 982,500
----------
2,001,250
----------
Financial Services -- 3.5%
1,000,000 ADVANTA Corp., MTN,
7.00%, 5-1-01 991,250
1,000,000 Lehman Brothers Holdings, Inc.,
7.25%, 4-15-03 992,500
1,000,000 Merrill Lynch & Co. Inc.,
7.00%, 3-15-06 977,500
1,750,000 Norwest Financial, Inc.,
6.25%, 11-1-02 1,693,125
2,000,000 Salomon Brothers Inc.,
6.75%, 2-15-03 1,920,000
----------
6,574,375
----------
Insurance -- 0.5%
1,000,000 Nationwide Mutual Insurance Co.,
6.50%, 2-15-04+ 948,750
----------
Publishing -- 0.5%
1,000,000 Time Warner Inc.,
8.11%, 8-15-06 998,750
----------
Real Estate -- 1.0%
1,000,000 Price REIT, Inc. (The),
7.25%, 11-1-00 983,750
1,000,000 Spieker Properties, Inc.,
6.80%, 12-15-01 966,250
----------
1,950,000
----------
Retail (General Merchandise) -- 2.3%
1,000,000 Dayton Hudson Corporation,
9.75%, 7-1-02 1,122,500
1,000,000 Sears, Roebuck & Co., MTN,
5.72%, 2-6-01 958,750
1,000,000 Sears, Roebuck & Co., MTN,
8.23%, 10-21-04 1,060,000
1,000,000 Wal-Mart Stores Inc.,
8.00%, 9-15-06 1,061,250
----------
4,202,500
----------
See Notes to Financial Statements
6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Amount Value
- --------------------------------------------------------------------------------
Utilities (Electric) -- 2.0%
$1,000,000 Detroit Edison Company, MTN,
5.41%, 5-1-97 $992,500
1,000,000 Kansas Power & Light Co.,
8.875%, 3-1-00 1,061,250
1,700,000 Pacific Gas & Electric Co.,
6.25%, 8-1-03 1,610,750
----------
3,664,500
----------
Total Corporate Bonds-- 16.6% 31,016,375
(Cost $31,738,478) ----------
SOVEREIGN GOVERNMENTS & AGENCIES
1,350,000 China Light & Power Co. Ltd.,
7.50%, 4-15-06 1,326,375
1,500,000 Korea Electric Power,
6.375%, 12-1-03 1,423,125
1,000,000 Province of Ontario,
7.625%, 6-22-04 1,035,000
2,000,000 Province of Quebec,
6.50%, 1-17-06 1,882,500
1,700,000 Republic of Italy, VRN,
5.542%, 7-26-96, resets
quarterly off the 3-month
LIBOR plus .0625% with no
caps, final maturity 7-26-99 1,703,230
----------
Total Sovereign Governments & Agencies -- 3.9% 7,370,230
(Cost $7,610,790) ----------
TEMPORARY CASH INVESTMENTS -- 4.8%
Repurchase Agreement
(Goldman Sachs & Co., Inc.),
5.35%, due 7-1-96; collateralized
by $7,345,000 par value U.S.
Treasury Bonds, 8.75%-10.75%,
due 2-15-03 through 8-15-20
(Delivery value $9,004,012) 9,000,000
(Cost $9,000,000) ----------
Total Investment Securities-- 100.0% $186,451,155
(Cost $166,218,615) ==========
FORWARD FOREIGN CURRENCY CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain
- --------------------------------------------------------------------------------
86,949,279 JPY 7/31/96 $796,775 $522
======= ===
(Value on Settlement Date $797,297)
See Notes to Financial Statements
7
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
JPY = Japanese Yen
MTN = Medium Term Note
ORD = Foreign Ordinary Shares
VRN = Variable Rate Note (rate shown effective 6/30/96)
1 Non-income producing.
* Expected remaining maturity indicated and used for purposes of calculating the
weighted average portfolio maturity.
+ The following security was purchased under Rule 144A of the Securities Act of
1933 and, unless registered under the Act or exempted from registration, may
only be sold to qualified institutional investors.
June 30, 1996
-----------------------
Acquisition Average Market Percentage of
Issuer Date Cost Per Share Value Net Assets
- --------------------------------------------------------------------------------
Nationwide Mutual
Insurance Co.,
6.50%, 2-15-04 2-9-96 $100.84 $948,750 0.5%
======= ===
See Notes to Financial Statements
8
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment securities, at value
(identified cost of $166,218,615) (Note 3)...................... $186,451,155
Cash.............................................................. 362,626
Receivable for forward foreign currency exchange contracts........ 522
Receivable for investments sold................................... 573,956
Receivable for capital shares sold................................ 822,297
Dividends and interest receivable................................. 1,243,593
----------
189,454,149
----------
LIABILITIES
Payable for investments purchased................................. 435,165
Payable for capital shares redeemed............................... 6,660
Accrued management fees (Note 2).................................. 150,116
Other liabilities................................................. 196
----------
592,137
----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES....................... $188,862,012
==========
CAPITAL SHARES, $.01 PAR VALUE
Authorized........................................................ 200,000,000
==========
Outstanding....................................................... 26,546,991
==========
NET ASSET VALUE PER SHARE......................................... $7.11
==========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)........................... $164,553,597
Undistributed net investment income............................... 19,917
Accumulated undistributed net realized gain
from investments and foreign currency transactions.............. 4,056,621
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies (Note 3)........ 20,231,877
----------
$188,862,012
==========
See Notes to Financial Statements
9
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest....................................................... $2,393,055
Dividends (net of foreign taxes withheld of $12,505)........... 556,875
----------
2,949,930
----------
Expenses:
Management fees (Note 2)....................................... 819,531
Directors' fees and expenses................................... 763
----------
820,294
----------
NET INVESTMENT INCOME............................................... 2,129,636
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
(Note 3)
Net realized gain during the period on:
Investments.................................................... 3,958,688
Foreign currency transactions.................................. 186,225
----------
4,144,913
----------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments.................................................... 2,632,490
Translation of assets and liabilities in foreign currencies.... (21,827)
----------
2,610,663
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY.................................... 6,755,576
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........................................... $8,885,212
==========
See Notes to Financial Statements
10
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
- ---------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 1996 1995
<S> <C> <C>
OPERATIONS
Net investment income..................................... $2,129,636 $3,389,143
Net realized gain on investments
and foreign currency transactions..................... 4,144,913 6,816,727
Change in net unrealized appreciation on investments
and translation of assets and liabilities
in foreign currencies................................. 2,610,663 13,457,861
---------- ----------
Net increase in net assets resulting from operations...... 8,885,212 23,663,731
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................ (2,172,411) (3,317,076)
From net realized gains from investment transactions...... (4,758,581) --
In excess of net realized gains from investment
transactions.......................................... (88,292) --
---------- ----------
(Decrease) in net assets from distributions............... (7,019,284) (3,317,076)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................................. 32,893,286 36,523,452
Proceeds from reinvestment of distributions............... 7,019,284 3,317,076
Payments for shares redeemed.............................. (6,739,656) (11,464,097)
---------- ----------
Net increase in net assets
from capital share transactions....................... 33,172,914 28,376,431
---------- ----------
NET INCREASE IN NET ASSETS.................................. 35,038,842 48,723,086
NET ASSETS
Beginning of period....................................... 153,823,170 105,100,084
---------- ----------
End of period............................................. $188,862,012 $153,823,170
========== ==========
Undistributed net investment income......................... $19,917 $62,692
========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold...................................................... 4,642,373 5,501,320
Issued in reinvestment of distributions................... 1,007,541 494,003
Redeemed.................................................. (960,617) (1,765,833)
---------- ----------
Net increase.............................................. 4,689,297 4,229,490
========== ==========
</TABLE>
See Notes to Financial Statements
11
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization --
TCI Portfolios, Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Five series of shares are currently issued as TCI Growth, TCI Balanced, TCI
Advantage, TCI International and TCI Value. With the exception of shares issued
for the initial capitalization of a series of the Corporation, shares may be
purchased only by insurance companies to fund the benefits of variable annuity
or variable life insurance policies. The investment objective of TCI Balanced
(the Fund) is capital growth and current income. The following significant
accounting policies related to the Fund are in accordance with accounting
policies generally accepted in the investment company industry.
Security Valuations --
Portfolio securities traded primarily on a principal securities exchange
are valued at the last reported sales price, or the mean between the latest bid
and asked prices where no last sales price is available. Securities traded
over-the-counter are valued at the mean of the latest bid and asked prices or,
in the case of certain foreign securities, at the last reported sales price.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the mean of the most
recent bid and asked prices. Short-term securities are valued at amortized cost,
which approximates value. When valuations are not readily available, securities
are valued at fair value as determined in good faith by the board of directors.
Security Transactions --
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income --
Dividend income less foreign taxes withheld (if any) is recorded as of the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. Interest income is recognized on the accrual basis
and includes amortization of discounts and premiums.
Foreign Currency Transactions --
The accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of assets and
liabilities other than portfolio securities at the end of the reporting period,
resulting from changes in the exchange rates.
12
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies (continued)
Forward Foreign Currency Exchange Contracts --
The Fund may enter into forward foreign currency exchange contracts for the
purpose of settling specific purchases or sales of securities denominated in a
foreign currency or to hedge the Fund's exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Repurchase Agreements --
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Fund monitors the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status --
It is the policy of the Fund to distribute all taxable income and capital
gains to shareholders and to otherwise qualify as a regulated investment company
under provisions of the Internal Revenue Code. Accordingly, no provision has
been made for federal or state taxes.
Distributions to Shareholders --
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net invest-ment income are declared and paid quarterly.
Distributions from net realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differing
treatments for foreign currency transactions and wash sales.
Supplementary Information --
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of the Corporation's investment manager, Investors
Research Corporation (IRC).
13
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1996 (Unaudited)
2. Management Agreement
The Management Agreement with IRC provides for a monthly management fee
computed by multiplying the applicable fee for the Fund by the average daily
closing value of the Fund's net assets during the previous month. The Agreement
further provides that all expenses of the Fund, except brokerage commissions,
taxes, interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The agreement may be
terminated by either party upon 60 days' written notice.
The current annual management fee for the Fund is 1%.
3. Investment Transactions
The aggregate cost of investment securities purchased (excluding short-term
investments) for the six months ended June 30, 1996, totaled $70,783,579 for
common stocks, $31,993,789 for U.S. Treasury and Agency obligations and
$36,497,515 for other debt obligations. Proceeds from investment securities sold
(excluding short-term investments) totaled $59,963,806 for common stocks,
$23,820,055 for U.S. Treasury and Agency obligations and $30,833,897 for other
debt obligations. On June 30, 1996, accumulated net unrealized appreciation on
investments, based on the aggregate cost of investments of $166,334,602 for
federal income tax purposes, was $20,116,553, consisting of unrealized
appreciation of $22,576,183 and unrealized depreciation of $2,459,630.
14
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
Six Months Years Ended December 31, May 1, 1991
Ended June 30, ------------------------------------------- (Inception) through
1996 (Unaudited) 1995 1994 1993 1992 December 31, 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ........... $7.04 $5.96 $6.07 $5.74 $6.19 $5.00
----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income.................... .09 1 .17 .15 .11 .08 .08
Net Realized
and Unrealized
Gains (Losses)............ .27 1.08 (.11) .33 (.45) 1.19
----- ----- ----- ----- ----- -----
Total from
Investment Operations..... .36 1.25 .04 .44 (.37) 1.27
----- ----- ----- ----- ----- -----
DISTRIBUTIONS
From Net
Investment Income......... (.09) (.17) (.15) (.11) (.08) (.08)
From Net Realized
Gains on Investment
Transactions.............. (.20) -- -- -- -- --
----- ----- ----- ----- ----- -----
Total Distributions....... (.29) (.17) (.15) (.11) (.08) (.08)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD.................. $7.11 $7.04 $5.96 $6.07 $5.74 $6.19
===== ===== ===== ===== ===== =====
TOTAL RETURN.............. 5.19%2 21.12%2 .61%2 7.68%2 (6.04%)2 38.02%3
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets........ .97%3 .97% 1.00% 1.00% 1.00% 1.00%3
Ratio of Net Investment
Income to Average
Net Assets................ 2.51%3 2.69% 2.49% 1.97% 1.91% 2.36%3
Portfolio
Turnover Rate............. 72% 87% 63% 68% 85% 28%
Average Commission
Paid per Share Traded..... $.0344 $.0400 --4 --4 --4 --4
Net Assets, End
of Period (in thousands).$188,862 $153,823 $105,100 $75,924 $34,382 $1,412
- ---------------------------------------------------------------------------------------------------------------
1 Computed using average shares outstanding for the period.
2 Total returns for periods less than one year are not annualized. Total return
assumes reinvestment of dividends and capital gains distributions, if any.
3 Annualized.
4 Not computed for period indicated.
</TABLE>
See Notes to Financial Statements
15
This page left blank for your notes.
16
TCI Balanced TCI PORTFOLIOS, INC.
TCI Balanced
Investment Manager Semiannual Report
INVESTORS RESEARCH CORPORATION June 30, 1996
Kansas City, Missouri
This report and the financial statements
contained herein are submitted for the
general information of our shareholders.
The report is not authorized for distribution
to prospective investors unless preceded or
accompanied by an effective prospectus.
[company logo]
=============================
- -----------------------------
TCI PORTFOLIOS, INC.
- -----------------------------
Part of the Twentieth Century
Family of Funds
- --------------------------------------------
P.O. Box 419385
Kansas City, Missouri
64141-6385
- --------------------------------------------
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
- --------------------------------------------
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
- --------------------------------------------
Fax: 816-340-4360
- --------------------------------------------
Internet: http://www.twentieth-century.com
- --------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-5398 [recycled logo]
9608 Recycled
<PAGE>
TCI PORTFOLIOS, INC.
TCI Growth
Semiannual Report
JUNE 30,
1996
[company logo]
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Our Message to You .................................................... 1
Investment Review ..................................................... 2
Schedule of Investments ............................................... 4
Statement of Assets and Liabilities.................................... 8
Statement of Operations ............................................... 9
Statements of Changes in Net Assets.................................... 10
Notes to Financial Statements ......................................... 11
Financial Highlights .................................................. 14
- --------------------------------------------------------------------------------
INDEX USED FOR PERFORMANCE COMPARISON
The index listed below is used throughout this report to serve as a comparison
for the performance of the fund.
THE S&P 500 INDEX -- An index created by Standard & Poor's Corporation that is
considered to represent the performance of the stock market generally. It is not
an investment product available for purchase.
- --------------------------------------------------------------------------------
<PAGE>
June 30, 1996
- --------------------------------------------------------------------------------
OUR MESSAGE TO YOU
The performance of TCI Growth during the six months ended June 30, 1996,
has lagged both the market and Twentieth Century's expectations for its growth
funds. TCI Growth posted a 1.38% return for the six months ended June 30, 1996,
compared to a 10.07% gain for the S&P 500. Accordingly, a new management team
assumed responsibility for the fund effective July 1.
The team is led by Glenn Fogle, vice president and portfolio manager, who
has been with Twentieth Century since 1990. In addition to TCI Growth, this team
also manages Giftrust Investors and Vista Investors, two Twentieth Century funds
that have notable long-term records.
[photo of James E. Stowers and James E. Stowers III on left side of page]
In our view, TCI Growth's lagging performance can be attributed to
inconsistent implementation of our investment process. Proper execution of our
time-tested approach demands an emphasis on accelerating growth stocks.
Additionally, our portfolio construction process is based on the notion of
adding to "winners" and quickly selling "losers." It is our belief that if our
stock selection is accurate, port-folios constructed in this fashion should be
able to generate better performance than a broadly diversified portfolio. The
new management team will be much more focused on these critical variables.
TCI Growth's mission remains the same--to invest in growing companies of
all sizes for investors seeking capital growth. To meet that objective, the
management team invests in companies with accelerating earnings and revenue
growth. We believe that such an approach has the potential to provide attractive
returns over the long term. We are confident that the measures we have taken to
reinvigorate this fund will make a noticeable difference over time.
Sincerely,
/s/James E. Stowers /s/James E. Stowers III
James E. Stowers James E. Stowers III
Chairman of the Board and Founder President
1
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (as of June 30, 1996)
TCI GROWTH S&P 500 Index
------------------ ------------------
6 months* 1.38% 10.07%
1 year 11.25% 25.92%
3 year 11.41% 17.22%
5 year 12.09% 15.68%
Inception 12.24% 16.13%
(11/20/87-6/30/96)
*Actual
- --------------------------------------------------------------------------------
$10,000 OVER LIFE OF FUND (as of June 30, 1996)
[mountain graph]
Value on 6/30/96: $27,009 TCI Growth
$36,205 S&P 500 Index
[graph data] TCIP S&P 500
GROWTH Index
Nov 20, 87 $10,000 $10,000
Dec 31, 87 10,720 10,301
Jun 30, 88 10,801 11,609
Dec 31, 88 10,477 12,001
Jun 30, 89 12,072 13,981
Dec 31, 89 13,486 15,792
Jun 30, 90 14,852 16,273
Dec 31, 90 13,317 15,300
Jun 30, 91 15,264 17,475
Dec 31, 91 18,894 19,940
Jun 30, 92 16,858 19,809
Dec 31, 92 18,640 21,457
Jun 30, 93 19,543 22,498
Dec 31, 93 20,563 23,611
Jun 30, 94 19,109 22,820
Dec 31, 94 20,322 23,931
Jun 30, 95 24,278 28,752
Dec 31, 95 26,642 32,897
6/30/96 27,009 36,205
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
Quick Fund Facts
-----------
TCI GROWTH
-----------
STRATEGY:
Growth over time through
investments in stocks of
small, medium and large
companies.
INCEPTION DATE:
November 20, 1987
SIZE:
$1.5 billion
(as of June 30, 1996)
INVESTMENT APPROACH:
Capital Growth
- --------------------------------------------------------------------------------
No expenses or fees are reflected in the S&P 500 Index. All performance
illustrations for TCI Growth are shown net of fees and assume reinvestment of
all distributions.
2
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS* (as of June 30, 1996)
% of fund's
investments in
% of fund's these stocks
investments six months ago
Tellabs, Inc. 2.9% 1.0%
Cisco Systems Inc. 2.7% 1.7%
Newbridge Networks Corp. ADR 2.7% --
Glenayre Technologies, Inc. 2.5% 2.0%
Home Depot, Inc. 2.5% --
Andrew Corp. 2.2% 1.8%
MFS Communications Co., Inc. 2.2% 1.3%
Gartner Group, Inc. 2.1% 1.0%
CompUSA Inc. 1.8% --
Conseco, Inc. 1.8% --
TOP FIVE INDUSTRIES* (as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments in
% of fund's these industries
investments six months ago
Communications Equipment 12.6% 11.1%
Computer Software & Services 10.4% 14.2%
Financial Services 9.0% 7.6%
Retail (Specialty) 7.3% 1.9%
Electrical & Electronic Components 5.7% 11.1%
INVESTMENTS BY COUNTRY* (as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments
Canada 3.4%
France 0.5%
Japan 5.3%
Netherlands 0.9%
Norway 0.7%
United Kingdom 0.4%
United States 88.8%
-----
100.0%
=====
*The composition of the portfolio may change over time.
[company logo]
3
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
TCI GROWTH
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS
Airlines -- 0.9%
265,000 UAL Corp. 1 $ 14,243,750
----------
Automobiles & Auto Parts -- 2.3%
900,000 Honda Motor Co. Ltd. ORD 23,321,168
425,000 Toyota Motor Corp. ORD 10,625,000
----------
33,946,168
----------
Banking -- 2.9%
285,000 Citicorp 23,548,125
80,000 Wells Fargo & Co. 19,110,000
----------
42,658,125
----------
Biotechnology -- 4.5%
250,000 Amgen Inc. 1 13,468,750
150,000 Cephalon Inc. 1 2,943,750
275,000 Chiron Corp. 1 26,915,625
600,000 Gilead Sciences, Inc. 1 15,075,000
300,000 Neurogen Corp. 1 7,650,000
----------
66,053,125
----------
Business Services & Supplies -- 2.7%
282,500 DST Systems, Inc. 1 9,040,000
850,000 Gartner Group, Inc. 1 31,184,375
----------
40,224,375
----------
Communications Equipment -- 12.6%
600,000 Andrew Corp. 1 32,475,000
550,000 Boston Technology, Inc. 1 9,315,625
750,000 Glenayre Technologies, Inc. 1 37,453,125
78,500 MRV Communications, Inc. 1 3,306,813
350,000 Motorola, Inc. 22,006,250
600,000 Newbridge Networks Corp. ADR 1 39,300,000
630,700 Tellabs, Inc. 1 42,178,062
----------
186,034,875
----------
Communications Services -- 5.6%
400,000 Brooks Fiber Properties, Inc. 1 13,150,000
575,000 LCI International, Inc. 1 18,040,625
850,000 MFS Communications Co., Inc. 1 31,928,125
1,000,000 Nextel Communications Inc. 1 19,062,500
----------
82,181,250
----------
Computer Peripherals -- 4.3%
700,000 Cisco Systems Inc. 1 39,681,250
615,000 FORE Systems, Inc. 1 22,178,438
131,000 Microcom, Inc. 1++ 1,653,875
---------
63,513,563
----------
Computer Software & Services -- 10.4%
552,800 Applix, Inc. 1++ 15,823,900
400,000 Baan Co., N.V. ADR 1+ 13,625,000
630,000 Cambridge Technology
Partners (Mass.) Inc. 1 19,254,375
194,400 Computer Associates
International, Inc. 13,851,000
350,000 Control Data Systems, Inc. 1 7,503,125
200,000 Fuji Soft Corporation ORD 7,262,773
350,000 Geoworks 1 12,250,000
155,000 Microsoft Corp. 1 18,609,688
1,050,800 Structural Dynamics
Research Corp. 1 22,986,250
300,000 Sybase, Inc. 1 7,106,250
400,000 Synopsys, Inc. 1 15,950,000
----------
154,222,361
----------
Computer Systems -- 3.0%
725,000 Auspex Systems, Inc. 1 10,784,375
220,000 Dell Computer Corp. 1 11,178,750
370,000 Sun Microsystems, Inc. 1 21,783,750
----------
43,746,875
----------
Consumer Products -- 1.0%
205,000 Estee Lauder Companies Inc. Cl. A 8,661,250
1,000,000 Nissho Iwai Corp. ORD 5,629,562
----------
14,290,812
----------
Electrical & Electronic Components -- 5.7%
680,000 Actel Corp. 1 12,537,500
300,000 Atmel Corp. 1 9,056,250
525,000 Checkpoint Systems, Inc. 1 18,046,875
125,000 Dynatech Corp. 1 4,078,125
425,000 LSI Logic Corp. 1 11,050,000
250,000 Matsushita Communications
Industrial Co., Ltd. ORD 6,500,912
220,000 SGS-Thomson Microelectronics
N.V. ADR1 7,892,500
See Notes to Financial Statements
4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
45,000 Toshiba Ceramics Co. Limited ORD $ 496,807
605,000 Vitesse Semiconductor Corp. 1 14,557,812
----------
84,216,781
----------
Energy (Services) -- 2.2%
685,000 Input/Output, Inc. 1 22,176,875
368,500 Petroleum Geo-Services A/S ADR 1 10,433,156
----------
32,610,031
----------
Financial Services -- 9.0%
275,000 Aames Financial Corp. 9,865,625
350,000 ContiFinancial Corporation 1 10,325,000
350,000 First USA, Inc. 19,250,000
250,000 Franklin Resources, Inc. 15,250,000
1,225,125 Money Store, Inc. (The) 26,876,180
305,000 Morgan Stanley Group Inc. 14,983,125
800,000 Olympic Financial Ltd. 1 18,400,000
320,000 Schwab (Charles) Corp. 7,840,000
225,000 Travelers Corp. 10,265,625
----------
133,055,555
----------
Food & Beverage -- 1.6%
675,000 PepsiCo, Inc. 23,878,125
----------
Healthcare -- 0.4%
250,000 Curative Technologies, Inc. 1 6,640,625
---------
Industrial Equipment
& Machinery -- 1.2%
500,000 KLA Instruments Corp. 1 11,593,750
325,000 Ultratech Stepper, Inc. 1 6,073,438
---------
17,667,188
----------
Insurance -- 2.4%
358,400 American Travellers Corp. 1 8,220,800
675,000 Conseco, Inc. 27,000,000
----------
35,220,800
----------
Leisure -- 3.9%
500,000 Casino Data Systems 1 7,468,750
100,000 Grand Casinos, Inc. 1 2,575,000
300,000 MGM Grand, Inc. 1 11,962,500
440,000 Mirage Resorts, Inc. 1 23,760,000
400,000 Trump Hotels & Casino
Resorts, Inc. 1 11,400,000
----------
57,166,250
----------
Medical Equipment & Supplies -- 2.5%
120,000 Becton, Dickinson & Co. 9,630,000
175,000 Eclipse Surgical
Technologies, Inc. 1 2,406,250
240,000 Sofamor Danek Group, Inc. 1 6,660,000
455,000 Target Therapeutics, Inc. 1 18,655,000
----------
37,351,250
----------
Metals & Mining -- 0.6%
275,000 Getchell Gold Corp. 1 9,075,000
---------
Office Equipment -- 0.6%
185,000 Danka Business Systems plc ADR 5,399,687
614,000 Sanyo Electric Company Ltd. ORD 3,747,865
---------
9,147,552
----------
Pharmaceuticals -- 3.3%
300,000 BioChem Pharma Inc. ADR 1 11,231,250
450,000 Eisai Co., Ltd. ORD 8,499,088
200,000 Merck & Co., Inc. 12,925,000
360,000 Pharmacia & Upjohn, Inc. 15,975,000
----------
48,630,338
----------
Restaurants -- 2.1%
400,000 Boston Chicken, Inc. 1 12,975,000
635,000 Starbucks Corp. 1 17,899,063
----------
30,874,063
----------
Retail (Apparel) -- 3.0%
1,170,000 AnnTaylor Stores Corp. 1++ 23,692,500
634,400 Gap, Inc. 20,380,100
----------
44,072,600
----------
Retail (General Merchandise) -- 1.5%
350,000 Kohl's Corp. 1 12,818,750
215,000 Nordstrom, Inc. 9,540,625
----------
22,359,375
----------
Retail (Specialty) -- 7.3%
300,000 Avon Products, Inc. 13,537,500
800,000 CompUSA Inc. 1 27,300,000
685,000 Home Depot, Inc. 36,990,000
275,000 Marui, Co., Ltd. ORD 6,097,171
360,000 PETsMART, Inc. 1 17,100,000
300,000 Skylark ORD 6,322,993
----------
107,347,664
----------
See Notes to Financial Statements
5
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Miscellaneous -- 1.7%
567,750 Concord EFS, Inc. 1 $ 20,297,062
200,000 Sunrise Assisted Living, Inc. 1 4,875,000
----------
25,172,062
----------
Total Common Stocks-- 99.2% 1,465,600,538
(Cost $1,206,612,444) -------------
TEMPORARY CASH INVESTMENTS -- 0.8%
Repurchase Agreement
(Goldman Sachs & Co., Inc.),
5.35%, due 7-1-96; collateralized
by $8,945,000 par value U.S.
Treasury Bonds, 10.75%-12.00%, due
5-15-03 through 5-15-05
(Delivery value $11,805,261) 11,800,000
(Cost $11,800,000) ----------
Total Investment Securities-- 100.0% $1,477,400,538
(Cost $1,218,412,444) ==============
FORWARD FOREIGN CURRENCY CONTRACTS
Contracts Settlement Unrealized
to Sell Date Value Gain
- --------------------------------------------------------------------------------
6,802,569,432 JPY 7/31/96 $62,336,549 $40,870
=========== =======
(Value on Settlement Date $62,377,419)
See Notes to Financial Statements
6
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
JPY = Japanese Yen
ORD = Foreign Ordinary Shares
1 Non-income producing.
+ The following security was purchased under Rule 144A of the Securities Act of
1933 and, unless registered under the Act or exempted from registration, may
only be sold to qualified institutional investors.
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------
Acquisition Average Market Percentage of
Issuer Date Cost Per Share Value Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baan Co., N.V. ADR 6-7-95 to 7-26-95 $14.57 $13,625,000 0.9%
=========== ====
</TABLE>
++ Affiliated Company: represents ownership of at least 5% of the voting
securities of the issuer and is, therefore, an affiliate as defined in the
Investment Company Act of 1940. See Note 4 in Financial Statements for a
summary of transactions for each issuer who is or was an affiliate at or
during the period ended June 30, 1996.
See Notes to Financial Statements
7
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment securities, at value
(identified cost of $1,218,412,444) (Notes 3 and 4)....... $ 1,477,400,538
Cash........................................................ 74,568
Receivable for forward foreign currency exchange contracts.. 40,870
Receivable for investments sold............................. 14,852,775
Receivable for capital shares sold.......................... 4,697,674
Dividends and interest receivable........................... 630,491
-------------
1,497,696,916
-------------
LIABILITIES
Payable for investments purchased........................... 15,926,056
Payable for capital shares redeemed......................... 1,431,326
Accrued management fees (Note 2)............................ 1,232,718
Other liabilities........................................... 1,620
-------------
18,591,720
-------------
NET ASSETS APPLICABLE
TO OUTSTANDING SHARES....................................... $ 1,479,105,196
=============
CAPITAL SHARES, $.01 PAR VALUE
Authorized.................................................. 500,000,000
=============
Outstanding................................................. 136,304,068
=============
NET ASSET VALUE PER SHARE................................... $ 10.85
=====
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)..................... $ 1,218,707,540
Undistributed net investment (loss)......................... (4,301,265)
Accumulated undistributed net realized gain
from investments and foreign currency transactions........ 5,682,232
Net unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies (Note 3)....................................... 259,016,689
-------------
$ 1,479,105,196
=============
See Notes to Financial Statements
8
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (LOSS)
Income:
Dividends (net of foreign taxes withheld of $83,663)...... $ 2,480,442
Interest.................................................. 537,001
----------
3,017,443
----------
Expenses:
Management fees (Note 2).................................. 7,311,931
Directors' fees and expenses.............................. 6,777
----------
7,318,708
----------
NET INVESTMENT (LOSS).......................................... (4,301,265)
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (Notes 3 and 4)
Net realized gain (loss) during the period on:
Investments................................................. (1,699,640)
Foreign currency transactions............................... 9,276,873
----------
7,577,233
----------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments............................................... 17,360,884
Translation of assets and liabilities in
foreign currencies..................................... (716,454)
----------
16,644,430
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY............................... 24,221,663
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...................................... $ 19,920,398
==========
See Notes to Financial Statements
9
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 1996 1995
<S> <C> <C>
OPERATIONS
Net investment (loss)..................................................... $ (4,301,265) $ (2,898,945)
Net realized gain on investments
and foreign currency transactions....................................... 7,577,233 187,913,648
Change in net unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies............. 16,644,430 134,253,469
---------- -----------
Net increase in net assets resulting from operations...................... 19,920,398 319,268,172
---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................................ -- (1,019,296)
In excess of net investment income........................................ -- (133,044)
From net realized gains from investment transactions...................... (163,386,583) --
In excess of net realized gains from investment transactions.............. (1,895,001) --
----------- -------------
(Decrease) in net assets from distributions............................... (165,281,584) (1,152,340)
------------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................................................. 184,366,475 812,061,191
Proceeds from reinvestment of distributions............................... 165,281,584 1,152,340
Payments for shares redeemed.............................................. (186,305,331) (672,782,929)
------------- -------------
Net increase in net assets
from capital share transactions........................................ 163,342,728 140,430,602
----------- -----------
NET INCREASE IN NET ASSETS.................................................. 17,981,542 458,546,434
NET ASSETS
Beginning of period....................................................... 1,461,123,654 1,002,577,220
----------- -----------
End of period 1,479,105,196 $1,461,123,654
============== ==============
Undistributed net investment (loss).......................................$ (4,301,265) $ (751,266)
============== ==============
TRANSACTIONS IN SHARES OF THE FUND:
Sold...................................................................... 15,969,555 75,063,678
Issued in reinvestment of distributions................................... 15,461,327 126,492
Redeemed.................................................................. (16,262,639) (62,925,631)
------------ ------------
Net increase.............................................................. 15,168,243 12,264,539
========== ==========
See Notes to Financial Statements
</TABLE>
10
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization --
TCI Portfolios, Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Five series of shares are currently issued as TCI Growth, TCI Balanced, TCI
Advantage, TCI International and TCI Value. With the exception of shares issued
for the initial capitalization of a series of the Corporation, shares may be
purchased only by insurance companies to fund the benefits of variable annuity
or variable life insurance policies. The investment objective of TCI Growth (the
Fund) is capital growth. The following significant accounting policies related
to the Fund are in accordance with accounting policies generally accepted in the
investment company industry.
Security Valuations --
Portfolio securities traded primarily on a principal securities exchange
are valued at the last reported sales price, or the mean between the latest bid
and asked prices where no last sales price is available. Securities traded
over-the-counter are valued at the mean of the latest bid and asked prices or,
in the case of certain foreign securities, at the last reported sales price.
Short-term debt securities are valued at amortized cost, which approximates
value. When valuations are not readily available, securities are valued at fair
value as determined in good faith by the board of directors.
Security Transactions --
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income --
Dividend income less foreign taxes withheld (if any) is recorded as of the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. Interest income is recognized on the accrual basis
and includes amortization of discounts and premiums.
Foreign Currency Transactions --
The accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of assets and
liabilities other than portfolio securities at the end of the reporting period,
resulting from changes in the exchange rates.
11
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies (Continued)
Forward Foreign Currency Exchange Contracts --
The Fund may enter into forward foreign currency exchange contracts for the
purpose of settling specific purchases or sales of securities denominated in a
foreign currency or to hedge the Fund's exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Repurchase Agreements --
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Fund monitors the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status --
It is the policy of the Fund to distribute all taxable income and capital
gains to shareholders and to otherwise qualify as a regulated investment company
under provisions of the Internal Revenue Code. Accordingly, no provision has
been made for federal or state taxes.
Distributions to Shareholders --
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net invest-ment income and net realized gains are declared
and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differing
treatments for foreign currency transactions and wash sales.
Supplementary Information --
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of the Corporation's investment manager, Investors
Research Corporation (IRC).
2. Management Agreement
The Management Agreement with IRC provides for a monthly management fee
computed by multi-plying the applicable fee for the Fund by the average daily
closing value of the Fund's net assets during the previous month. The Agreement
further provides that all expenses of the Fund, except brokerage commissions,
taxes, interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The agreement may be
terminated by either party upon 60 days' written notice.
The current annual management fee for the Fund is 1%.
12
- --------------------------------------------------------------------------------
3. Investment Transactions
The aggregate cost of investment securities purchased (excluding short-term
investments) for the six months ended June 30, 1996, totaled $1,256,609,339 for
common stocks. Proceeds from investment securities sold (excluding short-term
investments) totaled $1,218,836,879 for common stocks. On June 30, 1996,
accumulated net unrealized appreciation on investments, based on the aggregate
cost of investments of $1,221,078,162 for federal income tax purposes, was
$256,322,376, consisting of unrealized appreciation of $290,171,184 and
unrealized depreciation of $33,848,808.
4. Affiliated Company Transactions
A summary of transactions for each issuer who is or was an affiliate at or
during the period ended June 30, 1996, follows:
<TABLE>
<CAPTION>
Share June 30, 1996
Balance Purchase Sales Realized Share Market
Issuer 12/31/95 Cost Cost Gain (Loss) Income Balance Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AnnTaylor
Stores Corp. -- $23,738,150 -- -- -- 1,170,000 $23,692,500
Applix, Inc. -- 18,105,310 $ 1,403,659 $ 208,266 -- 552,800 15,823,900
Microcom, Inc. 600,000 5,815,202 16,035,083 (6,147,210) -- 131,000 1,653,875
VTEL Corp. 670,000 -- 9,797,020 (2,500,404) -- -- --
---------- --------- ----------- --------- -----------
$47,658,662 $27,235,762 $ (8,439,348) -- $41,170,275
=========== =========== ============ ========= ===========
</TABLE>
13
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
Six Months Years Ended December 31,
Ended June 30, ----------------------------------------------------------------------
1996 (Unaudited) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................ $12.06 $9.21 $9.32 $8.47 $8.64 $6.16
----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (.03)1 (.02) .01 .03 .02 .04
Net Realized and
Unrealized Gains (Losses).......... .18 2.88 (.12) .84 (.14) 2.51
----- ----- ----- ----- ----- -----
Total from
Investment Operations.............. .15 2.86 (.11) .87 (.12) 2.55
----- ----- ----- ----- ----- -----
DISTRIBUTIONS
From Net
Investment Income.................. -- (.011) (.001) (.023) (.052) (.07)
From Net Realized Gains
on Investment Transactions......... (1.35) -- -- -- (.003) --
In Excess of Net
Realized Gains..................... (.01) -- -- -- -- --
----- ----- ----- ----- ----- -----
Total Distributions................ (1.36) (.011) (.001) (.023) (.055) (.07)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD...................... $10.85 $12.06 $9.21 $9.32 $8.47 $8.64
===== ===== ===== ===== ===== =====
TOTAL RETURN2...................... 1.38% 31.10% (1.17%) 10.30% (1.33%) 41.86%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets................. .99%3 .99% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets....... (.58%)3 (.23%) .11% .35% .32% .62%
Portfolio Turnover Rate............ 83% 147% 115% 87% 135% 182%
Average Commission
Paid per Share Traded............ $.0269 $.0370 -- 4 -- 4 -- 4 -- 4
Net Assets, End
of Period (in thousands).........$1,479,105 $1,461,124 $1,002,577 $755,689 $415,005 $255,592
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Computed using average shares outstanding for the period.
2 Total returns for periods less than one year are not annualized. Total return
assumes reinvestment of dividends and capital gains distributions, if any.
3 Annualized.
4 Not computed for period indicated.
See Notes to Financial Statements
14
This page left blank for your notes.
15
This page left blank for your notes.
16
TCI Growth TCI PORTFOLIOS, INC.
TCI Growth
Investment Manager Semiannual Report
INVESTORS RESEARCH CORPORATION June 30, 1996
Kansas City, Missouri
This report and the financial statements
contained herein are submitted for the
general information of our shareholders.
The report is not authorized for distribution
to prospective investors unless preceded or
accompanied by an effective prospectus.
[company logo]
==============================
- ------------------------------
TCI PORTFOLIOS, INC.
- ------------------------------
Part of the Twentieth Century
Family of Funds
- ------------------------------------------
P.O. Box 419385
Kansas City, Missouri
64141-6385
- ------------------------------------------
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
- ------------------------------------------
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
- ------------------------------------------
Fax: 816-340-4360
- ------------------------------------------
Internet: http://www.twentieth-century.com
- ------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-5399 [recycled logo]
9608 Recycled
<PAGE>
TCI PORTFOLIOS, INC.
TCI International
Semiannual Report
June 30,
1996
[company logo]
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Our Message to You ................................................. 1
Investment Review .................................................. 2
Schedule of Investments ............................................ 5
Statement of Assets and Liabilities ................................ 10
Statement of Operations ............................................ 11
Statements of Changes in Net Assets ................................ 12
Notes to Financial Statements ...................................... 13
Financial Highlights ............................................... 16
- --------------------------------------------------------------------------------
INDICES USED FOR PERFORMANCE COMPARISON
The indices listed below are used throughout this report to serve as a
comparison for the performance of the fund.
THE S&P 500 INDEX -- An index created by Standard & Poor's Corporation that is
considered to represent the performance of the stock market generally. It is not
an investment product available for purchase.
EAFE(R) INDEX -- The Morgan Stanley Europe, Australia, Far East Index is a
widely followed group of stocks from 20 different countries. It is not an
investment product available for purchase.
- --------------------------------------------------------------------------------
<PAGE>
June 30, 1996
- --------------------------------------------------------------------------------
OUR MESSAGE TO YOU
TCI International posted a 7.30% total return for the six months ended June
30, 1996, compared to 4.52% for the fund's benchmark index, EAFE.
The strong relative performance of TCI International versus the index was
due in part to the implementation of our stock selection discipline, emphasizing
accelerating earnings and revenue. As a result, the fund held a relatively
smaller percentage of Japanese securities (25.7% as of June 30), which lagged
during the period, than the EAFE Index (39.6%). Economic recovery in Japan
helped produce significant earnings growth in the fund's Japanese holdings.
However, a sell-off in June in the Japanese market dampened returns. In
addition, the dollar rallied against the yen, diminishing Japanese stock returns
in U.S. dollars.
[photo of James E. Stowers and James E. Stowers III on left side of page]
Much of the fund's gains came from earnings growth in European and emerging
markets holdings. During the six-month period the fund's management team added
investments in French and German stocks, which together made up 14.6% of the
fund's portfolio at June 30, 1996, compared to 7.8% at Dec. 31, 1995. Many
companies in France and Germany are undergoing restructuring and cost-cutting
that is similar to what we've seen in the United States since the late 1980s,
providing numerous opportunities for earnings growth.
During the period, our stock selection discipline led the management team
to select stocks in the food, beverage and consumer goods category, where 10% of
the fund was committed at June 30, up from 4% six months earlier. Retail stocks
in Europe appear strong as investors move to defensive positions.
TCI International celebrated its second birthday in May. Going forward, we
believe there are good prospects for continued strong performance as overseas
investing increases. In the first quarter of 1996, investors poured $11.8
billion into U.S.-based international mutual funds, compared to $322 million in
the first quarter of 1995. We believe that applying our long-held growth
investing philosophy to international equity markets carries significant
investment potential for investors.
Sincerely,
/s/James E. Stowers /s/James E. Stowers III
James E. Stowers James E. Stowers III
Chairman of the Board and Founder President
1
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (as of June 30, 1996)
TCI INTERNATIONAL EAFE Index+ S&P 500 Index
6 months* 7.30% 4.52% 10.07%
1 year 15.77% 13.28% 25.92%
Inception 6.43% 7.14% 23.19%
(5/1/94-6/30/96)
*Actual
- --------------------------------------------------------------------------------
$10,000 OVER LIFE OF FUND (as of June 30, 1996)
[mountain graph]
Value on 6/30/96: $11,439 TCI International
$15,678 S&P 500 Index
$11,611 EAFE Index+
$10,000 investment made 5/1/94 (Inception date)
[graph data]
TCI EAFE S&P
DATE INTERNATIONAL INDEX+ 500 INDEX
May 1, 94 $10,000 $10,000 $10,000
Jun 30, 94 9,780 10,083 9,882
Sep 30, 94 10,100 10,093 10,365
Dec 31, 94 9,500 9,990 10,363
Mar 31, 95 9,300 10,176 11,369
Jun 30, 95 9,880 10,250 12,451
Sep 30, 95 10,360 10,677 13,437
Dec 31, 95 10,660 11,110 14,246
3/31/96 10,920 11,431 15,008
6/30/96 11,439 11,611 15,678
Past performance is not predictive of future performance.
+ Source: Lipper Analytical Services, Inc. (Data date 4/30/94).
No expenses or fees are reflected in the S&P 500 or the EAFE Index.
All performance illustrations for TCI International are shown net of fees and
assume reinvestment of all distributions.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS (as of June 30, 1996) The composition of the portfolio may
change over time.
% of fund's
investments in
% of fund's these stocks
investments 6 months ago
Sandoz 3.70% 3.26%
Kaufhof Holding 3.67% --
Adia 2.28% --
Sankyo 2.19% --
Toyota Motor 2.08% --
Telebras ADR 2.08% --
Lagardere Groupe 2.02% --
Campagnie Financiere Richemont 1.97% --
NKK 1.75% --
Societe Suisse de Microelectronique 1.73% --
et d' Horlogerie
- --------------------------------------------------------------------------------
QUICK FUND FACTS
-------------
TCI INTERNATIONAL
-------------
STRATEGY:
Capital growth
through investments in
international stocks, emphasizing
companies in developed
markets.
INCEPTION DATE:
May 1, 1994
SIZE:
$79.4 million
(as of June 30, 1996)
INVESTMENT APPROACH:
Capital Growth
2
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENTS BY COUNTRY
[bar graph]
At June 30, 1996, and December 31, 1995, TCI International had investments in
the following countries.
Size of investments is indicated as a percentage of total fund investments.
[graph data] 6/30/96 12/31/95
Japan 26% 27%
Switzerland 10% 6%
Canada 9% 5%
Germany 7% 4%
France 7% 3%
United Kingdom 4% 7%
Italy 4% 4%
Netherlands 3% 6%
United States 2% 1%
Brazil 2% 1%
Israel 2% 2%
Australia 2% 0%
Singapore 2% 1%
Temporary Cash Investments 10% 8%
*Other 10% 8%
*Reflects countries with investments each less than 2% of total fund
investments.
3
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT REVIEW (continued)
- --------------------------------------------------------------------------------
INVESTMENTS BY INDUSTRY
[bar graph]
At June 30, 1996, and December 31, 1995, TCI International had investments in
these industry sectors.
Size of investments is indicated as a percentage of total fund investments.
[graph data] 6/30/96 12/31/96
Pharmaceuticals & Medical Equipment 11% 11%
Telecommunications 11% 9%
Food & Beverage/Consumer Goods 10% 4%
Aerospace & Technology 8% 11%
Manufacturing 7% 12%
Automotive/Engineering 5% 0%
Media & Publishing 5% 7%
Retail 5% 4%
Financial 4% 11%
Oil/Gas Exploration/Distribution/Services 4% 6%
Transporation 3% 2%
Metals and Mining/Aggregates 3% 0%
Construction & Property Development 2% 6%
Forest Products & Packaging 2% 0%
Utilities 1% 2%
Temporary Cash Investments 10% 8%
Other Industries 9% 7%
4
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
TCI INTERNATIONAL
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS & RIGHTS
Argentina -- 1.06%
38,000 YPF Sociedad Anonima ADR $855,000
(oil and gas) ----------
Australia -- 1.50%
25,000 News Corp. ADR 587,500
(international media)
248,000 Southcorp Holdings 614,453
(packaging, wines, and appliances) ----------
1,201,953
----------
Belgium -- 0.68%
11,000 Delhaize Le Lion 549,500
(retail supermarkets) ----------
Canada -- 8.73%
10,000 Alberta Energy 188,831
(oil and gas exploration)
36,000 CAE 299,637
(aerospace, electronics,
industrial technologies)
19,500 Canadian National Railway
(Installment Receipts) 358,313
(railroad)
34,000 Canadian Pacific 745,499
(diversified holding company)
26,000 Hollinger 203,058
(international newspaper)
14,000 Northern Telecom 761,250
(telecommunications equipment)
35,000 Poco Petroleums1 268,214
(oil and gas exploration)
62,000 QLT Phototherapeutics1 1,154,842
(pharmaceuticals and
photodynamic therapies)
40,000 Renaissance Energy1 1,055,989
(oil and gas exploration)
115,000 Rogers Communications B1 1,079,456
(communications and media)
67,000 Tellus 904,044
(telecommunications) ----------
7,019,133
----------
France -- 7.12%
5,700 BIS1 595,630
(temporary employment agency)
29,720 Cap Gemini Sogeti1 1,154,511
(computer consulting services)
16,000 Casino Guichard-Perrachon et Cie 660,386
(grocery chain)
16,000 Casino Guichard-Perrachon et Cie Rights 24,862
(grocery chain)
63,100 Lagardere Groupe 1,626,371
(high technologies, automobile
and communication)
11,400 Total 845,396
(oil and gas exploration,
rubber and chemicals)
15,300 Valeo 818,714
(auto parts) ----------
5,725,870
----------
Germany -- 5.57%
600 Altana 462,871
(pharmaceuticals, dietetics
and chemicals)
16,000 Deutsche Pfandbriefund Hypothekenbank 632,125
(mortgage banking)
7,800 Kaufhof Holding 2,947,491
(general retailers)
2,200 Schmalbach-Lubeca Aktiengesellschaft1 431,698
(packaging and container manufacturer) ----------
4,474,185
----------
Hong Kong -- 0.77%
7,000 Asia Satellite Telecommunications ADR1 208,250
(telecommunications)
216,000 CDL Hotels International 118,594
(hotels)
25,214 New World Development 116,938
(diversified property developments)
121,000 Peregrine Investments Holdings 174,293
(securities brokerage) ----------
618,075
----------
See Notes to Financial Statements
5
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
India -- 0.93%
6,600 Gujarat Ambuja Cements GDR $82,500
(cement manufacturer)
9,900 Indian Tobacco GDR1 103,950
(tobacco)
22,000 Larsen and Toubro GDR+ 412,500
(engineering equipment and construction)
11,000 Reliance Industries GDR1 145,750
(man-made textiles and petrochemicals) ----------
744,700
----------
Ireland -- 0.61%
106,722 Independent Newspapers 493,643
(newspaper publisher) ----------
Israel -- 1.97%
100 Africa Israel Investments1 94,674
(tourism, property development)
194,400 Bezek The Israeli Telecommunications 517,380
(telecommunications)
42,000 ECI Telecom ADR 973,875
(digital telecommunications equipment) ----------
1,585,929
----------
Italy -- 3.79%
69,600 Arnoldo Mondadori Editore 526,053
(publishing and printing)
980,000 Parmalat Finanziaria Spa 1,315,394
(dairy production)
540,000 Telecom Italia Mobile 1,205,082
(mobile telephone services) ----------
3,046,529
----------
Japan -- 25.69%
28,000 Bridgestone 533,942
(tire and rubber manufacturer)
27,000 Chiyoda Fire & Marine Insurance 158,896
(insurance)
42,000 Daifuku 643,796
(machine, equipment developer)
80,000 Dainippon Screen 712,409
(precision machinery)
24,000 Daiwa Securities 308,759
(securities broker)
102,000 Fuji Heavy Industries 519,307
(transportation equipment)
64,000 Hitachi Cable 536,058
(wire and cable manufacturer)
200 Hoya 6,460
(glass manufacturer,
electronic components)
54,000 Japan Synthetic Rubber 388,741
(synthetic rubber producer and chemicals)
18,000 JEOL1 138,777
(electron microscope manufacturer)
9,000 Keyence 1,223,540
(measure and control equipment)
48,000 Kokuyo 1,327,007
(paper products, office equipment
and furniture)
200 Kurita Water 4,872
(water treatment equipment)
60,000 Mitsubishi Estate 826,642
(property investment)
8,000 National House Industries 124,818
(housing materials)
15,000 Nichicon 217,609
(electrical machinery manufacturer)
4,000 Nichiei 266,423
(finance company)
14,300 Nintendo 1,064,672
(video games)
25,000 Nippon Express 244,069
(general transport)
75,000 Nippon Kayaku 550,182
(pharmaceuticals and
chemical products)
25,000 Nissan Fire & Marine Insurance 181,113
(insurance)
465,000 NKK1 1,408,577
(iron, steel producer and
heavy industrials)
58,000 Sanden 443,467
(automobile air-conditioners)
68,000 Sankyo 1,762,044
(pharmaceutical manufacturer)
12,000 Secom 792,701
(security service)
56,000 Sharp 981,022
(consumer electronics)
273,000 Sumitomo Metal Industries 836,934
(steel producer, engineering services)
See Notes to Financial Statements
6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
42,000 Terumo $532,664
(medical supplies manufacturer)
109,000 Tokyu 830,429
(railway and properties)
67,000 Toyota Motor 1,675,000
(auto manufacturer)
28,000 Uni-Charm 720,438
(household products)
53,000 Ushio 647,993
(optical equipment and specialty lamps)
2,000 Venture Link 35,219
(information service firm) ----------
20,644,580
----------
Malaysia -- 0.44%
210,000 Renong 352,613
(diversified holding company) ----------
Netherlands -- 3.39%
6,660 Hagemeyer 474,321
(trading)
43,250 ING 1,289,343
(financial services group)
5,500 Nutricia 581,440
(food processing)
24,400 Verenigd Bezit VNU 378,705
(publishing) ----------
2,723,809
----------
New Zealand -- 0.47%
90,000 Telecom Corporation of New Zealand 378,152
(telecommunications services) ----------
Norway -- 0.01%
200 Smedvig 4,628
(oil and gas services) ----------
Portugal -- 0.88%
27,000 Portugal Telecom ADR 708,750
(telecommunications services) ----------
Singapore -- 1.64%
320,000 Singapore Technologies Industrial 848,073
(diversified holding company)
140,000 Straits Steamship Land 468,254
(property investment) ----------
1,316,327
----------
South Africa -- 1.28%
150,000 Safmarine and Rennies Holdings $441,635
(shipping, tourism)
20,064 South African Breweries 588,414
(brewery) ----------
1,030,049
----------
South Korea -- 0.69%
23,000 Korea Electric Power ADR 557,750
(electric power supplier) ----------
Spain -- 0.79%
12,600 Tabacalera 634,055
(tobacco) ----------
Sweden -- 0.78%
23,100 Securitas B 483,478
(security and electronic
trading systems)
10,800 Sparbanken Sverige A 139,853
(financial services) ----------
623,331
----------
Switzerland -- 10.24%
7,300 Adia 1,830,100
(employment company)
1,000 Compagnie Financiere Richemont 1,580,838
(tobacco and luxury goods)
1,900 Edipresse 455,090
(publishing)
2,600 Sandoz 2,970,539
(pharmaceuticals)
2,000 Societe Suisse de Microelectronique
et d' Horlogerie (SMH)1 1,389,221
(watch manufacturer) ----------
8,225,788
----------
Thailand -- 0.60%
700 Bank of Ayudhya Rights 2,067
(bank)
22,500 Shinawatra Computer 483,795
(cellular telecommunications equipment) ----------
485,862
----------
See Notes to Financial Statements
7
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
United Kingdom -- 4.01%
385,000 Ladbroke Group $1,074,843
(hotels and gaming)
49,000 Misys 591,272
(computer software)
132,000 Orange1 461,671
(computer and ancillary systems)
130,500 Railtrack Group1 443,268
(rail network)
139,000 Rolls-Royce 482,919
(aerospace/defense manufacturer)
11,900 Siebe 168,696
(industrial and electronic equipment) ----------
3,222,669
----------
United States -- 2.50%
28,000 Pharmacia and Upjohn 1,242,500
(pharmaceuticals)
43,100 Tele-Communications International A1 762,331
(telecommunications and cable television)----------
2,004,831
----------
Total Common Stocks & Rights-- 86.14% 69,227,711
(Cost $64,428,057) ----------
PREFERRED STOCKS
Australia -- 0.23%
52,700 Village Roadshow 184,458
(motion picture producer) ----------
Brazil -- 2.14%
82,800 Companhia Cervejaria Brahma 49,062
(brewery)
24,000 Telebras ADR 1,671,000
(telecommunications) ----------
1,720,062
----------
Germany -- 1.92%
1,700 Henkel KGAA 732,994
(chemical products, household cleaners)
1,390 Wella 811,879
(body care products) ----------
1,544,873
----------
Total Preferred Stocks-- 4.29% $3,449,393
(Cost $2,789,127) ----------
TEMPORARY CASH INVESTMENTS
Repurchase Agreement
(Goldman Sachs & Co.),
5.35%, due 7-1-96; collateralized
by $1,470,000 par value
U.S. Treasury Bonds,
8.75%, due 11-15-08, and $175,000
par value U.S. Treasury Bonds,
8.75%, due 5-15-17
(Delivery value $1,800,803) 1,800,000
$2,900,000 par value FHLMC
Discount Note, 5.28%, 7-3-96 2,899,149
$3,000,000 par value FNMA
Discount Note, 5.20%, 7-18-96 2,992,633
----------
Total Temporary Cash Investments-- 9.57% 7,691,782
(Cost $7,672,371) ----------
Total Investment Securities-- 100.00% $80,368,886
(Cost $74,889,555) ==========
FORWARD FOREIGN CURRENCY CONTRACTS
Unrealized
Contracts Settlement Current Gain
to Sell Dates Value (Loss)
- --------------------------------------------------------------------------------
3,604,720 CHF 7/31/96 $2,885,161 $(16,075)
3,209,113 DEM 7/31/96 2,109,787 (6,099)
8,932,081 FRF 7/31/96 1,737,306 (7,272)
201,575 GBP 7/31/96 312,554 (2,014)
641,263,927 JPY 7/31/96 5,876,336 3,853
2,057,169 NLG 7/31/96 1,207,457 (4,414)
921,690 SEK 7/31/96 138,727 646
---------- -------
$14,267,328 $(31,375)
========== =======
(Value on Settlement Date $14,235,953)
See Notes to Financial Statements
8
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
CHF = Swiss Franc
DEM = German Mark
FRF = French Franc
GBP = British Pound
JPY = Japanese Yen
NLG = Netherlands Guilder
SEK = Swedish Krona
ADR = American Depositary Receipts
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GDR = Global Depositary Receipts
1 Non-income producing.
+ Security purchased under Rule 144A of the Securities Act of 1933 and, unless
registered under the Act or exempted from registration, may only be sold to
qualified institutional investors. (Acquired 3/13/96 through 6/14/96 at an
average cost per share of $18.03, and represents 0.52% of Net Assets.)
See Notes to Financial Statements
9
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment securities, at value
(identified cost of $74,889,555) (Note 3)....................... $80,368,886
Foreign currency holdings, at value
(identified cost of $25,532).................................... 25,538
Cash.............................................................. 466,933
Receivable for capital shares sold................................ 1,077,396
Receivable for investments sold................................... 952,703
Receivable for forward foreign currency
exchange contracts held......................................... 4,499
Dividends and interest receivable................................. 225,541
----------
83,121,496
----------
LIABILITIES
Payable for shares redeemed....................................... 1,264,384
Payable for investments purchased................................. 2,314,274
Payable for forward foreign currency exchange contracts held...... 35,874
Accrued management fees (Note 2).................................. 93,169
----------
3,707,701
----------
NET ASSETS APPLICABLE
TO OUTSTANDING SHARES............................................. $79,413,795
==========
CAPITAL SHARES, $0.01 PAR VALUE
Authorized........................................................ 200,000,000
==========
Outstanding....................................................... 14,195,394
==========
NET ASSET VALUE PER SHARE......................................... $5.59
==========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)........................... $71,352,309
Undistributed net investment income............................... 141,507
Accumulated undistributed net realized gain on
investments and foreign currency transactions................... 2,477,736
Net unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies (Note 3)............................................. 5,442,243
----------
$79,413,795
==========
See Notes to Financial Statements
10
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $69,724)............ $512,918
Interest........................................................ 204,394
----------
717,312
----------
Expenses:
Management fees (Note 2)........................................ 509,673
Directors' fees and expenses.................................... 642
----------
510,315
----------
NET INVESTMENT INCOME................................................ 206,997
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY (Note 3)
Net realized gain (loss) during the period on:
Investments..................................................... 3,008,301
Foreign currency transactions................................... (408,687)
----------
2,599,614
----------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments..................................................... 2,783,218
Translation of assets and liabilities in foreign currencies..... (698,121)
----------
2,085,097
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY..................................... 4,684,711
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................................ $4,891,708
==========
See Notes to Financial Statements
11
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended June 30, 1996 (Unaudited) and
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
OPERATIONS
Net investment income.......................... $206,997 $279,252
Net realized gain on investments
and foreign currency transactions............ 2,599,614 1,951,797
Change in net unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies........ 2,085,097 3,873,069
---------- ----------
Net increase in net assets
resulting from operations.................... 4,891,708 6,104,118
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income..................... (279,252) --
In excess of net investment income............. (928,713) --
From net realized gains on investment
transactions................................. (402,656) --
---------- ----------
Net decrease in net assets
from distributions to shareholders........... (1,610,621) --
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold...................... 40,536,370 67,407,052
Proceeds from reinvested distributions......... 1,610,621 --
Payments for shares redeemed................... (17,623,220) (39,895,430)
---------- ----------
Net increase in net assets
from capital share transactions.............. 24,523,771 27,511,622
---------- ----------
NET INCREASE IN NET ASSETS....................... 27,804,858 33,615,740
---------- ----------
NET ASSETS
Beginning of period............................ 51,608,937 17,993,197
---------- ----------
End of period.................................. $79,413,795 $51,608,937
========== ==========
Undistributed net investment income............ $141,507 $1,142,475
========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold........................................... 7,420,189 13,758,884
Issued in reinvested distributions............. 292,840 --
Redeemed....................................... (3,194,056) (7,872,880)
---------- ----------
Net increase................................... 4,518,973 5,886,004
========== ==========
See Notes to Financial Statements
12
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization --
TCI Portfolios, Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Five series of shares are currently issued as TCI Growth, TCI Balanced, TCI
Advantage, TCI International and TCI Value. With the exception of shares issued
for the initial capitalization of a series of the Corporation, shares may be
purchased only by insurance companies to fund the benefits of variable annuity
or variable life insurance policies. The investment objective of TCI
International (the Fund) is to seek capital growth by investing primarily in
equity securities. The following significant accounting policies related to the
Fund are in accordance with accounting policies generally accepted in the
investment company industry.
Security Valuations --
Portfolio securities traded primarily on a principal securities exchange
(domestic or foreign) are valued at the last reported sales price on that
exchange or the mean between the latest bid and asked prices where no last sales
price is available. Securities traded over-the-counter are valued at either the
mean of the latest bid and asked prices or at the last reported sales price,
depending on local convention or regulation. Short-term securities are valued at
amortized cost, which approximates value. When valuations are not readily
available, securities are valued at fair value as determined in good faith by
the board of directors.
Security Transactions --
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which
also is used for federal income tax purposes.
Foreign Currency Transactions --
The accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Fund isolates that portion of the results of operations resulting from
changes in the foreign exchange rates on investments from the fluctuations
arising from changes in the market prices of securities held.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains and losses arise from changes in the value of portfolio
securities and other assets and liabilities at the end of the reporting period,
resulting from changes in the exchange rates.
13
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 1996 (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Forward Foreign Currency Exchange Contracts --
The Fund may enter into forward foreign currency exchange contracts for the
purpose of settling specific purchases or sales of securities denominated in a
foreign currency or to hedge the Fund's exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Investment Income --
Dividend income less foreign taxes withheld is recorded on the ex-dividend
date or upon receipt of ex-dividend notification in the case of certain foreign
securities. Interest income is recognized on the accrual basis.
Repurchase Agreements --
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Fund monitors the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status --
It is the policy of the Fund to distribute all taxable income and capital
gains to shareholders and to otherwise qualify as a regulated investment company
under provisions of the Internal Revenue Code. Accordingly, no provision has
been made for federal or state taxes.
Distributions to Shareholders --
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net investment income and net realized gains in excess of
capital loss carryovers are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differing
treatments for foreign currency transactions and wash sales.
Supplementary Information --
Certain officers and directors of the Corporation are also officers and/or
directors and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of the Corporation's investment manager, Investors
Research Corporation (IRC).
14
- --------------------------------------------------------------------------------
2. MANAGEMENT AGREEMENT
The Management Agreement with IRC provides for a monthly management fee
computed by multiplying the applicable fee for the Fund by the average daily
closing value of the Fund's net assets during the previous month. The Agreement
further provides that all expenses of the Fund, except brokerage commissions,
taxes, interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The agreement may be
terminated by either party upon 60 days' written notice.
The current annual management fee for the Fund is 1.50%.
3. INVESTMENT TRANSACTIONS
The aggregate cost of securities purchased (excluding short-term
investments) for the period ended June 30, 1996, totaled $66,900,442 for common
stocks and, $2,666,170 for preferred stocks. Proceeds from investment securities
sold (excluding short-term investments) totaled $47,455,815 for common stocks
and $146,652 for preferred stocks.
On June 30, 1996, accumulated net unrealized appreciation on investments,
based on the aggregate cost of investments of $74,972,509 for federal income tax
purposes, was $5,396,377, consisting of unrealized appreciation of $6,570,851
and unrealized depreciation of $1,174,474.
15
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
Six Months Ended Year Ended May 1, 1994
June 30, 1996 December 31, (inception) through
(Unaudited) 1995 December 31, 1994
- --------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD............... $5.33 $4.75 $5.00
----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment
Income (Loss)................ 0.01 0.03 (0.003)
Net Realized
and Unrealized
Gain (Loss).................. 0.38 0.55 (0.25)
----- ----- -----
Total from
Investment Operations........ 0.39 0.58 (0.25)
----- ----- -----
DISTRIBUTIONS
From Net
Investment Income............ (0.02) -- --
In Excess of
Net Investment
Income....................... (0.08) -- --
From Net Realized
Gains on
Investment Transactions...... (0.03) -- --
----- ----- -----
Total Distributions.......... (0.13) -- --
----- ----- -----
NET ASSET VALUE,
END OF PERIOD..................... $5.59 $5.33 $4.75
===== ===== =====
TOTAL RETURN1................ 7.30% 12.21% (5.00%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets........... 1.50%2 1.50% 1.50%2
Ratio of Net Investment
Income (Loss) to
Average Net Assets........... 0.61%2 0.70% (0.11%)2
Portfolio
Turnover Rate................ 76% 214% 157%
Average Commission Paid
per Share Traded............$0.0206 $0.0020 --3
Net Assets, End
of Period (in thousands)....$79,414 $51,609 $17,993
- --------------------------------------------------------------------------------
1 Total returns for periods less than one year are not annualized. Total return
assumes reinvestment of dividends and capital gains distributions, if any.
2 Annualized.
3 Not computed for period indicated.
See Notes to Financial Statements
16
TCI International TCI PORTFOLIOS, INC.
TCI International
Investment Manager Semiannual Report
INVESTORS RESEARCH CORPORATION June 30, 1996
Kansas City, Missouri
This report and the financial statements
contained herein are submitted for the
general information of the shareholders
of the corporation. The report is not
authorized for distribution to prospective
investors in the corporation unless preceded
or accompanied by an effective prospectus.
[company logo]
==============================
- ------------------------------
TCI PORTFOLIOS, INC.
- ------------------------------
Part of the Twentieth Century
Family of Funds
- --------------------------------------------
P.O. Box 419385
Kansas City, Missouri
64141-6385
- --------------------------------------------
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
- --------------------------------------------
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
- --------------------------------------------
Fax: 816-340-4360
- --------------------------------------------
Internet: http://www.twentieth-century.com
- --------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-5397 [recycled logo]
9608 Recycled
<PAGE>
TCI PORTFOLIOS, INC.
TCI Value
Semiannual Report
JUNE 30,
1996
[company logo]
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Our Message to You .................................................. 1
Investment Review ................................................... 2
Schedule of Investments ............................................. 4
Statement of Assets and Liabilities ................................. 7
Statement of Operations ............................................. 8
Statement of Changes in Net Assets .................................. 9
Notes to Financial Statements ....................................... 10
Financial Highlights ................................................ 13
- --------------------------------------------------------------------------------
INDICES USED FOR PERFORMANCE COMPARISON
The indices listed below are used throughout this report to serve as a
comparison for the performance of the fund.
THE S&P 500 INDEX -- An index created by Standard & Poor's Corporation that is
considered to represent the performance of the stock market generally. It is not
an investment product available for purchase.
THE S&P/BARRA VALUE INDEX is a capitalization-weighted index consisting of S&P
500 stocks that have lower price-to-book ratios and in general share other
characteristics associated with "value" stocks.
- --------------------------------------------------------------------------------
<PAGE>
June 30, 1996
- --------------------------------------------------------------------------------
OUR MESSAGE TO YOU
TCI Value, which commenced operations on May 1, 1996, seeks to offer the
opportunity for long-term capital appreciation, but with the potential for less
risk and price fluctuation than is usually associated with stock funds pursuing
a more aggressive "growth-oriented" approach. The fund's "value-oriented"
approach leads its management team to invest in stocks that it believes are
temporarily undervalued. The team seeks to choose well-established companies for
whom temporary problems (resulting from market trends or other external factors)
have caused their stock prices to lag behind the market. This fundamental
"bottom up" approach relies more on analyzing the health and business prospects
of individual companies than it does on analyzing and assigning weightings to
entire industry sectors.
[photo of James E. Stowers and James E. Stowers III on left side of page]
The management team has selected two performance benchmarks for the fund
- --the S&P/BARRA Value Index (a market index representing value stocks) and the
S&P 500 Index (a market index representing the U.S. stock market). The fund's
total return for the two months from inception through June 30, 1996, was 2.75%,
outperforming the 1.02% total return of the S&P/BARRA Value Index, over the same
period, but underperforming the 3.02% total return of the S&P 500. The fund
outperformed S&P/BARRA for two main reasons. First, the fund held fewer cyclical
stocks, which underperformed the market during the period, than the index.
Second, the management team selected stocks that significantly boosted the
fund's performance, but not the index's. For example, Giant Food Inc., a retail
stock not included in the S&P/BARRA index, was the fund's largest holding and
one of its best performers. (The fund does not have to own S&P/BARRA index
stocks. The index doesn't include smaller cap value stocks such as Giant Food.)
Both the fund and S&P/BARRA underperformed the S&P 500 as larger cap growth
stocks generally outperformed value stocks during the period.
The management team continues to pursue well-established companies whose
stocks it believes are temporarily undervalued, seeking to buy those stocks and
then sell them when prices reach a fair market value range. Since June 30, the
team has started to see value in cyclical stocks and has gradually increased the
fund's cyclical stock holdings. The team remains confident that the fund has the
potential to provide investors with a long-term rate of return that could
comfortably outpace the rate of inflation.
Sincerely,
/s/James E. Stowers /s/James E. Stowers III
James E. Stowers James E. Stowers III
Chairman of the Board and Founder President
1
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS (as of June 30, 1996)
S&P/BARRA S&P 500
TCI VALUE Value Index* Index
----------------- ------------------ ---------------
Inception 2.75% 1.02% 3.02%
5/1/96-6/30/96
- --------------------------------------------------------------------------------
$10,000 OVER LIFE OF FUND (as of June 30, 1996)
[mountain graph]
Value on 6/30/96: $10,275 TCI VALUE
$10,302 S&P 500 Index
$10,102 S&P BARRA Value Index*
[graph data] S&P/BARRA S&P 500
TCI VALUE Value Index* Index
5/1/96 $10,000 $10,000 $10,000
5/31/96 10,120 10,151 10,222
6/30/96 10,255 10,102 10,302
Past performance is not predictive of future performance.
*Source: Lipper Analytical Services, Inc. (Data date 4/30/96).
- --------------------------------------------------------------------------------
QUICK FUND FACTS
---------------
TCI VALUE
---------------
STRATEGY:
Long-term capital growth with
income as a secondary objective
through investing in equity
securities that management
believes are undervalued
at the time of purchase.
INCEPTION DATE:
May 1, 1996
SIZE:
$4.2 million
(as of June 30, 1996)
INVESTMENT APPROACH:
Capital Growth and Current Income
No expenses or fees are reflected in the S&P 500 or the S&P/BARRA Value Index.
All performance illustrations for TCI Value are shown net of fees and assume
reinvestment of all distributions.
2
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS* (as of June 30, 1996)
% of fund's
investments
Giant Food Inc. 4.4%
Browning-Ferris Industries, Inc. 2.8%
MAPCO Inc. 2.5%
Universal Foods Corp. 2.4%
Mercantile Bancorporation Inc. 2.2%
Unilever PLC ORD 2.2%
American Greetings Corp. CI. A 2.1%
Air Products & Chemicals, Inc. 2.1%
Ball Corporation 2.1%
Banta Corp. 2.1%
TOP FIVE INDUSTRIES* (as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments
Energy (Production & Marketing) 14.2%
Utilities 12.7%
Chemicals & Resins 8.4%
Food & Beverage 7.4%
Publishing 7.2%
INVESTMENTS BY COUNTRY* (as of June 30, 1996)
- --------------------------------------------------------------------------------
% of fund's
investments
France 2.5%
United Kingdom 1.6%
United States 95.9%
-----
100.0%
=====
*The composition of the portfolio may change over time.
[company logo]
3
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
TCI VALUE
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS
Automobiles & Auto Parts -- 0.8%
1,400 Superior Industries International, Inc. $ 37,100
----------
Banking -- 3.9%
900 First Bell Bancorp, Inc. 12,375
1,600 First Virginia Banks, Inc. 64,000
2,200 Mercantile Bancorporation Inc. 97,900
----------
174,275
----------
Building & Home
Improvements -- 1.4%
700 Juno Lighting, Inc. 11,856
1,600 Masco Corp. 48,400
----------
60,256
----------
Chemicals & Resins -- 8.4%
1,600 Air Products & Chemicals, Inc. 92,400
300 Dow Chemical Co. 22,800
4,100 Ethyl Corp. 39,463
3,000 Lubrizol Corp. 91,124
1,400 Nalco Chemical Co. 44,100
1,800 Petrolite Corporation 57,150
400 Rohm & Haas Co. 25,100
----------
372,137
----------
Consumer Products -- 2.8%
700 Tambrands, Inc. 28,612
4,900 Unilever PLC ORD 97,279
----------
125,891
----------
Diversified Companies -- 0.6%
400 Minnesota Mining & Manufacturing Co. 27,600
----------
Energy (Production & Marketing) -- 14.2%
1,100 Amoco Corp. 79,613
2,300 Apache Corp. 75,612
500 Atlantic Richfield Co. 59,250
1,000 Burlington Resources Inc. 43,000
200 Exxon Corp. 17,375
2,000 MAPCO Inc. 112,750
1,900 Murphy Oil Corp. 86,212
1,900 Societe Nationale Elf Aquitaine ADR 69,825
2,500 Unocal Corp. 84,375
----------
628,012
----------
Environmental Services -- 2.8%
4,200 Browning-Ferris Industries, Inc. 121,800
----------
Food & Beverage -- 7.4%
1,100 Archer-Daniels-Midland Co. 21,037
2,900 Dean Foods Co. 71,775
3,700 Hudson Foods, Inc. 51,800
2,900 Ralcorp Holdings, Inc. 1 59,812
1,100 Savannah Foods & Industries, Inc. 14,162
2,900 Universal Foods Corp. 106,938
----------
325,524
----------
Healthcare -- 2.3%
1,500 Mallinckrodt Group Inc. 58,313
1,200 Seafield Capital Corp. 45,150
----------
103,463
----------
Industrial Equipment & Machinery -- 3.4%
1,400 Cooper Industries, Inc. 58,100
2,100 Gerber Scientific, Inc. 33,863
3,200 Watts Industries, Inc. 59,600
----------
151,563
----------
Insurance -- 5.4%
1,800 Argonaut Group, Inc. 55,575
600 CNA Financial Corp. 1 61,800
1,400 Home Beneficial Corp. 36,050
2,600 NAC Re Corp. 87,100
----------
240,525
----------
Metals & Mining -- 1.0%
1,700 Ashland Coal, Inc. 44,200
----------
Packaging & Containers -- 2.1%
3,200 Ball Corporation 92,000
----------
See Notes to Financial Statements
4
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Paper & Forest Products -- 3.7%
3,200 Chesapeake Corp. $ 84,000
400 Rayonier Inc. 15,200
500 Union Camp Corp. 24,375
1,300 Westvaco Corp. 38,838
----------
162,413
----------
Publishing -- 7.2%
3,400 American Greetings Corp. Cl. A 92,863
3,600 Banta Corp. 91,125
1,400 Central Newspapers, Inc. 52,500
3,000 McClatchy Newspapers, Inc. 82,875
----------
319,363
----------
Restaurants -- 0.7%
1,900 Bob Evans Farms, Inc. 32,181
----------
Retail (Food & Drug) -- 4.4%
5,400 Giant Food Inc. 193,725
----------
Retail (General Merchandise) -- 0.8%
400 Dillard Department Stores, Inc. 14,600
500 May Department Stores Co. (The) 21,875
----------
36,475
----------
Tobacco Products -- 0.7%
600 Dimon, Inc. 11,100
700 Schweitzer Mauduit International 19,688
----------
30,788
----------
Transportation -- 1.9%
4,000 Rollins Truck Leasing Corp. 41,500
1,000 XTRA Corp. 44,250
----------
85,750
----------
Utilities -- 12.7%
2,100 BellSouth Corp. 88,987
1,900 Florida Progress Corp. 66,025
2,400 Kansas City Power & Light Co. 66,000
1,800 Northern States Power Co. (Minn.) 88,875
3,400 Potomac Electric Power 90,100
1,600 SBC Communications Inc. 78,800
1,500 Sierra Pacific Resources 38,063
1,200 Union Electric Co. 48,300
----------
565,150
----------
Total Common Stocks-- 88.6% 3,930,191
(Cost $3,872,579) ----------
CONVERTIBLE BONDS
Communications Equipment -- 1.8%
$100,000 Motorola Inc., 1.41%*, 9-27-13 78,500
----------
Food & Beverage -- 0.3%
(pound)10,000 Allied Domecq plc, 6.75%, 7-7-08 14,987
----------
Retail (General Merchandise) -- 0.3%
15,000 Jacobson's, 6.75%, 12-15-11 11,559
----------
Total Convertible Bonds-- 2.4% 105,046
(Cost $106,105) ----------
TEMPORARY CASH INVESTMENTS
100,000 par value FHLB Discount Note,
5.52%, 7-1-96 100,000
100,000 par value FHLMC Discount Note,
5.20%, 7-18-96 99,838
100,000 par value FNMA Discount Note,
5.30%, 7-12-96 99,754
Repurchase Agreement (Goldman Sachs
& Co., Inc.), 5.35%, due 7-1-96;
collateralized by $95,000 par value
U.S. Treasury Bonds, 9.25%, 8-15-98
(Delivery value $100,045) 100,000
----------
Total Temporary Cash Investments-- 9.0% 399,592
(Cost $399,592) ----------
Total Investment Securities-- 100.0% $ 4,434,829
(Cost $4,378,276) ==========
See Notes to Financial Statements
5
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued) June 30, 1996 (Unaudited)
FORWARD FOREIGN CURRENCY CONTRACTS
Contracts Settlement Unrealized
to Sell Dates Value (Loss)
- --------------------------------------------------------------------------------
15,726 GBP 7/31/96 $24,385 $(187)
300,264 FRF 7/31/96 58,402 (244)
------ -----
$82,787 $(431)
======= =====
(Value on Settlement Date $82,356)
NOTES TO SCHEDULE OF INVESTMENTS
ADR = American Depositary Receipt
FHLB = Federal Home Loan Banks
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
FRF = French Franc
GBP = British Pounds Sterling
ORD = Foreign Ordinary Shares
1 Non-income producing.
* Rate disclosed for this security represents effective yield to maturity as of
June 30, 1996.
See Notes to Financial Statements
6
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investment securities, at value
(identified cost of $4,378,276) (Note 3)..................... $ 4,434,829
Cash............................................................ 33,860
Receivable for investments sold................................. 47,120
Receivable for capital shares sold.............................. 74,048
Dividends and interest receivable............................... 6,437
----------
4,596,294
----------
LIABILITIES
Payable for forward foreign currency exchange contracts......... 431
Payable for investments purchased............................... 375,958
Accrued management fees (Note 2)................................ 3,848
Other liabilities............................................... 4
----------
380,241
----------
NET ASSETS APPLICABLE
TO OUTSTANDING SHARES........................................... $ 4,216,053
==========
CAPITAL SHARES, $.01 PAR VALUE
Authorized...................................................... 200,000,000
==========
Outstanding..................................................... 825,055
==========
NET ASSET VALUE PER SHARE....................................... $ 5.11
==========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)......................... $ 4,157,968
Distributions in excess of net investment income................ (3,677)
Accumulated undistributed net realized gain
from investments and foreign currency transactions........... 5,665
Net unrealized appreciation on investments and
translation of assets and liabilities in foreign
currencies (Note 3).......................................... 56,097
----------
$ 4,216,053
==========
See Notes to Financial Statements
7
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
May 1, 1996 (Inception) through June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $290).................. $11,619
Interest........................................................... 2,854
-------
14,473
-------
Expenses:
Management fees (Note 2)........................................... 3,848
Directors' fees and expenses....................................... 4
-------
3,852
-------
NET INVESTMENT INCOME................................................. 10,621
-------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY (Note 3)
Net realized gain (loss) during the period on:
Investments........................................................ 6,624
Foreign currency transactions...................................... (959)
-------
5,665
-------
Change in net unrealized appreciation (depreciation)
during the period on:
Investments........................................................ 56,553
Translation of assets and liabilities in foreign currencies........ (456)
-------
56,097
-------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY...................................... 61,762
-------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................................. $72,383
=======
See Notes to Financial Statements
8
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
May 1, 1996 (Inception) through
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS 1996
OPERATIONS
Net investment income........................................ $ 10,621
Net realized gain on investments
and foreign currency transactions.......................... 5,665
Change in net unrealized appreciation on
investments and translation of assets
and liabilities in foreign currencies...................... 56,097
----------
Net increase in net assets resulting from operations......... 72,383
----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................................... (14,298)
----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.................................... 4,143,670
Proceeds from reinvestment of distributions.................. 14,298
----------
Payments for shares redeemed................................. --
Net increase in net assets from capital share transactions... 4,157,968
----------
NET INCREASE IN NET ASSETS...................................... 4,216,053
NET ASSETS
Beginning of period.......................................... --
----------
End of period................................................ $ 4,216,053
==========
Distributions in excess of net investment income............. $ (3,677)
==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold......................................................... 822,263
Issued in reinvestment of distributions...................... 2,792
Redeemed..................................................... --
----------
Net increase................................................. 825,055
==========
See Notes to Financial Statements
9
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization --
TCI Portfolios, Inc. (the Corporation) is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Five series of shares are currently issued as TCI Growth, TCI Balanced, TCI
Advantage, TCI International and TCI Value. With the exception of shares issued
for the initial capitalization of a series of the Corporation, shares may be
purchased only by insurance companies to fund the benefits of variable annuity
or variable life insurance policies. The investment objective of TCI Value (the
Fund) is long-term capital growth. Income is a secondary objective. The
following significant accounting policies related to the Fund are in accordance
with accounting policies generally accepted in the investment company industry.
Security Valuations --
Portfolio securities traded primarily on a principal securities exchange
are valued at the last reported sales price, or the mean between the latest bid
and asked prices where no last sales price is available. Securities traded
over-the-counter are valued at the mean of the latest bid and asked prices or,
in the case of certain foreign securities, at the last reported sales price.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the mean of the most
recent bid and asked prices. Short-term securities are valued at amortized cost,
which approximates value. When valuations are not readily available, securities
are valued at fair value as determined in good faith by the board of directors.
Security Transactions --
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income --
Dividend income less foreign taxes withheld (if any) is recorded as of the
ex-dividend date or upon receipt of ex-dividend notification in the case of
certain foreign securities. Interest income is recognized on the accrual basis
and includes amortization of discounts and premiums.
Foreign Currency Transactions --
The accounting records of the Fund are maintained in U.S. dollars. All
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of
investment securities, dividend and interest income, and certain expenses are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign currency exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
currency exchange gains or losses arise from changes in the value of assets and
liabilities other than portfolio securities at the end of the reporting period,
resulting from changes in the exchange rates.
10
- --------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies (Continued)
Forward Foreign Currency Exchange Contracts --
The Fund may enter into forward foreign currency exchange contracts for the
purpose of settling specific purchases or sales of securities denominated in a
foreign currency or to hedge the Fund's exposure to foreign currency exchange
rate fluctuations. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined daily using prevailing exchange
rates. Forward contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign currency exchange rate underlying the
forward contract. Additionally, losses may arise if the counterparties do not
perform under the contract terms.
Repurchase Agreements --
Securities pledged as collateral for repurchase agreements are held by the
Federal Reserve Bank and are designated as being held on the Fund's behalf by
its custodian under a book-entry system. The Fund monitors the adequacy of the
collateral daily and can require the seller to provide additional collateral in
the event the market value of the securities pledged falls below the carrying
value of the repurchase agreement.
Income Tax Status --
It is the policy of the Fund to distribute all taxable income and capital
gains to shareholders and to otherwise qualify as a regulated investment company
under provisions of the Internal Revenue Code. Accordingly, no provision has
been made for federal or state taxes.
Distributions to Shareholders --
Distributions to shareholders are recorded on the ex-dividend date.
Distributions from net invest-ment income are declared and paid quarterly.
Distributions from net realized gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differences
in the recognition of income and expense items for financial statement and tax
purposes.
Supplementary Information --
Certain officers and directors of the Corporation are also officers and/or
directors, and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of the Corporation's investment manager, Investors
Research Corporation (IRC).
11
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 1996 (Unaudited)
2. Management Agreement
The Management Agreement with IRC provides for a monthly management fee
computed by multiplying the applicable fee for the Fund by the average daily
closing value of the Fund's net assets during the previous month. The Agreement
further provides that all expenses of the Fund, except brokerage commissions,
taxes, interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The agreement may be
terminated by either party upon 60 days' written notice.
The current annual management fee for the Fund is 1%.
3. Investment Transactions
The aggregate cost of investment securities purchased (excluding short-term
investments) for the six months ended June 30, 1995, totaled $3,668,836 for
common stocks and $5,088,703 for U.S. Treasury and Agency obligations.
Investment Securities sold totaled $4,527,905 for common stocks and $5,379,833
for U.S. Treasury and Agency obligations. At June 30, 1995, accumulated net
unrealized appreciation on investments, based on the aggregate cost of
investments of $20,826,179 for federal income tax purposes, was $1,948,766,
consisting of $2,020,669 unrealized appreciation and $71,903 unrealized
depreciation.
12
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
May 1, 1996
(Inception) through
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.................... $5.00
-----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income 1................ .02
Net Realized and
Unrealized Gains....................... .11
-----
Total from
Investment Operations.................. .13
-----
DISTRIBUTIONS
From Net
Investment Income...................... (.02)
-----
NET ASSET VALUE,
END OF PERIOD.......................... $5.11
=====
TOTAL RETURN 2......................... 2.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets..................... 1.00%3
Ratio of Net Investment Income
(Loss) to Average Net Assets........... 2.74%3
Portfolio Turnover Rate................ 4%
Average Commission
Paid per Share Traded ............... $.0221
Net Assets, End
of Period (in thousands)............... $4,216
- --------------------------------------------------------------------------------
1 Computed using average shares outstanding for the period.
2 Total returns for periods less than one year are not annualized. Total return
assumes reinvestment of dividends and capital gains distributions, if any.
3 Annualized.
See Notes to Financial Statements
13
TCI Value TCI PORTFOLIOS, INC.
TCI Value
Investment Manager Semiannual Report
INVESTORS RESEARCH CORPORATION June 30, 1996
Kansas City, Missouri
This report and the financial statements
contained herein are submitted for the
general information of our shareholders.
The report is not authorized for distribution
to prospective investors unless preceded or
accompanied by an effective prospectus.
[company logo]
==============================
- ------------------------------
TCI PORTFOLIOS, INC.
- ------------------------------
Part of the Twentieth Century
Family of Funds
- ---------------------------------------------------
P.O. Box 419385
Kansas City, Missouri
64141-6385
- ---------------------------------------------------
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
- ---------------------------------------------------
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
- ---------------------------------------------------
Fax: 816-340-4360
- ---------------------------------------------------
Internet: http://www.twentieth-century.com
- ---------------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
SH-BKT-5402 [recycled logo]
9608 Recycled
