BLANCHARD
PRECIOUS METALS
FUND, INC.
Portfolio Adviser
Cavelti Capital
Management, Ltd.
The Blanchard Group of Funds are available through Signet/R/ Financial
Services, Inc., member NASD, and are advised by an affiliate, Virtus
Captial Management, Inc., which is compensated for this service.
Investment products are not deposits, obligations of, or guaranteed by
any bank. They are not insured by the FDIC. They involve risk,
including the possible loss of principal invested.
Federated Securities Corp. is the distributor of the Fund.
S E M I - A N N U A L
BLANCHARD
PRECIOUS
METALS
FUND, INC.
SEMI-ANNUAL
REPORT
March 31, 1997
Available through
Signet Financial
Services, Inc.
Managed by Virtus Capital
Management, Inc.
(2351)
CUSIP 093254100
G01485-10 (5/97)
PRESIDENT'S MESSAGE
May 15, 1997
Dear Shareholder:
I am pleased to present your Semi-Annual Report for the Blanchard
Precious Metals Fund, Inc. covering the six-month period from October
1, 1996 through March 31, 1997. The report includes a complete listing
of the Fund's holdings and financial activity.
On your behalf, the Fund pursues a high level of growth through a
professionally managed portfolio of precious metals investments and
securities of mining companies involved in precious metals.* During
the six-month reporting period, the Fund paid $0.31 per share in
income and $2.26 per share in capital gains. However, due to price
declines in the market, the Fund experienced a 35% decline in net
asset value, resulting in a total return of (4.35%) for the period.**
Assets in the Fund stood at $78.1 million at the end of the period.
Thank you for selecting the Blanchard Precious Metals Fund to pursue
your long-term financial goals. If you have comments or questions,
please call Investors' Services at 1-800-829-3863.
Sincerely,
/s/ Edward C. Gonzales
Edward C. Gonzales
President
*The precious metals sector is subject to many political, social and
economic influences, often resulting in high volatility.
**Performance quoted reflects past performance. Investment return and
principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
BLANCHARD PRECIOUS METALS FUND, INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
--------- -------------------------------- -----------
<C> <S> <C>
EQUITIES--81.3%
------------------------------------------
METALS & MINING--81.3%
------------------------------------------
AUSTRALIA--1.9%
--------------------------------
600,000 Croesus Mining NL $ 305,739
--------------------------------
1,000,000 (a)Laverton Gold NL 235,184
--------------------------------
1,258,000 (a)(b)Lone Star Exploration NL 436,143
--------------------------------
1,300,000 (a)Lone Star Exploration NL 474,810
-------------------------------- -----------
Total 1,451,876
-------------------------------- -----------
CANADA--52.7%
--------------------------------
1,640,000 (a)Ariel Resources, Ltd. 805,489
--------------------------------
50,000 (a)Bre-X Minerals Ltd. 72,228
--------------------------------
421,000 Cambior, Inc. 5,701,517
--------------------------------
125,000 Echo Bay Mines Ltd. 828,125
--------------------------------
1,205,200 (a)(b)Eldorado Gold Corp., Ltd. 7,138,057
--------------------------------
25,000 Euro-Nevada Mining Corp. 722,283
--------------------------------
175,000 (a)First Silver Reserve, Inc. 130,191
--------------------------------
62,100 Franco-Nevada Mining Corp., Ltd. 2,870,639
--------------------------------
300,000 (b)Geomaque Explorations Ltd. 693,391
--------------------------------
676,800 (a)Geomaque Explorations Ltd. 1,564,290
--------------------------------
236,000 (a)Greenstone Resources Ltd. 2,386,421
--------------------------------
510,000 (a)Kinross Gold Corp. 3,442,500
--------------------------------
125,000 (a)Meridian Gold, Inc., Receipts 315,999
--------------------------------
801,395 (a)Newmex Mining Co. Ltd. 868,250
--------------------------------
277,500 (a)Philex Gold, Inc. 1,302,817
--------------------------------
135,000 Placer Dome, Inc. 2,446,875
--------------------------------
1,525,000 (a)Santa Cruz Gold, Inc. 826,111
--------------------------------
1,160,000 (a)TVX Gold, Inc. 8,127,122
--------------------------------
339,000 (a)Triton Mining Corp. 979,415
-------------------------------- -----------
Total 41,221,720
-------------------------------- -----------
</TABLE>
BLANCHARD PRECIOUS METALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/ VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
---------- ------------------------ -----------
<C> <S> <C>
EQUITIES--CONTINUED
-----------------------------------
METALS & MINING--CONTINUED
-----------------------------------
SOUTH AFRICA--7.2%
------------------------
Ashanti Goldfields Co.,
255,000 GDR $ 3,506,250
------------------------
East Rand Gold & Uranium
216,700 Co., Ltd., ADR 382,345
------------------------
Free State Consolidated
120,000 Gold Mines Ltd., ADR 843,750
------------------------
Vaal Reefs Explorations
150,000 & Mining Co., Ltd., ADR 909,375
------------------------ -----------
Total 5,641,720
------------------------ -----------
UNITED STATES--19.5%
------------------------
455,000 (a)Atlas Corp. 284,375
------------------------
(a)Canyon Resources
1,470,000 Corp. 4,410,000
------------------------
260,000 Homestake Mining Co. 3,932,500
------------------------
640,000 (a)Meridian Gold, Inc. 2,960,000
------------------------
86,000 Newmont Mining Corp. 3,332,500
------------------------
36,000 (a)Pegasus Gold, Inc. 292,500
------------------------ -----------
Total 15,211,875
------------------------ -----------
TOTAL EQUITIES
(IDENTIFIED COST
$79,562,837) 63,527,191
------------------------ -----------
WARRANTS--1.3%
-----------------------------------
227,500 Atlas Corp., Warrants 2,275
------------------------
Canyon Resources Corp.,
75,000 Warrants --
------------------------
(b)Geomaque Explorations
325,000 Ltd., Warrants 817,643
------------------------
(b)Greenstone Resources
45,000 Ltd., Warrants 170,639
------------------------
Lone Star Exploration
629,000 NL, Warrants --
------------------------ -----------
TOTAL WARRANTS
(IDENTIFIED COST
$1,066,053) 990,557
------------------------ -----------
PREFERRED STOCKS--0.6%
-----------------------------------
25,000 Freeport-McMoRan Copper & Gold, Inc., Cumulative
Pfd., Series SILV (IDENTIFIED
COST $432,868) 493,750
------------------------ -----------
CORPORATE BONDS--1.9%
-----------------------------------
$2,250,000 (b)Greenstone Resources
Ltd., Unit, 9.00%, 2/28/2002
(IDENTIFIED COST $1,525,699) 1,523,564
------------------------ -----------
</TABLE>
BLANCHARD PRECIOUS METALS FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TROY OUNCES/ VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
------------ --------------------------------------------------- -----------
<C> <S> <C>
PRECIOUS METAL--4.5%
----------------------------------------------------------------
10,034 (a)Gold Bullion (IDENTIFIED COST $3,868,955) $ 3,523,799
--------------------------------------------------- -----------
U.S. TREASURY SECURITIES--8.9%
----------------------------------------------------------------
U.S. TREASURY BILLS--8.9%
---------------------------------------------------
$7,000,000 5/1/1997 (IDENTIFIED COST $6,969,958) 6,969,958
--------------------------------------------------- -----------
(C) REPURCHASE AGREEMENT--1.1%
----------------------------------------------------------------
871,142 CS First Boston Corp. 6.45%, dated 3/31/1997, due
4/1/1997
(AT AMORTIZED COST) 871,142
--------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $94,297,512)(D) $77,899,961
--------------------------------------------------- -----------
</TABLE>
(a) Non-income producing security.
(b) Certain of these securities are subject to restrictions on resale
under Federal Securities laws. At March 31, 1997, these securities
amounted to $6,010,466 which represents 7.6% of net assets.
(c) The repurchase agreement is fully collateralized by government
and/or agency obligations based on market prices at the date of
the portfolio.
(d) The cost of investments for federal tax purposes amounts to
$94,297,512. The net unrealized depreciation of investments on a
federal tax basis amounts to $16,398,320, which is comprised of
$434,703 appreciation and $16,833,023 depreciation at March 31,
1997.
Note: The categories of investments are shown as a percentage of net assets
($78,187,487) at March 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository Receipt
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------
Total investments in securities, at value
(identified and tax cost $94,297,512) $ 77,899,961
- ------------------------------------------------
Income receivable 191,383
- ------------------------------------------------
Receivable for investments sold 1,402,298
- ------------------------------------------------
Receivable for shares sold 100,028
- ------------------------------------------------ ------------
Total assets 79,593,670
- ------------------------------------------------
LIABILITIES:
- ------------------------------------
Payable for investments purchased $810,118
- ------------------------------------
Payable for shares redeemed 116,076
- ------------------------------------
Payable for taxes withheld 15,974
- ------------------------------------
Accrued expenses 464,015
- ------------------------------------ -----------
Total liabilities 1,406,183
- ------------------------------------------------ ------------
NET ASSETS for 12,892,547 shares outstanding $ 78,187,487
- ------------------------------------------------ ------------
NET ASSETS CONSIST OF:
- ------------------------------------------------
Paid in capital $ 95,071,571
- ------------------------------------------------
Net unrealized depreciation of investments and
translation of assets and
liabilities in foreign currency (16,398,320)
- ------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (313,221)
- ------------------------------------------------
Distributions in excess of net investment income (172,543)
- ------------------------------------------------ ------------
Total Net Assets $ 78,187,487
- ------------------------------------------------ ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- ------------------------------------------------
$78,187,487 / 12,892,547 shares outstanding $6.06
- ------------------------------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------
Dividends (net of foreign taxes withheld of $18,035) $ 428,286
- -----------------------------------------------------------
Interest (net of foreign taxes withheld of $1,336) 361,270
- ----------------------------------------------------------- -----------
Total income 789,556
- ----------------------------------------------------------- -----------
EXPENSES:
- ------------------------------------------------
Management fee $ 420,395
- ------------------------------------------------
Administrative personnel and services fee 40,859
- ------------------------------------------------
Custodian fees 41,725
- ------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 67,458
- ------------------------------------------------
Directors'/Trustees' fees 1,275
- ------------------------------------------------
Auditing fees 8,081
- ------------------------------------------------
Legal fees 1,786
- ------------------------------------------------
Portfolio accounting fees 37,448
- ------------------------------------------------
Distribution services fee 315,296
- ------------------------------------------------
Share registration costs 11,475
- ------------------------------------------------
Printing and postage 26,842
- ------------------------------------------------
Insurance premiums 985
- ------------------------------------------------
Taxes 283
- ------------------------------------------------
Miscellaneous 1,479
- ------------------------------------------------ ----------
Total expenses 975,387
- ------------------------------------------------
Net operating loss (185,831)
- ----------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
- -----------------------------------------------------------
Net realized gain on investments and foreign currency
transactions 816,138
- -----------------------------------------------------------
Net change in unrealized depreciation of investments and
translation of assets and liabilities in foreign currency (4,607,946)
- ----------------------------------------------------------- -----------
Net realized and unrealized loss on investments and
foreign currency (3,791,808)
- ----------------------------------------------------------- -----------
Change in net assets resulting from operations $(3,977,639)
- ----------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30, APRIL 30,
1997 1996 1996
- ----------------------------------- ------------ ------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------
OPERATIONS--
- -----------------------------------
Net operating loss $ (185,831) $ (500,885) $ (1,069,928)
- -----------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($816,138, $9,039,433, and $12,174,374, net gains
respectively, as computed for
federal tax purposes) 816,138 10,615,594 13,950,013
- -----------------------------------
Net change in unrealized
appreciation (depreciation) of
investments and translation of
assets and liabilities in foreign
currency (4,607,946) (19,953,719) 13,616,081
- ----------------------------------- ------------ ------------ ------------
Change in net assets resulting
from operations (3,977,639) (9,839,010) 26,496,166
- ----------------------------------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------
Distributions from net investment
income (2,843,683) -- --
- -----------------------------------
Distributions from net realized
gains on investments and foreign
currency transactions (20,849,368) -- --
- ----------------------------------- ------------ ------------ ------------
Change in net assets resulting
from
distributions to shareholders (23,693,051) -- --
- ----------------------------------- ------------ ------------ ------------
SHARE TRANSACTIONS--
- -----------------------------------
Proceeds from sale of shares 31,086,588 35,684,735 103,376,874
- -----------------------------------
Net asset value of shares issued to
shareholders
in payment of distributions
declared 21,735,852 -- --
- -----------------------------------
Cost of shares redeemed (34,852,152) (67,247,212) (75,865,525)
- ----------------------------------- ------------ ------------ ------------
Change in net assets resulting
from share transactions 17,970,288 (31,562,477) 27,511,349
- ----------------------------------- ------------ ------------ ------------
Change in net assets (9,700,402) (41,401,487) 54,007,515
- -----------------------------------
NET ASSETS:
- -----------------------------------
Beginning of period 87,887,889 129,289,376 75,281,861
- ----------------------------------- ------------ ------------ ------------
End of period (including
undistributed net investment income
of $0 and $2,856,971, $1,904,789
respectively) $ 78,187,487 $ 87,887,889 $129,289,376
- ----------------------------------- ------------ ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
SIX MONTHS ENDED
(UNAUDITED) PERIOD ENDED
MARCH 31, SEPTEMBER 30,
1997 1996(A) 1996 1995 1994
- ------------------------ ---------------- ------------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.90 $ 9.77 $ 7.12 $ 8.73 $ 6.83
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income -- (0.10) (0.10) (0.02) (0.11)(b)
- ------------------------
Net realized and
unrealized gain (loss)
on investments and
foreign currency (0.27) (0.77) 2.75 (0.41) 2.01(b)
- ------------------------ ------- ------- -------- ------- -------
Total from investment
operations (0.27) (0.87) 2.65 (0.43) 1.90
- ------------------------ ------- ------- -------- ------- -------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income (0.31) -- -- -- --
- ------------------------
Distributions from net
realized gain on
investments and foreign
currency transactions (2.26) -- -- (0.03) --
- ------------------------
Distributions in excess
of net realized gain on
investments and foreign
currency transactions -- -- -- (1.06)(c) --
- ------------------------
Tax return of capital -- -- -- (0.09) --
- ------------------------ ------- ------- -------- ------- -------
Total distributions (2.57) -- -- (1.18) --
- ------------------------ ------- ------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 6.06 $ 8.90 $ 9.77 $ 7.12 $ 8.73
- ------------------------ ------- ------- -------- ------- -------
TOTAL RETURN (D) (4.35)% (8.90%) 37.03% (4.39%) 27.80%
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 2.32%* 2.32%* 2.36% 2.49% 2.46%
- ------------------------
Net investment income (0.44%)* (1.13%)* (1.27%) (1.48%) (1.21%)
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period (000 omitted) $78,187 $87,888 $129,289 $75,282 $68,092
- ------------------------
Average commission rate
paid (e) $.0116 $0.0199 -- -- --
- ------------------------
Portfolio turnover 63% 36% 176% 116% 174%
- ------------------------
</TABLE>
* Computed on an annualized basis.
(a) The Fund has changed its fiscal year end from April 30 to
September 30. Reflects operations for the period from May 1, 1996
to September 30, 1996.
(b) Calculated based on average shares outstanding--prior years
amounts restated for comparative purposes.
(c) Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of
capital for federal income tax purposes.
(d) Based on net asset value.
(e) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------------------------
1993 1992 1991 1990 1989(A)
- ------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 5.04 $ 5.29 $ 6.30 $ 7.19 $ 8.00
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income (0.08)(b) (0.09)(b) (0.08)(b) (0.03)(b) 0.02
- ------------------------
Net realized and
unrealized gain (loss)
on investments and
foreign currency 1.87(b) (0.16)(b) (0.93)(b) (0.59)(b) (0.83)
- ------------------------ ------- ------- ------- ------- -------
Total from investment
operations 1.79 (0.25) (1.01) (0.62) (0.81)
- ------------------------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income -- -- -- -- --
- ------------------------
Distributions from net
realized gain on
investments and
foreign currency
transactions -- -- -- (0.03) --
- ------------------------
Distributions in excess
of net realized gain on
investments and foreign
currency transactions -- -- -- (0.10)(c) --
- ------------------------
Tax return of capital -- -- -- (0.14) --
- ------------------------ ------- ------- ------- ------- -------
Total distributions -- -- -- (0.27) --
- ------------------------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 6.83 $ 5.04 $ 5.29 $ 6.30 $ 7.19
- ------------------------ ------- ------- ------- ------- -------
TOTAL RETURN (D) 35.50% (4.70%) (16.00%) (10.90%) (10.20%)
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 3.24% 3.09% 3.05% 2.95% 3.99%*(e)(f)
- ------------------------
Net investment income (1.46%) (1.57%) (1.28%) (0.40%) 0.77%*(e)(g)
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period (000 omitted) $32,636 $20,900 $24,924 $31,539 $25,837
- ------------------------
Average commission rate
paid -- -- -- -- --
- ------------------------
Portfolio turnover 66% 62% 57% 56% 21%
- ------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 22, 1988 (date of
initial public investment) to April 30, 1989.
(b) Calculated based on average shares outstanding--prior years
amounts restated for comparative purposes.
(c) Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of
capital for federal income tax purposes.
(d) Based on net asset value.
(e) Net of expense reimbursement.
(f) During the first year (1989), the net expense ratio to average net
assets would have been 4.03%, if a portion of the 12b-1
distribution and management fees had not been waived by the prior
distributor and prior manager, respectively.
(g) The net investment income ratio to average net assets would have
been 0.72%, if a portion of the 12b-1 distribution and management
fees had not been waived by the prior distributor and prior
manager, respectively.
(See Notes which are an integral part of the Financial Statements)
BLANCHARD PRECIOUS METALS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
(1) ORGANIZATION
Blanchard Precious Metals Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The fund
seeks to provide long-term capital appreciation and preservation of
purchasing power through investments in physical precious metals, such
as gold, silver, platinum and palladium, and in securities of
companies involved with precious metals. A secondary objective of the
fund is to reduce the risk of loss of capital and decrease the
volatility often associated with precious metals investments by
changing the allocation of its assets from precious metals securities
to physical precious metals and/or investing in short-term instruments
and government securities during periods when the fund's portfolio
manager believes the precious metals markets may experience declines.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Listed foreign and domestic equity securities
and bullion are valued at the last sale price reported on a national
securities exchange. Short-term foreign and domestic securities are
valued at the prices provided by an independent pricing service.
However, short-term foreign and domestic securities with remaining
maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have
been established by the Fund to monitor, on a daily basis, the
market value of each repurchase agreement's collateral to ensure
that the value of collateral at least equals the repurchase price to
be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers,
which are deemed by the Fund's manager to be creditworthy pursuant
to the guidelines and/or standards reviewed or established by the
Board of Directors (the "Directors"). Risks may arise from the
potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded after the ex-dividend date
based upon when information becomes available to the Fund.
Distributions are determined in accordance with income
tax-regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of capital
for federal income tax purposes.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its
income. Accordingly, no provisions for federal tax are necessary.
However, federal taxes may be imposed on the fund upon the
disposition of certain investments in passive foreign investment
companies. Withholding taxes on foreign interest and dividends have
been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage
in when- issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked to market daily and
begin earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign
currency exchange transactions. Purchase contracts are used to
acquire exposure to foreign currencies; whereas, contracts to sell
are used to hedge the Fund's securities against currency
fluctuations. Risks may arise upon entering these transactions from
the potential inability of counter-parts to meet the terms of their
commitments and from unanticipated movements in security prices or
foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date. At March 31, 1997, the Fund
had no outstanding foreign currency commitments.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated
in foreign currencies ("FC") are translated into U.S. dollars based
on the rate of exchange of such currencies against U.S. dollars on
the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid
are adjusted when reported by the custodian bank. The Fund does not
isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between
the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the
issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by
the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the
secondary market in transactions exempt from registration. Such
restricted securities may be determined to be liquid under criteria
established by the Board of Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the
secondary market or, if no market prices are available, at the fair
value as determined by the Fund's pricing committee.
Additional information on each restricted security held at March 31,
1997 is as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
----------------------------------- ---------------- ----------------
<S> <C> <C>
Lone Star Exploration NL 7/24/96 $ 971,822
Eldorado Gold Corp., Ltd. 2/13/96-3/19/97 2,544,991
Geomaque Explorations Ltd. 3/3/96-3/6/96 681,760
Ashanti Gold Fields Co. 4/19/94-11/15/96 5,269,317
Geomaque Explorations Ltd. Warrants 3/11/97 827,565
Greenstone Resources Ltd. Warrants 2/11/97 136,113
Greenstone Resources Ltd. 2/11/97 1,525,699
</TABLE>
CHANGE IN FISCAL YEAR--The Fund has changed its fiscal year-end from
April 30 to September 30 beginning May 1, 1996.
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade date.
BLANCHARD PRECIOUS METALS FUND, INC.
- -------------------------------------------------------------------------------
(3) CAPITAL STOCK
At March 31, 1997, there is an unlimited number of par value shares
($0.001 per share) authorized: Transactions in capital stock were as
follows:
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30, APRIL 30,
1997 1996 1996
- --------------------------------- ------------ ------------- ----------
<S> <C> <C> <C>
Shares sold 4,141,320 3,728,778 11,891,108
- ---------------------------------
Shares issued to shareholders in
payment of distributions declared 3,428,368 -- --
- ---------------------------------
Shares redeemed (4,555,911) (7,081,402) (9,230,002)
- --------------------------------- ---------- ---------- ----------
Net change resulting from share
transactions 3,013,777 (3,352,624) 2,661,106
- --------------------------------- ---------- ---------- ----------
</TABLE>
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Virtus Capital Management Inc., the Fund's investment
manager, (the "Manager"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net
assets.
Under the terms of a sub-advisory agreement between the Manager and
Cavelti Capital Management, Ltd., Cavelti Capital Management, Ltd.
receives an annual fee from the Manager equal to .30% of the Fund's
average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Fund with certain administrative personnel and services. The fee
paid to FAS is based on the level of average combined aggregate net
assets of the Fund, Blanchard Funds and The Virtus Funds, all of which
are advised by the Manager. The Aministrative fee received during the
period of the Administrative Services Agreement shall be at least $75,
000 per Portfolio.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's shares. The
Plan provides that the Fund may incur distribution expenses up to
0.75% of the average daily net assets of the Fund shares, annually, to
reimburse FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
BLANCHARD PRECIOUS METALS FUND, INC.
- -------------------------------------------------------------------------------
CUSTODIAN FEES--Signet Trust Company is the Fund's custodian. The fee
is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended March 31, 1997, were as follows:
<TABLE>
<S> <C>
- ---------
PURCHASES $44,746,681
- --------- -----------
SALES $48,435,790
- --------- -----------
</TABLE>
CONCENTRATION OF CREDIT RISK--The Fund invests in securities of
non-U.S. issuers. The political or economic developments within a
particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally,
political or economic developments may have an effect on the liquidity
and volatility of portfolio securities and currency holdings.
DIRECTORS OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and
Peter E. Madden Secretary
Gregor F. Meyer Joseph S. Machi
John E. Murray, Jr. Vice President and Assistant
Wesley W. Posvar Treasurer
Marjorie P. Smuts Richard B. Fisher
Vice President
C. Grant Anderson
Assistant Secretary
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contain facts concerning its objective and policies, management fees,
expenses and other information.
