Semi-Annual Report / June 30, 1996
William Blair
Mutual Funds, Inc.
Growth Fund
International Growth Fund
Income Fund
Ready Reserves Fund
This report has been prepared for the information of the shareholders of
William Blair Mutual Funds, Inc. It is not to be construed as an offering to
sell or buy any securities of the Fund. Such offering is made only by the
Prospectus.
<PAGE>
Table of Contents
Overview 3
A letter from the President 3
Growth Fund 4
A letter from the Portfolio Managers 4
Portfolio of Investments 6
International Growth Fund 8
A letter from the Fund's Senior Vice President 8
Portfolio of Investments 11
Income Fund 14
A letter from the Portfolio Manager 14
Portfolio of Investments 16
Ready Reserves Fund 19
A letter from the Portfolio Manager 19
Portfolio of Investments 20
Notes to Financial Statements 26
Financial Highlights 30
2
<PAGE>
Overview William Blair Mutual Funds, Inc.
<TABLE>
Performance Highlights
<CAPTION>
June 30,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Growth Fund 11.9% 29.1% 6.5% 15.5%
S&P 500 Index 10.2 37.5 1.3 10.0
Russell 2000 Index 10.4 28.4 (1.8) 18.9
International Growth Fund 8.2 7.2 (0.04) 33.6
Lipper International Index 8.5 10.0 (0.7) 39.2
EAFE Index 4.7 11.6 8.1 32.9
Income Fund (0.3) 14.4 (0.7) 7.8
Lehman Intermediate
Govt./Corp. Index (0.2) 15.3 (1.9) 8.8
Ready Reserves Fund 4.8(a) 5.5 3.7 2.6
S&P-rated AAA Money Market
Funds 4.7(a) 5.4 3.6 2.0
</TABLE>
<TABLE>
Investor Information
<CAPTION>
Growth International Income Ready
Fund Growth Fund Fund Reserves Fund
<S> <C> <C> <C> <C>
Ending Assests (in millions) $448 $101 $153 $669
Portfolio Turnover Rate (%) (a) 49 82 64 --
Total Expense Ratios (%)(a) .75 1.41 .66 .72
Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None
12b-1 Fees None None None None
</TABLE>
(a) rates are annualized
A Letter from the President
Dear Shareholders:
The domestic stock market has continued its record-breaking run, and,
for the first six months, was the leader among various security classes with a
10+% gain. International equity markets also turned in a good performance as
the Japanese market moved to new highs on expectations of economic recovery.
Perhaps the one surprising development has been the 180-degree turn in the bond
market. Posting mostly negative returns, 1994 was the worst year in decades for
the bond market, while 1995 was the exact opposite, with returns of 15% or more.
Now 1996 has returned to the negative side, even though the Federal Reserve
Board has not raised rates as has been expected.
The divergence of the U.S. stock and bond markets is troubling. Our
equity markets need lower rates if prices or multiples are to be sustained. In
addition, this current economic cycle is quite mature. No longer can investors
expect 20% earnings gains as has been the case for the past 4-5 years. The
classic bull market stimuli are fading and we have been lowering the risk
profile of all of our funds. This has paid off in good relative returns, and
should provide some comfort if markets start to decline.
Looking forward, we would be surprised to see longer-term interest rates
move much higher. While we expect the Federal Reserve to raise short-term
rates before year-end, this should be a positive as it helps investors feel
more comfortable that inflation will not be allowed to gain significant
momentum. While this scenario may be choppy for both stock and bond markets,
we think the net result still should be profitable for the patient investor.
Rocky Barber
3
<PAGE>
Growth Fund William Blair Mutual Funds, Inc.
<TABLE>
Performance Highlights
<CAPTION>
June 30,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Growth Fund 11.9% 29.1% 6.5% 15.5% 7.6% 44.4%
S&P 500 Index 10.2 37.5 1.3 10.0 7.7 30.5
Russell 2000 Index 10.4 28.4 (1.8) 18.9 18.4 46.1
</TABLE>
<TABLE>
Investor Information
<CAPTION>
June 30,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Ending Assets (in millions) $448 $363 $218 $150 $111 $91
Portfolio Turnover Rate (%) 49 (a) 32 46 55 27 33
Total Expense Ratios (%) .75 (a) .65 .71 .78 .83 .90
</TABLE>
(a) rates are annualized
A Letter from the Portfolio Managers
Dear Shareholders:
The 1995 momentum of an excellent U.S. stock market has carried over
into the first half of 1996. Momentum of this sort often leads to excess in some
areas of the market. This time it is the smaller company initial public
offerings (IPOs), especially those that are technology-related, that have gotten
carried away and are now in the process of returning to more realistic levels. A
slowing economy and modest earnings gains may contain some disappointments for
the broader market, but we don't see a major problem lurking on the horizon. Our
economy is still growing, the budget deficit is shrinking, inflation remains
under control and Washington politics are in their usual stalemate. Foreign
economies look poised for growth and our exports should improve. We just don't
see the underpinnings of a sustained bear market, although a normal 10% large
cap correction could happen at any time. Indeed, this correction may already be
underway. The S&P 500 has dropped over 5% from its early June highs and the more
volatile, smaller cap Over-the-Counter (OTC) market has dropped almost 15%.
With stocks selling at higher prices and in light of a mature domestic
economic cycle, we continue to focus on the highest quality companies. While the
universe of these companies is shrinking, we have been concentrating on slightly
larger companies with less economic sensitivity so that we won't be hurt much
should the economy fall into a moderate recession in 1997. Several companies,
including some of our larger cap holdings, have seen slowing growth. Even though
this had to be expected, current market psychology has little tolerance for
shortfalls, and 20-30% price drops are common in such situations. Although
larger cap companies can offer a haven in a choppy market, they only do so if
fundamentals are impeccable. We are constantly re-examining our companies to
make sure their earnings growth is consistent and predictable.
Amongst smaller capitalization issues, we continue to find a significant
number of exciting growth opportunities despite the gradually maturing U.S.
economy. While many of the best companies are fully priced on near term
prospects, we think that consistent growth and strong, durable business
franchises will continue to command premium valuation levels in a slow growth,
low inflation environment.
Even with a more volatile market, we produced good results for the first
half of 1996. Looking forward, we continue to believe that there are many
opportunities for quality individual stock selections to add to our superior
long-term record and reward our shareholders.
Rocky Barber Mark A. Fuller III
4
<PAGE>
International Growth Fund William Blair Mutual Funds, Inc.
<TABLE>
Performance Highlights
<CAPTION>
June 30,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
International Growth Fund 8.2% 7.2% (0.04%) 33.6%
Lipper International Index 8.5 10.0 (0.7) 39.2
EAFE Index 4.7 11.6 8.1 32.9
</TABLE>
<TABLE>
Investor Information
<CAPTION>
June 30,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Ending Assets (in millions) $101 $90 $70 $40
Portfolio Turnover Rate (%) 82 (a) 77 40 83
Total Expense Ratios (%) 1.41 (a) 1.48 1.51 1.71
</TABLE>
(a) rates are annualized
A Letter from the Fund's Senior Vice President
Dear Shareholders:
Most of the world's major stock markets posted solid if unspectacular
gains for the first six months of 1996. As shown in the first table below,
overall international performance was in the same range as the U.S. in local
currencies but dollar strength reduced returns to the unhedged U.S. investor by
4-5%. Europe was slightly stronger than Asia, principally due to monetary ease
and convergence of interest rate trends.
<TABLE>
Major World Index Price Movement, January - June 1996
<CAPTION>
Percent Change, Price Only
US Dollars Local Currency
<S> <C> <C>
Europe 5.3% 8.7%
Japan 1.1 7.5
Asia (except Japan) 8.9 6.7
Emerging Markets 13.4 --
World (except US) 3.9 8.3
US 8.5 8.5
</TABLE>
Source: FT/S&P, IFC
The International Growth Fund showed a return of 8.2% over the period,
as compared to the 8.5% Lipper international fund average and 4.7% for the
Morgan Stanley Capital International EAFE index.
The relative performance of smaller companies has shown a clear trend
toward improvement in 1996, reversing last year's significant weakness.
<TABLE>
<PAGE>
Performance of Small Cap vs Large Cap
Percent Change, Price Only
<CAPTION>
Representative Indicies 1995 1996 (6 months)
<S> <C> <C>
UK
Morgan Stanley Capital Int'l UK 17.2% 1.0%
FT-SE Small Cap UK 11.5 13.8
Continental Europe
Morgan Stanley Capital Europe (ex UK) 19.7 7.4
James Capel Small Cap Europe (ex UK) 2.3 10.3
Japan
Morgan Stanley Capital Japan UK 0.0 0.8
James Capel Small Cap Japan -10.3 10.7
</TABLE>
Source: Morgan Stanley Capital International, James Capel
Our cyclical outlook for the balance of 1996 and into next year is for a
modest reacceleration of the global economy, with strength increasingly evident
in Japan and the western hemisphere. Questions will remain about the
vulnerability of developed economies to rising inflation, but it seems likely
that interest rates are near the bottom for the current cycle.
Perhaps more importantly, however, it is becoming increasingly apparent
in both Europe and Japan that management views on profitability, shareholder
value and capital productivity are changing profoundly. Influenced by American
competition and the globalization of capital markets, managers are working to
improve both operational efficiency and the utilization of corporate
organizational and financial assets. These changes, which may take a decade or
more to unfold, should in turn significantly alter the investment landscape.
Among the opportunities this new environment may present, we would highlight the
following:
. Enhanced long-term growth for companies able to consistently
implement efficiences
. Greater visibility for corporate innovators and niche
competitiors
. Potential market share gains for low cost producers in emerging
markets
. Rising returns for shareholders overall as private equity
capital plays a more dominant "economic stakeholder" role.
We believe that investor strategy should focus primarily on identifying
the beneficiaries of these trends: consistent growth companies with coherent
strategies and strong management disciplines.
Norbert W. Truderung
9<PAGE>
Income Fund William Blair Mutual Funds, Inc.
<TABLE>
Performance Highlights
<CAPTION>
June 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income Fund (0.3%) 14.4% (0.7%) 7.8% 7.2%
Lehman Intermediate Govt./Corp. Index (0.2) 15.3 (1.9) 8.8 7.2
Investor Information
June 30,
1996 1995 1994 1993 1992
Ending Assets (in millions) $153 $147 $144 $204 $137
Portfolio Turnover Rate (%) 64 (a) 54 63 144 47
Total Expense Ratios (%) .66 (a) .68 .68 .70 .88
(a) rates are annualized
A Letter from the Portfolio Manager
Dear Shareholders:
During the first six months of 1996, the sentiment in the bond market changed
dramatically. At the start of the year, the economic consensus called for very
slow growth with the Federal Reserve Board responding by continuing to lower
short-term interest rates. The surprise came when the economy started to recover
and the consensus made a significant turn. Current expectations are for the Fed
to raise rates higher in an attempt to cool an economic recovery that is looking
quite strong.
Interest rates responded to this change by rising fairly consistently during
the period. The ten-year U.S. Treasury note yield started the year at 5.60% and
has risen steadily to a level above 7.00% more recently. Following our
contrarian approach, we have been spending the larger cash reserves that we built up in late 1995 and
have extended our average maturity and duration. We are favoring U.S. Treasury
notes in this process and we continue to hold an underweighted position in the
corporate sector.
The total return for the Income Fund during the period, with dividends
reinvested, was -0.3%, which trailed slightly the -0.2% of the Lehman
Intermediate Government/Corporate Bond Index. Assets continued to remain very
stable in the $150 million range. Finally, we maintained our monthly dividend at
$.05 for the first six months and expect to do so through at least the next
quarter.
Bentley M. Myer
14
<PAGE>
Income Fund William Blair Mutual Funds, Inc.
Board of Directors
Conrad Fischer, Chairman
Principal, William Blair & Company, L.L.C.
Vernon Armour
Private Investor
George Kelm
Retired Chairman of the Board, Sahara Coal Company, Inc.
James M. McMullan
Principal, William Blair & Company, L.L.C.
Ann P. McDermott
Director and Trustee,
Profit and not-for-profit organizations
John B. Schwemm
Retired Chairman and CEO, R.R. Donnelley & Sons Company
W. James Truettner, Jr., Senior Vice President
Principal, William Blair & Company, L.L.C.
Officers
Rocky Barber, President
Mark A. Fuller, III, Senior Vice President
Bentley M. Myer, Senior Vice President
Norbert W. Truderung, Senior Vice President
James S. Kaplan, Vice President
John P. Kayser, Vice President
Terence M. Sullivan, Vice President
Walter Rucinski, Treasurer
Janet V. Gassmann, Secretary
Investment Adviser
William Blair & Company, L.L.C.
Transfer Agent
State Street Bank and Trust Company
P.O. Box 9104
Boston, MA 02266-9104
800-635-2886
(Massachusetts 800-635-2840)
William Blair Mutual Funds, Inc.
222 West Adams Street
Chicago, IL 60606
<PAGE>
Ready Reserves Fund William Blair Mutual Funds, Inc.
</TABLE>
<TABLE>
Performance Highlights
<CAPTION>
June 30,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Ready Reserves Fund 4.8% (a) 5.5% 3.7% 2.6% 3.3% 5.6%
S&P-rated AAA Money Market Funds 4.7 (a) 5.4 3.6 2.0 3.2 5.6
</TABLE>
<TABLE>
Investor Information
<CAPTION>
June 30,
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991
Ending Assets (in millions) $669 $704 $521 $477 $449 $403
Total Expense Ratios (%) .72 (a) .72 .71 .71 .71 .71
</TABLE>
(a) rates are annualized
A Letter from the
Portfolio Manager
Dear Shareholders:
In the early part of 1996, the Federal Reserve Board responded to the
continuing weak pattern of economic activity and lowered short-term interest
rates. However, as the growth rate of the economy picked up later in the period,
the Fed moved to the sidelines. The market is now calling for an increase in
rates in response to the more recent very strong economic reports, but given
that this is an election year, we do not expect aggressive increases in interest
rates.
With the change in expectations and the higher rates reflected in those
expectations, we have been extending our average maturity. We started the year
with our average maturity at about 35 days and have increased that average
steadily to its current level of about 49 days. If the Fed raises rates, we are
likely to continue extending toward our maximum average of 60 days. In addition,
we have added some government agency floating rate notes to the portfolio to try
to take advantage of the change to a rising interest rate environment. The
floating rate component now stands at about 6% of the portfolio (with the
balance in highly rated, fixed rate commercial paper).
For the first six months of 1996, the return of Ready Reserves Fund was
4.75%, exceeding the 4.68% return gained by the money market funds of our peer
group, S&P AAA. Assets remained fairly stable around the $700 million level.
Bentley M. Myer
19
<PAGE>
LOGO
Portfolio of Investments
June 30, 1996
(unaudited)
(all amounts in thousands)
Shares Value
- - ------------- --------
COMMON STOCKS
Applied Technology -- 19.1%
239 * Acxiom Corporation $ 8,142
400 * Airtouch Communications, Inc. 11,300
267 * American Management Systems 7,810
230 Automatic Data Processing, Inc. 8,884
232 * Brite Voice Systems, Inc. 4,988
73 * Catalina Marketing Corporation 6,670
177 First Data Corporation 14,111
213 * NFO Research, Inc. 5,029
220 * Paging Network, Inc. 5,280
100 Reuters Holdings PLC (ADR) 7,250
94 Shared Medical Systems Corporation 6,052
85,516
Consumer Retail -- 16.8%
120 Albertson's, Inc. 4,965
149 * Barnes and Noble, Inc. 5,356
260 * Eckerd Corporation 5,883
250 Home Depot, Inc. 13,500
90 * Kohl's Corporation 3,296
132 Melville Corporation 5,346
220 * Office Depot, Inc. 4,483
107 * PetSmart, Inc. 5,119
245 * Staples, Inc. 4,787
123 * Starbucks Corporation 3,475
159 * Sunglass Hut International, Inc. 3,863
217 * Viking Office Products, Inc. 6,821
160 Walgreen Company 5,360
106 * Whole Foods Market, Inc. 2,809
75,063
Financial Services -- 11.6%
213 * Associates First Capital Corp.,
Class "A" 8,006
100 Advanta Corporation, Class "A" 5,100
317 * Credit Acceptance Corporation 6,649
90 Federal Home Loan Mortgage
Corporation 7,695
100 Household International, Inc. 7,600
278 MBNA Corporation 7,909
180 State Street Boston Corporation 9,180
52,139
Technology -- 11.2%
113 * Digi International, Inc. 3,009
100 Intel Corporation 7,344
80 * Intuit, Inc. 3,799
150 Linear Technology Corporation 4,500
90 * Microsoft Corporation 10,811
98 Molex Incorporated 3,101
159 Molex Incorporated, Class "A" 4,659
110 * Solectron Corporation 4,166
185 * Xilinx, Inc. 5,864
165 * Zebra Technologies Corporation,
Class "A" 2,925
50,178
Shares Value
- - ------------- --------
Business Services -- 10.6%
125 Cintas Corporation $ 6,698
219 * Heartland Express, Inc. 5,869
105 * Interim Services, Inc. 4,511
237 * Knight Transportation, Inc. 4,869
100 Olsten Corporation 2,937
151 * Patterson Dental Co. 5,456
80 Reynolds & Reynolds, Inc., Class
"A" 4,260
130 * Robert Half International, Inc. 3,635
146 * Rural/Metro Corporation 5,007
74 Wallace Computer Services, Inc. 4,398
47,640
Healthcare-Related Specialties -- 10.0%
100 * Elan PLC (ADR) 5,712
215 * Health Care & Retirement
Corporation 5,109
200 * Healthsouth Rehabilitation
Corporation 7,200
104 * Nellcor Puritan Bennett, Inc. 5,029
234 Omnicare, Inc. 6,190
69 * Quintiles Transnational
Corporation 4,517
200 Smithkline Beecham PLC (ADR) 10,875
44,632
Distribution -- 6.5%
120 Alco Standard Corporation 5,430
139 Cardinal Health, Inc. 9,989
119 * Gulf South Medical Medical
Supply, Inc. 4,641
63 * Henry Schein, Inc. 2,394
293 * Peak Technologies Group, Inc. 6,858
29,312
Industrial Products -- 4.1%
110 Danaher Corporation 4,785
255 M.A. Hanna Company 5,333
237 Minerals Technologies, Inc. 8,172
18,290
Specialty Consumer Services and Products -- 3.9%
56 * Blyth Industries, Inc. 2,541
225 * CUC International, Inc. 7,988
153 * Day Runner, Inc. 3,969
135 * Department 56, Inc. 3,052
17,550
Food-Related Companies -- 2.0%
189 Cracker Barrel Old Country Store,
Inc. 4,593
120 Pepsico, Inc. 4,245
8,838
TOTAL COMMON STOCK -- 95.8% 429,157
(cost $306,129)
6
<PAGE>
Principal
Amount Value
- - ---------------- --------
SHORT-TERM INVESTMENTS
$ 1,748 Associates Corp. of North
America Demand Note, 5.15%,
due 7/1/96 $ 1,748
697 Household Finance Corp., 5.32%,
due 7/5/96 697
2,000 Ford Motor Credit Co., 5.23%,
due 7/5/96 2,000
3,000 Ford Motor Credit Co., 5.34%,
due 7/12/96 3,000
1,078 GE Capital Corp., 5.33%,
due 7/19/96 1,078
2,000 GE Capital Corp., 5.34%,
due 7/19/96 2,000
2,000 GMAC, 5.37%, due 7/26/96 2,000
Principal
Amount Value
- - ---------------- --------
$ 1,036 Household Finance Corp., 5.35%,
due 8/2/96 $ 1,036
3,148 GMAC, 5.40%, due 8/9/96 3,148
1,500 GE Capital Corp., 5.35%, 8/16/96 1,500
--------
TOTAL SHORT-TERM
INVESTMENTS -- 4.1% 18,207
(cost $18,207)
TOTAL INVESTMENTS -- 99.9% 447,364
Cash and other assets, less
liabilities -- 0.1% 496
--------
Net assets -- 100.0% $447,860
========
- - ---------------
* Non-income producing securities
ADR = American Depository Receipt
See accompanying Notes to Financial Statements.
7
<PAGE>
LOGO
Portfolio of Investments
June 30, 1996
(unaudited)
(all amounts in thousands)
Shares Value
- - ------------- --------
COMMON STOCKS -- Europe 48.0%
Austria -- .7%
10 Flughafen Wien AG (Vienna
airport) $ 685
--------
Denmark -- 1.0%
7 Novo Nordisk AS (Pharmaceutical) 992
--------
Finland -- 1.2%
19 Nokia (AB) OY (Telecommunications
equipment) 702
9 Raision Tehtaat OY (Food) 513
--------
1,215
--------
France -- 7.2%
4 Air Liquide (Industrial gases) 707
3 Axime (Financial services) 465
4 Canal Plus (Media/television) 979
4 Cie De St. Gobain (Building
materials) 469
38 Lagardere Group (Industrial
holding company) 981
22 * SGS Thomson Micro (Electronic
semiconductors) 774
9 Societe Bic (Consumer goods) 1,280
7 Societe Generale French ORD
(Bank) 771
2 Sodexho (Contract catering) 888
--------
7,314
--------
Germany -- 6.7%
1 Altana Industrie -- Aktiem Und
Anlagen AG (Pharmaceuticals) 735
11 Adidas AG (Sporting goods) 926
30 Bayer AG (Chemicals) 1,061
3 * Mannesmann AG (General
engineering) 1,039
0.50 Munchener Ruckversicherun AG
(Reinsurance) 1,033
9 SGL Carbon AG (Engineering) 1,054
18 Veba AG (Utility) 958
--------
6,806
--------
Italy -- 4.3%
502 Banca Fideuram SPA (Fund
management) 1,093
50 Bulgari (Luxury consumer goods) 799
150 Edison SPA (Electric utility) 906
12 La Rinascente warrants
(Retailing) 10
250 La Rinascente (Retailing) 647
400 Telecom Italia Mobile (Mobile
telephones) 897
--------
4,352
--------
Luxembourg -- .9%
20 Millicom International Cellular
SA (Communications) 945
--------
Shares Value
- - ------------- --------
Netherlands -- 4.6%
20 ABN Amro Holdings (Bank) $ 1,074
14 Gucci Group NV (Luxury consumer
goods) 908
4 Heineken NV (Brewer) 1,006
26 Philips Electronics NV (Consumer
electronics) 846
20 Van Ommeren Ceteco (Specialty
chemicals) 788
--------
4,622
--------
Spain -- 2.0%
30 General de Aguas d'Barcelona
(Water utility) 1,116
38 Centros Comerciales Pryca
(Supermarket) 938
--------
2,054
--------
Sweden -- 3.5%
28 Autoliv AB (Airbag manufacturers) 855
15 Astra AB (Pharmaceuticals) 664
50 Ericsson AB Telecom
(Telecommunication services) 1,081
22 Kinnevik AB-B Free Shares
(Industrial holding company) 683
22 Netcom Systems AB-B Shares
(Telecommunications) 255
--------
3,538
--------
Switzerland -- 4.9%
0.43 Baloise Holdings (Insurance) 926
10 CS Holdings (Banking) 953
0.85 Nestle SA (Food) 972
0.13 Roche Holdings AG
(Pharmaceuticals) 955
1 Sandoz AG (Pharmaceuticals) 1,146
--------
4,952
--------
United Kingdom -- 11.0%
50 DFS Furniture Company (Furniture
manufacturer/retailer) 429
125 First Leisure Corporation PLC
(Entertainment) 697
386 Firstbus PLC (Transportation
services) 959
225 Frost Group (Retailers) 343
135 Grand Metropolitan PLC
(Breweries) 895
100 Hays PLC (Bulk distribution/
personnel services) 705
100 Kwik Fit Holdings ORD PLC
(Distributors) 708
200 Lloyds TSB Group PLC (Bank) 734
150 Marling Industries PLC (Textiles) 606
1,500 Mercury Assets Management Group
(Banks/Merchant) 899
200 Pilkington PLC (Building
materials) 562
11
<PAGE>
Shares Value
- - ------------- --------
United Kingdom (continued)
50 Rolls Royce PLC (Engineering) $ 174
88 Shire Pharmaceuticals Group
(Pharmaceuticals) 342
65 Shell Transport and Trading
(Integrated oil) 952
65 Standard Chartered PLC
(Retail banks) 647
125 Tesco PLC (Food retailer) 571
25 Unilever Limited (Food and
detergent producer) 497
75 Watmoughs Holdings (Printer) 489
--------
11,209
--------
COMMON STOCKS -- Asia -- 38.2%
Australia -- 2.6%
68 Broken Hill Proprietary (Mining) 939
100 QBE Insurance Group Limited
(General insurer) 594
160 Western Mining Corp Holdings
(Mining) 1,144
--------
2,677
--------
Japan -- 28.6%
77 Anritsu Corporation (Electrical
machinery) 1,071
75 Asahi Tec Corporation (Automobile
parts) 545
33 Bank of Tokyo Mitsubishi (Bank) 762
15 Chodai Company, Ltd. (Consulting
services) 542
44 Credit Saison Company, Ltd.
(Financial Services) 1,067
0.10 DDI Corporation (Cellular telecom
service provider) 874
25 Enix Corporation (Entertainment
software) 781
15 Fuji Machine Manufacturing
(Automated assembly machine) 424
19 Giken Seisakusho Company, Ltd.
(Machinery) 417
50 Hitachi Metals (Specialty steel
maker) 576
18 Ito Yokado Company (Food
retailer) 1,088
60 Jaccs Company (Consumer finance) 548
7 Keyence Corporation (Electronics) 954
170 Mitsubishi Heavy Industries, Ltd.
(Machinery) 1,482
47 Mitsubishi Trust & Banking
(Banking) 795
55 Namco (Commercial use videogame
hardware) 1,826
68 Neturen Company (Metal products) 593
100 New Oji Paper Company (Pulp and
paper manufacturer) 865
16 Nichiei Company (Finance company) 1,068
90 Nikko Securities Company
(Securities firm) 1,013
Shares Value
- - ------------- --------
Japan (continued)
150 NTN Corporation (Bearings
producer) $ 1,063
70 Obayashi-Gumi Corporation
(Construction) 634
18 Oiles Corporation (Machinery) 801
87 Ricoh Company (Color copier
manufacturer) 923
8 Riso Kagaku Corporation (Printing
machine producer) 644
20 Rohm Company (Electronics) 1,321
21 Ryosan Electro Corporation
(Semiconductors/workstations) 544
10 SMC Corporation (Machinery) 776
36 Santen Pharmaceutical Company
(Opthalmic pharmaceuticals) 847
14 Secom Company (Services) 927
23 Sho Bond Corporation
(Construction) 878
30 Sumitumo Bank (Bank) 582
55 Sumitumo Trust & Banking (Bank) 755
60 Topre Corporation (Automobile
pressed parts) 520
18 Tostem Corporation (Metal
products) 532
--------
29,038
--------
Hong Kong -- 5.1%
2,200 Cafe DeCoral Holdings, Ltd.
(Food) 611
300 Cathay Pacific Airways, Ltd.
(Airline) 550
150 Citic Pacific, Ltd. (Industrial) 607
2,400 * Founder Hong Kong, Ltd.
(Electronics) 1,000
59 HSBC Holdings (Bank) 895
148 Inner Mongolia Erdos Cashmere
(Wool producer) 72
250 * New World Infrastructure
(Construction) 533
100 Swire Pacific Limited "A"
(Airline/general trading/ real
estate) 856
--------
5,124
--------
Singapore -- 1.9%
45 City Developments (Real estate) 351
4 Fraser and Neave Warrants
(Diversified conglomerate) 19
85 Jurong Engineering, Ltd.
(Engineering) 99
80 Keppel Corporation (Diversified
conglomerate) 669
50 Overseas Chinese Banking
Corporation (Bank) 585
5 Overseas Chinese Banking
Corporation Rights (Bank) 200
--------
1,923
--------
12
<PAGE>
Shares Value
- - ------------- --------
COMMON STOCKS -- Emerging Markets -- 10.1%
Argentina -- .7%
21 Irsa Inversiones Y
Representaciones GDR (Property) $ 698
--------
Brazil -- 1.2%
40 (a) Rhodia Ster S A (Packaging) 200
8 Telecommunicacoes Brasilera, ADR
(Telecommunications) 571
40 (a) Usinas Siderurgicas De Minas
Gerais S.S. (Steel) 435
--------
1,206
--------
Chile -- .4%
14 Santa Isabel SA GDR (Food
retailer) 381
--------
Indonesia -- .5%
350 PT Telekomunikasi Indonesia
(Telecommunications) 477
--------
Korea -- .4%
15 Korea Electric Power Corporation
ADR (Electric utility) 362
--------
Malaysia -- 2.4%
90 Commerce Asset Holdings Berhad
(Retail bank) 548
70 Box Pak (Malaysia) Berhad
(Packaging) 43
70 Kian Joo Can Factory Berhad (Can
manufacturer) 384
120 Malaysia Assurance Alliance
(Insurance) 635
158 YTL Corporation Berhad (Holding
company/power generation) 821
--------
2,431
--------
Peru -- 1.8%
505 Telefonica Del Peru SA CPT, 'B'
Shares (Telephone company) 1,023
88 Cia de Minas Buenaventura
(Mining) 779
--------
1,802
--------
Shares or
Amount Value
- - ------------- --------
South Africa -- 1.1%
115 Free State Consolidated Gold
Mines (Mining) $ 1,082
--------
Thailand -- 1.6%
200 (b) Industrial Finance Corporation of
Thailand (Bank) 898
99 Robinson Department Store
(General retailer) 246
69 Thai Farmers Bank (Bank) 511
--------
1,655
--------
TOTAL COMMON STOCKS -- 96.3%
(cost $85,267) 97,540
--------
CONVERTIBLE BONDS -- 6%
$ 500 United Micro Electric 1.25%,
due 6/8/04 (Technology)
(cost $855) 640
--------
SHORT-TERM INVESTMENT -- 2.5%
$2,446 Investors Bank & Trust Company
Repurchase Agreement
(cost $2,446) 2,446
--------
TOTAL INVESTMENTS -- 99.4% 100,626
Cash and other assets, less
liabilities -- .6% 633
--------
Net assets -- 100.0% $101,259
========
- - ---------------
* Non-income producing securities
GDR = Global Depository Receipts
ADR = American Depository Receipts
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1996, the value of
these securities was 0.6% of net assets.
(b) Foreign registered securities (Alien Market).
At June 30, 1996 the Fund's Portfolio of Investments includes the
following categories: Services -- 26%; Finance -- 21%; Capital Equipment
-- 19%; Consumer Goods -- 14%; Materials -- 10%; Multi-industry -- 6%; and
Energy -- 4%.
See accompanying Notes to Financial Statements.
13
<PAGE>
LOGO
Portfolio of Investments
June 30, 1996
(unaudited)
(all amounts in thousands)
Principal
Amount Issue Value
- - ------ ---- --------
U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY GUARANTEED
OBLIGATIONS -- 67.2%
U.S. Treasury -- 30.0%
$ 10,322 U.S. Treasury Note,
5.750%, due 8/15/03 $ 9,821
15,500 U.S. Treasury Note,
7.250%, due 5/15/04 16,052
18,650 U.S. Treasury Note,
7.875%, due 11/15/04 20,034
-------- --------
44,472 Total U.S. Treasury Obligations 45,907
-------- --------
U.S. GOVERNMENT GUARANTEED
OBLIGATIONS -- 15.8%
Small Business Administration -- 7.2%
-- Receipt for Multiple
Originator Fees, #3
0.785%, due 11/8/08
(Interest Only) WAC 1,881
342 Loan #100023, 9.375%, due
11/25/14 358
-- Receipt for Multiple
Originator Fees, #146
3.069%, due 6/3/15
(Interest Only) WAC 1,597
-- Receipt for Multiple
Originator Fees, #156
3.260%, due 7/20/15
(Interest Only) WAC 1,646
-- Receipt for Multiple
Originator Fees, #215
3.276%, due 9/3/15
(Interest Only) WAC 3,696
-- Receipt for Multiple
Originator Fees, #149
3.154%, due 10/1/15
(Interest Only) WAC 1,804
-------- --------
342 Total Small Business 10,982
-------- Administration --------
Obligations
U.S. Department of Veterans Affairs -- 4.3%
$ 1,580 Mortgage Trust 1992-1,
Tranche 2-B, 7.75%,
due 9/15/10 1,600
5,000 Mortgage Trust 1992-2,
-------- Tranche 2-D, 7.00%,
due 9/15/15 4,982
--------
6,580 Total U.S. Department of 6,582
-------- Veteran Affairs --------
Guaranteed Pass-Through
Certificates
Principal
Amount Issue Value
- - -------- -------------------------- --------
Federal Housing Authority -- 2.8%
4,134 9.68%, due 3/1/25 $ 4,296
-------- --------
Government National Mortgage
Association II -- 0.7%
23 12.00%, due 2/20/00 25
21 12.00%, due 2/20/15 24
685 11.00%, due 3/20/16 763
20 10.50%, due 6/20/19 21
85 10.50%, due 8/20/20 93
100 10.50%, due 9/20/20 109
-------- --------
934 Total Government National 1,035
-------- Mortgage Association --------
Mobile Home Obligations
Government National Mortgage
Association -- 0.7%
11 12.50%, due 4/15/14 12
54 13.00%, due 11/15/14 60
917 8.50%, due 12/15/21 945
-------- --------
982 Total Government National 1,017
-------- Mortgage Association --------
Obligations
Government National Mortgage
Association Mobile Home -- 0.1%
77 9.75%, due 3/15/98 79
37 9.75%, due 1/15/99 38
-------- --------
114 Total Government National 117
-------- Mortgage Association --------
Mobile Home Obligations
16
<PAGE>
Principal
Amount Issue Value
- - -------- -------------------------- --------
U.S. GOVERNMENT AGENCY GUARANTEED OBLIGATIONS -- 21.4%
Federal Home Loan Mortgage Corp.
(FHLMC) -- 12.0%
$ 403 #1475, Tranche SC, 9.431%
FR, due 2/15/08 $ 380
1,092 #1693, Tranche S+, 6.100%,
due 9/15/08 843
918 #1214, Tranche EB, 10.504%
FR, due 2/15/15 921
947 #77, Tranche F, 8.500%,
due 6/15/17 951
3,793 #555280, Pass Through,
8.500% , due 9/1/17 3,910
4,054 #845059, Pass Through,
7.630% FR, due 5/1/18 4,184
2,000 1289, Tranche PK, 7.500%,
due 5/15/18 2,020
2,519 #C00137, Pass Through,
9.000%, due 5/1/22 2,638
603 #1492, Tranche SE,
10.133%, due 3/15/23 543
2,017 #1542, Tranche S, 14.325%,
-------- due 7/15/23 1,997
--------
18,346 Total FHLMC Mortgage 18,387
-------- Obligations --------
Federal National Mortgage Association
(FNMA) -- 9.4%
853 1991-79, Tranche S,
17.446% FR, due 7/25/98 926
2,900 1993-47, Tranche B,
6.650%, due 3/25/06 2,830
54 13.25%, due 8/1/14 54
4,000 1992-15, Tranche E,
7.000%, due 9/25/18 3,997
4,192 7.440%, due 12/1/18 4,336
1,890 1992-200, Tranche SE,
11.500%, due 11/25/22 1,894
266 1993-19, Tranche SH,
-------- 11.234%, due 4/25/23 256
--------
14,155 Total FNMA Mortgage 14,293
-------- Obligations --------
90,059 Total U.S. Government and 102,616
-------- U.S. Government Agency --------
Guaranteed Obligations
Principal S&P
Amount Issue Rating Value
- - -------- -------------------------- ------ --------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 19.0%
$ 3,256 Prudential Home Mortgage
Securities Corp.,
1992-45, Tranche A-8,
7.020% FR, due 1/25/00 AAA $ 3,044
1,600 Polk Co. HFA, 1991-1,
Tranche A-2, 9.550%, due
1/15/11 AAA 1,652
11,968 Morgan Keegan Funding I,
L.P., 8.000%, due
4/25/11 AA- 11,845
687 Mortgage Obligation
Structured Trust,
1993-1, Tranche A-1,
6.350%, due 10/25/18 AAA 685
5,000 Prudential Home Mortgage
Securities Corp.,
1993-8, Tranche A-10,
7.350%, due 3/25/23 AAA 5,018
4,256 Prudential Home Mortgage
Securities Corp.,
1993-40, Tranche A-2,
6.500%, due 10/25/23 AAA 4,236
232 Residential Finance Corp.,
1991-11, Tranche A-2,
10.000%, due 4/001/21 AA 232
1,071 Residential Finance Corp.,
1992-2, Tranche A,
7.917%, due 8/25/21 AA 1,078
235 Resolution Trust Corp.,
1991-3, Tranche A-2,
10.365%, due 8/25/21 AAA 245
945 Resolution Trust Corp.,
-------- 1992-5, Tranche 5-C,
8.621%, due 1/25/26 962
AA --------
29,250 Total Collateralized 28,997
-------- Mortgage Obligations --------
CORPORATE OBLIGATIONS -- 2.0%
1,250 Sears, Roebuck Corp.
Medium Term Note, 9.75%, A- 1,372
due 3/21/00
1,500 Household Finance Corp.
-------- Medium Term Note,
10.38%, due 12/15/00 1,700
A --------
2,750 Total Corporate 3,072
-------- Obligations --------
122,059 TOTAL LONG-TERM 134,685
-------- INVESTMENTS -- 88.2% --------
(cost $136,737)
17
<PAGE>
Principal S&P
Amount Issue Rating Value
- - --------- -------------------------- ------ --------
SHORT-TERM INVESTMENTS
$ 3,500 Associates Corp. of North
America Demand Note,
5.150%, due 7/1/96 A-1+ $ 3,500
2,700 General Motors Acceptance
Corp., 5.300%, due
7/29/96 A-2 2,700
5,000 General Motors Acceptance
Corp., 5.330%, due
8/9/96 A-2 5,000
$ 3,000 American Express Credit
Corp., 5.280%, due
9/5/96 A-1 3,000
2,000 Ford Motor Credit Company,
-------- 5.370%, due 10/3/96 2,000
A-1 --------
16,200 TOTAL SHORT-TERM
-------- INVESTMENTS -- 10.6% 16,200
--------
(cost $16,200)
150,885
$138,259 TOTAL INVESTMENTS -- 98.8%
========
Cash and other assets, 1,864
less liabilities -- 1.2%
--------
Net assets -- 100.0% $152,749
========
- - ---------------
WAC = Weighted Average Coupon
FR = Floating Rate
See accompanying Notes to Financial Statements.
18
<PAGE>
Blair Ready Reserves Fund Logo
Portfolio of Investments
June 30,1996
(unaudited)
(all amounts in thousands)
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
U.S. GOVERNMENT AGENCY GUARANTEED -- 6.5%
$ 2,833 Agency for
International
Development
VRN -- Peru 5.622% 7/1/96 $ 2,833
8,000 Agency for
International
Development
VRN -- Zimbabwe 5.685% 7/1/96 8,000
3,738 Federal National
Mortgage
Association VRN 5.420% 7/2/96 3,738
5,819 National Oceanic
and Atmospheric
Administration VRN 5.793% 7/1/96 5,819
1,068 National Oceanic
and Atmospheric
Administration VRN 5.823% 7/1/96 1,068
9,000 Student Loan
Marketing
Association VRN 5.665% 7/2/96 9,000
12,993 Student Loan
Marketing
Association VRN 5.390% 7/2/96 12,993
- - --------- ---------
43,451 43,451
- - --------- ---------
Demand Note-- 0.4%
2,925 Associates
Corporation of
North America
Demand Note VRN 5.150% 7/2/96 2,925
---------
Fixed Rate Notes -- 0.3%
2,000
- - ---------
National Rural
Utilities
Cooperative
Finance
Corporation 8.160% 1/15/97 2,023
---------
COMMERCIAL PAPER -- 93.8%
Insurance -- 22.8%
4,000 American General
Corporation 5.380% 9/12/96 3,956
7,206 American General
Finance
Corporation 5.320% 7/9/96 7,197
3,781 American General
Finance
Corporation 5.290% 8/5/96 3,762
3,605 American General
Finance
Corporation 5.300% 8/6/96 3,586
6,269 American General
Finance
Corporation 5.300% 8/6/96 6,236
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
$ 5,000 American General
Finance
Corporation 5.290% 8/15/96 $ 4,967
8,280 General Re
Corporation 5.390% 9/13/96 8,188
10,617 Metlife Funding
Incorporated 5.380% 9/24/96 10,482
660 Metlife Funding
Incorporated 5.380% 10/1/96 651
10,000 Metlife Funding
Incorporated 5.390% 10/1/96 9,862
15,000 Prudential Funding
Corporation 5.290% 7/16/96 14,967
7,629 Prudential Funding
Corporation 5.270% 7/26/96 7,601
8,000 Prudential Funding
Corporation 5.270% 8/1/96 7,964
3,502 Prudential Funding
Corporation 5.270% 8/2/96 3,486
6,000 SAFECO Credit
Corporation 5.300% 7/17/96 5,986
1,592 SAFECO Credit
Corporation 5.280% 8/9/96 1,583
3,000 SAFECO Credit
Corporation 5.280% 8/19/96 2,978
3,000 SAFECO Credit
Corporation 5.270% 8/21/96 2,978
3,000 SAFECO Credit
Corporation 5.280% 8/27/96 2,975
5,000 SAFECO Credit
Corporation 5.320% 9/3/96 4,953
3,600 SAFECO Credit
Corporation 5.390% 9/3/96 3,566
5,000 SAFECO Credit
Corporation 5.370% 9/4/96 4,952
4,200 SAFECO Credit
Corporation 5.400% 9/18/96 4,150
5,000 USAA Capital
Corporation 5.280% 7/9/96 4,994
5,000 USAA Capital
Corporation 5.290% 8/8/96 4,972
2,850 USAA Capital
Corporation 5.270% 8/20/96 2,829
8,000 USAA Capital
Corporation 5.270% 8/22/96 7,939
5,000 USAA Capital
Corporation 5.380% 9/19/96 4,940
- - --------- ---------
153,791 152,700
- - --------- ---------
Finance -- 18.7%
6,000 American Express
Credit Corporation 5.280% 7/23/96 5,981
9,293 American Express
Credit Corporation 5.290% 8/7/96 9,242
20
<PAGE>
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
$ 4,222 American Express
Credit Corporation 5.290% 8/30/96 $ 4,185
5,877 Associates
Corporation of
North America 5.260% 7/24/96 5,857
1,777 Associates
Corporation of
North America 5.290% 7/24/96 1,771
2,055 Associates
Corporation of
North America 5.270% 7/30/96 2,046
6,000 Associates
Corporation of
North America 5.300% 8/5/96 5,969
4,690 Associates
Corporation of
North America 5.380% 9/6/96 4,643
5,000 Associates
Corporation of
North America 5.400% 9/17/96 4,942
5,000 Avco Financial
Services
Incorporated 5.300% 8/14/96 4,968
6,195 Avco Financial
Services
Incorporated 5.330% 9/10/96 6,130
10,840 Beneficial
Corporation 5.400% 9/25/96 10,700
6,620 Beneficial
Corporation 5.400% 9/26/96 6,534
3,080 Household Finance
Corporation 5.280% 8/23/96 3,056
3,415 Norwest Financial,
Inc. 5.300% 7/3/96 3,414
5,801 Norwest Financial,
Inc. 5.310% 8/9/96 5,768
9,770 Norwest Financial,
Inc. 5.280% 8/12/96 9,710
14,484 Norwest Financial,
Inc. 5.300% 9/5/96 14,343
10,000 Student Loan
Corporation 5.280% 7/29/96 9,959
6,000 Student Loan
Corporation 5.300% 8/28/96 5,948
- - --------- ---------
126,119 125,166
- - --------- ---------
Manufacturing -- 13.6%
3,052 Ford Motor Credit
Company 5.280% 8/20/96 3,030
7,213 Ford Motor Credit
Company 5.430% 10/9/96 7,104
6,995 Ford Motor Credit
Company 5.410% 10/9/96 6,890
4,975 Ford Motor Credit
Company 5.430% 10/10/96 4,899
7,071 General Electric
Capital
Corporation 5.220% 7/10/96 7,062
5,000 General Electric
Capital
Corporation 5.250% 7/10/96 4,993
7,319 General Electric
Capital
Corporation 5.230% 7/18/96 7,301
6,000 General Electric
Capital
Corporation 5.260% 7/31/96 5,974
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
$ 2,450 General Electric
Capital
Corporation 5.290% 8/12/96 $ 2,435
6,000 General Electric
Capital
Corporation 5.290% 9/11/96 5,937
3,507 General Electric
Company 5.250% 7/8/96 3,503
7,476 General Electric
Company 5.260% 7/22/96 7,453
9,379 General Electric
Company 5.280% 8/16/96 9,316
5,000 Paccar Financial
Corporation 5.300% 8/1/96 4,977
5,000 Paccar Financial
Corporation 5.280% 8/16/96 4,966
5,000 Paccar Financial
Corporation 5.270% 8/29/96 4,957
- - --------- ---------
91,437 90,797
- - --------- ---------
Utilities -- Telephone -- 9.1%
4,548 American Telephone
& Telegraph Corp. 5.290% 7/25/96 4,532
6,384 American Telephone
& Telegraph Corp. 5.350% 8/6/96 6,350
9,000 American Telephone
& Telegraph Corp. 5.390% 10/3/96 8,873
5,000 Ameritech Capital
Funding
Corporation 5.700% 1/16/96 4,971
1,000 Ameritech Capital
Funding
Corporation 5.280% 8/9/96 986
5,500 Ameritech Capital
Funding
Corporation 5.420% 10/2/96 5,423
6,000 Ameritech Capital
Funding
Corporation 5.400% 10/2/96 5,904
5,000 Ameritech Capital
Funding
Corporation 5.280% 10/18/96 4,920
5,668 Ameritech Capital
Funding
Corporation 5.270% 10/18/96 5,574
5,000 Ameritech Capital
Funding
Corporation 5.340% 10/21/96 4,909
7,000 U S West Capital
Funding Inc. 5.300% 7/15/96 6,986
1,200 U S West
Communications
Inc. 5.300% 8/19/96 1,191
- - --------- ---------
61,300 60,619
- - --------- ---------
Media / Entertainment -- 8.7%
5,000 Dun and Bradstreet
Corporation 5.320% 7/9/96 4,994
6,000 Dun and Bradstreet
Corporation 5.280% 7/30/96 5,975
6,000 Knight Ridder
Incorporated 5.260% 7/3/96 5,998
21
<PAGE>
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
$ 5,000 Knight Ridder
Incorporated 5.270% 7/12/96 $ 4,992
4,000 Knight Ridder
Incorporated 5.290% 7/30/96 3,983
5,250 Knight Ridder
Incorporated 5.300% 8/8/96 5,221
4,382 McGraw Hill
Incorporated 5.320% 7/2/96 4,381
8,500 McGraw Hill
Incorporated 5.420% 10/11/96 8,369
2,680 McGraw Hill
Incorporated 5.420% 10/15/96 2,637
3,320 McGraw Hill
Incorporated 5.420% 10/15/96 3,267
8,500 McGraw Hill
Incorporated 5.410% 10/17/96 8,362
- - --------- ---------
58,632 58,179
- - --------- ---------
Energy -- 5.9%
12,000 Chevron Oil
Finance Company 5.250% 7/15/96 11,976
2,000 Chevron Oil
Finance Company 5.290% 8/23/96 1,985
5,600 Chevron U.K.
Investment PLC 5.380% 9/9/96 5,541
9,100 Chevron U.K.
Investment PLC 5.290% 9/16/96 8,997
6,100 Chevron U.K.
Investment PLC 5.300% 10/7/96 6,012
5,000 Mobil Finance
Corporation
(Australia) 5.390% 9/20/96 4,939
- - --------- ---------
39,800 39,450
- - --------- ---------
Brokerage -- 4.3%
5,000 Merrill Lynch &
Company, Inc. 5.290% 7/1/96 5,000
4,850 Merrill Lynch &
Company, Inc. 5.320% 8/2/96 4,827
3,000 Merrill Lynch &
Company, Inc. 5.360% 8/26/96 2,975
890 Merrill Lynch &
Company, Inc. 5.420% 10/2/96 878
5,000 Morgan Stanley
Group Incorporated 5.300% 7/26/96 4,982
5,000 Morgan Stanley
Group Incorporated 5.720% 1/10/96 4,958
5,000 Morgan Stanley
Group Incorporated 5.450% 3/22/96 4,957
- - --------- ---------
28,740 28,577
- - --------- ---------
Electronic/Technology -- 2.7%
5,000 Hewlett Packard
Company 5.170% 7/19/96 4,987
3,000 IBM Corporation 5.280% 7/17/96 2,993
9,730 IBM Corporation 5.280% 7/19/96 9,704
- - --------- ---------
17,730 17,684
- - --------- ---------
Principal Interest Amortized
Amount Issue Rate Maturity Cost
- - --------- ------------------ -------- -------- ---------
Utilities -- Energy & Gas -- 2.2%
$ 5,000 National Rural
Utilities
Cooperative
Finance
Corporation 5.280% 7/3/96 $ 4,998
10,000 National Rural
Utilities
Cooperative
Finance
Corporation 5.270% 7/17/96 9,977
- - --------- ---------
15,000 14,975
- - --------- ---------
Drugs/Health -- 1.7%
7,332 Schering
Corporation 5.270% 8/13/96 7,286
2,200 Schering
Corporation 5.410% 10/15/96 2,165
2,000 Warner -- Lambert
Company 5.270% 7/30/96 1,991
- - --------- ---------
11,532 11,442
- - --------- ---------
Banks -- 1.7%
5,269 J P Morgan 5.300% 7/11/96 5,261
6,000 J P Morgan 5.300% 7/11/96 5,991
- - --------- ---------
11,269 11,252
- - --------- ---------
Food/Beverage/Tobacco -- 1.4%
3,361 Brown -- Forman
Corporation 5.320% 7/2/96 3,361
1,267 Brown -- Forman
Corporation 5.430% 9/6/96 1,254
5,000 Brown -- Forman
Corporation 5.390% 9/10/96 4,947
- - --------- ---------
9,628 9,562
- - --------- ---------
Chemical/Forest -- 1.0%
7,000 Weyerhauser
Company 5.300% 7/22/96 6,978
- - --------- ---------
631,978 Total Commercial
Paper 627,381
---------
Portfolio Weighted
Average Maturity 49 Days
$ 680,354 TOTAL INVESTMENTS -- 101.0% 675,780
Liabilities, plus cash and other
assets -- (1.0%) (6,908 )
---------
Net assets -- 100.0% $668,872
========
- - ---------------
VRN = Variable Rate Note
See accompanying Notes to Financial Statements.
22
<PAGE>
<TABLE>
LOGO
Statements of Assets and Liabilities
June 30, 1996
(unaudited)
(all amounts in thousands)
<CAPTION>
Ready
Growth International Income Reserves
Fund Growth Fund Fund Fund
-------- ------------- -------- --------
<S> <C> <C> <C> <C>
Assets
Investments at market (cost $324,336;
$88,568; $152,937; and $675,757, respectively) $447,364 $ 100,626 $150,885 $675,757
Cash -- 126 -- 1
Receivable for:
Fund shares sold 997 29 115 5,892
Investments sold -- 1,160 329 --
Interest and dividends 333 278 1,613 626
Foreign currency sold -- 153 -- --
Foreign withholding tax -- 154 -- --
Deferred organization costs 15 -- --
Other assets 20 -- 1 50
-------- -------- -------- --------
Total assets 448,714 102,541 152,943 682,326
Liabilities
Payable for:
Fund shares redeemed 468 12 71 11,815
Investments purchased -- 1,020 -- --
Dividends -- -- -- 1,154
Management fee and organization costs (Notes 1 and 2) 276 110 73 351
Unrealized depreciation on foreign currency forward contracts -- 112 -- --
Other 110 28 50 134
-------- -------- -------- --------
Total liabilities 854 1,282 194 13,454
-------- -------- -------- --------
Net assets $447,860 $ 101,259 $152,749 $668,872
======== ======== ======== ========
Capital
Capital stock ($0.001 par value; 33,629; 7,140; 14,864; and
668,872 shares issued and outstanding, respectively) $ 32 $ 7 $ 15 $ 669
Paid-in-surplus 307,738 86,909 158,172 668,203
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions 123,028 11,893 (2,052) --
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions 16,610 1,829 (3,651) --
Undistributed net investment income 452 621 265 --
-------- -------- -------- --------
Net assets $447,860 $ 101,259 $152,749 $668,872
======== ======== ======== ========
$13.32 $14.19 $10.27 $1.00
Net asset value per share ======== ======== ======== ========
</TABLE>
23
<PAGE>
LOGO
<TABLE>
Statements of Operations
For the Period Ended June 30, 1996
(unaudited)
(all amounts in thousands)
<CAPTION>
International Ready
Growth Growth Income Reserves
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Investment Income
Interest $ 563 $ 105 $4,828 $9,680
Dividends 1,051 1,133 -- --
Less foreign tax withheld (15 ) (161) -- --
-------- ------ -------- ------
Total investment income 1,599 1,077 4,828 9,680
Expenses
Investment advisory fees (Note 2) 1,214 578 420 2,090
Custodian fees 54 94 26 79
Professional fees 27 27 24 28
Transfer agent fees 57 9 13 162
Registration fees 20 2 5 23
Organization costs -- 5 -- --
Miscellaneous 89 28 19 130
-------- ------ -------- ------
Total expenses 1,461 743 507 2,512
-------- ------ -------- ------
Net investment income 138 334 4,321 7,168
Net realized and unrealized gain (loss)
on investments, foreign currency and
other assets and liabilities
Net realized gain on investments 16,497 2,697 312 --
Less foreign tax withheld on investments sold -- (1) -- --
Net realized loss on foreign currency transactions -- (310) -- --
-------- ------ -------- ------
Total net realized gain 16,497 2,386 312 --
Change in net unrealized appreciation
(depreciation) on investments, and
other assets and liabilities (Note 1) 28,507 5,576 (4,991 ) --
-------- ------ -------- ------
Net realized and unrealized gain (loss)
on investments, foreign currency and
other assets and liabilities 45,004 7,962 (4,679 ) --
-------- ------ -------- ------
Net increase (decrease) in net
assets resulting from operations $45,142 $ 8,296 $ (358 ) $7,168
======== ====== ======== ======
</TABLE>
24
<PAGE>
LOGO
<TABLE>
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(unaudited)
(all amounts in thousands)
<CAPTION>
International
Growth Fund Growth Fund Income Fund Ready Reserves Fund
-------------------- ------------------- -------------------- --------------------------
1996 1995 1996 1995 1996 1995 1996 1995
-------- -------- -------- ------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 138 $ 993 $ 334 $ 704 $ 4,321 $ 9,265 $ 7,168 $ 31,846
Net realized gain (loss) on
investments
and foreign currency
transactions 16,497 13,274 2,386 (403) 312 (955) -- --
Change in net unrealized
appreciation
(depreciation) on
investments
and other assets and
liabilities 28,507 58,269 5,576 5,958 (4,991) 11,783 -- --
-------- -------- -------- ------- -------- -------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations 45,142 72,536 8,296 6,259 (358) 20,093 7,168 31,846
Distributions to shareholders
from
Net investment income (5) (817) -- (880)(a) (4,043) (9,438) (7,168) (31,846)
Net realized gain -- (13,275) -- -- -- -- -- --
-------- -------- -------- ------- -------- -------- ----------- -----------
(5) (14,092) -- (880) (4,043) (9,438) (7,168) (31,846)
Capital stock transactions
Shares sold 73,255 106,709 23,598 20,612 20,934 23,930 1,539,641 2,514,548
Shares issued in
reinvestment of income
dividends and capital
gain distributions 5 12,714 -- 717 2,956 6,875 15,037 31,117
Less shares redeemed (33,573) (32,391) (20,397) (7,349) (14,110) (37,880) (1,589,799) (2,362,949)
-------- -------- -------- ------- -------- -------- ----------- -----------
Change from capital stock
transactions 39,687 87,032 3,201 13,980 9,780 (7,075) (35,121) 182,716
-------- -------- -------- ------- -------- -------- ----------- -----------
Change in net assets 84,824 145,476 11,497 19,359 5,379 3,580 (35,121) 182,716
Net assets
Beginning of period 363,036 217,560 89,762 70,403 147,370 143,790 703,993 521,277
-------- -------- -------- ------- -------- -------- ----------- -----------
End of period $447,860 $363,036 $101,259 $89,762 $152,749 $147,370 $ 668,872 $ 703,993
======== ======== ======== ======= ======== ======== =========== ===========
- - -------------------------
Undistributed net
investment
income at the end of the
period $ 452 $ 319 $ 621 $ 343 $ 265 $ (13) $ -- $ --
======== ======== ======== ======= ======== ======== =========== ===========
- - -------------------------
Capital stock transactions
Shares sold 5,761 9,647 1,764 1,688 1,999 2,337 1,539,641 2,514,548
Shares issued in
reinvestment of income
dividends and capital
gain distributions 1 1,092 -- 55 285 668 15,037 31,117
Less shares redeemed (2,648) (2,875) (1,466) (595) (1,356) (3,670) (1,589,799) (2,362,949)
-------- -------- -------- ------- -------- -------- ----------- -----------
Change from capital stock
transactions 3,114 7,864 298 1,148 928 (665) (35,121) 182,716
======== ======== ======== ======= ======== ======== =========== ===========
- - ---------------
</TABLE>
(a) Includes $414 relating to PFIC transactions which are treated as ordinary
income for Federal income tax purposes.
25
<PAGE>
Notes to Financial Statements
(unaudited)
(1) Significant Accounting Policies
(a) Description of the Fund
William Blair Mutual Funds, Inc. (the "Fund") is a no-load, open-end
diversified mutual fund currently consisting of four portfolios, each with its
own investment objective and policies.
The Growth Fund is a portfolio whose principal objective is to provide
long-term appreciation of capital by investing in well-managed companies in
growing industries.
The International Growth Fund is a portfolio which invests primarily in
common stocks issued by companies domiciled outside the United States and
securities convertible into, ex-changeable for, or having the right to buy
such common stocks. The investment objective of the portfolio is long-term
capital appreciation through investment in well-managed, quality, growth
companies.
The Income Fund is a portfolio designed to provide investors with as high
a level of current income as is consistent with preservation of capital.
The Ready Reserves Fund is a money market portfolio designed for
investors who are looking for professional management of their reserve assets.
The Ready Reserves Fund portfolio seeks to obtain maximum current income
consistent with preservation of capital and invests exclusively in high
quality money market instruments.
All of the portfolio's investments are subject to market fluctuations and
fiscal risks.
(b) Investment Securities
Equity securities traded on national securities markets are valued at the
last sale price or, in the absence of a sale on the date of determination, at
the latest bid price. Long-term fixed-income securities are valued by using
market quotations or independent services that use prices provided by market
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. The value of a foreign
security held is determined based upon its sale price on the foreign exchange
or market on which it is traded as of the close of the appropriate exchange
or, if there have been no sales during the day, at the latest bid price. Other
securities are valued at fair value as determined in good faith by the Board
of Directors. Short-term securities in all Funds except Ready Reserves Fund
are valued at cost which approximates market value. Securities in Ready
Reserves Fund are valued on the amortized cost method. Under this method, any
premium or discount, as of the date an investment security is acquired, is
amortized on a straight-line basis to maturity.
Interest income is determined on the basis of interest accrued, adjusted
for amortization of premium or discount. Dividend income is recorded on the
ex-dividend date, except that certain dividends from foreign securities are
recorded as soon as the information is available. Securities transactions are
recorded on the trade date. Realized gains and losses from securities
transactions are reported on an identified cost basis.
Put bonds may be redeemed at the discretion of the holder on specified
dates prior to maturity. Variable rate bonds and floating rate notes earn
interest at a coupon rate which fluctuates at specific time intervals. The
interest rates shown in the Income Fund and Ready Reserves Fund Portfolios of
Investments are the coupon rates in effect at June 30, 1996.
(c) Share Valuation and Dividends to Shareholders
Shares are sold and redeemed on a continuous basis at net asset value.
Each Fund determines net asset value per share by dividing the value of its
Fund assets, less liabilities, by the number of shares outstanding as of the
earlier of 3:00 p.m. or the daily close of business of the New York Stock
Exchange for Growth Fund and International Growth Fund or on each day when New
York banks are open for
26
<PAGE>
business (except Good Friday) for Income Fund and Ready Reserves Fund.
Dividends from net investment income of the Growth Fund, International Growth
Fund, Income Fund and Ready Reserves Fund are declared at least semi-annually,
annually, monthly and daily, respectively. Dividends payable to shareholders
are recorded on the ex-dividend date. Dividends are determined in accordance
with Federal income tax principles which may treat certain transactions
differently from generally accepted accounting principles. The International
Growth Fund has elected to mark-to-market its investments in Passive Foreign
Investment Companies ("PFIC") for Federal income tax purposes. In accordance
with this election, $414,000 in unrealized appreciation was recognized in
1995. The International Growth Fund's distribution for 1994 included $431,097
relating to a tax return of capital. The permanent book and tax difference
relating to this distribution resulted in a reduction to Paid-in-Surplus.
(d) Repurchase Agreements
The Fund may enter into repurchase agreements through its custodian,
whereby the Fund acquires ownership of a debt security and the custodian
agrees, at the time of the sale, to repurchase the debt security from the Fund
at a mutually agreed upon time and price. The Fund's policy is to take
possession of securities under repurchase agreements. The Fund minimizes
credit risk by (i) monitoring credit exposure of the custodian and (ii)
monitoring collateral value on a daily basis and requiring additional
collateral to be deposited with or returned to the Fund when deemed necessary.
(e) Foreign Currency Translation and Forward Foreign Currency Contracts
All assets and liabilities of the International Growth Fund denominated
in foreign currencies are translated into U.S. dollar amounts at the current
exchange rate at the day of valuation. The International Growth Fund may enter
into forward foreign currency contracts as a means of managing the risks
associated with changes in exchange rates for the purchase or sale of a
specific amount of a particular foreign currency. Additionally, from time to
time, the Fund may enter into contracts to hedge the value, in U.S. dollars,
of securities it currently owns. Forward foreign currency contracts and
foreign currencies are valued at the forward and current exchange rates,
respectively, prevailing on the day of valuation. Realized gains and losses
from foreign currency transactions associated with purchases and sales of
investments are included in the cost or proceeds. All other foreign currency
transactions are included in net realized gain or loss from investments.
(f) Income Taxes
Each Fund intends to comply with the special provisions of the Internal
Revenue Code available to regulated investment companies and, therefore, no
provision for Federal income taxes has been made in the accompanying financial
statements since the Funds intend to distribute their taxable income to their
shareholders and be relieved of all Federal income taxes. At December 31,
1995, the Fund's most recent tax year end, the International Growth Fund and
the Income Fund have capital loss carryforwards of $118,000 and $3,965,000,
respectively. These loss carryforwards, which expire in 2003 and 2002,
respectively, can be used to offset capital gains.
(g) Organization Costs
The initial organization costs of the International Growth Fund have been
paid or accrued by William Blair & Company L.L.C. (the "Company") and the Fund
will reimburse the Company for the amount of such expenses not exceeding
$50,000. The deferred organization costs are being amortized on the
straight-line method and repaid to the Company over a five year period.
(2) Investment Advisory, Transactions with Affiliates and Director's Fees
The Company serves as the Funds' Investment Adviser (the "Adviser") and
provides administrative services to the Funds under a Management Agreement.
For the Growth Fund, effective as of May 1, 1996, the Fund pays the
Adviser a monthly management advisory fee at an annual rate equal to .75% of
the average daily net assets of the portfolio.
27
<PAGE>
Prior to May 1, 1996, the Fund paid the Adviser a monthly management advisory
fee at an annual rate equal to .625% of the first $75 million of the Growth
Fund's average daily net assets and .50% of average daily net assets above $75
million.
As compensation for its services to the International Growth Fund,
effective as of May 1, 1996, the Adviser is entitled to a monthly advisory fee
at an annual rate equal to 1.10% of the first $250 million of average daily
net assets of the portfolio and 1.00% of average daily net assets above $250
million. The Adviser pays the Sub-Adviser a monthly sub-advisory fee at an
annual rate equal to .40% of the first $100 million of average daily assets of
the portfolio and .275% of average daily net assets above $100 million. Prior
to May 1, 1996, the Fund paid the Adviser a monthly management advisory fee at
an annual rate equal to 1.10% of the first $100 million of the International
Growth Fund's average daily net assets and .95% of average daily net assets
above $100 million.
For the Income Fund, effective as of May 1, 1996, the Fund pays the
Adviser a monthly management advisory fee at an annual rate equal to .25% of
the first $250 million of average daily net assets of the portfolio and .20%
of average daily net assets in excess of $250 million, plus 5.0% of the gross
income earned. Prior to May 1, 1996, the Fund paid the Adviser a monthly
management advisory fee at an annual rate equal to .25% of the first $100
million of the Income Fund's average daily net assets, plus .20% of the next
$150 million of average daily net assets and .15% of average daily net assets
in excess of $250 million, plus 5.0% of the gross income earned by the
portfolio.
For the Ready Reserves Fund, effective as of May 1, 1996, the Fund pays
the Adviser a monthly management advisory fee at the annual rate of .625% of
the first $250 million of average daily net assets of the portfolio, .60% of
the next $250 million, .575% of the next $2 billion and .55% of the average
daily net assets in excess of $2.5 billion. Prior to May 1, 1996, the Fund
paid the Adviser a monthly management advisory fee at an annual rate equal to
.625% of the first $250 million of the Ready Reserves Fund's average daily net
assets, .60% of the next $250 million, .55% of the next $500 million, .50% of
the next $2 billion, .45% of the next $2 billion, and .40% of the average
daily net assets in excess of $5 billion.
The Company purchased U.S. Government guaranteed obligations at amortized
cost from the Ready Reserves Fund in 1994. The excess of the purchase price
(amortized cost) over the fair market value at the date of purchase was
reflected as a capital contribution to the Fund.
The Funds paid fees of $24,000 to non-affiliated directors of the Funds
for the period ended June 30, 1996.
28
<PAGE>
(3) Investment Transactions
Investment transactions, excluding money market instruments, for the
period ended June 30, 1996, are as follows:
<TABLE>
<CAPTION>
International
Growth Growth Income
(in thousands) Fund Fund Fund
-------- ------------- -------
<S> <C> <C> <C>
Purchases $142,422 $44,464 $40,324
Proceeds from sales and maturities 100,802 41,834 33,023
Gross unrealized appreciation
(depreciation) at June 30, 1996
is as follows:
Unrealized appreciation $126,120 $15,164 $ 1,253
Unrealized depreciation (3,092) (3,106) (3,305)
-------- ------- -------
Net unrealized appreciation (depreciation) $123,028 $12,058 $(2,052)
======== ======= =======
</TABLE>
Cost of investments is the same for financial statement and Federal
income tax purposes.
(4) Forward Foreign Currency Contracts
In order to protect itself against a decline in the value of the Deutsche
mark and French franc against the U.S. dollar, the International Growth Fund
entered into forward contracts with its custodian to deliver Deutsche marks
and French francs in exchange for U.S. dollars as described below.
International Growth Fund bears the market risk that arises from changes in
foreign exchange rates and bears the credit risk if the counterparty fails to
perform under the contract. The unrealized gain or loss associated with these
forward contracts is reflected in the accompanying financial statements. At
June 30, 1996, the International Growth Fund had the following forward foreign
currency contracts outstanding:
(in thousands)
- - ----------------------------------------------------
Contract
Foreign Currency amount in Unrealized Settlement
to be delivered U.S. Dollars Gain (Loss) Date
- - ---------------------- ------------ ----------- ------------------
11,553 Deutsche marks $7,702 $(109) July 15, 1996
42,526 French francs 8,289 (11) July 15, 1996
3,000 French francs 576 8 July 22, 1996
-----------
$(112)
=========
29
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Six Months Years Ended December 31,
Ended -------------------------------------------------------
GROWTH FUND June 30, 1996(a) 1995 1994 1993 1992 1991
- - --------------------------------------------------- ---------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.900 $ 9.600 $ 9.730 $ 9.390 $ 9.490 $ 6.970
Income from investment operations:
Net investment income .003 .034 .027 .035 .045 .070
Net realized and unrealized gain on investments 1.417 2.750 .581 1.389 .671 2.970
-------- -------- -------- -------- -------- -------
Total from investment operations 1.420 2.784 .608 1.424 .716 3.040
Less distributions from:
Net investment income -- .030 .025 .035 .047 .070
Net realized gain -- .454 .713 1.049 .769 .450
-------- -------- -------- -------- -------- -------
Total distributions -- .484 .738 1.084 .816 .520
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 13.320 $ 11.900 $ 9.600 $ 9.730 $ 9.390 $ 9.490
======== ======== ======== ======== ======== =======
Total return (%) 11.93 29.07 6.45 15.51 7.61 44.37
Ratios to average daily net assets (%):
Expenses .75 .65 .71 .78 .83 .90
Net investment income .07 .34 .32 .38 1.34 .83
Supplemental data:
Net assets at end of period (in thousands) $447,860 $363,036 $217,560 $150,046 $111,082 $91,433
Portfolio turnover rate (%) 49 32 46 55 27 33
</TABLE>
<TABLE>
<CAPTION>
Six Months Years Ended December 31, Period Ended
Ended ------------------------------- December 31,
INTERNATIONAL GROWTH FUND June 30, 1996(a) 1995 1994 1993 1992(a)(b)
- - ------------------------------------------------------ ---------------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.120 $12.360 $13.180 $10.130 $10.000
Income from investment operations:
Net investment income (loss) .046 .105 0.016 0.008 (0.011)
Net realized and unrealized gain (loss) on
investments and foreign currency and other assets
and liabilities 1.024 .785 (0.025) 3.401 0.141
------- ------- ------- -------
Total from investment operations 1.070 .890 (0.009) 3.409 0.130
Less distributions from:
Net investment income -- .130(c) 0.024 -- --
Net realized gain -- -- 0.714 0.359 --
Tax return of capital -- -- 0.073 -- --
------- ------- ------- -------
Total distributions -- .130 0.811 0.359 --
------- ------- ------- -------
Net asset value, end of period $ 14.190 $13.120 $12.360 $13.180 $10.130
======= ======= ======= =======
Total return (%) 8.16 7.22 (0.040) 33.6 1.3
Ratios to average daily net assets (%):
Expenses(d) 1.41 1.48 1.51 1.71 1.88
Net investment income(d) .63 .87 .15 .11 (.56)
Supplemental data:
Net assets at end of period (in thousands) $101,259 $89,762 $70,403 $40,298 $10,767
Portfolio turnover rate (%) 82 77 40 83 5
</TABLE>
- - ---------------
(a) Ratios are annualized except total returns for periods less than one year.
(b) For the period October 1, 1992 (Commencement of Operations) to December
31, 1992.
(c) Includes $.061 in PFIC transactions which are treated as ordinary income
for Federal income tax purposes.
(d) Without the waiver of expenses in 1993 and 1992, the expense ratios would
have been 2.08% and 2.55% and the net investment income ratios would have
been (.25)% and (1.22)%, respectively.
30
<PAGE>
<TABLE>
<CAPTION>
Six Months Years Ended December 31,
Ended --------------------------------------------------------
INCOME FUND June 30, 1996(a) 1995 1994 1993 1992 1991
- - ------------------------------------------- ----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.570 $ 9.850 $ 10.580 $ 10.600 $ 10.770 $ 10.200
Income from investment operations:
Net investment income .294 .646 .661 .651 .832 .945
Net realized and unrealized gain
(loss) on investments (.319) .732 (.741) .159 (.089) .638
-------- -------- -------- -------- -------- --------
Total from investment operations (.025) 1.378 (.080) .810 .743 1.583
Less distributions:
Net investment income .275 .658 .646 .651 .827 .870
Net realized gain -- -- .004 .179 .086 .143
-------- -------- -------- -------- -------- --------
Total distributions .275 .658 .650 .830 .913 1.013
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.270 $ 10.570 $ 9.850 $ 10.580 $ 10.600 $ 10.770
================ ======== ======== ======== ======== ========
Total return (%) (.33) 14.37 (.74) 7.82 7.17 16.47
Ratios to average daily net assets (%):
Expenses .66 .68 .68 .70 .88 .92(b)
Net investment income 5.66 6.24 6.33 5.96 7.69 8.33(b)
Supplemental data:
Net assets at end of period (in
thousands) $ 152,749 $147,370 $143,790 $204,381 $136,896 $ 83,041
Portfolio turnover rate (%) 64 54 63 114 47 64
</TABLE>
<TABLE>
<CAPTION>
Six Months Years Ended December 31,
Ended --------------------------------------------------------
READY RESERVES FUND June 30, 1996(a) 1995 1994 1993 1992 1991
- - ------------------------------------------- ----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
Income from investment operations:
Net investment income .0220 .0530 .0361 .0261 .0327 .0551
Net realized loss on investments -- -- (.0026) -- -- --
-------- -------- -------- -------- -------- --------
Total from investment operations .0220 .0530 .0335 .0261 .0327 .0551
Less distributions from:
Net investment income .0220 .0530 .0361 .0261 .0327 .0551
-------- -------- -------- -------- -------- --------
Total distributions .0220 .0530 .0361 .0261 .0327 .0551
-------- -------- -------- -------- -------- --------
Capital contribution -- -- .0026 -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
================ ======== ======== ======== ======== ========
Total return (%) 2.38 5.45 3.67(c) 2.64 3.32 5.64
Ratios to average daily net assets (%):
Expenses .72 .72 .71 .71 .71 .71
Net investment income 2.20 5.30 3.61 2.61 3.27 5.51
Supplemental data:
Net assets at end of period (in
thousands) $ 668,872 $703,993 $521,277 $477,268 $448,797 $402,978
</TABLE>
- - ---------------
(a) Ratios are annualized except total returns for periods of less than one
year.
(b) Without the waiver of expenses in 1991, the expense ratio would have been
1.06% and the net investment income ratio would have been 8.19%.
(c) The total return includes the impact of the Company's capital
contribution. Without the Company's capital contribution, the total return
would have been 3.40%.
31
<PAGE>
