SMITH HAYES TRUST, INC.
CAPITAL BUILDER
CONVERTIBLE
SMALL CAP
GOVERNMENT/QUALITY BOND
ANNUAL REPORT
JUNE 30, 1996
<PAGE>
Shareholder Letter........................................... 1
Comparison Graphs
Capital Builder Fund..................................... 2
Convertible Fund......................................... 3
Small Cap Fund........................................... 4
Government/Quality Bond Fund............................. 5
Independent Auditors' Report................................. 6
Schedule of Investments
Capital Builder Fund..................................... 7
Convertible Fund......................................... 10
Small Cap Fund........................................... 13
Government/Quality Bond Fund............................. 17
Statement of Assets and Liabilities.......................... 18
Statement of Operations...................................... 19
Statements of Changes in Net Assets
Capital Builder Fund..................................... 20
Convertible Fund......................................... 20
Small Cap Fund........................................... 21
Government/Quality Bond Fund............................. 21
Financial Highlights
Capital Builder Fund..................................... 22
Convertible Fund......................................... 23
Small Cap Fund........................................... 24
Government/Quality Bond Fund............................. 25
Notes to Financial Statements................................ 26
<PAGE>
SMITH HAYES TRUST, INC.
Fellow Shareholders:
Fiscal 1996 was an eventful year for the financial markets as well as the SMITH
HAYES Trust, Inc. On August 24, 1995, Conley Investment Partners Ltd
consolidated with the Asset Allocation, Balanced and Value portfolios to form
the Capital Builder Fund under the banner of the SMITH HAYES Trust. Presently
five separate funds, plus a Money Market fund are offered within the SMITH HAYES
Trust. These funds are designed to meet different investment objectives along
the risk/reward spectrum. The specifics of the Capital Builder, Convertible,
Small Cap and Government Quality Bond Funds are included in this report.
Separate reports are available on the Nebraska Tax Free and Institutional Money
Market Funds.
In fiscal 1996, while the stock market extended the rally which began in January
1995, the bond market evidenced diverse trends. During the first half of the
fiscal year interest rates declined and in January the trend was reversed and
rates increased steadily. At the present time, the yield on the 10 year Treasury
is approximately 6.90% as compared to 5.60% at the beginning of the calendar
year and 6.20% a year ago. The increase in yields is attributed to the market's
fear that economic growth is excessive and concerns about what the Federal
Reserve Board will do.
A handful of the 58 economists who participated in a recent survey by the Wall
Street Journal are forecasting a declining rate of growth in GDP (Gross Domestic
Product) during the second half of 1996 and negative growth in the first half of
1997. However, the vast majority of economists continue to forecast steady
growth in the economy. The average estimated rate of growth is 2.25% for the
July - December period slowing to 1.90% in the first half of next year. The rate
of inflation is expected to remain around the current level of 2.8% - 3.0%
Our mission as managers is to position the portfolios so that each of the Funds
will provide the most favorable long-term return in conjunction with specific
objectives of the respective portfolio.
In September, we will begin utilizing the name Lancaster Funds. We believe this
is a strong name which reflects the diversity of the funds. This is a name
change only and will not affect any investment objectives or policies of any of
the funds in the Series.
Following are comments on each of the funds. Please do not hesitate to call your
SMITH HAYES Trust representative if you have any questions.
Sincerely,
John H. Conley, CFA July 25, 1996
<PAGE>
CAPITAL BUILDER FUND
OBJECTIVE:
Capital Builder Fund has as a primary investment objective to seek long-term
capital appreciation with a secondary objective of providing current income. The
Fund invests in a diversified portfolio of common and preferred stocks,
convertible securities, U.S. Government Securities, repurchase agreements,
mortgage-backed securities, corporate debt securities, and money market
instruments. At least 65% of the Fund's total assets will be invested in common
and preferred stocks and securities convertible into common stocks.
PERFORMANCE REVIEW:
On June 30, 1996 the net asset value of the Fund was $11.98 and the
inception-to-date performance was +20.2% versus +22.6% for the index, the S&P
500. The Fund is broadly diversified among industries and companies so as to
reduce its exposure to certain investment and market risks. Some individual
companies that provided significant performance to the Fund included Harley
Davidson, Gillette, and Sears. The steel industry has under performed the S&P
500 and actually has negative performance since December, 1995. The Fund's basic
industry sector includes steel companies but this sector represents less than 5%
of the total portfolio. Performance for the Fund versus the S&P 500 is shown
below:
[GRAPHIC OMITTED]
Comparison of change in value of $10,000 investment in Capital Builder
and the S&P 500
Avg. Annual Return 06/30/96 Value
1 year - Capital Builder $12,022.97
Inception 24.14% Lehman Bros. Municipal $12,269.54
Past performance is not predictive of future performance.
For the period August 24, 1995 (inception) through June 30, 1996.
<PAGE>
CONVERTIBLE FUND
OBJECTIVE:
The Convertible Fund has the investment objective of preservation of capital
while maximizing total return (a combination of capital gains, interest and
dividends) by investing in a portfolio of convertible corporate debt securities
and/or convertible preferred stock. In seeking to accomplish its objective, the
Fund normally invest at least 65% of its total assets in a diversified portfolio
of convertible securities, primarily bonds and preferred stocks which are
convertible into common stock.
PERFORMANCE REVIEW:
For the fiscal year ended June 30, 1996 the Fund performed quite well returning
+17.6% versus its benchmark of the First Boston Convertible Securities Index of
+16.4%. The strong showing from the equity market in calendar 1995 meant a
realignment of the portfolio in the second half of the fiscal year. A portion of
the portfolio's stock weighting, which had grown through the call and
conversation of the several convertibles as well as appreciation of selected
equities, were liquidated. The Fund's weighting in both investment-grade issues
and zero-coupon convertibles was increased during the second half of the fiscal
year to maintain a proper risk/reward balance in the portfolio while still
allowing for good equity participation in the market. The Fund's performance
versus its benchmark is listed below.
[GRAPHIC OMITTED]
Comparison of change in value of $10,000 investment in Convertible
and the First Boston Convertible Securities Index
Avg. Annual Return 06/30/96 Value
1 year 17.60%
5 year 12.53% Convertible $20,266.04
Inception 9.20% First Boston Convert. Sec. $24,655.43
Past performance is not predictive of future performance.
For the period June 23, 1988 (inception) through June 30, 1996.
<PAGE>
SMALL CAP FUND
OBJECTIVE:
Small Cap Fund has an investment objective of long-term capital appreciation.
The Fund will normally invest at least 90% of its assets (excluding Money Market
Instruments) in stocks of companies which have market capitalizations of between
$50 million and $2 billion, with the average market capitalization of these
companies owned by the Fund in the aggregate normally between $350 million to
$600 million. Market capitalization is determined by multiplying the per share
market value of a company's shares by the total number of shares outstanding.
The Fund's investment strategy is referred to as "growth at a discount".
Companies considered for inclusion in the portfolio will show an above average
growth, in general trade at a discount to the S&P 500 price-earnings ratio, have
consistent positive historical earnings over the last three to five years, have
debt to capital ratios of 35% or less, and either have cash exceeding 10% of
shareholder equity, employee ownership exceeding 10% or are currently paying a
dividend.
PERFORMANCE REVIEW:
The Fund's performance for the fiscal year was +22.33% versus the Russell 2000
index return of +23.86% for the same time period. In the latest quarter (March
31 to June 30) the Fund outperformed its benchmark +5.46% versus +5.00% and also
outperformed it for the latest six months, (December to June) +12.28% versus
+10.40%.
[GRAPHIC OMITTED]
Comparison of change in value of $10,000 investment in Small Cap
and the Russell 2000
Avg. Annual Return 06/30/96 Value
1 year 22.33% Small Cap $17,560.70
Inception 15.13% Russell 2000 $19,570.38
Past performance is not predictive of future performance.
For the period July 1, 1992 (inception) through June 30, 1996.
<PAGE>
GOVERNMENT/QUALITY BOND FUND
OBJECTIVE:
The investment objective of the Government/Quality Bond Fund is income and
capital appreciation consistent with preservation of capital. The Fund attempts
to achieve its objective by investing solely in U.S. Government Securities,
repurchase agreements on U.S. Government Securities, and corporate bonds rated A
or better by Moody's or Standard & Poor's. Except for temporary defensive
investment situations when the Fund will invest in Money Market instruments, the
Fund will normally maintain at least 65% of its total assets in U.S. Government
Securities and no more than 10% in corporate bonds rated A by Moody's or
Standard & Poor's. The Fund's average maturity of all U.S. Government Securities
and corporate bonds will not exceed ten years.
PERFORMANCE REVIEW:
The bond market exhibited diverse trends over the past year. During the first
half of the fiscal year interest rates declined but in January the trend was
reversed and rates steadily increased. At the present time, the yield on the 10
year Treasury is approximately 6.90% compared to 5.60% at the beginning of the
calendar year and 6.20% a year ago. The Fund returned +2.83% versus the Merrill
Lynch U.S. Treasury Intermediate-Term Bond Index return of +4.87% for the fiscal
year. The Fund's performance is shown below:
[GRAPHIC OMITTED]
Comparison of change in value of $10,000 investment in Govnernment/Quality
Bond and the Merrill Lynch U.S. Treasury Intermediate-Term Bond
Avg. Annual Return 06/30/96 Value
1 year 2.83%
5 year 6.66% Government/Quality Bond $10,698.79
Inception 7.18% Merrill Lynch U.S. Trea. Inter-Term Bond $11,624.31
Past performance is not predictive of future performance.
For the period June 23, 1988 (inception) through June 30, 1996.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SMITH HAYES Trust, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of SMITH HAYES Trust, Inc. (comprised respectively
of the Capital Builder, Convertible, Small Cap, and Government/Quality Bond
Funds) as of June 30, 1996, the related statement of operations for the year
then ended and statements of changes in net assets and the financial highlights
for the years ended June 30, 1996 and 1995. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the
period July 1, 1991, (except for the Small Cap Fund, which commenced operations
July 1, 1992) to June 30, 1994 were audited by other auditors whose report dated
July 22, 1994, expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios constituting SMITH HAYES Trust, Inc. as of June 30,
1996, the results of its operations for the year then ended, and the changes in
its net assets and the financial highlights for the years ended June 30, 1996
and 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Lincoln, Nebraska
July 22, 1996
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments
June 30, 1996
CAPITAL BUILDER FUND
Percent
of Net Market
Shares Assets Value
- -------------- -------- --------
Common Stock 88.18%
------------ ------
Cosmetics/Personal Care 3.29%
-------------------------------------------------
4,500 Gillette Company $280,687
--------
Electrical Equipment 4.14%
-------------------------------------------------
6,000 Duracell International, Inc. 258,750
6,000 Pacific Scientific Company 94,500
--------
353,250
--------
Electronics 7.37%
-------------------------------------------------
4,000 General Electric Company 346,000
4,500 Motorola, Inc. 282,938
--------
628,938
--------
Entertainment/Leisure 3.38%
-------------------------------------------------
7,000 Harley-Davidson, Inc. 287,875
--------
Financial Services 10.65%
-------------------------------------------------
3,990 Chase Manhattan Corporation 281,794
3,700 Federal Home Loan Mortgage Corporation 316,350
1,300 Wells Fargo & Company 310,537
--------
908,681
--------
Food-Processing 3.46%
------------------------------------------------
6,500 ConAgra, Inc. 294,938
--------
Household Products/Wares 4.31%
------------------------------------------------
12,000 Newell Company 367,500
--------
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
CAPITAL BUILDER FUND
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- ---------- ----------------------------------- ------- -------
Insurance 5.94%
-------------------------------------------------
9,700 Integon Corporation $195,213
4,000 MBIA, Inc. 311,500
--------
506,713
--------
Iron/Steel 4.34%
-------------------------------------------------
14,750 Kentucky Electric Steel, Inc.* 119,844
12,000 Worthington Industries, Inc. 250,500
--------
370,344
--------
Machine-Diversified 6.60%
-------------------------------------------------
6,100 Briggs & Stratton Corporation 250,863
7,500 Thermo Electron Corporation* 312,187
--------
563,050
--------
Manufacturing 7.04%
-------------------------------------------------
4,000 Eastman Kodak Company 311,000
12,000 Pall Corporation 289,500
--------
600,500
--------
Office/Business 3.70%
-------------------------------------------------
6,600 Pitney-Bowes, Inc. 315,150
--------
Oil/Gas 6.68%
-------------------------------------------------
7,171 Coastal Corporation 299,389
8,000 Unocal Corporation 270,000
--------
569,389
--------
Pharmaceutical/Medical 3.79%
-------------------------------------------------
5,000 Merck & Company, Inc. 323,125
--------
* Indicates nonincome-producing security.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
CAPITAL BUILDER FUND
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- ---------- --------------------------------- --------- ---------
Publishing/Printing 3.06%
-------------------------------------------------
7,000 Belo (A. H.) Corporation Series A $ 260,750
--------
Real Estate 3.73%
-------------------------------------------------
13,000 Simon Property Group, Inc. 318,500
--------
Restaurant/Food Service 3.56%
-------------------------------------------------
6,500 McDonald's Corporation 303,875
--------
Retail Store/Apparel 3.14%
-------------------------------------------------
5,500 Sears Roebuck & Company 267,437
--------
Total Common Stock 7,520,702
---------
Closed-End Management Company 3.31%
-------------------------------------------------
16,000 Global Health Sciences Fund* 282,000
--------
Total Investment in Securities (cost $6,121,461) 91.49% 7,802,702
Cash Equivalents 8.53% 727,270
Other Assets, Less Liabilities ( .02%) ( 1,433)
-------- ---------
NET ASSETS 100.00% $8,528,539
======== ==========
* Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments
June 30, 1996
CONVERTIBLE FUND
Percent
Principal of Net Market
Amount Assets Value
- ---------- ------- --------
Convertible Debentures 51.74%
-------------------------------------------------
25,000 All American Communications 6.50%, due 10/1/03 $22,625
35,000 Alza Corporation 5.00%, due 5/1/06 34,038
35,000 Apache Corporation 6.00%, due 1/15/02 42,044
50,000 Automatic Data Processing, Inc. 0%, due 2/20/12 25,688
16,000 Big B Inc., 6.50%, due 3/15/03 15,400
20,000 Carnival Cruise Lines, Inc. 4.50%, due 7/1/97 33,250
24,000 Cooper Industries, Inc. 7.05%, due 1/1/15 25,920
45,000 Elan International 0%, due 10/16/12 28,069
80,000 Fremont General Corporation 0%, due 10/12/13 37,200
12,000 Gencorp, Inc. 8.00%, due 8/1/02 13,020
35,000 Hasbro, Inc. 6.00%, due 11/15/98 43,400
30,000 HFS, Inc. 4.75%, due 3/1/03 37,050
23,000 Integrated Device Technology, Inc. 5.50%, due 6/1/02 18,170
30,000 Interpublic Group, Inc. 3.75%, due 4/1/02 31,162
32,000 Ivax Corporation 6.50%, due 11/15/01 28,480
25,000 LDDS Communications 5.00%, due 8/15/03 36,500
60,000 Motorola, Inc. 0%, due 9/27/13 46,875
40,000 Nabors Industries, Inc. 5.00%, due 5/15/06 44,800
100,000 News Corporation 0%, due 3/11/13 49,250
36,000 Pennzoil Company 4.75%, due 10/1/03 38,700
95,000 RPM, Inc. 0%, due 9/30/12 41,325
40,000 Thermo Electron Corporation 4.25%, due 1/1/03 49,400
90,000 Time Warner, Inc. 0%, due 6/22/13 37,012
140,000 USF&G Corporation 0%, due 3/3/09 82,600
130,000 U.S. Cellular 0%, due 6/15/15 44,200
25,000 Varlen Corporation 6.50%, due 6/1/03 26,000
-------
Total Convertible Debentures 932,178
-------
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
CONVERTIBLE FUND
Percent
of Net Market
Shares Assets Value
- ----------- ---------- ----------
Preferred Stock 19.39%
-------------------------------------------------
Auto/Trucks 2.35%
-------------------------------------------------
400 Ford Motor Company, $4.20 Prfd Series A $ 42,400
-------
Financial Services 5.63%
-------------------------------------------------
500 Ahmanson (H.F.) & Company, 6% Prfd Series D 29,687
250 Banc One Corporation, $3.50 Prfd Series C 16,687
550 First Chicago NBD Corporation, $5.75 Prfd Series B 36,644
200 Travelers, Inc., $2.75 Prfd Series B 18,400
-------
101,418
-------
Food/Beverage/Tabacco 2.56%
-------------------------------------------------
7,100 RJR Nabisco Holdings Corporation, 9% Prfd Series C 46,150
-------
Metals/Mining 1.21%
-------------------------------------------------
400 Cyprus Amax Mineral Company, $4 Prfd Series A 21,800
-------
Oil/Gas 4.45%
-------------------------------------------------
1,200 Lomak Petroleum, Inc., $2.03 Prfd Series C 48,600
600 Valero Energy Corporation, $3.125 Prfd 31,500
-------
80,100
-------
Packaging/Container 1.67%
-------------------------------------------------
500 Sonoco Products Company, $2.25 Prfd Series A 30,125
-------
Telecommunications 1.52%
-------------------------------------------------
1,000 US West, Inc. 7.625% Pfrd 12/15/98 Series A 27,375
-------
Total Preferred Stock 349,368
-------
* Indicates nonincome-producing security.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
CONVERTIBLE FUND
Percent
of Net Market
Shares Assets Value
- ------------ ------- --------
Common Stock 16.06%
-------------------------------------------------
Chemical/Drug 3.58%
-------------------------------------------------
1,400 Carter-Wallace, Inc. $ 20,475
800 Warner-Lambert Company 44,000
-------
64,475
-------
Computers 1.11%
-------------------------------------------------
1,700 Telxon Corporation 19,975
-------
Leisure 1.37%
-------------------------------------------------
1,000 WMS Industries, Inc.* 24,625
-------
Manufacturing 2.46%
-------------------------------------------------
1,100 Lindsay Manufacturing Company 44,275
-------
Restaurant/Food Service 2.22%
-------------------------------------------------
2,420 Consolidated Products, Inc.* 39,930
-------
Telecommunications 1.47%
-------------------------------------------------
1,500 Alcatel Alsthom ADS 26,438
-------
Transportation 3.85%
-------------------------------------------------
316 AMR Corporation 28,756
507 Delta Air Lines, Inc. 40,877
-------
69,633
-------
Total Common Stock 289,351
Total Investment in Securities(cost $1,463,957) 87.19% 1,570,897
Cash Equivalents 12.51% 225,487
Other Assets, Less Liabilities 0.30% 5,442
------- ----------
NET ASSETS 100.00% $1,801,826
======= ==========
* Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments
June 30, 1996
SMALL CAP FUND
Percent
of Net Market
Shares Assets Value
- ----------- ----------- ---------
Common Stock 95.67%
-------------------------------------------------
Chemicals 1.73%
-------------------------------------------------
7,200 OM Group, Inc. $ 282,600
-------
Computer Related 13.03%
-------------------------------------------------
18,100 American Business Information, Inc. * 330,325
15,600 Ciber, Inc.* 343,200
13,500 GMIS, Inc.* 162,000
4,300 Keane, Inc.* 158,563
50 Rainbow Technology, Inc.* 1,000
16,100 Softkey International, Inc.* 304,894
10,500 STB Systems, Inc.* 179,812
20,100 Stormedia, Inc.* 218,588
34,300 Symantec, Corporation* 428,750
-------
2,127,132
---------
Electrical Equipment 2.56%
-------------------------------------------------
27,900 Smartflex Systems, Inc.* 418,500
-------
Electronics 10.21%
-------------------------------------------------
5,400 BMC Industries, Inc. 155,250
12,900 DII Group, Inc. * 328,950
4,900 Harman International Industries, Inc. 241,325
17,800 Powell Industries, Inc. * 206,925
14,200 Tech-Sym Corporation* 422,450
13,000 Vitesse Semiconductor Corporation* 312,000
-------
1,666,900
---------
* Indicates nonincome-producing security.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
SMALL CAP FUND
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- ----------- ---------------------------------- ------- --------
Engineering/Construction .94%
-----------------------------------------------
19,800 Insituform Technologies Class A* $ 153,450
-------
Environmental Control 1.77%
-------------------------------------------------
16,500 Tetra Technologies, Inc. * 288,750
-------
Financial Services 13.12%
-------------------------------------------------
22,800 Americredit Corporation * 356,250
18,600 Bank Plus Corporation * 162,750
9,300 Coast Savings Financial, Inc. * 304,575
13,100 First Colorado Bancorp, Inc. * 173,575
15,600 Imperial Credit Industries * 471,900
10,700 Imperial Credit Mortgage Holdings * 171,200
5,000 Long Island Bancorp, Inc. 152,812
9,550 Southern Pacific Funding Corporation* 167,125
8,100 WFS Financial, Inc. * 182,250
-------
2,142,437
---------
Insurance 2.12%
-------------------------------------------------
11,000 Sierra Health Services, Inc.* 346,500
-------
Manufacturing .99%
-------------------------------------------------
13,700 Maverick Tube Corporation* 160,975
-------
Medical Supplies/Services 4.79%
-------------------------------------------------
27,300 Circon Corporation * 320,775
11,400 EMPI, Inc. * 148,200
13,400 Fischer Imaging Corporation * 160,800
8,100 Inphynet Medical Management, Inc.* 151,875
-------
781,650
-------
* Indicates nonincome-producing security.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
SMALL CAP FUND
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
--------- ------------------------------------------------- -------
Office/Business .93%
-------------------------------------------------
14,300 Kentek Information Systems, Inc. * $ 151,938
-------
Oil/Gas 24.95%
-------------------------------------------------
18,900 Box Energy Corporation Class B * 172,462
21,600 Digicon, Inc. * 361,800
6,300 Dreco Energy Services Limited * 173,250
32,700 Global Natural Resources, Inc. * 535,462
12,400 Lomak Petroleum, Inc. 176,700
4,600 Newpark Resources * 169,050
16,900 Nuevo Energy Company * 545,025
13,900 Parker & Parsley Petroleum Company 385,725
11,300 Pride Pet Services, Inc.* 161,025
25,350 Tuboscope Vetco International Corporation* 282,019
23,500 Unit Corporation* 155,688
12,000 United Meridian Corporation* 432,000
10,200 Varco International, Inc.* 184,875
13,300 Vintage Petroleum, Inc. 339,150
-------
4,074,231
---------
Real Estate 6.11%
-------------------------------------------------
11,700 Felcor Suite Hotels, Inc. 356,850
22,450 NHP, Inc.* 463,031
16,300 Sunstone Hotel Investors, Inc. 177,263
-------
997,144
-------
Retail/Retail Store 3.99%
-------------------------------------------------
19,000 Friedman's, Inc. Class A* 484,500
11,400 Sport-Haley, Inc. * 166,725
-------
651,225
-------
* Indicates nonincome-producing security.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments (Continued)
SMALL CAP FUND
Percent
of Net Market
Shares Common Stock (Continued) Assets Value
- ----------- ------------------------------- ---------- ---------
Telecommunications 4.94%
-------------------------------------------------
16,600 Intervoice, Inc.* $329,925
8,600 IPC Information Systems, Inc.* 150,500
13,600 Symmetricom, Inc. * 183,600
10,800 Tekelec Designs* 141,750
-------
805,775
-------
Transportation 2.35%
-------------------------------------------------
3,175 Atlas Air, Inc. * 182,562
11,800 Covenant Transport * 200,600
-------
383,162
-------
Trucking & Leasing 1.14%
-------------------------------------------------
9,800 Swift Transportation Company. Inc.* 187,425
-------
Total Investment in Securities (cost $14,363,609) 95.67% 15,619,794
Cash Equivalents 2.80% 457,874
Other Assets, Less Liabilities 1.53% 249,710
------ ---------
NET ASSETS 100.00% $16,327,378
====== ==========
* Indicates nonincome-producing security.
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
Schedule of Investments
June 30, 1996
GOVERNMENT/QUALITY BOND FUND
Principal Percent of Market
Amount Net Assets Value
- ------------- ------------ ---------
U.S. Government Securities 77.31%
-------------------------------------------------
200,000 Federal Home Loan Bank 5.58%, due 10/06/00 $ 190,563
193,221 Federal Home Loan Mortgage 7.00%, due 9/1/15 187,425
150,000 Federal Home Loan Mortgage 7.00%, due 11/15/19 146,320
253,029 Federal National Mortgage Asso. 6.00%, due 10/01/99 243,383
234,687 Federal National Mortgage Asso. 6.50%, due 10/01/02 229,994
143,576 Government National Mortgage Asso. 6.50%, due 8/20/08 138,866
110,338 Government National Mortgage Asso. 11.50%, due 10/15/10 125,441
196,672 Government National Mortgage Asso. 10.00%, due 12/15/18 214,249
3,784 Government National Mortgage Asso. 10.00%, due 5/15/19 4,123
24,162 Government National Mortgage Asso. 9.50%, due 9/15/19 25,816
32,032 Government National Mortgage Asso. 10.00%, due 5/15/20 34,895
93,200 Government National Mortgage Asso. 9.50%, due 9/15/21 99,578
124,747 Government National Mortgage Asso. 7.50%, due 4/15/22 122,915
90,849 Government National Mortgage Asso. 7.50%, due 5/15/23 89,514
179,758 Government National Mortgage Asso. 7.50%, due 1/15/24 177,117
75,000 U. S. Treasury Note 6.375%, due 8/15/02 74,391
250,000 U. S. Treasury Bond 10.75%, due 8/15/05 317,383
300,000 U. S. Treasury Bond 7.125%, due 2/15/23 303,094
-------
Total U.S. Government Securities 2,725,067
---------
Corporate Bonds 20.63%
-------------------------------------------------
150,000 Associates Corporation North America 5.25%, due 9/01/98 146,449
100,000 Bankamerica Corporation 8.375%, due 3/15/02 106,269
100,000 Banc One Corporation 8.74%, due 9/15/03 108,953
112,500 Chase Manhattan Credit Card 8.75%, due 8/15/99 114,680
250,000 Sears Credit Corporation 7.75%, due 9/15/98 251,094
-------
Total Corporate Bonds 727,445
-------
Total Investment in Securities (cost $3,498,418) 97.94% 3,452,512
Cash Equivalents 1.00% 35,225
Other Assets, Less Liabilities 1.06% 37,219
NET ASSETS 100.00% $3,524,956
======= =========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH HAYES TRUST, INC.
Statement of Assets and
Liabilities
June 30, 1996
Government/
Capital Quality
Builder Convertible Small Cap Bond
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Assets: ------------ ---------- ----------- ----------
Investments in securities, at market value
(cost $6,121,461, 1,463,957, 14,363,609,
and 3,498,418, respectively) $7,802,702 1,570,897 15,619,794 3,452,512
Cash equivalents 727,270 225,487 457,874 35,225
Accrued interest and dividends receivable 14,941 9,742 6,017 48,560
Receivable for investment securities sold - - 466,407 -
Receivable for fund shares sold 1,585 182 13,563 186
Organizational costs, net of accumulated 5,156 - - -
amortization ------------ ---------- ----------- ----------
Total assets 8,551,654 1,806,308 16,563,655 3,536,483
------------ ---------- ----------- ----------
Liabilities:
Accrued expenses, including investment
management and services fees and
distribution expense reimbursement payable to
adviser, administrator and
distributor (note 3) 15,930 4,189 22,882 5,948
Payable for securities purchased - - 201,385 -
Payable for fund shares redeemed 7,185 293 12,010 5,579
------------ ---------- ----------- ----------
Total liabilities 23,115 4,482 236,277 11,527
------------ ---------- ----------- ----------
Net assets applicable to outstanding
capital stock $8,528,539 1,801,826 16,327,378 3,524,956
============ ========== =========== ==========
Net assets are represented by:
Capital stock outstanding, at par (note 5) 712 137 1,069 347
Additional paid-in capital 6,351,707 1,465,082 13,605,277 3,790,714
Accumulated undistributed net
investment income (loss) (28,014) 1,674 (180,557) 4,886
Accumulated undistributed net realized
gain (loss) on investments 522,893 227,993 1,645,404 (225,085)
Unrealized appreciation
(depreciation) (note 4) 1,681,241 106,940 1,256,185 (45,906)
------------ ---------- ----------- ----------
Total net assets applicable
to shares outstanding $8,528,539 1,801,826 16,327,378 3,524,956
============ ========== =========== ==========
Shares outstanding and net asset value per
share
Shares of capital stock outstanding:
711,816, 136,538, 1,069,100
and 347,247, respectively (note 5) $11.98 13.20 15.27 10.15
============ ========== =========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMITH HAYES TRUST, INC.
Statement of Operations
Year Ended June 30, 1996
Government/
Capital Quality
Builder Small Cap Bond
Convertible
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
---------- -------- ---------- ---------
Investment income:
Dividends $128,988 27,336 90,784 -
Interest 25,283 54,670 47,076 286,187
---------- -------- ---------- ---------
Total investment income 154,271 82,006 137,860 286,187
---------- -------- ---------- ---------
Expenses (note 3):
Investment advisory fees 52,595 14,669 100,347 26,060
Administration fees 17,523 4,420 30,794 10,338
Distribution expenses 34,924 9,198 63,854 11,910
Amortization of organizational costs 207 - - -
Custodial fees 3,143 2,234 9,199 4,012
Auditing and tax accounting fees 5,289 2,420 3,157 3,147
Other operating expenses 13,350 2,528 15,901 5,751
---------- -------- ---------- ---------
Total expenses 127,031 35,469 223,252 61,218
---------- -------- ---------- ---------
Net investment income (loss) 27,240 46,537 (85,392) 224,969
---------- -------- ---------- ---------
Realized and unrealized gain (loss) on
investments (note 4):
Net realized gain (loss) 522,893 322,618 2,574,920 (39,002)
---------- -------- ---------- ---------
Net unrealized appreciation (depreciation)
Beginning of period - 179,058 1,325,971 (3,781)
Unrealized appreciation of securities
received in tax-free exchange (note 6) 752,965 - - -
End of period 1,681,241 106,940 1,256,185 (45,906)
---------- -------- ---------- ---------
Net unrealized appreciation (depreciation) 928,276 (72,118) (69,786) (42,125)
---------- -------- ---------- ---------
Net realized and unrealized gain
(loss) on investments 1,451,169 250,500 2,505,134 (81,127)
---------- -------- ---------- ---------
Net increase in net assets
resulting from operations $1,478,409 297,037 2,419,742 143,842
========== ======== ========== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Statements of Changes in Net Assets
The Period from August 24, 1995 (commencement of operations) to
June 30, 1996 for the Capital Builder Fund and
Years Ended June 30, 1996 and 1995 for the Convertible Fund
Capital
Builder Convertible
Fund Fund
----------- ---------------------
Period Year Year
Ended Ended Ended
June 30, June 30, June 30,
1996 1996 1995
----------- ---------- ----------
Operations:
Net investment income $27,240 46,537 56,762
Net realized gain (loss)
on investments 522,893 322,618 (11,847)
Unrealized appreciation (depreciation) 928,276 (72,118) 202,659
----------- ---------- ----------
Net increase in net assets
resulting from operations 1,478,409 297,037 247,574
----------- ---------- ----------
Distributions to shareholders from:
Net investment income 29,049 44,950 58,599
Net realized gains - 73,269 165,477
----------- ---------- ----------
Total distributions 29,049 118,219 224,076
----------- ---------- ----------
Capital share transactions: (note 5)
Proceeds from sales 1,205,089 214,846 169,674
Net assets from limited
partnership (note 6) 3,283,131 - -
Proceeds from fund conversion (note 6) 5,386,699 - -
Payment for redemptions (2,824,789) (473,816) (1,359,579)
Reinvestment of net investment
income and net realized gain
distributions at net asset value 29,049 117,011 223,270
----------- ---------- ----------
Total increase (decrease) from
capital share transactions 7,079,179 (141,959) (966,635)
----------- ---------- ----------
Total increase (decrease)
in net assets 8,528,539 36,859 (943,137)
Net assets:
Beginning of period - 1,764,967 2,708,104
----------- ---------- ----------
End of period $8,528,539 1,801,826 1,764,967
=========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH HAYES TRUST, INC.
Statements of Changes in Net Assets
Years Ended June 30, 1996 and 1995
Small Cap Government/Quality
Fund Bond Fund
----------------------- ----------------------
Year Ended Year Year Year
Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) ($85,392) (50,907) 224,969 398,566
Net realized gain (loss)
on investments 2,574,920 (37,137) (39,002) (232,150)
Unrealized appreciation
(depreciation) (69,786) 1,623,590 (42,125) 352,454
------------ ---------- ---------- ----------
Net increase in net assets
resulting from operations 2,419,742 1,535,546 143,842 518,870
------------ ---------- ---------- ----------
Distributions to shareholders from:
Net investment income - - 224,047 406,678
Net realized gains 897,261 276,654 - 292
------------ ---------- ---------- ----------
Total distributions 897,261 276,654 224,047 406,970
------------ ---------- ---------- ----------
Capital share transactions: (note 5)
Proceeds from sales 6,340,187 3,211,418 692,600 767,050
Payment for redemptions (1,997,137) (2,372,561) (1,986,710) (5,398,157)
Reinvestment of net investment
income and net realized gain
distributions at net asset value 872,059 273,095 205,347 380,984
------------ ---------- ---------- ----------
Total increase (decrease)
from capital
share transactions 5,215,109 1,111,952 (1,088,763) (4,250,123)
------------ ---------- ---------- ----------
Total increase (decrease)
in net assets 6,737,590 2,370,844 (1,168,968) (4,138,223)
Net assets:
Beginning of period 9,589,788 7,218,944 4,693,924 8,832,147
------------ ---------- ---------- ----------
End of period $16,327,378 9,589,788 3,524,956 4,693,924
============ ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SMITH HAYES TRUST, INC.
FINANCIAL HIGHLIGHTS
Period from August 24, 1995 (commencement of operation)
to June 30, 1996
Capital Builder
Fund
-----------------
Net asset value:
Beginning of period $10.00
Income from investment operations:
Net investment income 0.04
Net realized and unrealized gain
on investments 1.98
Total income from
investment operations 2.02
Distributions from net investment (0.04)
income
End of period $11.98
Total return 24.14% *
Ratios/Supplemental data:
Net assets, end of period $8,528,539
Ratio of expenses to average net assets 1.82% *
Ratio of net income to average net assets 0.42% *
Portfolio turnover rate 31.35%
*Annualized for those periods less than twelve months in duration.
See accompanying notes to financialstatements.
<PAGE>
SMITH HAYES TRUST, INC.
FINANCIAL HIGHLIGHTS
Years Ended June 30, 1996, 1995, 1994, 1993 and 1992
Convertible Fund
---------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30,
1996 1995 1994 1993 1992
---- ---- ---- ---- --------
Net asset value:
Beginning of period $11.97 11.69 12.58 10.76 9.96
----- ---- ----- ------ -----
Income (loss) from
investment operations:
Net investment income 0.33 0.30 0.29 0.33 0.31
Net realized and
unrealized gain (loss) on 1.73 1.01 (0.53) 2.16 0.80
investments
Total income (loss) from
investment operations 2.06 1.31 (0.24) 2.49 1.11
Less distributions:
Dividends from net
investment income (0.33) (0.30) (0.29) (0.33) (0.31)
Distributions from
capital gains (0.50) (0.73) (0.36) (0.34) -
------ ------ ------ ------ -----
Total distributions (0.83) (1.03) (0.65) (0.67) (0.31)
------ ------ ------ ------ -----
End of period $13.20 11.97 11.69 12.58 10.76
====== ===== ===== ===== =====
Total return 17.60% 14.09% (2.26%) 24.06% 10.95%
====== ====== ======= ====== ======
Ratios/Supplemental data:
Net assets, end of period $1,801,826 1,764,967 2,708,104 2,368,876 1,791,325
Ratio of expenses to
average net assets 1.93% 2.25% 2.06% 2.13% 2.48%
Ratio of net income to
average net assets 2.53% 2.58% 2.27% 2.91% 2.85%
Portfolio turnover rate 79.30% 51.31% 65.76% 69.72% 96.02%
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
FINANCIAL HIGHLIGHTS
Years Ended June 30, 1996, 1995, 1994 and 1993
Small Cap Fund
-------------------------------------------
Year Ended Year Ended Year Ended Year Ended
June 30, June 30, June 30, June 30,
1996 1995 1994 1993
------ ------ ------- -------
Net asset value:
Beginning of period $13.49 11.59 11.77 10.00
Income from investment operations:
Net investment loss (0.10) (0.08) (0.07) (0.05)
Net realized and unrealized gain
on investments 2.91 2.34 0.20 1.83
------ ------ ------ ------
Total income from
investment operations 2.81 2.26 0.13 1.78
------ ------ ------ ------
Distributions from capital gains (1.03) (0.36) (0.31) (0.01)
------ ------ ------ ------
End of period $15.27 13.49 11.59 11.77
====== ===== ===== =====
Total return 22.33% 20.33% 1.21% 17.80%
====== ====== ===== ======
Ratios/Supplemental data:
Net assets, end of period $16,327,378 9,589,788 7,218,944 3,137,762
Ratio of expenses to average
net assets 1.75% 1.93% 1.91% 2.18%
Ratio of net income to
average net assets (0.67%) (0.60%) (0.60%) (0.87%)
Portfolio turnover rate 150.05% 86.50% 75.23% 47.55%
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH HAYES TRUST, INC.
FINANCIAL HIGHLIGHTS
Years Ended June 30, 1996, 1995, 1994, 1993, and 1992
Government/Quality Bond Fund
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30,
1996 1995 1994 1993 1992
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $10.43 10.21 11.17 10.93 10.42
------ ----- ----- ----- -----
Income (loss) from
investment operations:
Net investment income 0.55 0.60 0.54 0.64 0.73
Net realized and unrealized
gain (loss) on investments (0.28) 0.22 (0.75) 0.43 0.60
------ ---- ------ ---- ----
Total income (loss) from
investment operations 0.27 0.82 (0.21) 1.07 1.33
---- ---- ------ ---- ----
Less distributions:
Dividends from net
investment income (0.55) (0.60) (0.54) (0.64) (0.71)
Distributions from
capital gains - - (0.21) (0.19) (0.11)
------- ----- ------ ------ ------
Total distributions (0.55) (0.60) (0.75) (0.83) (0.82)
------ ------ ------ ------ ------
End of period $10.15 10.43 10.21 11.17 10.93
====== ===== ===== ===== =====
Total return 2.83% 9.42% (2.00%) 11.00% 12.79%
===== ===== ======= ====== ======
Ratios/Supplemental data:
Net assets, end of period $3,524,956 4,693,924 8,832,147 9,709,386 8,112,226
Ratio of expenses to
average net assets 1.42% 1.47% 1.37% 1.38% 1.50%
Ratio of net income to
average net assets 5.21% 5.86% 4.94% 6.25% 6.64%
Portfolio turnover rate 36.11% 9.33% 218.11% 175.95% 507.52%
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
June 30, 1996
1. Organization
SMITH HAYES Trust, Inc. (the Trust) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust issues its shares in series, each series
representing a distinct fund with its own investment objectives and
policies. These financial statements relate only to the following funds:
Capital Builder Fund Small Cap Fund
Convertible Fund Government/Quality Bond Fund
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies employed by
the Trust in preparing its financial statements:
Use of Estimates: In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the financial
statements and changes in net assets for the period. Actual results
could differ from those estimates.
Valuation of Investments
Investment securities are carried at market determined using the
following valuation methods:
o Securities traded on a national or regional stock exchange or included
in the NASDAQ National Market System are valued at the last quoted
sales price.
o Securities not listed on an exchange or securities for which a latest
quoted sales price is not readily available and securities traded
over-the-counter but not included in the NASDAQ National Market System
are valued at the mean of the closing bid and asked prices.
o Securities including bonds or other assets for which reliable recent
market quotations are not readily available are valued at fair market
value as determined in good faith under the direction of The Board of
Directors. Determination of fair value involves, among other things,
reference to market indices, matrices and data from independent brokers
and pricing services.
All securities are valued in accordance with the above policies at the
close of each business day.
At June 30, 1996, the cost of investment securities is identical for
financial reporting and income tax purposes.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
2. Continued
When a call option is written on behalf of a fund, an amount equal to the
premium received by the fund is included by the fund in the fund's
statement of assets and liabilities as a liability. The amount of the
liability is subsequently marked to market to reflect the current value of
the option written. The current market value of a traded option is the last
sales price on the principal exchange on which such options are traded, or
in the absence of such a sale, at the latest ask quotation. When an option
expires on its stipulated expiration date or the fund enters into a closing
purchase transaction, the fund realizes a gain (or loss if the cost of a
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. When an option is
exercised, the fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are decreased by the premium
originally received.
When a put option is written, an amount equal to the premium paid by the
fund is included by the fund in the fund's statement of assets and
liabilities as an asset. The amount of the asset is subsequently marked to
market to reflect the current value of the option written. The current
market value of a traded option is the last sales price on the principal
exchange on which such options are traded, or in the absence of such a
sale, at the latest ask quotation. When an option expires on its stipulated
expiration date or the fund enters into a closing sales transaction, the
fund realizes a gain (or loss if the cost of a closing transaction is lower
than the premium paid when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the asset related
to such option is extinguished. When an option is exercised, the fund
realizes a gain or loss from the sale of the underlying security and the
proceeds from the sale are increased by the premium originally paid.
At June 30, 1996, the funds authorized to write option contracts had no
such option contracts outstanding nor were any written during the year.
Security Transactions
Security transactions are accounted for on the date securities are
purchased or sold (trade date). Dividend income is recognized on the
ex-dividend date and interest income, including amortization of premium and
discount on the straight-line basis, is accrued daily.
Realized investment gains and losses are determined by specifically
identifying the issue sold.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
2. Continued
Federal Income Taxes
It is the policy of each fund to comply with requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
virtually all of the taxable income generated by the funds to their
shareholders within the time period allowed by Federal law. Each fund is
treated as a separate entity for tax purposes, and on a calendar basis will
distribute substantially all of its net investment income and realized
gains, if any, to avoid payment of any federal excise tax. The funds will
not distribute net realized losses. Distributions will be made when capital
gains have been generated to cover these losses. Each fund prepares its tax
return on an accrual basis.
Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
Cash Equivalents
The Trust considers investments with a maturity of three months or less
when purchased to be cash equivalents.
3. Related Party Transactions
The Trust and each fund have retained CONLEY SMITH, Inc. (the Adviser) as
their exclusive investment adviser. The agreement provides that each fund,
except the Government/Quality Bond Fund, will pay the Adviser a fee equal
to .75% per annum of the fund's average daily net assets. The
Government/Quality Bond Fund pays .60% per annum of its average daily net
assets.
The Trust and each fund also retained Lancaster Administrative Services,
Inc. (the Administrator) to act as its administrator and transfer agent.
The agreement provides that each fund will pay an administrative fee to
the Administrator equal to .25% per annum of its average daily net assets.
In addition to the advisory and administrative services agreements, the
Trust and each fund have retained SMITH HAYES Financial Services
Corporation (the Distributor), a company related through common ownership
and management, to act as the underwriter and distributor of the fund's
shares. Pursuant to the shareholder approved distribution plan under Rule
12b-1, each fund will reimburse the
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
3. Continued
distributor for shareholder-related expenses incurred in connection with
the distribution of the fund's shares, however, under no circumstances
shall such reimbursement exceed .50% per annum of the fund's average
daily net assets (.25% for the Government/Quality Bond Fund).
Under the terms of the advisory, administrative and distribution agreements
outlined above, the funds collectively paid $193,671, $63,075 and $119,886,
respectively, for such services. Of the amount paid to the Distributor,
$110,320 was retained by them for sales of the Trust's shares made by their
agents and brokers.
At June 30, 1996, the following accrued investment management,
administrative fees and distribution expenses were payable to the
Adviser, Administrator and the Distributor:
Payable Payable Payable
to to to
Adviser Administrator Distributor Total
Capital Builder Fund $ 5,304 $1,759 $3,528 $10,591
Convertible Fund 1,112 371 741 2,224
Small Cap Fund 10,254 3,418 6,824 20,496
Government/Quality
Bond Fund 1,752 729 729 3,210
===== === === ======
Under the terms of the adviser agreement, the Adviser may be obligated to
reimburse a fund up to the amount of the Adviser's fee paid to the Adviser
if during any year the expenses of the fund, including the Adviser's fee,
exceed certain limitations. At June 30, 1996, no expense reimbursement was
required.
In addition to the amounts paid by the funds under the adviser,
administrative and distribution plans, the funds primarily used SMITH HAYES
Financial Services Corporation (SMITH HAYES) to affect security trades on
their behalf. As is customary in the industry, the investment sub-advisers
evaluate the pricing and ability to execute the transaction in selecting
brokers to affect trades. SMITH HAYES was paid commissions in the amount of
$27,146 for their brokerage services during the year ended June 30, 1996.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
4. Securities Transactions
Purchases of securities and proceeds from sales during the year
ended June 30, 1996, were as follows for each fund:
Purchases of Proceeds
Securities from Sales
Capital Builder Fund $8,028,883 $2,430,273
Convertible Fund 1,305,151 1,752,599
Small Cap Fund 22,191,709 18,248,600
Government/Quality Bond Fund 3,133,926 3,609,669
=========== ==========
At June 30, 1996, the aggregate gross unrealized appreciation and the
aggregate gross unrealized depreciation of securities in each fund were
as follows:
Aggregate Gross
Unrealized
Appreciation Depreciation Total
Capital Builder Fund $1,792,447 $111,206 $1,681,241
Convertible Fund 162,931 55,991 106,940
Small Cap Fund 2,135,996 879,811 1,256,185
Government/Quality Bond Fund 35,634 81,540 (45,906)
=========== ========= ===========
5. Capital Share Transactions
The Trust is authorized to issue a total of one billion shares of common
stock in series with a par value of $.001 per share. The Board of Directors
have authorized fifty million shares to be issued in each fund.
Transactions in the capital stock of each fund for the year ended June 30,
1996, were as follows:
Capital
Builder Convertible
Fund Fund
Transactions in shares:
Shares sold 107,023.604 16,444.542
Shares issued in exchange (note 6) 328,313.067 -
Shares issued in fund conversion (note 6) 535,902.736 -
Shares redeemed (261,988.059) (36,642.196)
Reinvested distributions 2,564.383 9,329.598
------------ -------------
Net increase (decrease) 711,815.731 (10,868.056)
============ =============
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
5. Continued
Government/
Small Cap Quality Bond
Fund Fund
Transactions in shares:
Shares sold 433,268.282 66,150.549
Shares redeemed (139,509.713) (188,799.123)
Reinvested distributions 64,549.166 19,883.156
------------ ------------
Net increase (decrease) 358,307.735 (102,765.418)
=========== ============-
At June 30, 1996, directors, officers and employees of the Trust, the
Adviser, Administrator and Distributor and their immediate families held
the following in each fund:
Shares Value
Capital Builder Fund 24,234.766 $290,332
Convertible Fund 2,550.678 33,669
Small Cap Fund 8,107.039 123,794
Government/Quality Bond Fund 345.046 3,502
=========== ========
6. Business Changes
On August 24, 1995, the Capital Builder Fund commenced operations. The net
assets of three SMITH HAYES Trust, Inc. pre-existing Funds (Asset
Allocation, Balanced, and Value Funds) were converted to cash of $5,386,699
and invested in Capital Builder. In addition, the net assets of a related
party limited partnership of $3,283,131, including securities with
unrealized appreciation of $752,965 were received by Capital Builder in a
tax-free exchange.
The Trust's Board of Directors has approved the creation of a
multiple-class share structure for the Funds. Three classes of stock will
be created for each Fund designated as Select, Investor, and Market Shares.
Each share class will have or share in varying levels of charges and
expenses of the Funds. The multiple-class structure is anticipated to
become effective in September 1996.
Effective in September 1996, the Trust will begin to utilize the trade
name Lancaster Funds in its operations. Additionally, the Small Cap
Fund's name will be changed to Crestone Small Cap Fund.
<PAGE>
SMITH HAYES
TRUST, INC.
[GRAPHIC OMITTED]
NEBRASKA TAX-FREE FUND
ANNAUL REPORT
JUNE 30, 1996
<PAGE>
Shareholder Letter............................. 1
Comparison Graph............................... 2
Independent Auditors' Report .................. 3
Schedule of Investments........................ 4
Statement of Assets and Liabilities............ 10
Statement of Operations........................ 11
Statements of Changes in Net Assets............ 12
Financial Highlights........................... 13
Notes to Financial Statements.................. 14
<PAGE>
SMITH HAYES TRUST, INC.
Fellow Shareholders:
A review of interest rates for the fiscal year ended June 30, 1996 indicates two
distinct phases. During the first half of the fiscal year interest rates
declined, with the 10-year Treasury reaching a low of approximately 5.60% in
January. During the last six months of the fiscal year interest evidenced a
relatively steady increase with the yield on the 10-year Treasury increasing
approximately 130 basis points to 6.90%. The increase in interest rates is
attributed to the market's fear that economic growth is excessive and concerns
about what initiatives will be implemented by the Federal Reserve Board.
According to a recent survey conducted by the Wall Street Journal most
economists are forecasting relative modest growth over the next twelve months
with inflation remaining around the current level of 2.8% - 3.0%. Accordingly,
the consensus estimate is for no significant change in the general level of
interest rates.
As a consequence of the increase in interest rates over the previous twelve
months bond prices have declined. Since the average maturity of the Nebraska Tax
Free Fund is less than six years the net asset value of the fund declined less
than 1% to $9.63. The overall return on the Fund was 4.25%. The current dividend
yield which is exempt from Federal and Nebraska State income taxes is 5.11%
Our mission as managers is to insure that the Fund's objective of providing
"investors with a high level of tax exempt income while seeking preservation of
capital consistent with prudent investing" is achieved. By giving careful
consideration to the slope of the yield curve coupled with these objectives we
can maintain the portfolio's goals.
In September, we will be changing the Trust's name from SMITH HAYES Trust to
Lancaster Funds. We believe this is a strong name which reflects the diversity
of the funds. This is a name change only for the Trust and will not affect any
investment objectives or policies of any of the funds in the Series. Please do
not hesitate to call your SMITH HAYES Trust representative if you have any
questions.
Sincerely,
John H. Conley, CFA July 25, 1996
<PAGE>
OBJECTIVE:
Nebraska Tax-Free Fund seeks to provide investors with a high level of income
exempt from federal income tax and from Nebraska state income tax while seeking
preservation of capital consistent with prudent investing. Under normal market
conditions, the Fund will attempt to invest 100% and, as a matter of fundamental
policy, will invest at least 80% of the value of its net assets in "municipal
securities", the interest on which is exempt from federal income taxes and from
the income taxes of the State of Nebraska.
PERFORMANCE REVIEW:
On June 30, 1996 the net asset value of the Fund was $9.63 compared to $9.71 on
June 30, 1995. In spite of the modest decline in the net asset value income was
sufficient to provide a positive return of 4.25% for the year.
The decrease in the net asset value reflects the increase in intermediate and
long-term yields experienced throughout the six months of 1996 reversing the
steady decline in interest rates in 1995. On June 30, 1996 the distribution rate
was 5.11% and the average life was 5.2 years. The average quality is "A".
GOING FORWARD
The recent changes in the level of interest rates are an indication of the
difficulty in forecasting interest rates even over a relatively short time
period. Difficulties in forecasting short-term interest rates coupled with
uncertain government policies stress the importance of long-term financial
objectives.
[GRAPHIC OMITTED]
Comparison of change in value of $10,000 investment in Nebraska Tax-Free
and the Lehman Bros. Municipal
Avg. Annual Return 06/30/96 Value
1 year 4.25% Nebraska Tax-Free $10,698.79
Inception 3.68% Lehman Bros. Municipal $11,624.31
Past performance is not predictive of future
performance. Results reflect payment of a maximum sales charge of 3.9% on the
$10,000 investment with dividends reinvested. For the period July 12, 1993
through June 30, 1996.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SMITH HAYES Trust, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the SMITH HAYES Trust, Inc. Nebraska Tax-Free
Fund as of June 30, 1996, the related statement of operations for the year then
ended, and statements of changes in net assets and the financial highlights for
the years ended June 30, 1996 and 1995. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period from July 12, 1993
(commencement of operations) to June 30, 1994 were audited by other auditors
whose report dated July 22, 1994, expressed an unqualified opinion on such
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the SMITH HAYES
Trust, Inc. Nebraska Tax-Free Fund as of June 30, 1996, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the years ended June 30, 1996 and 1995, in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Lincoln, Nebraska
July 22, 1996
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
PERCENT
OF NET
PRINCIPAL ASSETS MARKET
AMOUNT TAX-EXEMPT SECURITIES 97.64% VALUE
- --------------------------------------------------------------------------------
Education 12.98%
25,000 Cass County School District 001 (Plattsmouth
Comm. Schools) General Obligation Bonds , Series 1994,
6.25% due 12/01/14 $25,913
50,000 Lancaster County Schools District 001 (Lincoln
Public Schools) General Obligation Bonds, Series 1993,
6.00% due 1/15/12 50,860
200,000 Nebraska Educational Facilities Authority
Revenue Bonds, Series 1993 (Nebraska Wesleyan
University Project), 5.55% due 9/1/07 199,160
100,000 Nebraska Educational Finance Authority Revenue
Bonds, Series 1994 (Dana College Project),
6.75% due 6/1/14 102,912
100,000 Nebraska Educational Finance Authority Revenue
Bonds, Series 1995 (Condordia Teachers
College), 5.90% due 12/15/15 93,467
200,000 Nebraska Educational Finance Authority Revenue
Bonds, Series 1995 (Midland Lutheran
College Project), 6.25% due 6/15/15 194,294
300,000 Nebraska Higher Education Loan Program, Inc.
Junior Subordinate Bonds, Series
A-6, 6.40% due 6/1/13 302,454
100,000 Nebraska State College Revenue Bonds, Series
1992, 5.00% due 6/15/97 100,448
200,000 University of Nebraska- Lincoln Student Fees
and Facilities Revenue Bonds, Series 1996,
5.65% 7/1/16 190,504
---------
1,260,012
Electric, Water, Sewer 11.85%
300,000 City of Grand Island, Sewer System Revenue
Bonds Series 1994, 6.00% due 4/1/14 299,392
150,000 City of Grand Island Nebraska Electric Revenue
Bonds 5.60% due 9/1/97 $152,640
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS (Continued)
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT TAX-EXEMPT SECASSETSS (Continued) ASSETS VALUE
Electric, Water, Sewer (Continued)
100,000 City of Hastings, Nebraska Combined Utility
Revenue Bonds
Series 1994, 6.875% due 10/15/14 $102,882
100,000 City of Hastings, Nebraska Electric System
Revenue Refunding
Bonds, Series 1993, 5.00% due 1/1/08 95,211
200,000 City of Kearney, Nebraska Combined Utilities
Revenue Refunding
Bonds, Series 1994, 6.10% due 6/1/14 203,048
100,000 City of Lincoln, Nebraska Electric System
Revenue Refunding
Bonds, 1993 Series A, 5.20% due 9/1/08 97,368
205,000 City of Lincoln, Nebraska Electric System
Revenue Refunding Bonds, 1992 Series A (Power Supply
Facilities), 5.75% due 9/1/16 199,281
-------
1,149,822
---------
General Obligation 23.03%
50,000 Boyd County Nebraska School District No. 38
(Spencer - Naper) General Obligation Bonds,
5.85% due 6/15/13 48,178
150,000 Buffalo County Nebraska School District No.
105 (Pleasanton) General Obligation Bonds,
Series 1993, 5.95% due 12/15/07 15,394
120,000 Colfax County Nebraska School District No. 2
(Schuyler) General Obligation Bonds, Series
1993, 5.65% due 12/15/09 118,331
150,000 Colfax County Nebraska School District No. 2
(Schuyler) General Obligation Bonds, Series
1993, 5.75% due 12/15/11 146,990
100,000 Douglas County Nebraska Sanitary and
Improvement District No. 257 General Obligation
Refunding Bonds (Ramble Ridge),
6.25% due 5/15/09 102,564
150,000 Douglas County Nebraska School District No.
010, (Elkhorn Public Schools) General Obligation Bonds,
Series of 1995 6.44% due 12/15/08 $155,643
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS (Continued)
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT TAX-EXEMPT SECASSETSS (Continued) ASSETS VALUE
General Obligation (Continued)
100,000 Douglas County Nebraska School District No.
010, (Elkhorn Public Schools) General Obligation Bonds,
Series of 1994 6.60% due 12/15/10 $103,814
100,000 Douglas County Nebraska School District No.
010, (Elkhorn Public Schools) General Obligation Bonds,
Series of 1994 6.75% due 12/15/14 103,560
100,000 Keith County School District 001 Nebraska,
(Ogallala Public School) General Obligation
School Building Bond, Series 1994B,
6.30% due 11/15/09 102,440
565,000 Lancaster County School District 001 (Lincoln)
Lease Purchase General Obligation Bonds,
4.15% due 10/26/00 565,000
100,000 Lincoln-Lancaster County Public Building
Commission General Obligation Bonds, Series
1994, 6.20% due 10/15/11 102,477
100,000 Morrill County Nebraska School District No.
021, (Bayard) General Obligation Bonds,
5.80% due 5/15/06 100,825
100,000 City of North Platte Nebraska General
Obligation Various Purpose Bonds, Series
1995, 6.20% due 3/15/15 99,170
175,000 Saunders County, Nebraska School District #107
Cedar Bluffs Public Schools, General Obligation Bonds,
6.35% due 7/1/14 176,094
150,000 Western Nebraska Community College
Certificates of Participation Lease Rentals,
6.55% due 10/15/13 155,505
-------
2,234,985
----------
Hospital 9.79%
100,000 Douglas County Nebraska Hospital Authority No.
2 Revenue Bonds, Health Care Facilities (Catholic
Health Care Corp. A), 5.85% due 11/15/03 $103,929
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS (Continued)
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT TAX-EXEMPT SECASSETSS (Continued) ASSETS VALUE
Hospital (Continued)
125,000 Douglas County Nebraska Hospital Authority No.
2 Revenue Bonds, Health Care Facilities (Catholic
Health Care Corp. A), 6.00% due 11/15/15 $125,626
100,000 Douglas County Nebraska Hospital Authority No.
1 Revenue Bonds, Health Care Facilities (Archbishop
Bergan Mercy), 6.25% due 11/15/22 99,699
100,000 Gage County Nebraska Hospital Authority No.1
Hospital Revenue Bonds, (Beatrice Community Hospital and
Health Center Project), 6.40% due 10/1/07 103,826
200,000 Gage County Nebraska Hospital Authority No.1
Hospital Revenue Bonds, (Beatrice Community Hospital and
Health Center Project), 6.75% due 10/1/14 206,088
100,000 Kearney County Nebraska Hospital Authority No.
1 Revenue Bonds, Series 1993 (Bethpage Mission of the
Great Plains, Inc.), 5.90% due 6/1/07 102,419
200,000 Lancaster County Nebraska Hospital Authority
Hospital Revenue Bonds, Series 1992 A (Sisters of
Charity Health Care Systems, Inc.), 6.25% due 5/15/12 208,148
--------
949,735
--------
Housing 17.44%
150,000 Nebraska Investment Finance Authority Hospital
Revenue Bonds,(Great Plains Regional Medical Center
Project), 6.50% due 5/15/14 156,659
200,000 Nebraska Investment Finance Authority Hospital
Revenue Bonds,(Nebraska Methodist Healthcare System),
6.55% due 3/1/99 210,588
90,000 Nebraska Investment Finance Authority Revenue
Bonds, (Foundation Educational Building Fund),
7.00% due 11/1/09 $90,000
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS (Continued)
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT TAX-EXEMPT SECASSETSS (Continued) ASSETS VALUE
Housing (Continued)
100,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1995 Series A,
6.15% due 3/1/09 $100,000
100,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1995 Series A,
6.20% due 9/1/10 100,000
195,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1994 Series A-1,
6.30% due 3/1/17 195,000
100,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1996 Series A,
5.95% due 3/1/27 100,000
250,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1995 Series B, 6.40%
due 9/1/26 250,000
490,000 Nebraska Investment Finance Authority Single
Family Housing Revenue Bonds, 1994 Series D-1,
7.30% due 9/1/26 490,000
-------
1,692,247
---------
Power 9.64%
240,000 Cornhusker Public Power District Nebraska
Electric System Revenue and Refunding Bonds,
Series 1993, 5.80% due 3/1/16 231,792
100,000 McCook Nebraska Public Power District Electric
System Revenue and Refunding Bonds,
6.75% due 12/15/09 103,483
200,000 Municipal Energy Agency of Nebraska Power
Supply System Revenue Refunding Bonds, 1992 Series A,
6.00% due 4/1/17 202,264
150,000 Nebraska Public Power District Electric System
Revenue Bonds, Series 1992 A, 6.25% due 1/1/12 155,310
250,000 Omaha Public Power District Nebraska Electric
Revenue Bonds, Series B, 5.70% due 2/1/17 242,191
-------
$935,040
--------
<PAGE>
NEBRASKA TAX-FREE FUND
SCHEDULE OF INVESTMENTS (Continued)
PERCENT
PRINCIPAL OF NET MARKET
AMOUNT TAX-EXEMPT SECASSETSS (Continued) ASSETS VALUE
Transportation 1.00%
100,000 Omaha, Nebraska Airport Authority Airport
Facilities Revenue Refunding Bonds, Series 1993,
5.50% due 1/1/13 $97,005
Various Revenues 11.91%
150,000 District Energy Corporation Nebraska Facility
Revenue Bonds, Series 1993 (City-County Building
and County Correctional
Family Project), 5.50% due 7/1/13 141,311
250,000 City of Lincoln, Nebraska Parking Revenue
Bonds, Series 1994 C, 6.10% due 8/15/09 256,806
100,000 City of Lincoln, Nebraska Parking Revenue
Bonds, Series 1994 C, 6.15% due 8/15/11 101,968
200,000 Nebraska Public Gas Agency Gas Supply System
Revenue Bonds, Series A, 6.25% due 4/1/05 207,504
200,000 Nebraska Public Gas Agency Gas Supply System
Revenue Bonds, Series A, 5.65% due 4/1/06 198,694
250,000 County of Scottsbluff, Nebraska Development
Revenue Bonds Series 1995, (Northfield Villa, Inc. - The
Residency Project), 6.90% due 4/1/20 250,000
-------
1,156,283
---------
Total Investment in Securities (cost $9,477,291) 97.64% $9,475,129
Cash Equivalents 1.06% 102,846
Other Assets, less Liabilities 1.30% 125,762
----- -------
NET ASSETS 100.00% $9,703,737
====== ==========
See accompanying notes to financial statements.
<PAGE>
NEBRASKA TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
Assets:
Investments in securities, at market value (cost $9,477,291) $9,475,129
Cash equivalents 102,846
Accrued interest and dividends receivable 135,854
----------
Total assets 9,713,829
----------
Liabilities:
Accrued expenses, including investment management,
administration and distribution expense reimbursements
payable to the adviser, administrator and distributor (note 3) 9,343
Payable for Fund shares redeemed 749
----------
Total liabilities 10,092
----------
Net assets applicable to outstanding capital stock $9,703,737
==========
Net assets are represented by:
Capital stock outstanding, at par 1,008
Additional paid-in capital 10,071,234
Accumulated undistributed net investment income 20,462
Accumulated undistributed net realized loss on investments (386,805)
Unrealized depreciation (note 4) (2,162)
-------
Total amount representing net assets applicable to
1,008,135.163 outstanding shares of $.001 par value
common stock (50,000,000 shares authorized) $9,703,737
===========
Net asset value per share $9.63
See accompanying notes to financial statements.
<PAGE>
NEBRASKA TAX-FREE FUND
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
Investment Interest Income: $603,927
----------
Expenses (note 3):
Investment advisory fees 15,880
Administration fees 12,786
Distribution expenses 26,465
Custodial fees 5,558
Auditing and tax accounting fees 3,363
Legal fees 2,448
Registration fees 5,168
Other operating expenses 8,644
---------
Total expenses 80,312
---------
Net investment income 523,615
---------
Realized loss and unrealized appreciation
(depreciation) on investments (note 4):
Net realized loss (77,341)
---------
Net unrealized appreciation (depreciation)
Beginning of period 1,992
End of period (2,162)
---------
Net unrealized depreciation (4,154)
---------
Net realized and unrealized loss on investments (81,495)
---------
Net increase in net assets resulting from operations $442,120
==========
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
NEBRASKA TAX-FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended June 30, 1996 and 1995
Year Ended Year Ended
June 30, June 30,
1996 1995
---- ----
Operations:
Net investment income $523,615 511,758
Net realized loss on investments (77,341) (289,202)
Unrealized appreciation (depreciation)
on investments (4,154) 581,628
------------- -------------
Net increase in net assets resulting
from operations 442,120 804,184
------------- -------------
Dividends paid to shareholders from net
investment income: 527,052 506,537
------------- -------------
Capital share transactions:
Proceeds from shares sold (244,434.219
and 403,726.098 shares) 2,401,890 3,175,403
Distributions reinvested (29,550.493
and 25,799.151 shares) 290,084 242,880
Payment for redemptions (349,802.221
and 221,835.048 shares) (3,427,170) (2,085,987)
------------- -------------
Net increase (decrease) from capital
share transactions (75,817.509
and 207,690.201 shares) (735,196) 1,332,296
------------- -------------
Total increase (decrease) in net assets (820,128) 1,629,943
Net assets:
Beginning of period 10,523,865 8,893,922
------------- -------------
End of period $9,703,737 10,523,865
============= =============
See accompanying notes to financial statements.
<PAGE>
NEBRASKA TAX-FREE FUND
FINANCIAL HIGHLIGHTS
Years Ended June 30, 1996 and 1995, and for the period
from July 12, 1993 (commencement of operations) to June 30, 1994
Year Ended Year Ended Period Ended
June 30, June 30, June 30,
1996 1995 1994
---- ---- ----
Net asset value:
Beginning of period $9.71 9.42 10.00
----- ---- -----
Income (loss) from investment
operations:
Net investment income 0.49 0.48 0.50
Net realized and unrealized gain
(loss) on investments (0.08) 0.29 (0.63)
------ ---- ------
Total gain (loss) from
investment operations 0.41 0.77 (0.13)
---- ---- ------
Less distributions from net
investment income (0.49) (0.48) (0.45)
------ ------ ------
End of period (1) $9.63 9.71 9.42
===== ==== ====
Total return 4.3% 8.5% (1.6%) *
==== ==== ======
Ratios/Supplemental data:
Net assets, end of period $9,703,737 10,523,865 8,893,922
---------- ---------- ---------
Ratio of expenses to average
net assets 0.76% 0.71% 0.41% *
Ratio of net income to average
net assets 4.96% 5.15% 4.99% *
Portfolio turnover rate 17.53% 34.96% 7.45%
*Annualized
(1) Excludes maximum sales charge of 3.90%
See accompanying notes to financialstatements.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
June 30, 1996
1. Organization
SMITH HAYES Trust, Inc. (the Trust) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company. These financial statements apply only to the Nebraska Tax-Free
Fund (the Fund).
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies employed by
the Fund in preparing its financial statements:
Use of Estimates: In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the financial statements and
changes in net assets for the period. Actual results could differ from
those estimates.
Valuation of Investments: Fund securities are valued at fair market value as
determined in good faith under the direction of the Board of Directors.
Determination of fair value involves, among other things, reference to
market indices, matrices and data from independent brokers and pricing
services.
All securities are valued in accordance with the above policies at the close
of each business day provided that the Fund has shareholder activity.
At June 30, 1996, the cost of investment securities is identical for
financial reporting and income tax purposes.
Securities Transactions: Securities transactions are accounted for on the
date securities are purchased or sold (trade date). Interest income,
including amortization of premium and discount on the straight-line basis,
is accrued daily. Realized investment gains or losses are determined by
specifically identifying the security sold.
Federal Income Taxes: It is the policy of the Fund to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute virtually all of its taxable income, including
any net realized gain on investments, to its shareholders. Therefore, no
Federal income tax provision is required. The Fund prepares its tax return
on an accrual basis.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
2. Continued
Distributions to Shareholders: Dividends to shareholders are recorded on
the ex-dividend date.
Cash Equivalents: The Trust considers investments with a maturity of three
months or less when purchased to be cash equivalents.
3. Related Party Transactions
The Fund has retained CONLEY SMITH, Inc. (the Adviser) as its exclusive
investment adviser. The agreement provides that the Fund will pay the
Adviser a fee equal to .15% per annum of its average daily net assets.
The Fund also retained Lancaster Administrative Services, Inc. (the
Administrator), to act as its administrator and transfer agent. The
agreement provides that the Fund will pay a fee to the Administrator equal
to .125% per annum of the average daily net assets.
In addition to the advisory and administrative services agreements, the Fund
has retained SMITH HAYES Financial Services Corporation (the Distributor), a
company related through common ownership and management, to act as the
underwriter and distributor of the Fund's shares. Pursuant to the
distribution plan under Rule 12b-1, the Fund will reimburse the Distributor
for shareholder-related expenses incurred in connection with the
distribution of the Fund's shares, however under no circumstances shall such
reimbursement exceed .25% per annum of the Fund's average daily net assets.
Under the terms of the advisory, administrative and distribution agreements
outlined above, the Fund paid $15,880, $12,786, and $26,465, respectively,
for such services. Of the amount paid to the Distributor, $18,536 was
retained by them for the sale of shares made by their agents and brokers.
The Distributor also received $13,851 and retained $3,119 (after allowances
to dealers) as its portion of the sales charges paid by purchasers of the
Fund shares. Such sales charges are not an expense of the Trust and hence
are not reflected in the accompanying statement of operations.
At June 30, 996 the Fund had accrued sales charges of $1,088 payable to the
Distributor.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
3. Continued
Under the terms of the advisory agreement, the Adviser may be obligated to
reimburse the Fund up to the amount of the Adviser's fee paid to the Adviser
if during any year the expenses of the Fund, including the Adviser's fee,
exceed certain limitations. At June 30, 1996 no expense reimbursement was
required.
In addition to the amount paid by the Fund under the advisory,
administration and distribution plans, the Fund used SMITH HAYES Financial
Services Corporation (SMITH HAYES) to affect security trades on their
behalf. SMITH HAYES was paid commissions in the amount of $18,000 for their
brokerage services during the year ended June 30, 1996.
At June 30, 1996, the directors, officers, and employees of the Trust, the
Adviser, Administrator and Distributor and their immediate families held
10,195 shares at a value of $98,178.
4. Securities Transactions
The Fund made purchases and sales of investment securities of $1,794,548 and
$2,620,556, respectively, during the year ended June 30, 1996.
At June 30, 1996, the aggregate gross unrealized appreciation and the
aggregate gross unrealized depreciation of securities were $93,447 and
$95,609, respectively.
5. Business Changes
The Trust's Board of Directors has approved the creation of a multiple-class
share structure for the fund. Three classes of stock will be created
designated as Select, Investor, or Market Shares. Each share class will have
or share in varying levels of charges and expenses of the Fund. The
multiple-class structure is anticipated to become effective in September
1996.
Effective in September 1996, the Trust will begin to utilize the trade name
Lancaster Funds in its operations.
<PAGE>
SMITH HAYES
TRUST, INC.
INSTITUTIONAL MONEY MARKET PORTFOLIO
ANNUAL REPORT
JUNE 30, 1996
<PAGE>
Independent Auditors' Report .................. 1
Statement of Net Assets........................ 2
Statement of Operations........................ 4
Statements of Changes in Net Assets............ 5
Financial Highlights........................... 6
Notes to Financial Statements.................. 7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SMITH HAYES Trust, Inc.
We have audited the accompanying statement of net assets of SMITH HAYES Trust,
Inc. Institutional Money Market Fund as of June 30, 1996, the related statement
of operations for the year then ended, and statements of changes in net assets
and the financial highlights for the years ended June 30, 1996 and 1995. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the period November 12, 1992 (commencement of operations) to June
30, 1994 were audited by other auditors whose report dated July 22, 1994,
expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the SMITH HAYES
Trust, Inc. Institutional Money Market Fund as of June 30, 1996, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for the years ended June 30, 1996 and 1995, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Lincoln, Nebraska
July 22, 1996
<PAGE>
SMITH HAYES TRUST, INC.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
June 30, 1996
Yield at
Par Time of Amortized
Value Description Purchase Cost
- ---------------- -------------------------------- ---------- -------------
Certificates of Deposit -- 1%
95,000 Beatrice National Bank and Trust
Company, Beatrice, Nebraska, due 8/9/96 6.30% $95,000
95,000 First Bank & Trust Company,
Cozad, Nebraska, due 12/16/96 5.65% 95,000
95,000 Curtis State Bank,
Curtis Nebraska, due 9/16/96 5.50% 95,000
95,000 First National Bank
Holdrege Nebraska, due 2/10/97 6.00% 95,000
95,000 Havelock Bank
Lincoln Nebraska, due 8/03/96 5.80% 95,000
---------
Total (cost $475,000) 475,000
----------
Government Securities -- 4%
250,000 Federal Home Loan Mtg. Corp., due 7/5/96 5.35% 249,857
500,000 Federal Home Loan Mtg. Corp., due 7/15/96 5.25% 498,988
650,000 Federal Home Loan Mtg. Corp., due 7/18/96 5.28% 648,416
1,600,000 Federal Home Loan Mtg. Corp., due 8/27/96 5.40% 1,586,619
-------------
Total (cost $2,983,880) 2,983,880
-------------
Trust Certificates -- U.S. Government Guaranteed Student Loans -- 90%
60,000,000 Mid-America Student Finance Trust,
due 10/17/96 to 6/27/97 (cost$60,000,000) 5.63%* $60,000,000
-------------
63,458,880
----------
Total Investments -- 95%
<PAGE>
SMITH HAYES TRUST, INC.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF NET ASSETS
(Continued)
Excess of other Assets over Total Liabilities -- 5%
(Includes $13,279 payable to investment
adviser, administrator and distributor
and $152,548 dividends payable to
shareholders) 3,304,221
-------------
Net Assets -- 100%
Applicable to 66,763,101 outstanding
shares of $.001 par value common stock
(100,000,000 shares authorized) $66,763,101
=============
Net Asset Value:
Offering and redemption price per share $1.00
=============
*Interest rate fluctuates with 3-month U.S. Treasury Bill rate,
subject to no longer than 5-day settlement.
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
Investment Interest Income $1,564,234
-----------
Expenses (note 2):
Investment advisory fees 27,243
Administration fees 32,692
Distribution fee 54,439
Custodial fees 13,332
Auditing and tax accounting fees 6,068
Legal fees 6,206
Other expenses 16,126
-----------
Total expenses 156,106
-----------
Net Investment Income $1,408,128
===========
See accompanying notes to financial statements.
<PAGE>
SMITH HAYES TRUST, INC.
INSTITUTIONAL MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended June 30, 1996 and 1995
Year Ended Year Ended
June 30, June 30,
1996 1995
------------- -------------
From Investment Operations:
Net investment income
distributed to shareholders $1,408,128 1,080,158
============= =============
From Share Transactions:
(at constant net asset value of $1 per share)
Shares sold 101,840,935 61,906,153
Shares issued in reinvestment of
dividends from net investment income 992,239 693,024
------------- -------------
102,833,174 62,599,177
Shares redeemed 60,407,009 66,271,044
------------- -------------
Total increase (decrease) in net assets
derived from share transactions 42,426,165 (3,671,867)
Net Assets:
Beginning of period 24,336,936 28,008,803
------------- -------------
End of period $66,763,101 24,336,936
============= =============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SMITH HAYES TRUST, INC.
FINANCIAL HIGHLIGHTS
INSTITUTIONAL MONEY MARKET FUND
Years Ended June 30, 1996, 1995 and 1994 and the
Period from November 12, 1992 (commencement of operations)
to June 30, 1993
Year Ended Year Ended Year Ended Period Ended
June 30, June 30, June 30, June 30,
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period $1.00 1.00 1.00 1.00
Income from investment operations,
Net investment income 0.052 0.054 0.040 0.009
Less distributions,
Dividends from net investment income (0.052) (0.054) (0.040) (0.009)
End of period $1.00 $1.00 1.00 1.00
===== ===== ==== ====
Yield 5.02% 5.63% 4.52% 4.28% *
===== ===== ===== ===== -
Effective yield 5.14% 5.79% 4.62% 4.37% *
- --------------- ===== ===== ===== ===== -
Ratios/Supplemental data:
Net assets, end of period $66,763,101 24,336,936 28,008,803 14,855,439
----------- ---------- ---------- ----------
Ratio of expenses to average net 0.57% 0.54% 0.61% 0.68% *
Ratio of net income to average net assets 5.17% 5.42% 4.05% 4.40% *
*Annualized for those periods less than twelve months in duration.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
June 30, 1996
1. Organization and Significant Accounting Policies
SMITH HAYES Trust, Inc. (the Company) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company. These financial statements relate only to the Institutional Money
Market Fund (the Fund).
The following is a summary of significant accounting policies employed by
the Company in preparing its financial statements.
Valuation of Investments: Fund securities are valued at amortized cost.
Pursuant to Rule 2a-7 of the Investment Company Act of 1940, amortized cost
as defined is a method of valuing securities at acquisition cost, adjusted
for amortization of premium or accretion of discount, which approximates
market, or at original cost, which combined with accrued interest,
approximates market value. This method of valuation is used consistently
throughout the industry by money market funds wishing to maintain a constant
net asset value per share. The Fund maintains a constant net asset value of
$1 per share.
Security Transactions and Investment Income: Security transactions are
recorded on a trade date basis. Realized gains or losses on sales of
investments are determined by specifically identifying the issue sold. In
computing net investment income, the Fund amortizes premiums and discounts
and accrues interest income daily.
Federal Income Taxes: It is the policy of the Fund to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to have the Fund distribute virtually all of its taxable
income generated to it's shareholders. Therefore, no liability for Federal
income taxes is required. On a calendar year basis, the Fund, will
distribute substantially all of its net investment income and realized
gains, if any, to avoid the payment of any Federal excise taxes. The Fund
prepares its tax return on an accrual basis.
Distributions to Shareholders: Dividends to shareholders are accrued and
declared daily from net investment income. Payments or reinvestments of
dividends are made monthly.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
1. Continued
Trust Certificates: The trust certificates represent U. S. Government
guaranteed student loans held by Mid-America Student Finance Trust (the
Trust). The Trust invests in eligible student loans issued under the Higher
Education Act of 1965 as amended (the Act) established by the U. S.
Government to provide access to funds for students attending post-secondary
institutions. The Trust purchases the student loans from Nebraska and Iowa
banks who are eligible lenders as defined by the Act. The terms of the
loans, which vary on an individual basis, generally provide for repayment in
monthly installments over a period normally not in excess of ten years.
All of the student loans are guaranteed by various authorized guarantee
agencies who have contracts of reinsurance with the Department of Education.
These guarantees are made subject to the performance of certain loan
servicing procedures stipulated by the Act. If these due diligence
requirements are not met, the affected loans may not be covered by the
guarantees should the borrower default.
For liquidity purposes, certain banks have entered into unconditional
agreements to repurchase a predetermined amount of student loans from the
Trust upon five days written notice. The maximum amount any bank is
obligated to repurchase is five percent of the total student loans owned by
the Trust. The repurchase agreements are cancelable with 30 days advance
written notice. At June 30, 1996, 35 banks have entered into repurchase
agreements for an aggregate total of $71,000,000.
2. Management Fee, Distribution Expense and Transactions with Affiliates
The Fund has retained CONLEY SMITH, Inc. (the Adviser) as its exclusive
investment adviser. Under the terms of the agreement the adviser is paid a
monthly fee computed at an annual rate of .10% of the average daily net
assets of the Fund.
The Fund has also retained Lancaster Administrative Services, Inc. (the
Administrator), to act as its administrator and transfer agent. The
agreements provide for a fee computed and paid monthly at an annual rate of
.12% of the average daily net assets of the Fund.
<PAGE>
SMITH HAYES TRUST, INC.
Notes to Financial Statements
2. Continued
The Fund has retained SMITH HAYES Financial Services Corporation (the
Distributor), a company related through common ownership and management, to
act as the underwriter and distributor of the Fund's shares. Pursuant to the
shareholder approved distribution plan under Rule 12b-1, the Fund will
reimburse the Distributor for shareholder-related expenses incurred in
connection with the distribution of the Fund's shares. Aggregate payments
cannot exceed the annual rate of .20% of the Fund's average daily net
assets.
Under the terms of the advisory, administrative and distribution agreements
outlined above, the Fund paid $27,243, $32,692 and $54,439, respectively,
for such services.
In addition to the amounts paid under the advisory, administration and
distribution plans, the Fund primarily used SMITH HAYES Financial Services
Corporation (SMITH HAYES) to affect security trades on its behalf. As is
customary in the industry, the adviser evaluates the pricing and ability to
execute the transaction in selecting brokers to affect trades. SMITH HAYES
was paid commissions in the amount of $638 for brokerage services during the
year ended June 30, 1996.
At June 30, 1996, the directors, officers, and employees of the Company, the
Adviser, Administrator, Distributor and their immediate families held
1,308,503 shares of the Fund, which constituted 1.96% of the Fund's
outstanding shares.
3. Business Changes
Effective in September 1996, the Trust will begin to utilize the trade name
Lancaster Funds in its operations.
