<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
10 Exchange Place
Suite 2010
Jersey City, NJ 07302-3913
107/634/607
503/502 SA 9610
COMSTOCK PARTNERS
FUNDS, INC.
-------------------------
COMSTOCK PARTNERS
STRATEGY FUND
COMSTOCK PARTNERS
CAPITAL VALUE FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1996
<PAGE>
[LOGO]
COMSTOCK PARTNERS FUNDS, INC.
COMSTOCK PARTNERS STRATEGY FUND
COMSTOCK PARTNERS CAPITAL VALUE FUND
10 Exchange Place, Suite 2010
Jersey City, NJ 07302-3913
INVESTMENT ADVISER
COMSTOCK PARTNERS, INC.
10 Exchange Place
Jersey City, NJ 07302-3913
SUB-INVESTMENT ADVISER (STRATEGY FUND)
THE DREYFUS CORPORATION
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISER AND
ADMINISTRATOR (CAPITAL VALUE FUND)
THE DREYFUS CORPORATION
200 Park Avenue
New York, NY 10166
CUSTODIAN--DOMESTIC
THE BANK OF NEW YORK
110 Washington Street
New York, NY 10286
CUSTODIANS--INTERNATIONAL
BROWN BROTHERS HARRIMAN & CO. (STRATEGY FUND)
40 Water Street
Boston, MA 02109
THE BANK OF NEW YORK (CAPITAL VALUE FUND)
110 Washington Street
New York, NY 10286
ADMINISTRATOR (STRATEGY FUND)
PRINCETON ADMINISTRATORS, L.P.
P.O. Box 9095
Princeton, NJ 08540-9095
DISTRIBUTOR
PREMIER MUTUAL FUND SERVICES, INC.
60 State Street, Suite 1300
Boston, MA 02109
Tel. 1-800-221-7930, 1-617-557-3400
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, AND
SHAREHOLDER SERVICING AGENT
DREYFUS TRANSFER, INC.
1 American Express Plaza
Providence, RI 02940-9671
Tel. 1-800-645-6561
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
SIMPSON THACHER & BARTLETT
(a partnership which includes
professional corporations)
425 Lexington Avenue
New York, NY 10017-3909
OFFICERS & DIRECTORS
Charles L. Minter,
Chief Executive Officer and
Chairman of the Board
M. Bruce Adelberg, Director
Sven B. Karlen, Jr., Director
E. W. Kelley, Director
Robert M. Smith, Director
W. Troy Hottenstein, Secretary
Robert C. Ringstad, Vice President,
Treasurer, Chief Financial Officer
and Assistant Secretary
- --------------------------------------------------------------------------------
General information regarding a Fund's portfolio, updated semi-monthly, is
available by
calling the Fund's Distributor (see above).
This report is not authorized for use in connection with an offer of sale or a
solicitation of an offer to buy shares of a
Fund unless accompanied or preceded by a Fund's current prospectus. Past
performance results shown in this report
should not be considered a representation of future performance. Investment
return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost.
<PAGE>
DEAR FELLOW SHAREHOLDER:
For the six months ended October 31, 1996, the Comstock Partners Strategy Fund's
Class O, A, and C shares posted a total return of -2.10%, -2.23%, and -2.69%,
respectively, and the Comstock Partners Capital Value Fund's Class A, B, C, and
R shares posted a total return of -4.55%, -5.01%, -4.79%, and -4.55%,
respectively, based upon net asset value per share*, while the Standard & Poor's
500 Composite Stock Price Index (S&P 500) rose 9.08% and the Lehman Brothers
Government/Corporate Bond Index rose 5.39%. The main reason we underperformed
the indexes over the last six months was because both funds were positioned to
benefit from declining US equity prices.
We continue to believe that investing in equities at present valuation levels is
risky. We focus significant effort on researching the factors which have
historically existed at market tops and bottoms. The data we believe to be
important fall into general categories like valuation, monetary conditions,
economic environment, sentiment, and internal divergences. In our view, similar
conditions which existed during previous peaks also exist now. For instance, we
found that tops were generally characterized by tightening monetary conditions,
a booming economic environment, highly positive sentiment, excessive valuations,
and divergences between the averages and a broad list of stocks. The opposite
was true at bottoms. Although it is impossible to predict the future, this
analysis leads us to believe that the case is strong that a decline in equity
prices is close at hand.
Both of the Funds have positions in S&P 500 Index put options, while the Capital
Value Fund has sold short S&P 500 Index futures and individual equities. We have
been employing a strategy of selecting short sale candidates for the Capital
Value Fund by using a combination of factors including valuation, earnings
revisions, earnings growth, insider trading, and the relative strength of the
stock's price.
While the Funds remain positioned to benefit from a decline in the US equity
market, we have yet to maximize the positions for the downside. We will closely
monitor the markets in anticipation of increasing the Funds' bearish exposure if
we believe the conditions warrant. During certain periods when it has appeared
that the stock market might rise over the short term, both Funds purchased S&P
500 futures while still maintaining the net short exposure to the stock market.
At certain times this has helped the performance of the Funds.
The gold share position of the Funds was reduced significantly in early 1996 as
gold had risen to $417 per ounce and we believed the risk/reward ratio of
holding gold shares at that time had become less favorable. Presently, the
valuation of the gold shares has improved while surveys of market participants
have indicated that the sentiment toward gold bullion has gotten more bearish.
With inflation remaining low, however, the traditional fundamental rationale for
holding gold is weak. So while we are no longer reducing our position in gold
shares, we have not added to it. We still believe in the longer-term prospects
of gold shares and we will continue to monitor this market closely for
opportunities to add to the gold positions.
In an effort to diversify each Fund's currency exposure, we have allocated a
portion of their assets overseas. We believe that the countries chosen for
investment appear to offer a combination of favorable fundamental
characteristics such as higher real interest rates, stronger economic growth and
a stronger trade balance than we presently expect in the United States. The
Funds presently own positions in the Italian Lira, the Swedish Krona, the UK
Pound, and the German Mark.
Our work currently indicates a neutral view toward the bond market from a
longer-term perspective. However, trading opportunities do appear at times.
Presently, the Funds hold nominal trading positions in 30-year US Treasury
bonds. At this time we have hedged the South African Rand and the Swiss Franc.
<PAGE>
In summary, the Funds' positions are still focused to benefit from a US equity
market decline. The Funds are also positioned to benefit if the dollar declines,
and gold shares rise. Please note that, consistent with the Funds' prospectus
and our investment approach, we have the flexibility to change these positions
when we believe conditions warrant.
Sincerely,
Comstock Partners, Inc.
Investment Policy Committee
Jersey City, New Jersey
November 15, 1996
* PERFORMANCE INFORMATION:
Total return assumes the reinvestment of dividends and excludes the effect of
sales loads.
The Lehman Brothers Government/Corporate Bond Index is a widely accepted
unmanaged index of bond market performance which includes fixed rate issues
rated investment grade or higher; all returns are market value weighted
inclusive of accrued interest. The Standard & Poor's 500 Composite Stock Price
Index is a widely accepted unmanaged index of stock market performance which
reflects the reinvestment of income dividends and, where applicable, capital
gain distributions.
- --------------------------------------------------------------------------------
We are pleased to announce that you will soon be able to obtain current
information about Comstock Partners Strategy Fund and Comstock Partners
Capital Value Fund and our investment strategy through our internet web
site
www.comstockfunds.com
and a new telephone information line 201-332-4422. Please save this
information for future reference.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Strategy Fund Schedule of Investments (Unaudited) As of October 31, 1996
<TABLE>
<CAPTION>
S&P MOODY'S SHARES HELD/ VALUE
RATING* RATING* FACE AMOUNT ISSUE (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
BONDS
Corporate UNR UNR $ 3,850,000 Ashanti Capital, Ltd. 5.500% due 3/15/2003 $ 3,407,250
Convertible Bonds
- -- 5.4% UNR UNR 2,000,000 Bema Gold Corp. 7.500% due 2/28/2000 6,000,000
UNR UNR 1,500,000 Pegasus Gold Inc. 6.250% due 4/30/2002 1,462,500
UNR UNR 2,000,000 Pegasus Gold Inc. 6.250% due 4/30/2002 (a) 1,950,000
------------
12,819,750
------------
U.S. Government United States Treasury Notes & Bonds:
Obligations -- 56.9% UNR Aaa 13,665,000 6.000% due 2/15/2026 12,490,664
UNR Aaa 29,170,000 8.500% due 4/15/1997 29,580,203
UNR Aaa 90,200,000 8.875% due 11/15/1997 93,187,875
------------
135,258,742
------------
Foreign Government UNR Aaa GBP 7,170,000 United Kingdom Treasury 13.000% due 7/14/2000 13,842,193
Obligations -- 17.1% BBB+ Baa1 SAR 67,460,000 Republic of South Africa 12.500% due 12/21/2006 11,768,790
UNR Aa1 SEK 88,600,000 Kingdom of Sweden 11.000% due 1/21/1999 15,007,962
------------
40,618,945
------------
Foreign Corporate European Investment Bank:
Obligations -- 6.2% AAA Aaa ITL 10,450,000,000 10.800% due 3/15/1999 7,466,107
AAA Aaa ITL 10,450,000,000 11.450% due 10/14/1997 7,147,796
------------
14,613,903
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BONDS (Cost $199,615,529) -- 85.6% 203,311,340
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Chemical -- 0.0% 25,300 PT Tri Polyta Indonesia, ADR# 177,100
------------
Country Funds -- 0.8%
127,000 Fleming Russia Securities Fund (b) 1,318,260
77,600 Lazard Vietnam Fund, Ltd. (b) 582,000
------------
1,900,260
------------
Mining -- 3.0% 261,900 East Rand Gold & Uranium Company, Ltd., ADR# 510,705
147,600 Free State Consolidated Gold Mines, Ltd., ADR# 1,309,950
163,800 Harmony Gold Mining, Ltd., ADR# 1,248,975
230,700 Hartebeestfontein Gold, ADR# 582,518
177,100 Kloof Gold Mining, Ltd., ADR# 1,593,900
149,500 Randfontein Estates Gold Mining Company
Witwatersrand., Ltd., ADR# 747,500
38,800 Western Deep Levels, Ltd., ADR# 1,188,250
------------
7,181,798
------------
Real Estate Investment Trusts -- 1.8% 56,200 Essex Property Trust, Inc. 1,454,175
105,000 G & L Realty Corp. 1,640,625
69,000 RFS Hotel Investors, Inc. 1,121,250
------------
4,216,050
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (Cost $14,473,428) -- 5.6% 13,475,208
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK
Mining -- 1.2% 55,000 Amax Gold, Inc. $3.75 convertible pfd. 2,798,125
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PREFERRED STOCK (Cost $2,758,000) -- 1.2% 2,798,125
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
SECURITIES**
U.S. Government United States Treasury Bills:
Obligations -- 1.6% UNR Aaa $ 1,045,000 4.940% due 1/09/97 1,034,901
UNR Aaa 2,735,000 4.945% due 1/09/97 2,708,569
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES (Cost $3,744,183) -- 1.6% 3,743,470
- ---------------------------------------------------------------------------------------------------------------------------------
Total investments (cost $220,591,140) -- 94.0% 223,328,143
Put options purchased (cost $22,108,480) -- 4.1%+ 9,739,656
Variation margin on open futures contracts sold -- 0.2%++ 490,650
Unrealized depreciation on foreign exchange contracts -- 0.1%+++ (197,208)
Other assets less liabilities -- 1.8% 4,166,819
------------
Net Assets -- 100.0% $237,528,060
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Strategy Fund Schedule of Investments (concluded) As of October 31, 1996
+ Put options purchased as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
CONTRACTS ISSUE EXERCISE PRICE (NOTE 1A)
<S> <C> <C> <C>
135 S&P 500 Index Dec. 96/525 $ 1,687
865 S&P 500 Index Dec. 96/550 16,219
230 S&P 500 Index Dec. 96/600 23,000
580 S&P 500 Index Mar. 97/600 261,000
100 S&P 500 Index Jun. 97/550 36,250
2,470 S&P 500 Index Jun. 97/600 1,790,750
1,785 S&P 500 Index Sep. 97/625 2,387,437
765 S&P 500 Index Sep. 97/650 1,329,188
465 S&P 500 Index Dec. 97/600 534,750
560 S&P 500 Index Dec. 97/625 847,000
135 S&P Flex Index Dec. 96/525 0
3,700 S&P Flex Index Dec. 96/600 370,000
2,795 S&P Flex Index Mar. 97/600 1,187,875
830 S&P Flex Index Dec. 97/600 954,500
-------------
Total Put Options Purchased $ 9,739,656
-------------
-------------
</TABLE>
++ Open futures contracts as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
NUMBER OF VALUE UNREALIZED
CONTRACTS ISSUE EXPIRATION DATE (NOTE 1A) APPRECIATION
<S> <C> <C> <C> <C>
150 S&P 500 Index Dec. 96 $ 53,223,750 $ 356,100
------------- ------------
------------- ------------
</TABLE>
+++ Foreign exchange contracts as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
EXPIRATION CURRENCY CURRENCY VALUE
DATE PURCHASED COST SOLD (NOTE 1A)
<S> <C> <C> <C> <C>
Italian Lira
January 1997 U.S. Dollar $ 14,505,119 22,100,000,000 $ 14,307,911
------------ ------------
------------ ------------
<FN>
# American Depositary Receipt (ADR).
* UNR -- Unrated by Standard & Poor's or Moody's.
These securities are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of
purchase by the Fund.
** This security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions
exempt from registration normally to qualified institutional buyers.
(a) At October 31, 1996, the market value of
the security was $1,950,000 or 0.8% of net assets.
(b) Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Schedule of Investments (Unaudited) As of October 31, 1996
<TABLE>
<CAPTION>
S&P MOODY'S SHARES HELD/ VALUE
RATING* RATING* FACE AMOUNT ISSUE (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
BONDS
U.S. Government United States Treasury Bonds:
Obligations --
5.2% UNR Aaa $ 15,975,000 6.00% due 2/15/2026 $ 14,602,149
-------------
Foreign Government AAA UNR CHF 4,100,000 Republic of Austria 4.50% due 2/12/2000 3,448,385
Obligations --
22.3% UNR Aa1 CHF 15,000,000 Kingdom of Denmark 4.25% due 9/30/1999 12,550,583
UNR Aaa GBP 8,545,000 United Kingdom Treasury 13.00% due 7/14/2000 16,503,827
BBB+ Baa1 SAR 77,300,000 Republic of South Africa 12.50% due 12/21/2006 13,469,414
UNR Aa1 SEK 102,200,000 Kingdom of Sweden 11.00% due 1/21/1999 17,300,206
-------------
63,272,415
-------------
Foreign Corporate European Investment Bank:
Obligations --
6.0% AAA Aaa ITL 12,150,000,000 10.80% due 3/15/1999 8,678,114
AAA Aaa ITL 12,150,000,000 11.45% due 10/14/1997 8,308,129
-------------
16,986,243
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BONDS (Cost $90,947,220) --33.5% 94,860,807
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Chemical -- 0.2% 82,000 PT Tri Polyta Indonesia, ADR# 574,000
-------------
Country Funds --
1.0% 220,765 Fleming Russia Securities Fund (a) 2,291,540
87,000 Lazard Vietnam Fund (a) 652,500
-------------
2,944,040
-------------
Mining -- 12.2% 329,500 Ashanti Goldfields, GDR## 5,395,562
88,500 East Rand Gold & Uranium Company, Ltd., ADR# 172,575
166,400 Free State Consolidated Gold Mines, Ltd., ADR# 1,476,800
124,200 Getchell Gold (a) 5,526,900
192,600 Harmony Gold Mining Co., Ltd., ADR# 1,468,575
333,300 Hartebeestfontein Gold, ADR# 841,583
206,100 Kloof Gold Mining Co. Ltd., ADR# 1,854,900
342,300 Peagasus Gold (a) 3,423,000
176,200 Randfontein Estates Gold Mining Company
Witwatesrand, Ltd., ADR# 881,000
1,559,900 Royal Oak Mines (a) 5,849,625
344,082 Santa Fe Pacific Gold 4,085,974
262,000 TVX Gold 1,965,000
49,000 Western Deep Levels, Ltd., ADR# 1,500,625
-------------
34,442,119
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (Cost $39,783,340) -- 13.4% 37,960,159
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT - TERM
SECURITIES**
U.S. Government United States Treasury Bills:
Obligations --
47.3% UNR Aaa $ 40,349,000 5.09% due 11/7/96 40,318,335
UNR Aaa 30,150,000 5.12% due 11/29/96 30,036,334
UNR Aaa 22,404,000 5.07% due 12/5/96 22,298,253
UNR Aaa 33,835,000 4.87% due 12/12/96 33,642,141
UNR Aaa 607,000 4.99% due 1/9/97 601,134
UNR Aaa 4,100,000 4.96% due 1/16/97 4,056,704
UNR Aaa 3,036,000 4.98% due 1/23/97 3,000,995
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES (Cost $133,948,648) -- 47.3% 133,953,896
- ----------------------------------------------------------------------------------------------------------------------------------
Total investments (cost $264,679,208) -- 94.2% 266,774,862
Put options purchased (cost $24,082,546) -- 3.3%+ 9,424,062
Variation margin of open future contracts sold -- 0.1%++ 193,200
Unrealized appreciation on foreign exchange contracts -- 0.0%+++ 45,621
Other assets less liabilities -- 2.4% 6,872,883
-------------
Net Assets -- 100.0% $283,310,628
-------------
-------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Schedule of Investments (Unaudited) (concluded)
As of October 31, 1996
+ Put options purchased as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
CONTRACTS ISSUE EXERCISE PRICE (NOTE 1A)
<C> <S> <C> <C>
325 S&P 500 Index Dec. 96/525 $ 4,062
2,700 S&P 500 Index Dec. 96/550 50,625
1,510 S&P 500 Index Dec. 96/600 151,000
740 S&P 500 Index Jun. 97/550 268,250
2,310 S&P 500 Index Jun. 97/600 1,674,750
1,870 S&P 500 Index Sep. 97/625 2,501,125
525 S&P 500 Index Dec. 97/600 603,750
700 S&P 500 Index Dec. 97/625 1,058,750
325 S&P Flex Index Dec. 96/525 0
4,670 S&P Flex Index Mar. 97/600 1,984,750
980 S&P Flex Index Dec. 97/600 1,127,000
-------------
Total Put Options Purchased $ 9,424,062
-------------
-------------
</TABLE>
++ Open futures contracts sold as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF VALUE APPRECIATION
CONTRACTS ISSUE EXPIRATION DATE (NOTE 1A) (DEPRECIATION)
<C> <S> <C> <C> <C>
270 S&P 500 Index Dec. 96 $ 95,802,750 $ 640,875
200 S&P 500 Index Sept. 97 (72,850,000) (723,650)
------------ ------------
$ 22,952,750 $ (82,775)
------------ ------------
------------ ------------
</TABLE>
+++ Foreign exchange contracts as of October 31, 1996 are as follows:
<TABLE>
<CAPTION>
CURRENCY CURRENCY VALUE
EXPIRATION DATE PURCHASED COST SOLD (NOTE 1A)
<S> <C> <C> <C> <C>
January 1997 U.S. Dollar $ 15,857,683 Swiss Franc 19,700,000 $ 15,622,522
Italian Lira
January 1997 U.S. Dollar 16,636,022 25,696,000,000 16,825,563
------------ ------------
$ 32,493,705 $ 32,448,085
------------ ------------
------------ ------------
<FN>
# American Depositary Receipt (ADR).
## Global Depositary Receipt (GDR).
* UNR -- Unrated by Standard & Poor's or Moody's.
** These securities are traded on a discount basis; the interest rates
shown are the discount rates paid at the time of
purchase by the Fund.
(a) Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Statement of Securities Sold Short (Unaudited)
As of October 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Finance -- 2.5% 80,716 Bear Stearns $ 1,906,924
19,000 Dean Witter Discover, & Co. 1,118,625
88,000 Paine Webber Group 2,068,000
80,000 Schwab (Charles) 2,000,000
-------------
7,093,549
-------------
Manufacturing --
15.1% 51,300 AMP 1,737,787
33,600 Alcan Aluminum 1,104,600
16,000 Aluminum Company of America 938,000
23,100 B.A.T Industries, ADR 320,513
26,000 Bausch & Lomb 877,500
51,000 Boise Cascade 1,581,000
50,000 Bowater 1,768,750
80,000 Cooper Tire & Rubber 1,570,000
43,000 Crown Cork & Seal 2,064,000
27,900 Donnelley (R.R.) & Sons 847,462
47,000 Dow Jones & Co. 1,551,000
17,500 General Mills 999,688
17,800 General Motors, CL. H 950,075
29,000 Great Lakes Chemical 1,511,625
27,550 Heinz (H.J.) 978,025
55,600 Hewlett-Packard 2,453,350
12,000 Houghton Mifflin 595,500
40,000 International Flavors & Fragrances 1,655,000
50,000 International Paper 2,137,500
24,200 Kellogg 1,536,700
38,000 Kulicke & Soffa Industries 498,750
40,000 Louisiana Pacific 835,000
70,000 Lubrizol 2,082,500
13,200 Ralston Ralston Purina Group 872,850
20,000 Reader's Digest Association, CL. A 712,500
53,900 Reebok International 1,926,925
60,300 Rubbermaid 1,401,975
61,000 Seagram 2,310,375
15,000 Symbol Technologies 673,125
21,000 Tambrands 895,125
42,000 Texas Instruments 2,021,250
25,200 Whirlpool 1,190,700
-------------
42,599,150
-------------
Mining -- 0.5% 60,000 ASARCO 1,575,000
-------------
Services -- 1.0% 38,000 Genesis Health Ventures 869,250
42,000 Health Management Systems 987,000
35,000 Medic Computer Systems 988,750
1,000 PRI Automation 35,500
-------------
2,880,500
-------------
Transportation & Communication --
3.3% 23,400 AT & T 816,075
37,000 Brighpoint 925,000
36,000 Browning-Ferris Industries 945,000
45,000 Consolidated Freightways 1,080,000
14,400 Delta Air Lines 1,020,600
26,000 Federal Express 2,093,000
114,000 Hong Kong Telecom, ADR 2,009,250
30,300 Molten Metal Technology 405,262
-------------
9,294,187
-------------
Wholesale Trade --
0.6% 20,800 Motorola 956,800
25,000 Sysco 850,000
-------------
1,806,800
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES SOLD SHORT (Proceeds $68,638,870) -- 23.0% $65,249,186
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Statements of Assets and Liabilities (Unaudited) As of October 31, 1996
<TABLE>
<CAPTION>
STRATEGY CAPITAL
FUND VALUE FUND
<S> <C> <C>
ASSETS:
Investments at value (cost $220,591,140 and
$264,679,208, respectively) (Note 1a)............... $223,328,143 $266,774,862
Put options purchased (cost $22,108,480 and
$24,082,546, respectively) (Note 1a)................ 9,739,656 9,424,062
Receivable from brokers for proceeds on securities
sold short.......................................... -- 68,638,870
Receivables:
Interest........................................ 6,806,943 3,689,359
Capital stock sold.............................. 727,304 735,428
Securities sold................................. -- 569,748
Variation margin on open futures contracts...... 490,650 193,200
Dividends....................................... 51,563 --
Unrealized appreciation on foreign exchange
contracts........................................... -- 45,621
Other assets........................................ 102,265 29,501
------------ ------------
Total assets.................................... 241,246,524 350,100,651
------------ ------------
LIABILITIES:
Payables:
Short sales (proceeds $68,638,870).............. -- 65,249,186
Dividends to shareholders (Note 1f)............. 1,414,876 --
Capital stock redeemed.......................... 1,375,390 669,858
Payable for forward foreign exchange contracts
-- closed....................................... 232,604 179,327
Unrealized depreciation on foreign exchange
contracts....................................... 197,208 --
Investment advisory fees (Note 3)............... 124,152 97,226
Sub-investment advisory fees (Note 3)........... -- 196,886
Administrative fees (Note 3).................... 47,754 --
Distributor fees (Note 3)....................... 24,947 --
Accrued expenses and other liabilities.............. 301,533 397,540
------------ ------------
Total liabilities............................... 3,718,464 66,790,023
------------ ------------
NET ASSETS.......................................... $237,528,060 $283,310,628
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Paid in capital................................. $267,913,915 $411,171,966
Undistributed net investment income............. 11,331,857 14,130,611
Accumulated net realized loss on foreign
currency transactions........................... (4,372,415) (1,355,556)
Accumulated net realized loss on investments,
put options purchased, futures and short sale
transactions.................................. (27,895,198) (131,449,093)
Net unrealized appreciation on short sale
transactions.................................... -- 3,389,684
Net unrealized depreciaton on investments, put
options purchased and
futures transactions.......................... (9,275,721) (12,645,605)
Net unrealized appreciation (depreciation) on
foreign currency transactions................... (174,378) 68,621
------------ ------------
NET ASSETS.......................................... $237,528,060 $283,310,628
------------ ------------
------------ ------------
SHARES OF COMMON STOCK OUTSTANDING:
Class O shares:
150 million of $0.001 par value authorized.... 20,773,411 --
------------ ------------
------------ ------------
Class A shares:
200 million of $0.001 par value authorized.... 5,792,194 --
------------ ------------
------------ ------------
125 million of $0.001 par value authorized.... -- 20,191,199
------------ ------------
------------ ------------
Class B shares:
125 million of $0.001 par value authorized.... -- 7,513,016
------------ ------------
------------ ------------
Class C shares:
200 million of $0.001 par value authorized.... 2,052,539 --
------------ ------------
------------ ------------
125 million of $0.001 par value authorized.... -- 627,820
------------ ------------
------------ ------------
Class R shares:
125 million of $0.001 par value authorized.... -- 2,883
------------ ------------
------------ ------------
NET ASSET VALUE PER SHARE:
Class O shares:
$172,478,707 / 20,773,411 shares.............. $ 8.30 --
------------ ------------
------------ ------------
Class A shares:
$48,071,168 / 5,792,194 shares and
$203,045,613 / 20,191,199 shares,
respectively................................ $ 8.30 $ 10.06
------------ ------------
------------ ------------
Class B shares:
$74,115,668 / 7,513,016 shares................ -- $ 9.86
------------ ------------
------------ ------------
Class C shares:
$16,978,185 / 2,052,539 shares and
$6,120,349 / 627,820 shares, respectively $ 8.27 $ 9.75
------------ ------------
------------ ------------
Class R shares:
$28,998 / 2,883 shares........................ -- $ 10.06
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Statements of Operations for Six Months Ended
October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
STRATEGY CAPITAL
FUND VALUE FUND
<S> <C> <C>
INVESTMENT INCOME (NOTE 1E):
Interest and discount earned........................ $ 9,960,095 $ 9,690,553
Dividends (net of withholding tax of $29,092 and
$17,939, respectively)............................ 588,328 442,936
----------- ------------
Total investment income......................... 10,548,423 10,133,489
----------- ------------
EXPENSES:
Investment advisory fees (Note 3)................... 597,080 662,176
Dividends on securities sold short.................. -- 872,338
Administrative fees (Note 3)........................ 303,177 --
Shareholder servicing fees.......................... 259,453 593,038
Sub-investment advisory fees (Note 3)............... 199,027 509,796
Service and Distribution Plan fees (Note 3)......... 113,150 318,806
Printing and shareholder reports.................... 42,977 28,076
Registration fees................................... 42,093 31,635
Legal fees.......................................... 29,423 26,884
Insurance........................................... 28,396 2,271
Directors' fees and expenses........................ 24,793 28,013
Custodian fees...................................... 19,710 40,633
Audit fees.......................................... 16,096 28,852
Other operating expenses............................ 2,090 1,642
----------- ------------
Total expenses.................................. 1,677,465 3,144,160
----------- ------------
NET INVESTMENT INCOME............................... 8,870,958 6,989,329
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (NOTES 1B, 1C, 1E & 4):
Net realized loss on investments, put options
purchased and futures transactions................ (3,497,386) (7,221,725)
Net realized loss on short sale transactions........ -- (5,015,014)
Net realized loss on foreign currency
transactions...................................... (5,886,645) (261,472)
Change in net unrealized appreciation (depreciation)
on investments.................................... 650,033 (10,754,104)
Change in net unrealized appreciation on short sale
transactions...................................... -- 5,434,667
Change in net unrealized depreciation on put options
purchased......................................... (5,918,753) (2,295,750)
Change in net unrealized appreciation (depreciation)
on futures transactions........................... 356,100 (345,175)
Change in net unrealized depreciation on foreign
currency transactions............................. (238,417) (1,355,556)
----------- ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $(5,664,110) $(14,824,800)
----------- ------------
----------- ------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Statements of Changes in Net Assets
<TABLE>
<CAPTION>
STRATEGY FUND CAPITAL VALUE FUND
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE SEVEN
OCTOBER 31, 1996 YEAR ENDED OCTOBER 31, 1996 MONTHS ENDED
(UNAUDITED) APRIL 30, 1996 (UNAUDITED) APRIL 30, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS: Net investment income.......... $ 8,870,958 $ 21,479,096 $ 6,989,329 $ 6,879,172
Net realized gain (loss) on
investments, put options
purchased and futures
transactions............ (3,497,386) (6,887,974) (7,221,725) 24,598,637
Net realized loss on short sale
transactions............ -- -- (5,015,014) (3,510,946)
Net realized gain (loss) on
foreign currency
transactions............ (5,886,645) 5,554,446 (261,472) (842,088)
Change in net unrealized
appreciation
(depreciation) on
investments............. 650,033 (24,512,012) (10,754,104) (25,190,308)
Change in net unrealized
appreciation
(depreciation) on short
sale transactions....... -- -- 5,434,667 492,239
Change in net unrealized
appreciation
(depreciation) on put
options purchased....... (5,918,753) 13,061,612 (2,295,750) 3,754,246
Change in net unrealized
appreciation
(depreciation) on
futures transactions.... 356,100 -- (345,175) 205,425
Change in net unrealized
appreciation
(depreciation) on
foreign currency
transactions............ (238,417) (120,704) (1,355,556) 5,383,533
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net
assets resulting from
operations.............. (5,664,110) 8,574,464 (14,824,800) 11,769,910
---------------- ---------------- ---------------- ----------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS: Investment income -- net
Class O shares......... (3,835,617) (16,495,114) -- --
Class A shares......... (965,757) (3,453,678) -- (10,905,352)
Class B shares......... -- -- -- (2,909,347)
Class C shares*........ (210,481) (6,837) -- (29,071)
Class R shares*........ -- -- -- (44)
Realized transaction gain - net
Class O shares......... (3,149,588) -- -- --
Class A shares......... (757,462) -- -- --
Class B shares......... -- -- -- --
Class C shares*........ (133,166) -- -- --
Class R shares*........ -- -- -- --
---------------- ---------------- ---------------- ----------------
Net decrease in net assets
resulting from dividends
and distributions....... (9,052,071) (19,955,629) -- (13,843,814)
---------------- ---------------- ---------------- ----------------
CAPITAL STOCK
TRANSACTIONS: Net proceeds from shares sold:
Class O shares......... -- -- -- --
Class A shares......... 7,391,798 11,109,682 30,224,358 27,095,651
Class B shares......... -- -- 13,233,075 18,392,593
Class C shares*........ 17,918,202 367,799 3,850,785 3,593,718
Class R shares*........ -- -- 29,004 270
Dividends and distributions
reinvested:
Class O shares......... 1,080,269 2,440,189 -- --
Class A shares......... 539,502 1,062,696 -- 6,964,456
Class B shares......... -- -- -- 1,653,446
Class C shares*........ 35,593 875 -- 29,071
Class R shares*........ -- -- -- 44
Cost of shares redeemed:
Class O shares......... (41,743,664) (98,585,628) -- --
Class A shares......... (10,665,857) (22,354,127) (58,140,138) (61,921,614)
Class B shares......... -- -- (16,846,390) (25,781,438)
Class C shares*........ (428,678) (41,285) (1,005,569) (62,459)
Class R shares*........ -- -- -- --
---------------- ---------------- ---------------- ----------------
Net decrease in net assets
derived from capital
stock transactions...... (25,872,835) (105,999,799) (28,654,875) (30,036,262)
---------------- ---------------- ---------------- ----------------
Decrease in net assets......... (40,589,016) (117,380,964) (43,479,675) (32,110,166)
NET ASSETS: Beginning of period............ 278,117,076 395,498,040 326,790,303 358,900,469
---------------- ---------------- ---------------- ----------------
End of period.................. $237,528,060 $278,117,076 $283,310,628 $326,790,303
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Undistributed net investment
income.................. $ 11,331,857 $ 7,472,754 $ 14,130,611 $ 7,141,282
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
<FN>
*Class C shares of Strategy Fund were introduced on August 1, 1995; Class C
shares and Class R shares of Capital Value Fund were introduced on August 22,
1995.
</TABLE>
See notes to financial statements.
<PAGE>
- -----------------------------------------------------------------------------
Comstock Partners Funds, Inc. Strategy Fund
Financial Highlights
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE YEAR FOR THE YEAR
OCTOBER 31, 1996 ENDED ENDED
(UNAUDITED) APRIL 30, 1996 APRIL 30, 1995
---------------------------------- --------------------------------- --------------------
CLASS O CLASS A CLASS C CLASS O CLASS A CLASS C++ CLASS O CLASS A
-------- ------- ------- -------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD................... $ 8.78 $ 8.78 $ 8.77 $ 9.10 $ 9.10 $ 9.00 $ 9.40 $ 9.41
-------- ------- ------- -------- ------- --------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.......... 0.24 0.28 0.20 0.76 0.57 0.37 0.66 0.52
Net realized and unrealized
gain (loss) on
investments, put options
purchased, futures
transactions and foreign
currency transactions.... (0.42) (0.47) (0.43) (0.53) (0.36) (0.22) (0.44) (0.34)
-------- ------- ------- -------- ------- --------- -------- -------
Total from
investment
operations.......... (0.18) (0.19) (0.23) 0.23 0.21 0.15 0.22 0.18
-------- ------- ------- -------- ------- --------- -------- -------
LESS DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income................... (0.17) (0.16) (0.15) (0.55) (0.53) (0.38) (0.52) (0.49)
Dividends from realized gains
on foreign currency
transactions............. (0.13) (0.13) (0.12) -- -- -- -- --
-------- ------- ------- -------- ------- --------- -------- -------
Total
dividends........... (0.30) (0.29) (0.27) (0.55) (0.53) (0.38) (0.52) (0.49)
-------- ------- ------- -------- ------- --------- -------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 8.30 $ 8.30 $ 8.27 $ 8.78 $ 8.78 $ 8.77 $ 9.10 $ 9.10
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
Total investment return (1).... (2.10)% (2.23)% (2.69)% 2.66% 2.40% 1.96%(3) 2.39% 1.94%
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)................. $172,479 $48,071 $16,978 $224,148 $53,652 $ 317 $329,624 $65,874
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
Ratio of expenses to average
net assets............... 1.18%(4) 1.43%(4) 2.10%(4) 1.23% 1.48% 2.28%(4) 1.14% 1.46%
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
Ratio of net investment income
to average net assets.... 6.77%(4) 6.52%(4) 5.86%(4) 6.56% 6.33% 5.79%(4) 6.19% 5.83%
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
Portfolio turnover rate........ 57% 57% 57% 96% 96% 96% 100% 100%
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
Average commission rate
paid (5)................. $ 0.06 $ 0.06 $ 0.06 N/A N/A N/A N/A N/A
-------- ------- ------- -------- ------- --------- -------- -------
-------- ------- ------- -------- ------- --------- -------- -------
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
APRIL 30, 1994 APRIL 30, 1993 APRIL 30, 1992
-------------------- --------------------- --------------
CLASS O CLASS A CLASS O CLASS A+ CLASS O
-------- ------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD................... $ 9.27 $ 9.27 $ 9.56 $ 9.55 $ 9.48
-------- ------- -------- -------- --------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.......... 0.77 0.68 0.90 0.64 0.80
Net realized and unrealized
gain (loss) on
investments, put options
purchased, futures
transactions and foreign
currency transactions.... 0.15 0.22 (0.39) (0.28 ) 0.08
-------- ------- -------- -------- --------------
Total from
investment
operations.......... 0.92 0.90 0.51 0.36 0.88
-------- ------- -------- -------- --------------
LESS DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income................... (0.77) (0.74) (0.75) (0.64 ) (0.76)
Dividends from realized gains
on foreign currency
transactions............. (0.02) (0.02) (0.05) -- (0.04)
-------- ------- -------- -------- --------------
Total
dividends........... (0.79) (0.76) (0.80) (0.64 ) (0.80)
-------- ------- -------- -------- --------------
NET ASSET VALUE, END OF
PERIOD................... $ 9.40 $ 9.41 $ 9.27 $ 9.27 $ 9.56
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
Total investment return (1).... 10.13% 9.91% 5.70% 5.42 %(2) 9.59%
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)................. $464,937 $91,454 $548,514 $23,492 $810,700
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
Ratio of expenses to average
net assets............... 1.07% 1.40% 1.06% 1.41 %(4) 1.11%
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
Ratio of net investment income
to average net assets.... 7.57% 6.85% 8.95% 8.74 %(4) 8.03%
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
Portfolio turnover rate........ 31% 31% 56% 56 % 89%
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
Average commission rate
paid (5)................. N/A N/A N/A N/A N/A
-------- ------- -------- -------- --------------
-------- ------- -------- -------- --------------
<FN>
+ Class A shares were introduced on July 15, 1992. Except as
indicated below, information is presented for the period from July
15, 1992 to April 30, 1993.
++ Class C shares were introduced on August 1, 1995. Except as indicated
below, information is presented for the period August 1, 1995 to
April 30, 1996.
(1) Total investment returns exclude the effects of sales loads and assume
reinvestment of dividends and distributions. Total investment returns
for periods of less than one full year are not annualized.
(2) Total investment return is presented for the year ended April 30, 1993.
For the period prior to July 15, 1992, total investment return does not
reflect service and distribution fees because such fees were not paid
during that period.
(3) Total investment return is presented for the year ended April 30, 1996.
For the period prior to August 1, 1995, total investment return is based
upon the total investment return for Class A shares, and does not reflect
the greater service and distribution fees and certain other expenses
borne by Class C shares.
(4) Annualized.
(5) For fiscal years beginning after September 1, 1995, the Fund is required
to disclose its average commission rate paid per share for purchases and
sales of investment securities.
</TABLE>
See notes to financial statements.
<PAGE>
- ----------------------------------------------------------------------------
Comstock Partners Funds, Inc. Capital Value Fund
Financial Highlights
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
OCTOBER 31, 1996
(UNAUDITED)
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.54 $ 10.38 $ 10.24 $ 10.53
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................................... 0.23 0.21 0.16 0.30
Net realized and unrealized gain (loss) on investments, put
options purchased, future transactions, short sale
transactions and foreign currency transactions....... (0.71) (0.73) (0.65) (0.77)
-------- -------- -------- --------
Total from investment operations............. (0.48) (0.52) (0.49) (0.47)
-------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment income....................... -- -- -- --
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............................. $ 10.06 $ 9.86 $ 9.75 $ 10.06
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (2)................................ (4.55)% (5.01)% (4.79)% (4.55)%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000 omitted).................... $203,046 $ 74,116 $ 6,120 $ 29
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to average net assets.................... 0.91%(3) 1.29%(3) 1.30%(3) 0.79%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of interest expense and dividends on securities sold
short to average net assets.......................... 0.28%(3) 0.28%(3) 0.27%(3) 0.24%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment income to average net assets....... 2.36%(3) 1.98%(3) 1.98%(3) 2.53%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio turnover rate.................................... 92% 92% 92% 92%
-------- -------- -------- --------
-------- -------- -------- --------
Average commissions rate paid (4).......................... $ 0.05 $ 0.05 $ 0.05 $ 0.05
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
FOR THE SEVEN
MONTHS ENDED
APRIL 30, 1996
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.61 $ 10.41 $ 10.41 $ 10.62
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income...................................... 0.22 0.18 0.44 0.30
Net realized and unrealized gain (loss) on investments, put
options purchased, future transactions, short sale
transactions and foreign currency transactions....... 0.17 0.16 (0.12) 0.09
-------- -------- -------- --------
Total from investment operations............. 0.39 0.34 0.32 0.39
-------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment income....................... (0.46) (0.37) (0.49) (0.48)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............................. $ 10.54 $ 10.38 $ 10.24 $ 10.53
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (2)................................ 3.81% 3.36% 3.30% 3.97%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000 omitted).................... $241,472 $ 81,786 $ 3,531 $ 1
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of expenses to average net assets.................... 0.75%(3) 1.18%(3) 1.28%(3) 0.61%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of interest expense and dividends on securities sold
short to average net assets.......................... 0.18%(3) 0.19%(3) 0.18%(3) 0.17%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment income to average net assets....... 2.13%(3) 1.70%(3) 1.71%(3) 2.28%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio turnover rate.................................... 56%(3) 56%(3) 56%(3) 56%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Average commissions rate paid (4).......................... $ 0.05 $ 0.05 $ 0.05 $ 0.05
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Capital Value Fund
Financial Highlights (concluded)
<TABLE>
<CAPTION>
FOR THE
YEAR
FOR THE YEAR ENDED
ENDED SEPTEMBER
SEPTEMBER 30, 1995 30, 1994
------------------------------------------------------------ --------
CLASS A CLASS B CLASS C+ CLASS R+ CLASS A
-------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 11.88 $ 11.69 $ 10.64 $ 10.84 $ 11.42
-------- -------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................... 0.36 0.31 0.02 0.04 0.24
Net realized and unrealized gain (loss)
on investments, put options
purchased, futures transactions,
short sale transactions and foreign
currency transactions.............. (1.37) (1.38) (0.25) (0.26) 0.46
-------- -------- ---------- ---------- --------
Total from investment
operations....................... (1.01) (1.07) (0.23) (0.22) 0.70
-------- -------- ---------- ---------- --------
LESS DIVIDENDS
Dividends from net investment income..... (0.26) (0.21) -- -- (0.24)
-------- -------- ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD........... $ 10.61 $ 10.41 $ 10.41 $ 10.62 $ 11.88
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Total investment return (1).............. (8.58)% (9.27)% (2.26)% (2.03)% 6.14%
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)........................... $271,052 $ 87,847 $ 1 $ 1 $402,708
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Ratio of expenses to average net
assets............................. 1.24% 1.99% 0.26%(2) 0.14%(2) 1.21%
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Ratio of interest expense and dividends
on securities sold short to average
net assets......................... 0.45% 0.45% 0.06%(2) 0.04%(2) 0.39%
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Ratio of net investment income to average
net assets......................... 3.61% 2.86% 0.23%(2) 0.38%(2) 2.06%
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Portfolio turnover rate.................. 55% 55% 55% 55% 46%
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
Average commission rate paid (4)......... N/A N/A N/A N/A N/A
-------- -------- ---------- ---------- --------
-------- -------- ---------- ---------- --------
<CAPTION>
FOR THE YEAR
ENDED FOR THE YEAR FOR THE YEAR
SEPTEMBER 30, ENDED ENDED
1994 SEPTEMBER 30, 1993 SEPTEMBER 30, 1992
-------------- -------------------------- ------------------
CLASS B CLASS A CLASS B+ CLASS A
-------- -------- ---------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 11.32 $ 12.41 $ 10.58 $ 12.97
-------- -------- ---------- ------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.................... 0.23 0.24 0.03 0.40
Net realized and unrealized gain (loss)
on investments, put options
purchased, futures transactions,
short sale transactions and foreign
currency transactions.............. 0.38 (0.62) 0.71 (0.39)
-------- -------- ---------- ------------------
Total from investment
operations....................... 0.61 (0.38) 0.74 0.01
-------- -------- ---------- ------------------
LESS DIVIDENDS
Dividends from net investment income..... (0.24) (0.61) -- (0.57)
-------- -------- ---------- ------------------
NET ASSET VALUE, END OF PERIOD........... $ 11.69 $ 11.42 $ 11.32 $ 12.41
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Total investment return (1).............. 5.35% (2.70)% 6.99% (0.02)%
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)........................... $108,532 $412,316 $ 30,378 $537,392
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Ratio of expenses to average net
assets............................. 1.99% 1.23% 1.49%(2) 1.19%
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Ratio of interest expense and dividends
on securities sold short to average
net assets......................... 0.40% 0.45% 0.31%(2) 0.39%
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Ratio of net investment income to average
net assets......................... 1.39% 1.94% 0.83%(2) 2.83%
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Portfolio turnover rate.................. 46% 42% 42% 344%
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
Average commission rate paid (4)......... N/A N/A N/A N/A
-------- -------- ---------- ------------------
-------- -------- ---------- ------------------
<FN>
(+) Class B shares were introduced on January 15, 1993; Class C shares and
Class R shares were introduced on August 22, 1995.
(1) Total investment returns exclude the effects of sales loads and assume
reinvestment of dividends and distributions. Total investment returns
for periods of less than one full year are not annualized.
(2) Not annualized.
(3) Annualized.
(4) For fiscal years beginning after September 1, 1995, the Fund is required
to disclose its average commission rate paid per share for purchases and
sales of investment securities.
</TABLE>
See notes to financial statements.
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED):
1. SIGNIFICANT ACCOUNTING POLICIES:
Comstock Partners Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940 (the "1940 Act") as an open-end management investment
company offering shares in two separate portfolios: Comstock Partners Strategy
Fund (the "Strategy Fund") and Comstock Partners Capital Value Fund (the
"Capital Value Fund"). The Company accounts separately for the assets,
liabilities and operations of each Fund. The Strategy Fund is a non-diversified
portfolio with an investment objective to maximize total return over the
long-term investment horizon by investing primarily in a portfolio of debt
securities. The Capital Value Fund is a diversified portfolio with an investment
objective to maximize total return, consisting of capital appreciation and
current income. The Company originally commenced operations in May of 1988 as a
closed-end investment company, with the Strategy Fund as its only portfolio. At
a special meeting of shareholders on June 14, 1991, holders of a majority of the
Company's outstanding shares voted to approve the conversion of the Company to
an open-end investment company. The Company converted to open-end status on
August 1, 1991. On July 15, 1992, a second class of shares of the Strategy Fund,
Class A, was created and, on August 1, 1995, a third class of shares of the
Strategy Fund, Class C, was created. On February 8, 1996, (i) the Company
changed its name from Comstock Partners Strategy Fund, Inc., to Comstock
Partners Funds, Inc. (ii) the Strategy Fund, the Company's existing portfolio,
became a separate portfolio of the Company and (iii) the Capital Value Fund was
organized as a new portfolio of the Company. On July 25, 1996, the Capital Value
Fund acquired all of the assets and liabilities (whether contingent or
otherwise) of the Dreyfus Capital Value Fund in exchange for shares in the
Capital Value Fund. The Capital Value Fund offers Class A, Class B, Class C, and
Class R shares.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as distributor of
the Funds' shares. Each Class O, Class A and Class C share of the Strategy Fund,
and each Class A, Class B, Class C, and Class R share of the Capital Value Fund
represents an interest in the Strategy Fund or the Capital Value Fund, as the
case may be, in proportion to its net asset value, and has identical rights
except that Class A, B, and C shares of the Funds bear fees and expenses on an
ongoing basis pursuant to the Funds' Class A, Class B, and Class C Service and
Distribution Plans, respectively, and Class B and Class C shares bear additional
incremental shareholder administrative expenses resulting from deferred sales
charge arrangements. In addition, only the holders of Class A, Class B, and
Class C shares have voting rights with respect to matters pertaining to the
Class A, Class B, and Class C Service and Distribution Plans, respectively.
Class A shares of each Fund are subject to a sales charge imposed at the time of
purchase. Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within six years of
purchase. Class C shares of each Fund are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within one year of
purchase. Class R shares are sold at net asset value per share only to
institutional investors. Class O shares are no longer issued by the Company
except in connection with the reinvestment of dividends on outstanding Class O
shares.
The following is a summary of significant accounting policies followed by the
Company:
Strategy Fund and Capital Value Fund:
(a) Valuation of investments--Securities listed on national securities exchanges
are valued at the last sale price as of the close of business on the day the
securities are being valued, or lacking any sales, at the mean between the
closing bid and asked prices.
Securities traded in the over-the-counter market are valued on the basis of the
mean between the bid and asked prices at the close of trading on such day by
dealers that make markets in such securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
based on prices or quotes obtained from the broadest and most representative
market.
Options purchased are valued at the last bid price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the average of the last bid price as obtained from two
or more dealers.
Futures contracts are stated at market value or otherwise at the fair value at
which it is expected they may be resold, as determined in good faith by the
Board of Directors.
Short-term debt securities having a maturity of 60 days or less from the
valuation date are valued at amortized cost which approximates market value.
(b) Derivative financial instruments--The Funds may engage in various portfolio
strategies to seek to generate income or gains or as a hedge against its
portfolio against adverse movements in the equity, debt and currency markets.
Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
Forward foreign exchange contracts--The Funds are authorized to enter into
forward foreign exchange contracts to seek to generate income or gains or as a
hedge against either specific transactions or portfolio positions. Such
contracts are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Funds enter into such contracts. With
respect to the Strategy Fund, premium or discount is amortized over the life of
the contracts.
Financial futures contracts--The Funds may purchase or sell financial futures
contracts to seek to generate income or gains or as a hedge against adverse
changes in interest rates. A futures contract is an agreement between two
parties to buy or sell a security for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Funds as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
(c) Foreign Currency Transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income Taxes--It is the policy of the Company to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders. Therefore, no Federal income tax provision is required. Under the
applicable foreign tax law, a withholding tax may be imposed on interest and
capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend date. Interest income (including
amortization of discount) is recorded as earned. Realized gains and losses are
determined on the identified cost basis.
(f) Dividends and Distributions--Dividends and distributions payable by the
Funds are accrued on the ex-dividend date.
(g) Expenses--Expenses directly attributable to each Fund are charged to that
Fund's operations; expenses which are applicable to both Funds are allocated
among them on a pro rata basis.
<PAGE>
Strategy Fund:
(h) Reclassifications -During the year ended April 30, 1996, net realized losses
on foreign currency related transactions relating to prior years of $7,618,586
were reclassified from accumulated net realized loss on foreign currency
transactions to undistributed net investment income relating to prior years. Net
capital gains relating to prior years of $6,792 were reclassified from
accumulated realized capital gains to undistributed investment income. Net
assets were not affected by the reclassifications.
2. BANK LINE OF CREDIT:
Capital Value Fund:
In accordance with an agreement with a bank, the Capital Value Fund may borrow
up to $10 million under a short-term unsecured line of credit. Interest on
borrowings is charged at rates which are related to Federal Funds rates in
effect from time to time. For the period ended October 31, 1996, there were no
outstanding borrowings.
3. INVESTMENT ADVISORY, SUB-INVESTMENT ADVISORY, ADMINISTRATION AGREEMENTS AND
TRANSACTIONS WITH AFFILIATES:
(a) The Company, on behalf of the Funds, has engaged Comstock Partners, Inc.
(the "Investment Adviser") to provide professional investment management for
each Fund. Under the terms of an Amended Investment Advisory Agreement between
the Company, on behalf of the Strategy Fund, and the Investment Adviser, the
Investment Adviser furnishes continuing investment supervision to the Strategy
Fund and is responsible for the management of the Strategy Fund's portfolio. It
furnishes office space, equipment and personnel to the Strategy Fund in
connection with the performance of its investment management responsibilities.
For its services, the Investment Adviser receives from the Company, on behalf of
the Strategy Fund, a monthly fee at an annual rate of .60% of the Strategy
Fund's average daily net assets.
Under the terms of an Investment Advisory Agreement between the Company, on
behalf of the Capital Value Fund, and the Investment Adviser, the Investment
Adviser has responsibility for investment decisions for, and the day-to-day
management of, that portfolio. For its services, the Investment Adviser is
entitled to receive an annual fee from the Company, on behalf of the Capital
Value Fund, computed daily and paid monthly at the following annual rates: .40%
of the first $300 million of the Capital Value Fund's average daily net assets,
.45% of the Capital Value Fund's average daily net assets between $300 million
and $750 million, .50% of the Capital Value Fund's average daily net assets
between $750 million and $1 billion and .55% of the Capital Value Fund's average
daily net assets in excess of $1 billion. During the period from July 26, 1996
to October 31, 1996, $323,692 was paid pursuant to the Investment Advisory
Agreement.
The Investment Adviser has engaged The Dreyfus Corporation (the "Sub-Investment
Adviser") to provide sub-investment advisory services with respect to each Fund.
Under the terms of a Sub-Investment Advisory Agreement relating to the Strategy
Fund, the Sub-Investment Adviser manages the short-term cash and cash equivalent
investments of the Strategy Fund and provides investment research and other
advice regarding the Strategy Fund's portfolio. The Sub-Investment Adviser also
provides general advice regarding economic factors and trends, including
statistical and other factual information. For such services, at no cost to the
Strategy Fund, the Investment Adviser pays the Sub-Investment Adviser a monthly
fee at an annual rate of .15% of the Strategy Fund's average daily net assets.
The Dreyfus Corporation also acts as the sub-investment adviser to the Capital
Value Fund pursuant to a separate Sub-Investment Advisory and Administration
Agreement between the Company, on behalf of the Fund, and the Sub-Investment
Adviser. Under that agreement, the Sub-Investment Adviser manages the short-term
cash and cash-equivalent investments of the Capital Value Fund and provides
investment research and other advice regarding the Capital Value Fund's
portfolio. In addition, the Sub-Investment Adviser provides general advice
regarding economic factors and trends and acts as administrator to the Capital
Value Fund. For its services under the Sub-Investment Advisory and
Administration Agreement relating to the Capital Value Fund, the Sub-Investment
Adviser is entitled to receive an annual fee computed daily and paid monthly by
the Company at the following annual rates: .35% of the first $300 million of the
Capital Value Fund's average daily net assets, .30% of the Capital Value Fund's
average daily net assets between $300 million and $750 million, .25% of the
Capital Value Fund's average daily net assets between $750 million and $1
billion and .20% of the Capital Value Fund's average daily net assets in excess
of $1 billion. During the period from July 26, 1996 to October 31, 1996,
$283,231 was paid pursuant to the agreement. Prior to July 25, 1996, fees
payable to the Capital Value Fund pursuant to the provisions of an Investment
Advisory Agreement with The Dreyfus Corporation and a Sub-Investment Advisory
Agreement with Comstock Partners (together "Agreements") were paid monthly,
computed on the average daily value of the Capital Value Fund's net assets at
the following annual rates:
<TABLE>
<S> <C> <C>
AVERAGE NET ASSETS DREYFUS COMSTOCK PARTNERS
------------------------------------------------------- ----------- ------------------
0 up to $25 million.................................... .60 of 1% .15 of 1%
$25 up to $75 million.................................. .50 of 1% .25 of 1%
$75 up to $200 million................................. .45 of 1% .30 of 1%
$200 up to $300 million................................ .40 of 1% .35 of 1%
in excess of $300 million.............................. .375 of 1% .375 of 1%
</TABLE>
During the period from May 1, 1996 through July 25, 1996, $338,484 and $226,565
were paid to The Dreyfus Corporation and Comstock Partners, respectively.
The Agreements further provided that the Capital Value Fund could deduct from
the fees paid to The Dreyfus Corporation and Comstock Partners, or The Dreyfus
Corporation and Comstock Partners would bear such excess expense, to the extent
required by state law, should the Capital Value Fund's aggregate expenses,
exclusive of taxes, brokerage, interest on borrowings (which, in the view of
Stroock & Stroock & Lavan, counsel to the Capital Value Fund prior to the
reorganization, also contemplated dividends and interest accrued on securities
sold short), and extraordinary expenses, exceeded the expense limitation of any
state having jurisdiction over the Capital Value Fund. No expense reimbursement
was required for the period from May 1, 1996 through July 25, 1996.
Under the terms of an administration agreement between the Company, on behalf of
the Strategy Fund, and Princeton Administrators, L.P. ("Princeton"), Princeton
performs or arranges for the performance of certain administrative services
(i.e., services other than investment advice and related portfolio activities)
necessary for the operation of the Strategy Fund, including maintaining the
books and records of the Strategy Fund, preparing reports and other documents
required by United States federal, state and other applicable laws and
regulations to maintain the registration of the Strategy Fund and its shares and
providing the Strategy Fund with administrative office facilities. For the
services rendered to the Strategy Fund and the facilities furnished, the
Strategy Fund pays Princeton a monthly fee equal to the greater of (i) $300,000
per annum ($25,000 per month), or (ii) an annual rate equal to .25% of the
Strategy Fund's average daily net assets up to $100 million, .225% of the
Strategy Fund's average daily net assets on the next $100 million, .20% of the
Strategy Fund's average daily net assets on the next $400 million and .175% of
the Strategy Fund's average daily net assets in excess of $600 million.
The Company compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Sub-Investment Adviser, under a transfer agency agreement for providing
personnel and facilities to perform transfer agency services for the Funds. For
the period ended October 31, 1996, such compensation amounted to $72,205 for the
Capital Value Fund and $57,062 for the Strategy Fund, respectively.
<PAGE>
(b) Service and Distribution Plan--Class A Shares
Under the Class A Service and Distribution Plan, the Company, at the expense of
the Class A shares of each Fund, (a) reimburses the Distributor for payments to
certain Service Agents for distributing such Fund's Class A shares and servicing
shareholder accounts, and (b) pays the Sub-Investment Adviser, Dreyfus Service
Corporation and any affiliate of either of them (collectively, "Dreyfus") for
advertising and marketing relating to the Class A shares of such Fund and for
shareholder servicing activities, at an aggregate annual rate of .25 of 1% of
the value of the average daily net assets of Class A of such Fund.
Service and Distribution Plans--Class B Shares and Class C Shares
Under the Class B and Class C Service and Distribution Plans, the Company, at
the expense of the Class B shares of the Capital Value Fund and Class C shares
of each Fund, as the case may be, (a) pays the Distributor for distributing the
Capital Value Fund's Class B shares and each Fund's Class C shares at an annual
rate of .75 of 1% of the value of the average daily net assets of Class B or
Class C of the applicable Fund and (b) pays the Distributor for the provision of
certain services to the holders of Class B shares and Class C shares, as the
case may be, a fee at the annual rate of .25 of 1% of the value of the average
daily net assets of Class B or Class C of the applicable Fund.
(c) Certain officers and/or directors of the Company are officers and/or
directors of the Investment Adviser or Dreyfus. Each director who is not an
"affiliated person" as defined in the Act receives from the Company an annual
fee of $20,000 per year. Prior to July 25, 1996, each director who was not an
"affiliated person" as defined in the Act received from the Capital Value Fund
an annual fee of $4,500 and an attendance fee of $500 per meeting. The Chairman
of the Board received an additional 25% of such compensation and each director
emeritus received 50% of such compensation.
4. PURCHASES AND SALES OF INVESTMENTS:
Purchases and sales of investments, excluding short-term and U.S. Government
securities, for the six months ended October 31, 1996:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -------------
<S> <C> <C>
Strategy Fund:....................................... $ 37,606,298 $ 89,448,416
------------- -------------
------------- -------------
Capital Value Fund:
Long transactions............................ $ 87,580,173 $ 104,109,783
Short sale transactions...................... 46,950,004 35,003,369
------------- -------------
$ 134,530,177 $ 139,113,152
------------- -------------
------------- -------------
</TABLE>
Capital Value Fund: The Fund is engaged in short-selling which obligates the
Fund to replace the security borrowed by purchasing the security at current
market value. The Fund would incur a loss if the price of the security increases
between the date of the short sale and the date on which the Fund replaces the
borrowed security. The Fund would realize a gain if the price of the security
declines between those dates. Until the Fund replaces the borrowed security, the
Fund will maintain daily, a segregated account with a broker and/or custodian,
of cash and/or U.S. Government securities sufficient to cover its short
position. Securities sold short at October 31, 1996 and their related market
values and proceeds are set forth in the Statement of Securities Sold Short.
Realized and unrealized gains (losses) as of October 31, 1996 were as follows:
Strategy Fund:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
GAINS (LOSSES) GAINS (LOSSES)
-------------- --------------
<S> <C> <C>
Long-term investments............................... $ 1,537,247 $ 2,737,716
Short-term investments.............................. 66,202 (713)
Put options purchased............................... (6,199,561) (12,368,824)
Financial futures contracts......................... 1,098,726 356,100
Foreign currency transactions....................... (5,886,645) (174,378)
-------------- --------------
$ (9,384,031) $ (9,450,099)
-------------- --------------
-------------- --------------
</TABLE>
Capital Value Fund:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
GAINS (LOSSES) GAINS (LOSSES)
-------------- --------------
<S> <C> <C>
Long-term investments............................... $ 3,164,224 $ 2,090,406
Short sale transactions............................. (5,015,014) 3,389,684
Short-term investments.............................. 6,065 5,248
Put options purchased............................... (9,163,525) (14,658,484)
Financial futures contracts......................... (134,405) (82,775)
Foreign currency transactions....................... (1,355,556) 68,621
-------------- --------------
$(12,498,211) $ (9,187,300)
-------------- --------------
-------------- --------------
</TABLE>
As of October 31, 1996, the cost of investments for each Fund for Federal income
tax purposes was substantially the same as the cost for financial reporting
purposes. The following summarizes the net unrealized appreciation
(depreciation) on investments, put options purchased, futures transactions and
short sale transactions for each Fund at October 31, 1996.
<TABLE>
<CAPTION>
GROSS GROSS
APPRECIATION DEPRECIATION NET
------------ ------------ ------------
<S> <C> <C> <C>
Strategy Fund........................................................... $ 8,073,591 $17,349,312 $ (9,275,721)
Capital Value Fund...................................................... $16,112,965 $25,368,886 $ (9,255,921)
</TABLE>
<PAGE>
The following summarizes the capital loss carry forwards of each Fund at April
30,1996:
<TABLE>
<CAPTION>
EXPIRING IN FISCAL YEAR STRATEGY FUND CAPITAL VALUE FUND
-------------------------------------------------------------------- ------------- ------------------
<S> <C> <C>
1999 $ -- $ 9,100,000
2000 3,407,129 29,800,000
2001 8,776,949 17,800,000
2002 -- 56,700,000
2003 -- 9,200,000
2004 12,519,847 16,100,000
------------- ------------------
Total $24,703,925 $138,700,000
------------- ------------------
------------- ------------------
</TABLE>
5. DIVIDENDS:
In November 1996, the Company's Board of Directors declared ordinary income
dividends for the Strategy Fund's Class O, Class A and Class C shares as
follows:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
- ---------------------------------------
<C> <C> <C> <S> <C>
CLASS O CLASS A CLASS C PAYABLE DATE RECORD DATE
- --------- --------- --------- ------------------ ------------------
$0.05000 $0.04820 $0.04099 November 29, 1996 November 20, 1996
</TABLE>
