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COMSTOCK PARTNERS
FUNDS, INC.
------------------------------------------------
COMSTOCK PARTNERS
STRATEGY FUND
COMSTOCK PARTNERS
CAPITAL VALUE FUND
ANNUAL REPORT
APRIL 30, 1998
COMSTOCK PARTNERS FUNDS, INC.
993 LENOX DRIVE
SUITE 106
LAWRENCEVILLE, NJ 08648
107/634/607
503/502 A 984
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
COMSTOCK PARTNERS STRATEGY FUND
COMSTOCK PARTNERS CAPITAL VALUE FUND
993 Lenox Drive, Suite 106
Lawrenceville, NJ 08648
INVESTMENT ADVISER
COMSTOCK PARTNERS, INC.
993 Lenox Drive, Suite 106
Lawrenceville, NJ 08648
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
90 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)
90 Washington Street
New York, NY 10286
ADMINISTRATOR (STRATEGY FUND)
PRINCETON ADMINISTRATORS, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
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 AND DIVIDEND
DISBURSING AGENT
DREYFUS TRANSFER, INC.
P.O. Box 9671
Providence, RI 02940-9671
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.
SHAREHOLDER INQUIRIES TEL. 1-800-645-6561
<PAGE>
DEAR FELLOW SHAREHOLDER:
For the year ended April 30, 1998, the Comstock Partners Strategy Fund Class O,
A and C shares posted total returns of -14.88%, -15.11% and -15.16%,
respectively, and the Comstock Partners Capital Value Fund Class A, B, C and R
shares posted total returns of -31.48%, -32.01%, -32.10% and -31.28%,
respectively, based upon net asset value per share. During this period the
Standard & Poor's 500 Composite Stock Price Index rose 41.06% and the Lehman
Brothers Government/ Corporate Bond Index rose 11.33%.*
During the year the Funds were positioned to benefit from a bear market which
did not occur. We believe, however, that the case for the onset of a severe bear
market is even more compelling now. The U.S. stock market gain over the past
year has made what we believe to already have been an overvalued market even
more overvalued. In our estimation, fair market value, based on normal earnings
and price-to-earnings ratios, is substantially below current levels. In
addition, we believe that corporate earnings cannot maintain the rate of
increase registered over the past few years and are, in fact, already slowing
significantly. In our view, the negative impacts from the declining Asian
economies are only beginning to be felt elsewhere and are likely to be another
factor slowing U.S. profit growth. In this scenario, our view is that
price-to-earnings ratios are unlikely to expand further and, indeed, are more
likely to decline toward more prudent levels. With weak demand and excess supply
worldwide, we believe that deflation is more likely than inflation.
In this environment we have maintained our Funds' negative posture by
positioning the Capital Value Fund with equity shorts, put options and S&P 500
Index shorts, while using only put options in the Strategy Fund. Given our view
that demand will remain soft and pricing weak, we also see attractive
opportunities in the U.S. Treasury bond market. We have also retained a small
position in both Funds in gold stocks in a strategy intended to hedge against
anticipated worldwide financial asset turmoil.
The put options held by the Strategy Fund were the most significant reason it
underperformed the indexes over the last 12 months. Holdings of Treasury bonds
added to its results, while a small position in gold stocks detracted from them.
The Capital Value Fund's being short common stocks as well as futures on the S&P
contributed to its underperformance. Though both Funds have been positioned to
benefit from a U.S. stock market decline, the Capital Value Fund seeks to
accomplish this strategy in a more aggressive manner than the Strategy Fund.
Due to the bearish stance that we have taken over the past few years, each of
the Funds has accumulated substantial capital loss carryforwards (CLCFs),
including a CLCF of approximately $210 million in the Capital Value Fund and a
CLCF of approximately $54 million in the Strategy Fund as of fiscal year end.
These CLCFs may be considered as an important asset of the Funds and their
respective shareholders. Although there are certain restrictions on their use,
they would allow the Funds to shelter from tax capital gains that may be
realized, up to the amounts and subject to the expiration of the CLCFs. To the
extent the CLCFs are utilized by a Fund to shelter capital gains, the Fund will
not be required to pay out these gains as a taxable distribution to
shareholders. Furthermore, the amounts of any such undistributed gains would be
available to the Funds for reinvestment. (An expiration schedule with respect to
the CLCFs of each of the Funds is outlined in Note 3 to the financial
statements.)
In summary, the Funds are currently focused to benefit from a U.S. equity market
decline. 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
Lawrenceville, New Jersey
June 15, 1998
<PAGE>
* PERFORMANCE INFORMATION:
Total return assumes the reinvestment of dividends and distributions and
excludes the effect of sales loads.
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. 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.
Investors should note that there can be no assurance that the markets will
perform according to the investment adviser's expectations or that the
adviser's investment approach will achieve its objectives.
- --------------------------------------------------------------------------------
You may now obtain current information about Comstock Partners Strategy
Fund and Comstock Partners Capital Value Fund and our investment strategy
through the Funds' internet web site
www.comstockfunds.com
and a telephone information line 201-332-4422. Please save this
information for future reference.
- --------------------------------------------------------------------------------
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT -- COMSTOCK PARTNERS STRATEGY FUND
CLASS O SHARES*
S&P 500 Lehman Govt Blended
Date Class O Index Corp Bond Index
5/26/88 9550 10000 10000 10000
4/89 10824 12205 10858 11329
4/90 12242 13486 11767 12362
4/91 13302 15853 13513 14314
4/92 14577 18084 14968 16022
4/93 15409 19748 17139 18049
4/94 16970 20798 17336 18520
4/95 17375 24411 18536 20479
4/96 17837 31788 20139 23797
4/97 16972 39764 21492 26926
4/98 14446 57823 23927 33154
(Years shown above are as of April 30)
*The total return for Class O shares is based upon a hypothetical investment
in Class O shares at the Fund's inception on 5/26/88, assuming the maximum
4.5% initial sales load charged when the Fund last offered Class O shares.
Total return for Class O shares prior to August 1, 1991 reflects
performance of the Fund as a closed-end fund; as an open-end fund the
Fund incurs certain additional expenses as a result of the continuous
offering and redemption of its shares. Total return for Class O shares
assumes the reinvestment of dividends and capital gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****This unmanaged broad-based Index is comprised of U.S. Government Agency
and Treasury securities and investment grade corporate debt.
*****The blended Index contains 65% of Lehman Brothers Govt./Corp. Bond Index
and 35% of S&P 500 Index. Past performance is not predictive of future
performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
SALES CHARGE SALES CHARGE
- --------------------------------------------------------------
CLASS O SHARES
- --------------------------------------------------------------
Year Ended 4/30/98 -14.88% -18.71%
- --------------------------------------------------------------
Five Years Ended
4/30/98 - 1.28% - 2.19%
- --------------------------------------------------------------
Fund's inception
(5/26/88)
through 4/30/98 + 4.25% + 3.77%
- --------------------------------------------------------------
+ See the first footnote to the preceding graph for a discussion of the
presentation of total return.
Investors should note that the performance information presented in the
following tables and graphs for Class A and Class C shares of the Strategy
Fund prior to the dates these classes were introduced is based on historical
expenses of a predecessor class or classes of the Fund and does not reflect
how Class A and Class C shares would have performed on a relative basis.
Accordingly, this information may be used in assessing the Fund's performance
history but should not be utilized in evaluating whether Class A or Class C
shares would best suit an investor's needs.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT -- COMSTOCK PARTNERS STRATEGY FUND
CLASS A SHARES*
S&P 500 Lehman Govt Blended
Date Class A Index Corp Bond Index
5/26/88 9550 10000 10000 10000
4/89 10824 12205 10858 11329
4/90 12242 13486 11767 12362
4/91 13302 15853 13513 14314
4/92 14577 18084 14968 16022
4/93 15367 19748 17139 18049
4/94 16890 20798 17336 18520
4/95 17218 24411 18536 20479
4/96 17630 31788 20139 23797
4/97 16732 39764 21492 26926
4/98 14203 57823 23927 33154
(Years shown above are as of April 30)
*The total return for Class A shares is based upon a hypothetical investment
in Class O shares at the Fund's inception on 5/26/88, assuming the current
4.5% maximum initial sales load for Class A shares. Total return for
Class A shares prior to August 1, 1991 reflects performance of the Fund
as a closed-end fund; as an open-end fund the Fund incurs certain
additional expenses as a result of the continuous offering and redemption
of its shares. Because Class A shares were not actually introduced until
July 15, 1992, total return for Class A shares for the period prior to
July 15, 1992 does not reflect service and distribution fees borne by
Class A shares, which, if reflected, would reduce the total return
presented. Total return for Class A shares assumes the reinvestment of
dividends and capital gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****This unmanaged broad-based Index is comprised of U.S. Government Agency
and Treasury securities and investment grade corporate debt.
*****The blended index contains 65% of Lehman Brothers Govt./Corp. Bond Index
and 35% of S&P 500 Index.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
SALES CHARGE SALES CHARGE
- --------------------------------------------------------------
CLASS A SHARES
- --------------------------------------------------------------
Year Ended 4/30/98 -15.11% -18.93%
- --------------------------------------------------------------
Five Years Ended
4/30/98 - 1.56% - 2.47%
- --------------------------------------------------------------
Fund's inception
(5/26/88)
through 4/30/98 + 4.08% + 3.59%
- --------------------------------------------------------------
+ See the first footnote to the preceding graph for a discussion of the
presentation of total return.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT--COMSTOCK PARTNERS STRATEGY FUND
CLASS C SHARES*
S&P 500 Lehman Govt Blended
Date Class C Index Corp Bond Index
5/26/88 10000 10000 10000 10000
4/89 11334 12205 10858 11329
4/90 12819 13486 11767 12362
4/91 13929 15853 13513 14314
4/92 15264 18084 14968 16022
4/93 16091 19748 17139 18049
4/94 17685 20798 17336 18520
4/95 18029 24411 18536 20479
4/96 18381 31788 20139 23797
4/97 17290 39764 21492 26926
4/98 14591 57823 23927 33154
(Years shown above are as of April 30)
*The total return for Class C shares is based upon a hypothetical investment
in Class O shares at the Fund's inception on 5/26/88, assuming the
applicable contingent deferred sales charge (CDSC) for Class C shares.
Total return for Class C shares prior to August 1, 1991 reflects
performance of the Fund as a closed-end fund; as an open-end fund the
Fund incurs certain additional expenses as a result of the continuous
offering and redemption of its shares. Because Class C shares were not
actually introduced until August 1, 1995, total return for Class C shares
for the period prior to August 1, 1995 does not reflect higher service
and distribution fees and certain administrative expenses borne by Class
C shares, which, if reflected, would reduce the total return presented.
Total return for Class C shares assumes the reinvestment of dividends and
capital gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****This unmanaged broad-based Index is comprised of U.S. Government Agency
and Treasury securities and investment grade corporate debt.
*****The blended Index contains 65% of Lehman Brothers Govt./Corp. Bond Index
and 35% of S&P 500 Index.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
CDSC CDSC++
- --------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------
Year Ended 4/30/98 -15.61% -16.38%
- --------------------------------------------------------------
Five Years Ended
4/30/98 - 1.94% - 1.94%
- --------------------------------------------------------------
Fund's inception
(5/26/88)
through 4/30/98 + 3.88% + 3.88%
- --------------------------------------------------------------
+ See the first footnote to the preceding graph for a discussion of the
presentation of total return.
++ Assuming payment of the maximum contingent deferred sales charges. A
contingent deferred sales charge of 1% is imposed on redemptions made
within one year of purchase.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT--COMSTOCK PARTNERS CAPITAL VALUE
FUND**** CLASS A SHARES*
Comstock Partners
S&P 500 Capital Value Fund
Index Class A Shares
10/10/85 10000 9552
4/30/86 13223 13366
4/30/87 16728 15148
4/30/88 15641 17453
4/30/89 19221 19476
4/30/90 21243 22353
4/30/91 24978 22984
4/30/92 28475 23822
4/30/93 31100 24328
4/30/94 32752 24299
4/30/95 38464 23929
4/30/96 50068 23596
4/30/97 62646 20535
4/30/98 88371 14070
(Years shown above are as of April 30)
*The total return for Class A shares is based upon a hypothetical investment
in Class A shares at the Fund's inception on 10/10/85, assuming the current
maximum 4.5% initial sales load charged. Total return for Class A shares
assumes the reinvestment of dividends and capital gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****On July 25, 1996, the Comstock Partners Capital Value Fund became the
successor to the Dreyfus Capital Value Fund. Performance data prior to this
date reflects the performance of the Dreyfus Capital Value Fund.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
SALES CHARGE SALES CHARGE
- -----------------------------------------------------------------
CLASS A SHARES
- -----------------------------------------------------------------
Year Ended 4/30/98 -31.48% -34.59%
- -----------------------------------------------------------------
Five Years Ended
4/30/98 -10.37% -11.20%
- -----------------------------------------------------------------
Ten Years Ended
4/30/98 - 2.13% - 2.58%
- -----------------------------------------------------------------
Policy inception
(4/28/87)* through
4/30/98 - 0.67% - 1.08%
- -----------------------------------------------------------------
Fund's inception
(10/10/85) through
4/30/98 + 3.13% + 2.76%
- -----------------------------------------------------------------
* On April 28, 1987, Comstock Partners, Inc., the Capital Value Fund's
Investment Adviser, assumed investment responsibilities and the Fund changed
its investment objective to the current investment objective.
+ See the first footnote to the preceding graph for a discussion of the
presentation of total return.
Investors should note that the performance information presented in the
following tables and graphs for Class B, Class C and Class R shares of the
Capital Value Fund prior to the dates these classes were introduced is based
on historical expenses of a predecessor class or classes of the Fund and does
not reflect how Class B, Class C and Class R shares would have performed on a
relative basis. Accordingly, this information may be used in assessing the
Fund's performance history but should not be utilized in evaluating whether
Class B, Class C or Class R shares would best suit an investor's needs.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT--COMSTOCK PARTNERS CAPITAL VALUE
FUND**** CLASS B SHARES*
Comstock Partners
S&P 500 Capital Value Fund
Index Class B Shares
10/85 10000 10000
4/86 13223 13993
4/87 16728 15966
4/88 15641 18272
4/89 19221 20389
4/90 21243 23401
4/91 24978 24062
4/92 28475 24940
4/93 31100 25361
4/94 32752 25105
4/95 38464 24529
4/96 50068 24015
4/97 62646 20727
4/98 88371 14093
(Years shown above are as of April 30)
*The total return for Class B shares is based upon a hypothetical investment
in Class A shares at the Fund's inception on 10/10/85. Because Class B
shares were not actually introduced until January 15, 1993, total return for
Class B shares for the period prior to January 15, 1993 does not reflect
higher service and distribution fees and certain administrative expenses
borne by Class B shares, which, if reflected, would reduce the total return
presented. Total return for Class B shares assumes the reinvestment of
dividends and capital gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****On July 25, 1996, the Comstock Partners Capital Value Fund became the
successor to the Dreyfus Capital Value Fund. Performance data prior to this
date reflects the performance of the Dreyfus Capital Value Fund.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
CDSC CDSC++
- -----------------------------------------------------------------
CLASS B SHARES
- -----------------------------------------------------------------
Year Ended 4/30/98 -32.01% -34.37%
- -----------------------------------------------------------------
Five Years Ended
4/30/98 -11.09% -11.36%
- -----------------------------------------------------------------
Ten Years Ended
4/30/98 - 2.56% --
- -----------------------------------------------------------------
Policy inception
(4/28/87)* through
4/30/98 - 1.07% --
- -----------------------------------------------------------------
Fund's inception
(10/10/85) through
4/30/98 + 2.77% --
- -----------------------------------------------------------------
* On April 28, 1987, Comstock Partners, Inc., the
Capital Value Fund's Investment Adviser, assumed
investment responsibilities and the Fund changed
its investment objective to the current investment
objective.
+ See the first footnote to the preceding graph for a
discussion of the presentation of total return.
++ Assuming payment of the maximum contingent deferred
sales charge. Maximum contingent deferred sales
charge (CDSC) for Class B shares is 4% and is
reduced to 0% after six years.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT--COMSTOCK PARTNERS CAPITAL VALUE
FUND**** CLASS C SHARES*
Comstock Partners
S&P 500 Capital Value Fund
Index Class C Shares
10/10/85 10000 10000
4/86 13223 13993
4/87 16728 15966
4/88 15641 18272
4/89 19221 20389
4/90 21243 23401
4/91 24978 24062
4/92 28475 24940
4/93 31100 25361
4/94 32752 25105
4/95 38464 24529
4/96 50068 23979
4/97 62646 20750
4/98 88371 14089
(Years shown above are as of April 30)
*The total return for Class C shares is based upon a hypothetical investment
in Class A shares from the Fund's inception on 10/10/85 through 1/15/93, and
Class B shares from 1/15/93 through 8/22/95. Class C shares were not
actually introduced until August 22, 1995. Total return prior to January
15, 1993 does not reflect the higher level of service and distribution
fees and certain administrative expenses borne by Class C shares, which,
if reflected, would reduce the total return presented. Total return for
Class C shares assumes the reinvestment of dividends and capital gains
distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****On July 25, 1996, the Comstock Partners Capital Value Fund became the
successor to the Dreyfus Capital Value Fund. Performance data prior to this
date reflects the performance of the Dreyfus Capital Value Fund.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
% RETURN WITHOUT % RETURN WITH
CDSC CDSC++
- -----------------------------------------------------------------
CLASS C SHARES
- -----------------------------------------------------------------
Year Ended 4/30/98 -32.10% -32.68%
- -----------------------------------------------------------------
Five Years Ended
4/30/98 -11.09% --
- -----------------------------------------------------------------
Ten Years Ended
4/30/98 - 2.57% --
- -----------------------------------------------------------------
Policy inception
(4/28/87)* through
4/30/98 - 1.07% --
- -----------------------------------------------------------------
Fund's inception
(10/10/85) through
4/30/98 + 2.77% --
- -----------------------------------------------------------------
* On April 28, 1987, Comstock Partners, Inc., the
Capital Value Fund's Investment Adviser, assumed
investment responsibilities and the Fund changed
its investment objective to the current investment
objective.
+ See the first footnote to the preceding graph for a
discussion of the presentation of total return.
++ Assuming payment of the maximum contingent deferred
sales charge (CDSC). A contingent deferred sales
charge of 1% is imposed on redemptions made within
one year of purchase.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT--COMSTOCK PARTNERS CAPITAL VALUE
FUND**** CLASS R SHARES*
Comstock Partners
S&P 500 Capital Value Fund
Index Class R Shares
10/10/85 10000 10000
4/86 13223 13993
4/87 16728 15966
4/88 15641 18272
4/89 19221 20389
4/90 21243 23401
4/91 24978 24062
4/92 28475 24940
4/93 31100 25469
4/94 32752 25439
4/95 38464 25051
4/96 50068 24763
4/97 62646 21586
4/98 88371 14835
(Years shown above are as of April 30)
*The total return for Class R shares is based upon a hypothetical investment
in Class A shares at the Fund's inception on 10/10/85. Because Class R
shares were not actually introduced until August 22, 1995, total return for
Class R shares for the period prior to August 22, 1995 reflects the
performance information for Class A shares of the Capital Value Fund. Total
return for Class R shares assumes the reinvestment of dividends and capital
gains distributions.
**Fund's inception.
***This unmanaged broad-based Index is comprised of common stocks.
****On July 25, 1996, the Comstock Partners Capital Value Fund became the
successor to the Dreyfus Capital Value Fund. Performance data prior to this
date reflects the performance of the Dreyfus Capital Value Fund.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN+
AVERAGE
ANNUAL TOTAL
RETURN AT
NET ASSET VALUE
- -----------------------------------------
CLASS R SHARES
- -----------------------------------------
Year Ended 4/30/98 -31.28%
- -----------------------------------------
Five Years Ended
4/30/98 -10.24%
- -----------------------------------------
Ten Years Ended
4/30/98 - 2.06%
- -----------------------------------------
Policy inception
(4/28/87)* through
4/30/98 - 0.60%
- -----------------------------------------
Fund's inception
(10/10/85) through
4/30/98 + 3.19%
- -----------------------------------------
* On April 28, 1987, Comstock Partners, Inc., the Capital Value Fund's
Investment Adviser, assumed investment responsibilities and the Fund changed
its investment objective to the current investment objective.
+ See the first footnote to the preceding graph for a discussion of the
presentation of total return.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Strategy Fund Schedule of Investments As of April 30, 1998
<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 -- $ 17,700,000
85.9% AAA Aaa 6.375% due 8/15/2027 $18,684,120
-----------
United States Treasury Notes:
AAA Aaa 33,305,000 8.875% due 11/15/1998 33,908,653
AAA Aaa 25,210,000 8.875% due 2/15/1999 25,856,006
-----------
59,764,659
-----------
Corporate
Convertible Bonds 1,750,000
- -- 1.9% UNR UNR Ashanti Capital, Ltd. 5.500% due 3/15/2003 1,370,833
UNR UNR 500,000 TVX Gold, Inc. 5.000% due 3/28/2002 402,500
-----------
1,773,333
-----------
Foreign Corporate
Obligations -- CAD 1,500,000
0.6% UNR UNR William Resources, Inc. 8.000% due 1/23/2002 (c) 325,129
1,000,000 William Resources, Inc. 8.000% due 1/23/2002
(a)(c) 216,753
-----------
541,882
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BONDS (cost $82,869,223) -- 88.4% 80,763,994
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Country Funds -- 37,000
1.2% Fleming Russia Securities Fund (b) 652,125
77,600 Lazard Vietnam Fund, Ltd. (b) 155,200
250,000 Vietnam Enterprise Investment Fund, Ltd., Class C
(a)(b) 256,250
-----------
1,063,575
-----------
Mining -- 3.9% 201,017 Bema Gold Corporation (b) 502,543
100,000 Free State Consolidated Gold Mines, Ltd., ADR 568,750
64,593 Gold Fields, Ltd., ADR (b) 482,833
24,000 Greenstone Resources, Ltd. (b) 147,000
100,000 Harmony Gold Mining, Ltd., ADR (b) 559,375
218,074 Randfontein Estates Gold Mining Company
Witwatersrand, Ltd., ADR 676,029
265,000 Vista Gold Corporation (b) 82,812
18,800 Western Deep Levels, Ltd., ADR 528,750
103,332 William Resources, Inc. 25,649
-----------
3,573,741
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (cost $6,799,799) -- 5.1% 4,637,316
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS
Mining -- 0.7% 13,000 Amax Gold, Inc. $3.75 convertible pfd. 622,375
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN PREFERRED STOCKS (cost $654,160) -- 0.7% 622,375
- ---------------------------------------------------------------------------------------------------------------------------------
Total investments (cost $90,323,182) -- 94.2% 86,023,685
Put options purchased (cost $10,386,764) -- 4.2%+ 3,878,444
Other assets less liabilities -- 1.6% 1,441,299
-----------
Net Assets -- 100.0% $91,343,428
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Strategy Fund Schedule of Investments (concluded) As of April 30, 1998
+ Put options purchased as of April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
CONTRACTS ISSUE EXERCISE PRICE (NOTE 1A)
<S> <C> <C> <C>
425 S&P 500 Index Jun. 98/725 $ 2,656
560 S&P 500 Index Jun. 98/800 21,000
450 S&P 500 Index Dec. 98/850 523,125
191 S&P 500 Index Dec. 98/900 305,600
300 S&P 500 Index Dec. 98/950 697,500
530 S&P 500 Index Dec. 98/1025 1,941,125
50 S&P Flex Index Jun. 98/700 938
470 S&P Flex Index Jun. 98/800 23,500
880 S&P Flex Index Sep. 98/800 363,000
-----------
Total put options purchased
(cost $10,386,764) $ 3,878,444
-----------
-----------
</TABLE>
* Ratings shown have not been audited by Ernst & Young LLP.
ADR -- American Depositary Receipt.
UNR -- Unrated by Standard & Poor's or Moody's.
CAD -- Canadian Dollars.
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
April 30, 1998 these securities amounted to $473,003, or 0.52% of net
assets.
(b) Non-income producing.
(c) Subsequent to April 30, 1998, the issuer received approval from debenture h
olders to restructure the terms of these securities. As part of the
restructuring, the May 20, 1998 and November 20, 1998 interest payments
will be forgiven and the Fund will resume accruing interest on November
21, 1998. This event has resulted in a decline in the market value of these
securities.
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Schedule of Investments As of April 30, 1998
<TABLE>
<CAPTION>
SHARES
S&P MOODY'S HELD/ VALUE
RATING* RATING* FACE AMOUNT ISSUE (NOTE 1A)
<S> <C> <C> <C> <C> <C>
BONDS
U.S. Government United States Treasury Bonds:
Obligations --
21.1% AAA Aaa $19,750,000 6.375% due 8/15/2027 $20,848,100
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BONDS (cost $20,644,435) -- 21.1% 20,848,100
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Country Funds --
1.5% 60,765 Fleming Russia Securities Fund (a) 1,070,983
87,000 Lazard Vietnam Fund, Ltd. (a) 174,000
Vietnam Enterprise Investment Fund, Ltd., Class C
250,000 (a)(b) 256,250
------------
1,501,233
------------
Mining -- 6.9% 58,926 Ashanti Goldfields, GDR 581,894
241,000 Bema Gold Corporation (a) 602,500
100,000 Free State Consolidated Gold Mines, Ltd., ADR 568,750
25,000 Getchell Gold (a) 615,625
114,426 Gold Fields, Ltd., ADR (a) 855,334
29,000 Greenstone Resources, Ltd. (a) 177,625
120,000 Harmony Gold Mining Ltd., ADR (a) 671,250
18,000 Newmont Mining 579,375
201,412 Randfontein Estates Gold Mining Company
Witwatersrand, Ltd., ADR 624,377
200,000 TVX Gold (a) 812,500
335,000 Vista Gold Corporation (a) 104,688
19,700 Western Deep Levels, Ltd., ADR 554,063
115,000 William Resources, Inc. 28,547
------------
6,776,528
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (cost $13,983,361) -- 8.4% 8,277,761
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT - TERM
SECURITIES (C)
U.S. Government United States Treasury Bills:
Obligations --
63.7% AAA Aaa $1,292,000 5.01% due 5/28/98 1,287,582
AAA Aaa 13,055,000 4.97% due 6/25/98 (d)(e) 12,960,612
AAA Aaa 3,050,000 4.97% due 7/2/98 3,024,563
AAA Aaa 46,086,000 4.92% due 7/23/98 45,571,680
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM SECURITIES (cost $62,829,958) -- 63.7% 62,844,437
- ---------------------------------------------------------------------------------------------------------------------------------
Total investments (cost $97,457,754) -- 93.2% 91,970,298
Put options purchased (cost $12,721,763) -- 3.6%+ 3,589,012
Variation margin on open futures contracts -- (0.4%)++ (380,800)
Other assets less liabilities -- 3.6% 3,565,334
------------
Net Assets -- 100.0% $98,743,844
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Schedule of Investments (concluded) As of April 30, 1998
+ Put options purchased as of April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
CONTRACTS ISSUE EXERCISE PRICE (NOTE 1A)
<S> <C> <C> <C>
340 S&P 500 Index Jun. 98/725 $ 2,125
450 S&P 500 Index Jun. 98/800 16,875
960 S&P 500 Index Jun. 98/825 42,000
500 S&P 500 Index Dec. 98/850 581,250
227 S&P 500 Index Dec. 98/900 363,200
585 S&P 500 Index Dec. 98/1025 2,142,562
570 S&P Flex Index Jun. 98/800 28,500
1,000 S&P Flex Index Sep. 98/800 412,500
-----------
Total Put Options Purchased
(cost $12,721,763) $ 3,589,012
-----------
-----------
</TABLE>
++ Open futures contracts as of April 30, 1998 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF VALUE APPRECIATION
CONTRACTS ISSUE EXPIRATION DATE (NOTE 1A) (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
FUTURES PURCHASED: 27 S&P 500 Index Jun. 98 $ 7,554,600 $ 833,675
FUTURES SOLD: 95 S&P 500 Index Jun. 98 (26,581,000) (796,200)
---------
$ 37,475
---------
---------
</TABLE>
* Ratings shown have not been audited by Ernst & Young LLP.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
April 30, 1998 these securities amounted to $256,250, or 0.26% of net
assets.
(c) 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.
(d) Partially held by broker as collateral for open short positions.
(e) Partially held by the custodian in a segregated account as collateral for
open futures positions.
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc.
Capital Value Fund Statement of Securities Sold Short As of April 30, 1998
<TABLE>
<CAPTION>
VALUE
COMMON STOCKS SHARES ISSUE (NOTE 1A)
<S> <C> <C> <C>
Automotive -- 0.6% 30,000 Pep Boys Manny Moe & Jack $ 652,500
------------
Foreign Index -- 0.9% 92,900 WEBS-Hong Kong 923,194
------------
Manufacturing -- 9.7% 9,500 Altera 384,750
17,600 Best Foods 965,800
26,500 Compaq Computer 743,656
12,500 Harnischfeger Industries 353,125
9,200 Intel 743,475
16,300 International Flavors & Fragrance 797,681
23,500 Ionics 1,047,219
40,000 Komag 620,000
31,000 Micron Electronics 432,063
14,500 NIKE, Cl. B 692,375
24,200 OEA 461,312
27,200 St. Jude Medical 963,900
23,000 Seagate Technology 613,812
21,700 3Com 743,225
------------
9,562,393
------------
Services -- 3.9% 31,000 Cabletron Systems 410,750
31,600 Circus Circus Enterprises 570,775
27,300 Foundation Health Systems 789,994
24,300 Hilton Hotels 776,081
37,000 Itron 566,562
26,000 Vencor 705,250
------------
3,819,412
------------
Wholesale Trade -- 0.8% 13,800 Motorola 767,625
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES SOLD SHORT (proceeds $19,247,668) -- 15.9% $15,725,124
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Statements of Assets and Liabilities
As of April 30, 1998
<TABLE>
<CAPTION>
STRATEGY CAPITAL
FUND VALUE FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments at value (cost $90,323,182 and
$97,457,754, respectively) (Note 1a)................ $ 86,023,685 $ 91,970,298
Put options purchased (cost $10,386,764 and
$12,721,763, respectively) (Note 1a)................ 3,878,444 3,589,012
Cash................................................ 1,667 180,935
Receivable from brokers for proceeds on securities
sold short.......................................... -- 19,247,668
Receivables:
Interest........................................ 2,138,106 336,413
Capital stock sold.............................. 607,436 47,639
Securities sold................................. -- 359,988
Dividends....................................... 12,188 3,978
Other assets........................................ 9,275 32,112
------------ ------------
Total assets.................................... 92,670,801 115,768,043
------------ ------------
LIABILITIES:
Payables:
Short sales (proceeds $19,247,668).............. -- 15,725,124
Dividends to shareholders (Note 1f)............. 750,023 --
Capital stock redeemed.......................... 244,641 615,466
Investment advisory fees (Note 2)............... 45,672 33,082
Sub-investment advisory fees (Note 2)........... -- 28,947
Administrative fees (Note 2).................... 19,182 --
Service and Distribution Plan fees (Note 2)..... 5,230 42,345
Due to Dreyfus Transfer, Inc. (Note 2).......... 87,308 50,142
Variation margin on open futures contracts...... -- 380,800
Accrued expenses and other liabilities.............. 175,317 148,293
------------ ------------
Total liabilities............................... 1,327,373 17,024,199
------------ ------------
NET ASSETS.......................................... $ 91,343,428 $ 98,743,844
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Paid in capital................................. $168,227,757 $346,390,444
Undistributed net investment income............. 2,928,407 3,999,755
Accumulated net realized loss on investments,
put options purchased, futures, short sale
transactions and foreign currency
transactions.................................. (69,004,834) (240,586,396)
Net unrealized appreciation on short sale
transactions.................................. -- 3,522,544
Net unrealized depreciation on investments, put
options purchased and
futures transactions.......................... (10,807,817) (14,582,732)
Net unrealized appreciation (depreciation) on
foreign currency transactions................. (85) 229
------------ ------------
NET ASSETS.......................................... $ 91,343,428 $ 98,743,844
------------ ------------
------------ ------------
SHARES OF COMMON STOCK OUTSTANDING:
Class O shares:
150 million of $0.001 par value authorized.... 11,826,651 --
------------ ------------
------------ ------------
Class A shares:
200 million of $0.001 par value authorized.... 2,948,540 --
------------ ------------
------------ ------------
125 million of $0.001 par value authorized.... -- 12,740,341
------------ ------------
------------ ------------
Class B shares:
125 million of $0.001 par value authorized.... -- 5,256,078
------------ ------------
------------ ------------
Class C shares:
200 million of $0.001 par value authorized.... 293,887 --
------------ ------------
------------ ------------
125 million of $0.001 par value authorized.... -- 1,671,352
------------ ------------
------------ ------------
Class R shares:
125 million of $0.001 par value authorized.... -- 5,467
------------ ------------
------------ ------------
NET ASSET VALUE PER SHARE:
Class O shares:
$71,691,734 / 11,826,651 shares............... $ 6.06 --
------------ ------------
------------ ------------
Class A shares:
$17,871,169 / 2,948,540 shares and $64,452,401
/ 12,740,341 shares, respectively........... $ 6.06 $ 5.06
------------ ------------
------------ ------------
Class B shares:
$26,234,909 / 5,256,078 shares................ -- $ 4.99
------------ ------------
------------ ------------
Class C shares:
$1,780,525 / 293,887 shares and $8,028,945 /
1,671,352 shares, respectively................ $ 6.06 $ 4.80
------------ ------------
------------ ------------
Class R shares:
$27,589 / 5,467 shares........................ -- $ 5.05
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Statements of Operations for the Year Ended
April 30, 1998
<TABLE>
<CAPTION>
STRATEGY CAPITAL
FUND VALUE FUND
<S> <C> <C>
------------ ------------
INVESTMENT INCOME (NOTE 1E):
Interest and discount earned (net of withholding tax
of $3,185 and $48,786, respectively).............. $ 9,702,378 $ 9,168,466
Dividends (net of withholding tax of $5,788 and $0,
respectively)..................................... 278,507 203,293
------------ ------------
Total investment income......................... 9,980,885 9,371,759
------------ ------------
EXPENSES:
Investment advisory fees (Note 2)................... 817,706 616,951
Administrative fees (Note 2)........................ 350,466 --
Dividends on securities sold short.................. -- 367,604
Transfer agent fees (Note 2)........................ 372,674 277,177
Sub-investment advisory fees (Note 2)............... -- 539,832
Service and Distribution Plan fees (Note 2)......... 122,524 764,411
Professional fees................................... 114,999 58,109
Printing and shareholder reports.................... 6,703 55,707
Registration fees................................... 19,668 53,895
Insurance........................................... 28,367 15,082
Directors' fees and expenses........................ 42,394 43,231
Custodian fees...................................... 46,425 35,187
Other operating expenses............................ 359 --
------------ ------------
Total expenses.................................. 1,922,285 2,827,186
Waiver of administrative fees (Note 2).......... (18,826) --
------------ ------------
Net expenses.................................... 1,903,459 2,827,186
------------ ------------
NET INVESTMENT INCOME............................... 8,077,426 6,544,573
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS (NOTES 1B, 1C, 1E & 3):
Net realized loss on investments, put options
purchased and futures transactions................ (27,577,080) (62,173,921)
Net realized loss on short sale transactions........ -- (12,832,985)
Net realized gain (loss) on foreign currency
transactions...................................... (740,328) 527,134
Change in net unrealized appreciation (depreciation)
on investments, put options purchased and
futures transactions.............................. (1,114,320) 9,251,284
Change in net unrealized depreciation on short sale
transactions...................................... -- (2,948,168)
Change in net unrealized appreciation on foreign
currency transactions............................. 3,070 33,277
------------ ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $(21,351,232) $(61,598,806)
------------ ------------
------------ ------------
</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 FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1998 APRIL 30, 1997
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
OPERATIONS: Net investment income.......... $ 8,077,426 $ 15,958,909 $ 6,544,573 $ 16,844,056
Net realized loss on
investments, put options
purchased and futures
transactions................. (27,577,080) (16,069,197) (62,173,921) (23,936,012)
Net realized loss on short sale
transactions................. -- -- (12,832,985) (15,283,826)
Net realized gain (loss) on
foreign currency
transactions................. (740,328) (6,194,936) 527,134 1,219,208
Change in net unrealized
appreciation (depreciation)
on investments, put options
purchased and futures
transactions................. (1,114,320) (5,330,396) 9,251,284 (26,007,617)
Change in net unrealized
appreciation (depreciation)
on short sale transactions... -- -- (2,948,168) 8,515,695
Change in net unrealized
appreciation (depreciation)
on foreign currency
transactions................. 3,070 (67,194) 33,277 (33,048)
---------------- ---------------- ---------------- ----------------
Net decrease in net assets
resulting from operations.... (21,351,232) (11,702,814) (61,598,806) (38,681,544)
---------------- ---------------- ---------------- ----------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS: Net investment income
Class O shares............... (8,610,093) (9,509,711) -- --
Class A shares............... (2,388,760) (2,663,922) (12,466,331) (11,184,613)
Class B shares............... -- -- (4,682,782) (4,074,703)
Class C shares............... (318,865) (629,042) (1,564,172) (351,412)
Class R shares............... -- -- (3,942) (1,757)
Realized gains on foreign
currency transactions
Class O shares............... -- (3,149,588) -- --
Class A shares............... -- (757,462) -- --
Class C shares............... -- (133,166) -- --
---------------- ---------------- ---------------- ----------------
Net decrease in net assets
resulting from dividends and
distributions................ (11,317,718) (16,842,891) (18,717,227) (15,612,485)
---------------- ---------------- ---------------- ----------------
CAPITAL STOCK
TRANSACTIONS: Net proceeds from shares sold:
Class A shares............... 8,461,712 18,898,271 89,446,461 80,556,216
Class B shares............... -- -- 7,876,880 27,051,810
Class C shares............... 2,009,142 23,119,248 13,818,333 8,482,514
Class R shares............... -- -- 6,595 124,254
Dividends and distributions
reinvested:
Class O shares............... 1,697,713 2,306,043 -- --
Class A shares............... 819,637 1,072,115 8,919,796 7,737,035
Class B shares............... -- -- 3,073,203 2,459,697
Class C shares............... 75,612 136,605 530,907 130,312
Class R shares............... -- -- 3,840 1,757
Cost of shares redeemed:
Class O shares............... (40,070,923) (70,907,354) -- --
Class A shares............... (27,719,716) (24,374,508) (140,910,685) (130,659,314)
Class B shares............... -- -- (28,090,811) (31,821,065)
Class C shares............... (12,326,541) (8,756,049) (8,437,377) (3,667,272)
Class R shares............... -- -- (69,483) --
---------------- ---------------- ---------------- ----------------
Net decrease in net assets
resulting from capital stock
transactions................. (67,053,364) (58,505,629) (53,832,341) (39,604,056)
---------------- ---------------- ---------------- ----------------
Decrease in net assets......... (99,722,314) (87,051,334) (134,148,374) (93,898,085)
NET ASSETS: Beginning of year.............. 191,065,742 278,117,076 232,892,218 326,790,303
---------------- ---------------- ---------------- ----------------
End of year.................... $ 91,343,428 $191,065,742 $ 98,743,844 $232,892,218
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Undistributed net investment
income....................... $ 2,928,407 $ 10,656,233 $ 3,999,755 $ 8,372,853
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Statements of Changes in Net Assets
(concluded)
<TABLE>
<CAPTION>
STRATEGY FUND CAPITAL VALUE FUND
----------------------------------- ------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1998 APRIL 30, 1997
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
CAPITAL STOCK
TRANSACTIONS: Shares sold:
Class A shares............... 1,196,510 2,270,514 13,723,148 8,386,923
Class B shares............... -- -- 1,254,106 2,817,342
Class C shares............... 275,260 2,704,967 2,123,191 916,595
Class R shares............... -- -- 1,138 13,254
Shares issued for dividends and
distributions reinvested:
Class O shares............... 243,622 277,417 -- --
Class A shares............... 118,404 128,972 1,554,110 848,331
Class B shares............... -- -- 541,057 274,214
Class C shares............... 10,533 16,697 95,751 14,775
Class R shares............... -- -- 672 193
Shares redeemed:
Class O shares............... (5,756,722) (8,457,567) -- --
Class A shares............... (3,945,162) (2,931,757) (21,201,003) (13,484,994)
Class B shares............... -- -- (4,189,733) (3,322,387)
Class C shares............... (1,673,545) (1,076,210) (1,423,063) (400,566)
Class R shares............... -- -- (9,912) --
---------------- ---------------- ---------------- ----------------
Net decrease in shares
outstanding.................. (9,531,100) (7,066,967) (7,530,538) (3,936,320)
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</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 YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, 1998 APRIL 30, 1997
--------------------------------- -------------------------------
CLASS O CLASS A CLASS C CLASS O CLASS A CLASS C
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................... $ 7.77 $ 7.77 $ 7.74 $ 8.78 $ 8.78 $ 8.77
------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1)........... 0.43 0.42 0.37 0.78 0.54 0.45
Net realized and unrealized gain
(loss) on investments, put options
purchased, futures transactions and
foreign currency transactions...... (1.54) (1.55) (1.54) (1.19) (0.96) (0.95)
------- ------- ------- -------- ------- -------
Total from investment
operations....................... (1.11) (1.13) (1.17) (0.41) (0.42) (0.50)
------- ------- ------- -------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income............................. (0.60) (0.58) (0.51) (0.47) (0.46) (0.41)
Dividends from realized gains on
foreign currency transactions...... -- -- -- (0.13) (0.13) (0.12)
------- ------- ------- -------- ------- -------
Total dividends and
distributions.................... (0.60) (0.58) (0.51) (0.60) (0.59) (0.53)
------- ------- ------- -------- ------- -------
NET ASSET VALUE, END OF YEAR........ $ 6.06 $ 6.06 $ 6.06 $ 7.77 $ 7.77 $ 7.74
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Total investment return (2)......... (14.88)% (15.11)% (15.61)% (4.85)% (5.10)% (5.94)%
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of year (000
omitted)........................... $71,692 $17,871 $ 1,780 $134,719 $43,327 $13,020
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Ratio of expenses to average net
assets............................. 1.31% 1.55% 2.29% 1.18% 1.43% 2.14%
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Decrease reflected in above expense
ratios due to waiver of
administrative fees................ 0.01% 0.01% 0.01% -- -- --
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Ratio of net investment income to
average net assets................. 6.01% 5.79% 5.08% 6.80% 6.55% 5.81%
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
Portfolio turnover rate............. 227% 227% 227% 126% 126% 126%
------- ------- ------- -------- ------- -------
------- ------- ------- -------- ------- -------
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994
-------------------------------- -------------------- --------------------
CLASS O CLASS A CLASS C+ CLASS O CLASS A CLASS O CLASS A
------- ------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................... $ 9.10 $ 9.10 $ 9.00 $ 9.40 $ 9.41 $ 9.27 $ 9.27
------- ------- ------- -------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (1)........... 0.76 0.57 0.37 0.66 0.52 0.77 0.68
Net realized and unrealized gain
(loss) on investments, put options
purchased, futures transactions and
foreign currency transactions...... (0.53) (0.36) (0.22 ) (0.44) (0.34) 0.15 0.22
------- ------- ------- -------- ------- -------- -------
Total from investment
operations....................... 0.23 0.21 0.15 0.22 0.18 0.92 0.90
------- ------- ------- -------- ------- -------- -------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income............................. (0.55) (0.53) (0.38) (0.52) (0.49) (0.77) (0.74)
Dividends from realized gains on
foreign currency transactions...... -- -- -- -- -- (0.02) (0.02)
------- ------- ------- -------- ------- -------- -------
Total dividends and
distributions.................... (0.55) (0.53) (0.38) (0.52) (0.49) (0.79) (0.76)
------- ------- ------- -------- ------- -------- -------
NET ASSET VALUE, END OF YEAR........ $ 8.78 $ 8.78 $ 8.77 $ 9.10 $ 9.10 $ 9.40 $ 9.41
------- ------- ------- -------- ------- -------- -------
------- ------- ------- -------- ------- -------- -------
Total investment return (2)......... 2.66% 2.40% 1.96%(3) 2.39% 1.94% 10.13% 9.91%
------- ------- ------- -------- ------- -------- -------
------- ------- ------- -------- ------- -------- -------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of year (000
omitted)........................... $224,148 $53,652 $ 317 $329,624 $65,874 $464,937 $91,454
-------- ------- ------- -------- ------- -------- -------
-------- ------- ------- -------- ------- -------- -------
Ratio of expenses to average net
assets............................. 1.23% 1.48% 2.28%(4) 1.14% 1.46% 1.07% 1.40%
-------- ------- ------- -------- ------- -------- -------
-------- ------- ------- -------- ------- -------- -------
Decrease reflected in above expense
ratios due to waiver of
administrative fees................ -- -- -- -- -- -- --
-------- ------- ------- -------- ------- -------- -------
-------- ------- ------- -------- ------- -------- -------
Ratio of net investment income to
average net assets................. 6.56% 6.33% 5.79%(4) 6.19% 5.83% 7.57% 6.85%
-------- ------- ------- -------- ------- -------- -------
-------- ------- ------- -------- ------- -------- -------
Portfolio turnover rate............. 96% 96% 96% 100% 100% 31% 31%
-------- ------- ------- -------- ------- -------- -------
-------- ------- ------- -------- ------- -------- -------
+ Class C shares were introduced on August 1, 1995. Except as indicated
below, information is presented for the period from August 1, 1995 to
April 30, 1996.
(1) Based on average shares outstanding.
(2) 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.
(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.
</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 YEAR ENDED
APRIL 30, 1998
-----------------------------------------------
CLASS A CLASS B CLASS C CLASS R
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 8.62 $ 8.45 $ 8.31 $ 8.62
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.31(1) 0.25(1) 0.23(1) 0.33(1)
Net realized and unrealized gain
(loss) on investments, put options
purchased, futures transactions,
short sale transactions and foreign
currency transactions.............. (2.91) (2.85) (2.78) (2.91)
-------- -------- -------- --------
Total from investment
operations....................... (2.60) (2.60) (2.55) (2.58)
-------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment
income............................. (0.96) (0.86) (0.96) (0.99)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...... $ 5.06 $ 4.99 $ 4.80 $ 5.05
-------- -------- -------- --------
Total investment return (2)......... (31.48)% (32.01)% (32.10)% (31.28)%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)........................... $ 64,452 $ 26,235 $ 8,029 $ 28
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of operating expenses to
average net assets................. 1.35% 2.10% 2.08% 1.11%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of interest expense and
dividends on securities sold short
to average net assets.............. 0.24% 0.24% 0.21% 0.26%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment income to
average net assets................. 4.49% 3.74% 3.70% 4.73%
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio turnover rate............. 359% 359% 359% 359%
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
FOR THE YEAR ENDED
APRIL 30, 1998
-----------------------------------------------
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............... 0.59 0.54 0.57 0.82(1)
Net realized and unrealized gain
(loss) on investments, put options
purchased, futures transactions,
short sale transactions and foreign
currency transactions.............. (1.92) (1.93) (1.91) (2.13)
-------- -------- -------- --------
Total from investment
operations....................... (1.33) (1.39) (1.34) (1.31)
-------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment
income............................. (0.59) (0.54) (0.59) (0.60)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...... $ 8.62 $ 8.45 $ 8.31 $ 8.62
-------- -------- -------- --------
Total investment return (2)......... (12.97)% (13.69)% (13.47)% (12.83)%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)........................... $160,834 $ 64,671 $ 7,271 $ 117
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of operating expenses to
average net assets................. 1.28% 2.03% 2.07% 1.19%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of interest expense and
dividends on securities sold short
to average net assets.............. 0.51% 0.50% 0.47% 0.38%
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment income to
average net assets................. 6.16% 5.52% 6.02% 8.65%
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio turnover rate............. 399% 399% 399% 399%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. Capital Value Fund Financial Highlights
(concluded)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE SEVEN
MONTHS ENDED FOR THE YEAR ENDED
APRIL 30, 1996 SEPTEMBER 30, 1995
----------------------------------------------- ---------------------------------------------
CLASS A CLASS B CLASS C CLASS R CLASS A CLASS B CLASS C+ CLASS R
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.........................$ 10.61 $ 10.41 $ 10.41 $ 10.62 $ 11.88 $ 11.69 $ 10.64 $ 10.84
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.22 0.18 0.44 0.30 0.36 0.31 0.02 0.04
Net realized and unrealized gain
(loss) on investments, put
options purchased, futures
transactions, short sale
transactions and foreign
currency transactions.......... 0.17 0.16 (0.12) 0.09 (1.37) (1.38) (0.25) (0.26)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations................... 0.39 0.34 0.32 0.39 (1.01) (1.07) (0.23) (0.22)
-------- -------- -------- -------- -------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment
income......................... (0.46) (0.37) (0.49) (0.48) (0.26) (0.21) -- --
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD.........................$ 10.54 $ 10.38 $ 10.24 $ 10.53 $ 10.61 $ 10.41 $ 10.41 $ 10.62
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total investment return (2)..... 3.81% 3.36% 3.30% 3.97% (8.58)% (9.27)% (2.26)% (2.03)%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted).......................$241,472 $ 81,786 $ 3,531 $ 1 $271,052 $ 87,847 $ 1 $ 1
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of operating expenses to
average net assets............. 0.75%(3) 1.18%(3) 1.28%(3) 0.61%(3) 1.24% 1.99% 0.26%(3) 0.14%(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) 0.45% 0.45% 0.06%(3) 0.04%(3)
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment income
to average net assets.......... 2.13%(3) 1.70%(3) 1.71%(3) 2.28%(3) 3.61% 2.86% 0.23%(3) 0.38%(3)
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover rate......... 56%(3) 56%(3) 56%(3) 56%(3) 55% 55% 55% 55%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
--------------------- ---------------------
CLASS A CLASS B CLASS A CLASS B+
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 11.42 $ 11.32 $ 12.41 $ 10.58
-------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... 0.24 0.23 0.24 0.03
Net realized and unrealized gain
(loss) on investments, put
options purchased, futures
transactions, short sale
transactions and foreign
currency transactions.......... 0.46 0.38 (0.62) 0.71
-------- -------- -------- --------
Total from investment
operations................... 0.70 0.61 (0.38) 0.74
-------- -------- -------- --------
LESS DIVIDENDS
Dividends from net investment
income......................... (0.24) (0.24) (0.61) --
-------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD......................... $ 11.88 $ 11.69 $ 11.42 $ 11.32
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (2)..... 6.14% 5.35% (2.70)% 6.99%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000
omitted)....................... $402,708 $108,532 $412,316 $ 30,378
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of operating expenses to
average net assets............. 1.21% 1.99% 1.23% 1.49%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of interest expense and
dividends on securities sold
short to average net assets.... 0.39% 0.40% 0.45% 0.31%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Ratio of net investment income
to average net assets.......... 2.06% 1.39% 1.94% 0.83%(3)
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio turnover rate......... 46% 46% 42% 42%
-------- -------- -------- --------
-------- -------- -------- --------
+ Class B shares were introduced on January 15, 1993; Class C shares and
Class R shares were introduced on August 22, 1995.
(1) Based on average shares outstanding.
(2) 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.
(3) Not annualized.
</TABLE>
See notes to financial statements.
<PAGE>
COMSTOCK PARTNERS FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS:
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, Inc. 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 and in certain cases, contingent deferred sales charges. 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 and distributions 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, except for open short positions, where the
asked price is used for valuation purposes. Bid price is used when no asked
price is available.
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. Options written are valued at the last asked price.
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
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.
Options -- The Funds are authorized to write and purchase call and put options.
When a Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written. When a security is purchased or sold through an exercise
of an option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received). Written and
purchased options are non-income producing investments.
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 Funds' records. However, the effect on
operations is recorded from the date the Fund enters into such 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
Fund 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 year. Foreign currency transaction gains (losses) are the
result of settling (realized) or valuing (unrealized) assets or liabilities
expressed in foreign currencies into U.S. 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,
dividends and capital gains at various rates.
<PAGE>
(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. During the year ended April 30, 1998,
the Capital Value Fund and the Strategy Fund reclassified $7,799,556 and
$4,487,534, respectively, between accumulated net realized losses and
undistributed net investment income. These reclassifications were the result of
permanent book to tax differences, primarily from foreign currency transactions
and passive foreign investment companies. The results of operations and net
assets were not affected by these reclassifications.
(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.
(h) Use of estimates -- The Funds' financial statements are prepared in
accordance with generally accepted accounting principles which may require the
use of estimates and assumptions. Actual results could differ from these
estimates.
2. 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 receives
from the Company, on behalf of the Capital Value Fund, a monthly fee 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.
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 receives 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.
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.
Effective November 20, 1997, Princeton agreed to voluntarily reduce through
December 31, 1998 the minimum fee to $125,000 per annum.
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 year ended April 30, 1998, such compensation amounted to $159,704 for the
Capital Value Fund and $162,671 for the Strategy Fund.
(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 (a securities dealer, financial institution or other
industry professional) 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. During the
year ended April 30, 1998, $259,124 and $74,213 were charged to the Class A
shares of the Capital Value Fund and the Strategy Fund, respectively.
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 such Fund. During the year ended April
30, 1998, $311,125 and $67,840 were charged for distributing Capital Value
Fund's Class B and Class C shares, respectively, and $103,708 and $22,613 were
charged for shareholder servicing for Capital Value Fund's Class B and Class C
shares, respectively. For the same period, $36,233 and $12,078 were charged for
distributing and shareholder servicing, respectively, for Strategy Fund's Class
C shares.
(c) Certain officers and/or directors of the Company are officers and/or
directors of the Investment Adviser. Each director who is not an "affiliated
person" as defined in the 1940 Act receives from the Company an annual fee of
$20,000 per year.
<PAGE>
3. PURCHASES AND SALES OF INVESTMENTS:
Purchases and sales of investments, excluding short-term and U.S. Government
securities, for the year ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Strategy Fund:...................................... $ 53,979,702 $107,729,917
-------------- --------------
-------------- --------------
Capital Value Fund:
Long transactions................................. $158,225,773 $207,932,928
Short sale transactions........................... 131,386,108 74,397,307
-------------- --------------
$289,611,881 $282,330,235
-------------- --------------
-------------- --------------
</TABLE>
The Capital Value Fund engages 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 April 30, 1998 and their related market
values and proceeds are set forth in the Statement of Securities Sold Short.
Realized and unrealized gains (losses) as of April 30, 1998 were as follows:
Strategy Fund:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
GAINS (LOSSES) LOSSES
-------------- --------------
<S> <C> <C>
Long-term investments............................... $ (5,666,520) $ (4,299,497)
Short-term investments.............................. 498 --
Put options purchased............................... (23,526,435) (6,508,320)
Financial futures contracts......................... 1,615,377 --
Foreign currency transactions....................... (740,328) (85)
-------------- --------------
$(28,317,408) $(10,807,902)
-------------- --------------
-------------- --------------
</TABLE>
Capital Value Fund:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
GAINS (LOSSES) GAINS (LOSSES)
-------------- --------------
<S> <C> <C>
Long-term investments............................... $(18,506,793) $ (5,501,935)
Short sale transactions............................. (12,832,985) 3,522,544
Short-term investments.............................. 3,263 14,479
Put options purchased............................... (18,915,590) (9,132,751)
Financial futures contracts......................... (24,754,801) 37,475
Foreign currency transactions....................... 527,134 229
-------------- --------------
$(74,479,772) $(11,059,959)
-------------- --------------
-------------- --------------
</TABLE>
As of April 30, 1998, the cost of investments of the Capital Value Fund for
Federal income tax purposes was substantially the same as the cost for financial
reporting purposes. The cost of investments for the Strategy Fund for federal
income tax purposes was $101,515,568. The following summarizes the net
unrealized appreciation (depreciation) on investments, put options purchased,
futures transactions and short sale transactions for Federal income tax purposes
for each Fund at April 30, 1998:
<TABLE>
<CAPTION>
GROSS GROSS
APPRECIATION DEPRECIATION NET
------------ ------------ ------------
<S> <C> <C> <C>
Strategy Fund............................ $ 223,156 $(11,836,595) $(11,613,439)
Capital Value Fund....................... $ 5,689,303 $(16,749,491) $(11,060,188)
</TABLE>
The following summarizes the capital loss carryforwards of each Fund at April
30,1998:
<TABLE>
<CAPTION>
EXPIRING IN FISCAL YEAR STRATEGY FUND CAPITAL VALUE FUND
- ------------------------- ---------------- ------------------
<S> <C> <C>
1999 -- $ 9,100,000
2000 $ 3,400,000 29,800,000
2001 8,800,000 17,800,000
2002 -- 56,700,000
2003 -- 9,200,000
2004 12,500,000 15,800,000
2005 14,900,000 14,200,000
2006 14,100,000 57,400,000
---------------- ------------------
Total $ 53,700,000 $210,000,000
---------------- ------------------
---------------- ------------------
</TABLE>
4. SUBSEQUENT EVENT:
In May 1998 the Company's Board of Directors declared ordinary income dividends
for the Strategy Fund as follows:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
- -------------------------------------
<S> <C> <C> <C> <C>
CLASS O CLASS A CLASS C PAYABLE DATE RECORD DATE
- --------- ---------- ---------- ------------------ ----------------
$0.05000 $0.04873 $0.04476 05/29/98 05/19/98
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Comstock Partners Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments and statement of securities sold short,
of Comstock Partners Funds, Inc. (comprising, respectively, Comstock Partners
Strategy Fund and Comstock Partners Capital Value Fund) as of April 30, 1998,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and financial highlights, with respect to Comstock Partners Strategy
Fund, for each of the three years in the period then ended and with respect to
Comstock Partners Capital Value Fund, for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights, with respect to Comstock Partners Strategy
Fund, for each of the two years in the period ended April 30, 1995 were audited
by other auditors whose opinion dated May 31,1995 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 and financial highlights. Our procedures included confirmation of
securities owned as of April 30, 1998 by correspondence with the custodians 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, the financial statements and financial highlights referred to
above and audited by us present fairly, in all material respects, the financial
position of each of the Funds constituting Comstock Partners Funds, Inc. at
April 30,1998, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
New York, New York
June 15, 1998
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Funds, Inc. 1998
FEDERAL TAX INFORMATION (Unaudited)
Of the ordinary income distributions paid monthly by the Funds during the
fiscal year ended April 30, 1998, 2.17% and 0.32% qualify for the dividends
received deduction for corporations for the Strategy Fund and the Capital Value
Fund, respectively. Additionally, there were no long-term capital gains
distributions during the year.
The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. We
recommend that you consult your tax adviser to determine if any portions of the
dividends you received is exempt from state income tax.
Listed below are the percentages of total assets invested in Federal
obligations for each Fund as of the end of each quarter of the fiscal year:
<TABLE>
<CAPTION>
PERCENTAGE OF FEDERAL OBLIGATIONS*
----------------------------------------
FUND QUARTER ENDED STRATEGY FUND CAPITAL VALUE FUND
- ------------------ ------------- --------------------
<S> <C> <C>
7/31/97 43.49% 29.61%
10/31/97 58.49 47.93
1/31/98 82.08 66.43
4/30/98 84.65 72.56
</TABLE>
Of each Fund's ordinary income distributions paid during the fiscal year ended
April 30, 1998, 73.83% and 31.22% was attributable to federal obligations for
the Strategy Fund and the Capital Value Fund, respectively. In calculating the
foregoing percentages, expenses of each Fund have been allocated on a pro rata
basis.
* For purposes of this calculation, Federal obligations include U.S. Treasury
Notes, U.S. Treasury Bills, and U.S. Treasury Bonds. Also included are
obligations issued by the following agencies: Banks for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks and the Student Loan
Marketing Association. Repurchase agreements are not included in this
calculation.
