ANNUAL REPORT FOR 1995
Dear Shareholders,
Enclosed are the financial statements for the SCM Portfolio Fund for the 12-
month period ending December 31, 1995. Also, enclosed is a graph which
compares the Fund's performance to that of the S & P 500 Index from 1989, the
year in which the Fund became effective. The Fund reports as of January 1,
1989, since its capitalization was growing while awaiting SEC notification of
effectiveness, which occurred on March 8, 1989. The S & P 500 Index is a
broad-based index which meets the SEC requirements for comparative purposes.
While the Fund's adviser has a preference for investing totally in common
stocks, the Fund makes no representation that it was fully invested in stocks
for any period reported, as was the S & P 500 Index, or that the Fund ever will
be fully invested in common stocks.
Recent SEC rules require that the person or persons associated with the Fund
or investment adviser, SCM Associates, Inc., be disclosed with title(s) and
that the Fund's performance be reviewed annually, indicating investment
strategy and relating it to the Fund's objective and market conditions during
the year.
Stephen C. McCutcheon has managed the portfolio of the Fund since its
inception. He began managing client funds individually in 1986 with the
founding of SCM Associates and registering the adviser with the SEC.
The Fund reports a 14.11 per cent total return for the year compared to the S
& P 500's 37.57 per cent total return. Total return, of course, is the
combined result of capital appreciation and distributions (dividends and
capital gains) reinvested in shares of the Fund or comparative index. By way
of another comparison, according to Lipper Analytical Services, as reported in
the Wall Street Journal, the average balanced fund (stocks and bonds) gained
24.59 per cent. Of course, balanced funds and indexes are fully invested all
the time.
The objective of the Fund is to realize a combination of income and capital
appreciation which will result in the highest total return consistent with
safety of principal. The Fund follows a flexible investment policy and invests
in common stocks, preferred stocks, bonds, and money market instruments in
varying percentages, depending on the judgement of management as to the general
market and economic conditions. Management seeks to avoid or reduce negative
changes in the Fund's net asset value per share and seeks to provide a positive
return even in a declining market.
<PAGE>
The SCM Portfolio Fund was invested at the end of year, 46.68 per cent in
common stocks; 1.75 per cent in preferred stocks; 11.05 per cent in U.S.
Treasury Notes; and 40.52 per cent in cash equivalents. This is a conservative
portfolio mix, and the cash position held our total return back in a roaring
bull market. However, the traditional indicators, such as price to dividend
ratio and yield on S & P average were in record unacceptable territory, and
Fund management was reluctant to commit more than 50 per cent to common stocks.
Nevertheless, interest rates continued to decline and inflation appeared under
control to investors, and these factors, plus the investment demands of baby
boomers who are investing for retirement, were overriding the traditional
indicators of over-value in stocks.
As interest rates continue to decline and inflation remains under control, Fund
management will continue to buy stocks of companies which have prospects of
growing earnings.
We will have a further update at the annual meeting on March 2nd. Hope to see
you then.
Sincerely,
Steve McCutcheon
February 5, 1996
<PAGE>
Description of line graph comparing the change in value of $10,000 investment
in SCM Portfolio Fund and the S & P 500 Index dating from 01/01/89 through
12/31/95.
On the vertical axis the range in dollar value is $0 to $30,000.
On the horizontal axis, the dates begin with 01/01/89, next 03/08/89 (SEC
effectiveness date of the SCM Portfolio Fund), and thereafter each year ending
date (12/31) through 12/31/95.
The plotted values are as follows:
<TABLE>
<CAPTION>
Date S & P Index SCM Portfolio Fund
<C> <C> <C>
01-01-89 $10,000 $10,000
03-08-89 10,500 10,140
12-31-89 13,100 10,690
12-31-90 12,800 11,178
12-31-91 16,550 12,272
12-31-92 17,950 12,555
12-31-93 19,900 13,380
12-31-94 19,600 13,279
12-31-95 26,950 15,153
</TABLE>
<PAGE>
SCM PORTFOLIO FUND, INC
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
Independent Auditor's Report 1
Statement of Assets and Liabilities 2
Schedule of Investments 3-4
Statement of Operations 5
Statements of Changes in Net Assets 6
Notes to Financial Statements 7-8
Supplementary Information 9-11
</TABLE>
<PAGE>
MCMULLAN AND COMPANY
Certified Public Accountants
1355 Peachtree Street N E
Suite 820
Atlanta, GA 30309
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
SCM Portfolio Fund, Inc.
We have audited the accompanying statement of assets and liabilities of SCM
Portfolio Fund, Inc., including the schedule of investments, as of December 31,
1995, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended December 31, 1995 and
1994, and selected per share data and ratios for the years ending
December 31, 1995, 1994, 1993, 1992, 1991, 1990, and 1989. These financial
statements, per share data and ratios are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audit.
We conducted our audit 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 per
share data and ratios are free of material misstatement. Our procedures
included confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of SCM Portfolio Fund, Inc., as of December 31, 1995, and the results
of its operations for the year then ended, the changes in its net assets for
the years ended December 31, 1995 and 1994, and the selected per share data and
ratios for the years ended December 31, 1995, 1994, 1993, 1992, 1991, 1990, and
1989, in conformity with generally accepted accounting principles.
MCMULLAN AND COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
January 15, 1996
Atlanta, Georgia
<PAGE>
<TABLE>
SCM PORTFOLIO FUND INC
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<CAPTION>
ASSETS
<S> <C>
ASSETS
Investment in securities, at market values
(identified cost - $480,670) $549,734
Cash equivalents 366,702
Cash in custodial account and premium reserve 1,985
Dividends and interest receivable 5,409
________
$923,830
========
<CAPTION>
LIABILITIES
<S> <C>
LIABILITIES
Accounts payable $ 882
NET ASSETS (Equivalent to $10.97 per share
based on 84,150.522 shares outstanding;
10,000,000 shares authorized) 922,948
________
$923,830
========
Net assets consist of:
Capital paid in $852,599
Unrealized appreciation on investments 70,062
Accumulated undistributed net investment income 287
________
$922,948
========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCM PORTFOLIO FUND INC
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<CAPTION>
Number of
Shares or Market
Face Amount Value
___________ _________
<S> <C> <C>
CASH EQUIVALENTS (40.0%)
Fidelity National Bank Money Market Principal
(cost $366,702) $366,702 $366,702
========
SECURITIES (60.0%)
U.S. Government Obligations (11.1%)
U.S. Treasury Notes, 6.125%, December 31, 1996 $ 50,000 $ 50,513
U.S. Treasury Notes, 6.375%, January 15, 1999 50,000 51,577
________
Total (cost - $99,787) 102,090
________
Preferred stocks (1.8%)
General Motors Corp., 9.125%, Series B 600 16,200
________
Total (cost - $15,000) 16,200
________
Common stocks (47.1%)
Business Equipment (.9%)
Hewlett Packard Company 100 8,375
Business Services (.8%)
Automotic Data Processing 100 7,425
Chemical - Basic Material (4.0%)
PPG Industries 400 18,300
Sigma Aldrich Corp. 400 19,800
Chemical - Specialty Material (.9%)
Pall Corp. 300 8,061
Consumer Goods - Apparel, Textiles (.5%)
Hartmarx Corp 1,000 4,370
Consumer Goods - Drugs (6.6%)
Abbott Labs 400 16,648
Bristol Myers Squibb Co. 200 17,174
Merck & Co. 400 26,248
Consumer Goods - Foods (4.5%)
Coca Cola Company 100 7,425
Flowers Industries 1,000 12,120
H. J. Heinz 450 14,904
Sysco Corporation 200 6,500
Consumer Goods - Retail (4.8%)
Home Depot 500 23,875
Walmart Stores, Inc. 400 8,848
Fay's, Inc. 1,000 7,500
Office Depot 200 3,924
<FN>
-CONTINUED-
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCM PORTFOLIO FUND INC
SCHEDULE OF INVESTMENTS - CONTINUED
DECEMBER 31, 1995
<CAPTION>
Number of
Shares or Market
Face Amount Value
___________ _________
<S> <C> <C>
SECURITIES - CONTINUED
Energy - Coal, Gas & Pipe (.6%)
Quaker State Corp. 400 5,048
Energy - Oil - International (3.3%)
Occidental Petroleum Corp. 300 6,411
Texaco, Inc. 200 15,724
Pennzoil Co. 200 8,450
Energy - Miscellaneous (2.0%)
Noram Energy Corp. 1,200 10,644
Teco Energy Co. 300 7,686
Environmental Control Services (1.3%)
WMX Technologies, Inc. 400 11,900
Financial - Banks (1.6%)
Synovus Financial Corp. 500 14,250
Financial - Insurance (1.0%)
Torchmark Corp. 200 9,050
Household Products (1.1%)
Rubbermaid, Inc. 400 10,200
Paper and Allied Products (.7%)
Minnesota Mining & Manuf. Co. 100 6,637
Primary Metals Industries (.3%)
USX U. S. Steel 100 3,075
Railroads (.9%)
Norfolk Southern Corp. 100 7,937
Utilities - Electric (3.3%)
Dominion Resources, Inc. 200 8,250
Kansas City Power & Light 300 7,875
MDU Res. Group, Inc. 450 8,942
Southern Company 200 4,924
Utilities - Telephone (4.8%)
Bell Atlantic Corp. 200 13,374
GTE Corp. 700 30,709
Utilities - Gas (1.3%)
Atlanta Gas Light Co. 600 11,850
Wholesale Trade - Durable Goods (.9%)
Genuine Parts Company 200 8,200
Miscellaneous (1.0%)
Utilicorp United, Inc. 300 8,811
________
Total (cost - $365,883) 431,444
________
Total securities (cost - $480,670) $549,734
========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SCM PORTFOLIO FUND INC
STATEMENT OF OPERATIONS
DECEMBER 31, 1995
<S> <C>
INVESTMENT INCOME
Income
Interest $ 24,160
Dividends 14,216
________
38,376
________
Expenses
Administrative fees 2,124
Custodial fees 3,135
Fidelity bond 759
Legal expenses 929
Taxes and security fees 531
Registration and reports 350
Accounting and auditing 3,740
Miscellaneous fund expenses 917
________
12,485
________
Net investment income 25,891
________
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities transaction 3,333
Change in unrealized appreciation of investments for the year 82,899
________
Net gain on investments 86,232
________
Net increase in net assets resulting from operations $112,123
========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
SCM PORTFOLIO FUND INC
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
________ ________
<S> <C> <C>
OPERATIONS
Net investment income $ 25,891 $ 22,302
Net realized gain on security transactions 3,333 7,468
Change in unrealized appreciation 82,899 (34,742)
________ ________
Increase (Decrease) in net assets resulting
from operations 112,123 (4,972)
________ ________
CAPITAL SHARE TRANSACTIONS
Proceeds from issuance of shares 148,000 110,600
Reinvestment of dividends 25,806 22,196
Reinvestment of gain distribution 3,333 7,468
Cost of shares redeemed (149,804) (24,105)
________ ________
Increase in net assets from capital
share transactions 27,335 116,159
________ ________
DIVIDEND PAID
From net investment income (25,806) (22,196)
From realized capital gains (3,333) (7,468)
________ ________
Decrease in net assets from dividends paid (29,139) (29,664)
________ ________
TOTAL INCREASE IN NET ASSETS 110,319 81,523
Balance at beginning of period 812,629 731,106
________ ________
Balance at end of period (including undistributed
net investment income of $287 and $202, respectively) $922,948 $812,629
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
SCM PORTFOLIO FUND INC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
_NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES_
The SCM Portfolio Fund, Inc. (the Fund) is a diversified, open-end, fully
managed investment company. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its Financial
statements.
_Security Valuation_
Investments in securities are stated at market values based on the latest
quoted market prices.
_Cash Equivalents_
Cash equivalents represent temporary investments in bank money market account,
and are stated at cost which approximates market value.
_Federal Income Taxes_
No provision for federal income taxes is considered necessary since the Fund
intends to distribute substantially all of its taxable net income, including
any realized net gains on investment, and to otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. The identified cost method of determining the cost of investments
for purposes of computing gains or losses from securities transactions is used
for tax purposes.
_Other_
As is common in the industry, security transactions are accounted for on the
date the securities are purchased or sold. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. Realized gains and
losses from securities transactions and unrealized appreciation and
depreciation of investments are reported on an identified cost basis.
_NOTE 2 - PURCHASES AND SALES OF SECURITIES_
Purchases and sales of securities other than United States government
obligations and cash equivalents aggregated $121,218 and $72,841, respectively.
During 1995, no United States government obligations were purchased or
redeemed. Sales (maturities) exceeded purchases of cash equivalents by $27,550
for the year. For federal income tax purposes, the identified cost of
investments owned (securities and cash equivalents) as of December 31, 1995,
was $847,372.
<PAGE>
SCM PORTFOLIO FUND INC
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1995
_NOTE 3 - CAPITAL STOCK_
Transactions in capital stock for the year ended December 31, 1995, were as
follows:
<TABLE>
Shares Amount
<S> <C> <C>
Shares Sold 14,014.196 $148,000
Shares issued in reinvestment of:
Dividends 2,386.511 25,806
Capital gains distribution 303.814 3,333
__________ ________
16,704.521 177,139
Shares acquired (14,214.429) (149,804)
__________ ________
Net increase 2,490.092 $ 27,335
========== ========
</TABLE>
_NOTE 4 - INVESTMENT ADVISORY FEES AND ADMINISTRATIVE COSTS_
The Company is party to an Investment Advisory Contract that provides for fees
to be computed at an annual rate of 0.74 percent of the Company's average daily
net assets. The Company's president is also president of the investment
adviser. The agreement provides for an expense reimbursement from the
investment adviser to the extent that the Company's total expenses exceed 2
percent of the Company's daily net assets. For the year ended December 31,
1995, no fees were paid. The adviser waived the balance of its fees.
The Company is also party to an Administrative Services Contract with the same
adviser. This contract provides for fees to be computed at an annual rate of
0.25 percent of the Company's average daily net assets. Fees under this
contract have been recognized for 1995 at $2,124.
<PAGE>
SUPPLEMENTARY INFORMATION
<PAGE>
SCM PORTFOLIO FUND INC
SUPPLEMENTARY INFORMATION
SELECTED PER SHARE DATA AND RATIOS
THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, 1991, 1990, AND 1989
<TABLE>
Year Ended December 31
_____________________________________
1995 1994 1993 1992
<S> <C> <C> <C> <C>
_Selected Per-Share Data_
Net asset values, beginning $ 9.95 $ 10.41 $ 10.26 $ 10.49
of year
Income from investment
Operations:
Net investment income .32 .31 .31 .31
Net realized and unrealized
gain (loss) on investments 1.08 (.39) .35 (.08)
________ ___________ ___________ ___________
Total from investment 1.40 (.08) .66 .23
operations
Less Distributions:
From net investment income (.34) (.29) (.29) (.30)
From net realized gain (.04) (.09) (.22) (.16)
__________ ___________ ___________ ___________
Total distributions (.38) (.38) (.51) (.46)
__________ ___________ ___________ ___________
Net asset value, end of $ 10.97 $ 9.95 $ 10.41 $ 10.26
the year ========== =========== =========== ===========
_Total Return_ 14.11% (.76)% 6.57% 2.25%
_Ratios and Supplemental Data_
Net assets, end of year $922,948.00 $812,629.00 $731,106.00 $655,028.00
Ratio of expenses to
average net asset 1.47% 1.59% 1.58% 1.83%
Ratio of net investment income
to average net assets 4.52% 4.59% 4.36% 2.91%
Portfolio turnover rate 14.84% 27.17% 21.00% 28.00%
</TABLE>
<PAGE>
<TABLE>
Year Ended December 31
_____________________________________
1991 1990 1989
<S> <C> <C> <C>
_Selected Per-Share Data_
Net asset values, beginning $ 9.98 $ 9.96 $ 10.00
of year
Income from investment
Operations:
Net investment income .44 .59 .75
Net realized and unrealized
gain (loss) on investments .52 (.13) (.06)
________ ___________ ___________
Total from investment .96 .46 .69
operations
Less Distributions:
From net investment income (.44) (.44) (.73)
From net realized gain (.01) .00 .00
__________ ___________ ___________
Total distributions (.45) (.44) (.73)
__________ ___________ ___________
Net asset value, end of $ 10.49 $ 9.98 $ 9.96
the year ========== =========== ===========
_Total Return_ 9.78% 4.57% 6.69%
_Ratios and Supplemental Data_
Net assets, end of year $706,098.00 $693,383.00 $358,406.00
Ratio of expenses to
average net asset 1.39% 1.70% 1.40%
Ratio of net investment income
to average net assets 4.22% 5.75% 7.20%
Portfolio turnover rate 35.00% 45.00% 0.00%
</TABLE>
<PAGE>
McMullan and Company
Certified Public Accountants
AUDITOR'S REPORT ON INTERNAL CONTROL STRUCTURE
Board of Directors
SCM Portfolio Fund, Inc.
In planning and performing our audit of the financial statements of SCM
Portfolio Fund, Inc., for the year ended December 31, 1995, we considered its
internal control structure, including procedures for safeguarding securities,
in order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control structure.
The management of SCM Portfolio fund, Inc., is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
December 31, 1995.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
McMullan and Company
CERTIFIED PUBLIC ACCOUNTANTS
January 15, 1996
Atlanta, Georgia
