THE CHAPMAN FUNDS, INC.
THE CHAPMAN FUNDS, INC.
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
THE CHAPMAN FUNDS, INC.
December 21, 1995
Dear Shareholders:
Once again we are pleased to submit the seventh annual
report on The Chapman Funds for the year ended October 31,
1995.
The year that just ended was very positive for both
equity and fixed income investors. Yields on the 30 year
treasury moved down throughout most of the year; however,
the very short end actually increased. This turned out to
be positive for investors in the Chapman U.S. Treasury Fund.
Looking forward to 1996, we anticipate moderate to slow
economic growth as corporate downsizing and federal budget
discussions continue to dominate the investment scene. We
anticipate the Federal Reserve will continue to lower the
Fed Funds rate in the first half of 96 as inflation remains
insignificant. As a result we think short rates will trend
lower throughout the year.
For a short-term related fund rated AAAm by Standard
and Poors, we think the yield is very attractive relative to
the long bond and an excellent investment for short term
funds.
Thank you for your continued support.
Sincerely,
Nathan A. Chapman, Jr.
President
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THE CHAPMAN FUNDS, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS - OCTOBER 31, 1995
(Showing Percentage of Total Value of Net Assets)
<TABLE>
<CAPTION>
U.S. TREASURY MONEY FUND
Principal Value
Amount (Note B)
_________________ ________________
_
U.S. GOVERNMENT - 52.2%
<S> <C> <C>
$15,000,000 U.S. Treasury Bills 4.75%, $14,998,021
Due 11/2/95
1,000,000 U.S. Treasury Bills 6.53%, 987,121
Due 1/11/96
2,000,000 U.S. Treasury Bills 5.42%, 1,936,466
Due 5/30/96
17,921,608
REPURCHASE AGREEMENTS - 48.5%
6,675,000 Daiwa Securities, dated 10/31/95, 5.80%
agreement to repurchase at $6,676,075 on
11/1/95 (collateralized by $5,600,000 US
Treasury Bonds, 8.125%, due 8/15/19) 6,675,000
10,000,000 Natwest Securities, dated 10/31/95, 5.85%
agreement to repurchase at $10,001,625 on
11/1/95 (collateralized by $10,800,000
U.S. Treasury Bills, due 10/17/96) 10,000,000
16,675,000
Total Investments (Cost $34,596,608)* 34,596,608
- - 100.7%
Other Assets and Liabilities - (0.7%) (225,174)
Net Assets - 100.0% $34,371,434
* Cost for federal income tax
purposes.
</TABLE>
See Notes to Financial Statements.
3
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<TABLE>
<CAPTION>
THE CHAPMAN FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1995
INSTITUTIONA
L
U.S. TREASURY CASH
MONEY FUND MANAGEMENT
FUND
<S> <C> <C>
ASSETS:
Investments in securities
(Amortized cost $34,596,608) $34,596,608 (Note A)
(Note B)
Cash 38
Accrued interest receivable 2,700
Prepaid expenses 4,020
Total assets 34,603,366
LIABILITIES:
Accrued expenses (Note D) 82,525
Distribution payable 149,407
Total liabilities 231,932
NET ASSETS $34,371,434
NET ASSETS:
At October 31, 1995, net
assets consisted of:
Capital stock $34,371
Capital paid-in 34,337,063
Net assets, for 34,371,434
outstanding common shares $34,371,434
(Note C)
NET ASSET VALUE PER SHARE
($34,371,434 divided by
34,371,434 outstanding $1.00
shares)
</TABLE>
See Notes to Financial Statements.
4
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<TABLE>
<CAPTION>
THE CHAPMAN FUNDS, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31,
1995
INSTITUTION
AL
U.S. TREASURY CASH
MONEY FUND MANAGEMENT
FUND
<S> <C> <C>
INVESTMENT INCOME:
Interest income (Note B) $1,712,97 (Note A)
0
EXPENSES:
Management and administrative
fees
(Note D) 178,042
Legal and auditing 32,362
Transfer and dividend
disbursing
agent's fees 19,549
Custodian fees 20,070
Rating expense 21,254
Directors' fees and expenses 9,179
(Note E)
Other 8,4
61
Total expenses before 288,917
reimbursement
Reimbursement of expenses (66,57
(Note D) 7)
Net expenses 222,34
0
Net increase in net assets
resulting from operations $1,490,630
</TABLE>
See Notes to Financial Statements.
5
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<TABLE>
<CAPTION>
THE CHAPMAN FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
INSTITUTI INSTITUTIO
U.S. ONAL U.S. NAL
TREASURY CASH TREASURY CASH
MONEY MANAGEMEN MONEY MANAGEMENT
FUND T FUND FUND
FUN
D
<S> <C> <C> <C> <C>
INCREASE IN NET
ASSETS:
Operations:
Net increase in
net assets
resulting from $1,4 (Note A) $59 (Note A)
operations 90,630 8,949
Dividends:
Distributions
paid to
shareholders
from net
investment
income ($.0497 (1,4 (59
and $.0294 per 90,630) 8,949)
share,
respectively)
(Note B)
From Capital
Share
Activities:
(at $1 per
share)
Proceeds from
sales of shares 156,891, 32,248,1
847 22
Shares issued in
reinvestment of
dividends from
net investment 1,179,37 555,199
income 3
Cost of shares
redeemed (143,710 (36,307,
,447) 378)
Increase (decrease)
in net assets
derived from
capital share 14,36 (3,504
transactions 0,773 ,057)
Total increase 14,360,7 (3,504,0
(decrease) 73 57)
NET ASSETS:
Beginning of 20,0 23,514
year 10,661 ,718
End of year $34,371, $20,010,
434 661
</TABLE>
See Notes to Financial Statements.
6
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<TABLE>
<CAPTION>
THE CHAPMAN FUNDS, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, 1994 OCTOBER 31, 1993 OCTOBER 31, 1992 OCTOBER 31, 1991
1995
INSTITU INSTITU INSTITUT INSTITUT INSTITUT
U.S. TIONAL U.S. TIONAL U.S. IONAL U.S. IONAL U.S. IONAL
TREASU CASH TREASUR CASH TREASU CASH TREASUR CASH TREASUR CASH
RY MANAGEM Y MANAGEM RY MANAGEME Y MANAGEME Y MANAGEME
MONEY ENT MONEY ENT MONEY NT MONEY NT MONEY NT
FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
Net asset
value, $1.00 -- $1.00 -- $1.00 -- $1.00 -- $1.00 --
beginning of
year..........
..............
..............
Income from
Investment
Operations:
Net 0.0497 -- 0.0294 -- 0.0241 -- 0.0315 -- 0.0619 0.0697
Investment
income........
....
Distributions:
From net 0.0497 -- 0.0294 -- 0.0241 -- 0.0315 -- 0.0619 0.0697
investment
income.....
Net asset 1.00 -- 1.00 -- 1.00 -- 1.00 -- 1.00 1.00
value, end of
year........
Total Return 5.09% -- 3.04% -- 2.44% -- 3.20% -- 6.37% 7.20%
Ratios/Supplem
ental Data:
Net Assets,
end of year 34,371 -- 20.011 -- 23,515 -- 33,002 -- 12,229 --
(000
omitted)......
..............
.............
Ratios to
Average Net
Assets:
0.75% -- 0.75% -- 0.75% -- 0.75% -- 0.75%* 0.75%*
Expenses......
..............
............
Net 5.02% -- 2.94% -- 2.41% -- 3.15% -- 6.19% 6.97%
Investment
Income........
.....
</TABLE>
*Chapman Capital Management, Inc. (the "Advisor") agreed to bear all expenses
(excluding income, excise and other taxes and extraordinary expenses) of the
Fund in excess of .75% of average daily net assets on an annual basis. The
expense ratio of the U.S. Treasury Money Fund, had there been no reimbursement
of expenses by the Advisor, would have been .97%, 1.12%, 1.15%, 1.02%, and 1.13%
for the years ended October 31, 1995, 1994, 1993, 1992 and 1991, respectively.
The expense ratio of the Institutional Cash Management Fund, had there been no
reimbursement of expenses by the Advisor, would have been 1.14% for the year
ended October 31, 1991.
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THE CHAPMAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
NOTE A - GENERAL
The Chapman Funds, Inc. (the "Fund") was incorporated on
November 22, 1988, and operates as a series fund. There are
currently two series, the U.S. Treasury Money Fund (the
"Money Fund") and the Institutional Cash Management Fund
(the "Cash Management Fund"). The Fund is registered as a
diversified open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"). During
fiscal year 1991, the Cash Management Fund liquidated its
portfolio and distributed the proceeds to its shareholders.
Since 1991, there has been no activity, including
subscriptions for purchase of shares, in the Cash Management
Fund, however, the Cash Management Fund is still authorized
to sell shares to investors meeting the qualifications of
the Fund prospectus.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund uses the amortized cost method, which approximates
market value, to value portfolio securities which is
permitted under Rule 2a-7 of the 1940 Act provided the Fund
complies with certain conditions. The amortized cost
valuation method involves valuing a security at its cost on
the date of purchase and thereafter assuming a constant
amortization from date of purchase to date of maturity of
any discount or premium.
Repurchase Agreements
The Fund's custodian takes possession, through the Federal
Book Entry System, of the collateral pledged for investments
in repurchase agreements. The underlying collateral is
valued daily to ensure that the value, including accrued
interest, is at least equal to the repurchase price. In the
event of default, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the
obligation.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date.
Interest income is recorded on the accrual basis.
Distributions to Shareholders
Dividends to shareholders of the Fund are declared daily
from net investment income, which consist of accrued
interest and earned discount (including both original issue
and market discount), less amortization of premium and the
accrued expenses applicable to the dividend period.
8
<PAGE>
THE CHAPMAN FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Federal Income Taxes
As a regulated investment company, the Fund plans to
distribute sufficient investment income and security profits
in order that, under the Internal Revenue Code, it will not
incur Federal income taxes.
NOTE C - CAPITAL STOCK
The authorized capital stock of the Fund consists of ten
billion shares, par value of $.001 per share divided into
two portfolios. Each portfolio currently consists of five
billion authorized shares.
NOTE D - MANAGEMENT ADVISORY AND ADMINISTRATIVE FEES
Chapman Capital Management, Inc. ("CCM") acts as the
investment advisor and administrator for the Fund. The
investment advisory and administrative fees are based on the
average daily net assets of the Fund computed at annual
rates of .5% and .1%, respectively. For the year ended
October 31, 1995, these expenses were $178,042 for the Money
Fund. The Cash Management Fund did not incur any expenses
for the period ended October 31, 1995.
Effective January 1, 1995, CCM serves as Transfer and
Dividend Disbursing Agent for the Fund pursuant to a
Shareholder Services Agreement. The Fund pays CCM $1,500
per month for each active portfolio. Prior to January 1,
1995, these services were provided by Fund/Plan Services,
Inc. ("Fund/Plan"). For the year ended October 31, 1995
expenses for these services amounted to $15,000 and $4,549
for CCM and Fund/Plan, respectively.
CCM agreed to assume all expenses (excluding income, excise
and other taxes and extraordinary expenses) of the Fund in
excess of .75% of average daily net assets on an annualized
basis until December 31, 1995. Total expenses reimbursed
for the year ended October 31, 1995 were $66,577 for the
Money Fund.
NOTE E - DISTRIBUTION FEES AND RELATED PARTIES
Certain officers and directors of the Fund are "affiliated
persons", as defined in the Investment Company Act of 1940,
of the Advisor and Sub-Advisor.
Those directors who are not "affiliated persons"
(independent directors) receive $1,000 plus certain expenses
from the Fund for each Board of Directors meeting they
attend.
9
<PAGE>
To the Shareholders and Board of Directors of
The Chapman Funds, Inc.
We have audited the accompanying statement of assets and
liabilities, including the schedule of portfolio
investments, of The Chapman Funds, Inc. (comprising,
respectively, the U.S. Treasury Money Fund and the
Institutional Cash Management Fund) as of October 31, 1995,
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 for each of the five years in the period then
ended. These financial statements and financial highlights
are the responibility of the Funds' management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
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 suporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opnion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of each of the respective
portfolios constituting The Chapman Funds, Inc. at October
31, 1995, 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 financial highlights for
each of the five years in the period then ended in
conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Baltimore, Maryland
November 10, 1995
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