<PAGE> 1
<TABLE>
<S> <C>
The Sheffield Funds, Inc. THE SHEFFIELD FUNDS, INC.
900 Circle 75 Parkway
Suite 750 ====================================
Atlanta, Georgia 30339-3082
(770) 953-1597 ANNUAL REPORT
-------------
October 31, 1995
SHEFFIELD TOTAL RETURN FUND
LEGAL COUNSEL
Kilpatrick & Cody SHEFFIELD INTERMEDIATE TERM
Atlanta, Georgia 30309 BOND FUND
CUSTODIAN
United Missouri Bank, n.a.
Kansas City, Missouri 64141
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P.
Atlanta, Georgia 30309
Investment Advisor
Fund Administrator
Shareholder Servicing Agent
---------------------------
This report is authorized for distribution Sheffield Investment Management,
Inc. only to shareholders and to others who 900 Circle 75 Parkway
have received a copy of the prospectus of Suite 750
The Sheffield Funds, Inc. Atlanta, Georgia 30339-3082
(770) 953-1597
</TABLE>
<PAGE> 2
THE SHEFFIELD FUNDS, INC.
===============================================================================
October 31, 1995
DEAR SHAREHOLDER:
INTRODUCTION
This year marks the sixth annual report of The Sheffield Funds. For most of
these years, and for the year just completed in particular, the economy has
been kind to both the stock and bond markets. Current macroeconomic and
political trends including subdued inflation, declining interest rates, federal
budgetary constraints, and the potential for a capital gains tax cut all bode
well for financial markets as we head into 1996. Broad U.S. stock market
indices represented five of the 10 best performing major stock markets around
the world during our fiscal year.
TOTAL RETURN FUND
Philosophy
The Total Return Fund continues to be broadly diversified across all sectors of
the economy as it seeks to provide its shareholders with a combination of
capital appreciation and dividend income. The portfolio's investment philosophy
calls for the purchase of securities of companies that are generating
increasing cash flow returns on their invested capital. If cash flow returns
are increasing over time, then increasing shareholder wealth is likely to be
the end result.
As Portfolio Manager, I attempt to minimize the turnover of the holdings within
the Fund. Turnover not only increases a fund's cost of operations, but also
creates short-term capital gains (having higher tax consequences) at the
expense of long-term gains. During the past year, the Total Return Fund
experienced a turnover rate of 55%, an amount well below that of the average
equity mutual fund which has ranged between 75-85% during the past five years.
Foreign Securities
Our prospectus allows the Total Return Fund to invest up to 20% of its assets
in foreign securities. Ownership of these equities has normally been
accomplished through the purchase of a combination of open-end and closed-end
funds. This approach has been preferred over the acquisition of individual
ADR's (foreign stocks traded in the U.S.) as we have chosen to rely on the
expertise of local managers to understand the opportunities and risks within
specific countries and regions of the world rather than attempt to gain this
expertise in-house.
The emerging markets in 1995, unfortunately, continued to dramatically
underperform our domestic markets. The Total Return Fund began its fiscal year
with foreign holdings representing 6.4% of the assets. During 1995, many of
these positions were sold, and as of the date of this letter, these holdings
had declined to 1.4%. In spite of "statistical cheapness" within many of these
markets at this time, it is my intention to keep our emerging markets
securities at this nominal level until these markets begin to demonstrate a
renewed vigor and a rekindled investor interest.
Economic Sector Diversification
The chart below illustrates the Total Return Fund's investment mix compared to
that of the S&P 500 Index as of October 31, 1995. During the past twelve months
this mix has not varied significantly from the proportions shown
<PAGE> 3
below. The chart reveals that there are no particularly strong industry bets
being taken at the present time. The same posture held true throughout our
fiscal year.
Industry Sector Analysis
October 31, 1995
- ------------------------------------------------------------------------
Industry S&P 500 Index Sheffield Funds
- ------------------------------------------------------------------------
Basic Materials 5.8% 7.2%
Energy 8.8% 4.0%
Industrial 11.0% 9.8%
Conglomerates .7% 4.4%
Consumer Cyclical 11.5% 14.5%
Consumer Non Cyclical 22.9% 23.7%
Technology 13.8% 20.7%
Financial 12.9% 9.8%
Utility 12.6% 4.9%
Foreign 0 1.0%
Performance
The following information explains the Financial Highlights table of this
annual report. The Total Return Fund earned 30c. per share from interest and
dividends during fiscal 1995. These earnings were reduced by operating expenses
totalling 19c. per share. The balance of 11c. is described as the Fund's net
investment income. In addition, the Fund distributed 12c. per share of net
investment income from 1994 operations. The Fund experienced solid appreciation
this fiscal year. This increase in value is attributable to portfolio gains of
$1.68 per share. Finally, the Fund distributed 34c. per share of capital gains
realized in the prior fiscal year, which reduced the net asset value by that
amount.
Summarizing these figures, the Total Return Fund's net asset value increased
for the year by a total of $1.33 per share, which equates to an increase of
16.3%. During this same period, the S&P 500 Index increased 26.4%. While no
particularly dramatic reason jumps out as having caused the Fund to
underperform relative to the S&P 500 Index, certain attributes of the portfolio
can be cited by way of explanation.
<PAGE> 4
First, emerging market securities generally realized significant declines in
value during this period. While the Fund was gradually reducing exposure to
these markets throughout the year, the losses nevertheless sustained had a
dampening effect on portfolio results.
Second, an anomaly factor in the S&P 500 Index this past year contributed
heavily to its strong performance. I am referring to the exceptionally strong
price increases for the semiconductor stocks, one of the groups within the
technology sector. A large proportion of the stocks in that group increased by
more than 100% in less than twelve months. The characteristics of these stocks,
such as very high volatility, low dividend yields and rapid product
obsolescence makes them unsuitable for more than a small portion of the Total
Return Fund's portfolio, and thus, we had underweighted them (relative to the
S&P 500 Index) throughout the year. The chart on the right presents a
cumulative comparison of the Fund's performance against the S&P 500 results.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE TOTAL RETURN FUND AND S&P 500 INDEX
<TABLE>
<CAPTION>
VALUE OF VALUE OF
FOR YEAR ENDED TOTAL RETURN FUND S&P 500 INDEX
- -------------- ----------------- -------------
<S> <C> <C>
OCTOBER 1990 $ 8,824 $ 9,362
OCTOBER 1991 12,464 12,499
OCTOBER 1992 12,970 13,743
OCTOBER 1993 15,120 15,797
OCTOBER 1994 14,770 16,410
OCTOBER 1995 17,180 20,750
</TABLE>
INTERMEDIATE TERM BOND FUND
Philosophy
Our investment goals for this fund are twofold. First, we seek to build a
portfolio of investment quality, intermediate-term corporate bonds.
Intermediate-term bonds (maturing in from one-to-ten years) have demonstrated a
history of generating higher total returns with lower volatility over long
periods of time than have long-term bonds. Our fund seeks to participate in
this long-term phenomena. Second, we seek a modest degree of capital
appreciation potential by investing a small portion of our assets in two other
types of investments. The first type is convertible securities including
convertible bonds and convertible preferred stocks. Second, we invest a modest
portion of the bond fund's assets in high-dividend-paying common stocks.
Out of the broad universe of bonds traded in the marketplace, our fund limits
itself primarily to investment quality corporate bonds typically maturing in
from one-to-ten years. We can and do buy bonds with maturity dates exceeding
ten years, as long as the average maturity of our entire bond portfolio does
not exceed seven years. By concentrating on intermediate-term bonds rather than
longer-term bonds, our fund's current yield is never as high as it could be,
but we avoid the extreme volatility experienced by longer-term bonds when
interest rates fluctuate.
Our stock holdings are acquired for the purpose of obtaining long-term capital
gains coupled with high dividend yields relative to the yield of the overall
stock market. Our philosophy anticipates that the capital appreciation we seek
from our stock and convertible bond holdings will help to offset the operating
expenses incurred by the fund over a three-to-five year period of time.
<PAGE> 5
Finally, we can acquire adjustable rate securities, most commonly in the form
of adjustable rate preferred stocks. Typically, the dividends paid on these
securities will change as the general level of interest rates changes.
Adjustable rate securities are attractive during periods of rising interest
rates as these securities are more likely to hold their value vis a vis fixed
rate bonds. On the contrary, when interest rates decline, fixed rate bonds will
generally realize more significant price appreciation than will adjustable rate
securities. The Bond Fund began the year with a small percentage of its
holdings in the variable rate category and disposed of all of them during the
year.
Performance
During the past twelve months interest rates all along the yield curve have
declined. With declining interest rates, bondholders' wealth increases. This
has certainly been a pleasant turn of events from the prior year's disastrous
bond market losses. Bonds of different maturities have seen their interest
rates decline by varying percentages. For example, one-year maturity yields
have declined by approximately .6% (60 basis points) in the past year while
30-year bond interest rates dropped 164 basis points in the same time frame.
Thus, long-term bonds outperformed all others.
The following information explains the Financial Highlights table of this
annual report. The Bond Fund earned 70c. per share in the past year from
interest and dividends. These earnings were reduced by operating expenses
totaling 17c. per share. The balance of 53c. is described as the Fund's net
investment income. During the year, it distributed 57c. of net investment
income, decreasing the net asset value by 4c. per share before portfolio
transactions.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE INTERMEDIATE TERM BOND FUND AND
THE LEHMAN BROTHERS CORPORATE INTERMEDIATE TERM BOND INDEX
<TABLE>
<CAPTION>
VALUE OF LEHMAN BROTHERS
VALUE OF INTERMEDIATE CORPORATE INTERMEDIATE
FOR YEAR ENDED TERM BOND FUND TERM BOND INDEX
- -------------- --------------------- ------------------------
<S> <C> <C>
OCTOBER 1990 $ 9,984 $10,522
OCTOBER 1991 11,428 12,189
OCTOBER 1992 12,316 13,489
OCTOBER 1993 13,391 15,205
OCTOBER 1994 13,070 14,780
OCTOBER 1995 14,750 17,080
</TABLE>
The Fund had gains of 60c. per share on investments which includes both
realized and unrealized gains. The largest component of this gain was the
unrealized appreciation on bonds held. Additionally, the Fund distributed 3c.
per share of capital gains earned from the prior fiscal year, which reduced the
net asset value by that amount.
Summarizing these figures, the Bond Fund's net asset value increased for the
year by a total of 53c. per share. This increase in net asset value equates to
a gain of 12.9% versus 15.6% for the corporate bond index we use as a proxy.
<PAGE> 6
Other Characteristics
The Fund's average maturity can range between 3 and 7 years. With the decline
in interest rates experienced throughout the year, I had gradually extended its
average maturity to 7 years. By doing so, shareholders have reaped maximum
benefit the fund can offer in light of the current interest rate environment.
Portfolio turnover remains low at 35% for the year.
The Fund's rating mix is presented below.
<TABLE>
<CAPTION>
BOND RATING % OF BOND PORTFOLIO
----------- -------------------
<S> <C>
BBB 35.3%
A 52.5%
AA 10.2%
BB 2.0%
</TABLE>
As we begin our new fiscal year, a confluence of positive events appears to be
developing which may result in another good year in the investment markets.
Declining interest rates, a subdued level of inflation, and efforts to reduce
future budget deficits are all powerful engines for long-term economic growth.
Sincerely,
Roger A. Sheffield, CFA
President
<PAGE> 7
SHEFFIELD TOTAL RETURN FUND
Portfolio of Investments
October 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHORT-TERM INVESTMENTS (4.5%) PAR VALUE
- --------------------------------------------------------
<S> <C> <C>
United Missouri Bank Money Market
(cost - $972,512) $972,512 $972,512
- --------------------------------------------------------
COMMON STOCKS (95.9%) SHARES
- --------------------------------------------------------
AEROSPACE - 1.0%
Raytheon Co. 5,000 218,125
-------
AUTO/TRUCK PARTS - 2.8%
Eaton Corp. 4,500 230,625
Genuine Parts Co. 5,300 210,012
Superior Industries
International, Inc. 6,100 172,325
-------
612,962
-------
BANKING - 2.8%
Bank of Boston Corp. 5,000 222,500
First Tennessee National 4,200 224,700
Corp. 2,500 164,375
-------
NationsBank Corp. 611,575
-------
BEVERAGES - 4.3%
ALCOHOLIC - 1.4%
Anheuser Busch Cos., Inc. 4,700 310,200
-------
SOFT DRINK - 2.9%
Coca-Cola Co. 2,800 201,250
Pepsico, Inc. 8,000 421,000
-------
622,250
-------
CHEMICALS - 7.2%
BASIC - 5.3%
Eastman Chemical Co. 6,000 357,000
Lilly Industries, Inc.
CL A 15,000 191,250
Monsanto Co. 3,600 377,100
Sherwin Williams Co. 5,500 206,937
-------
1,132,287
---------
SPECIALTY - 1.9%
Avery Dennison Corp. 7,000 313,250
Englehard Corp. 4,500 111,937
-------
425,187
-------
COMPUTER HARDWARE - 4.5%
Bay Network, Inc. * 4,000 265,000
Compaq Computer Corp.* 2,000 111,250
EMC Corp. * 11,000 170,500
Hewlett Packard Co. 3,000 277,875
SCI Systems, Inc. * 4,400 154,550
-------
979,175
-------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE - 1.7%
Computer Associates
International, Inc. 3,900 $214,500
General Motors Class E 3,000 141,375
-------
355,875
-------
COSMETICS - 1.2%
Avon Products, Inc. 3,700 263,163
-------
DIVERSIFIED - 5.6%
Allied Signal, Inc. 8,900 378,250
PPG Industries, Inc. 6,900 293,250
Tenneco, Inc. 6,200 272,025
TRW, Inc. 3,900 256,425
-------
1,199,950
---------
ELECTRICAL EQUIPMENT - 2.9%
Honeywell, Inc. 5,100 214,200
Johnson Controls Industries,
Inc. 7,000 407,750
-------
621,950
-------
ELECTRONICS - 5.1%
Avnet Inc. 6,000 302,250
Eastman Kodak Co. 6,000 375,750
Motorola, Inc. 2,100 138,075
Pacific Scientific Co. 6,500 137,313
Sensormatic Electronics Corp. 6,200 132,525
-------
1,085,913
---------
ELECTRONICS-SEMICONDUCTOR - 1.7%
Intel Corp. 2,150 150,231
Texas Instruments, Inc. 3,100 212,350
-------
362,581
-------
ENTERTAINMENT/LEISURE - 1.9%
American Greetings Corp.
Class A 6,600 207,900
Brunswick Corp. 10,000 195,000
-------
402,900
-------
FOOD - 2.7%
Hershey Foods Corp. 6,300 376,425
Hormel Foods Corp. 8,900 204,700
-------
581,125
-------
FOODS WHOLESALE - .7%
SuperValu Stores 5,440 167,280
-------
FOREIGN - 1.4%
Latin America Equity Fund, Inc. 11,033 143,429
Malaysia Fund, Inc. 4,400 78,100
United Kingdom Fund, Inc. 6,800 83,300
-------
304,829
-------
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
- -----------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- -----------------------------------------------------------
<S> <C> <C>
HOMEBUILDING - .9%
Fleetwood Enterprises, Inc. 10,000 $205,000
-------
HOUSEHOLD FURNISHINGS - 1.0%
Whirlpool Corp. 4,000 212,000
-------
HOUSEHOLD PRODUCTS - 1.8%
Colgate Palmolive Co. 3,700 256,225
Rubbermaid, Inc. 5,000 130,625
-------
386,850
-------
INSURANCE - 4.3%
Allstate Corporation 5,098 187,352
Beneficial Corp. 4,000 196,000
Hartford Steam Boiler 5,700 265,762
Reliastar Financial Corp. 6,600 275,550
-------
924,664
-------
MANUFACTURING - 1.5%
Caterpillar, Inc. 3,000 170,250
Donaldson Co., Inc. 6,500 158,438
-------
328,688
-------
MEDICAL - 6.7%
HEALTHCARE - 5.0%
Merck & Co., Inc. 5,000 287,500
Pfizer, Inc. 6,400 367,200
Schering Plough Corp. 8,000 429,000
-------
1,083,700
---------
PHARMACEUTICAL - 1.7%
Mylan Laboratories 18,900 361,463
-------
MEDICAL SUPPLIES - 2.7%
Abbott Laboratories 5,000 198,750
Bausch & Lomb, Inc., 6,000 207,750
U.S. Surgical Corp. 7,000 171,500
-------
578,000
-------
OFFICE EQUIPMENT - 4.7%
Diebold, Inc. 5,300 280,900
Moore Corp., Ltd. 13,200 252,450
Pitney Bowes, Inc. 4,700 205,038
Xerox Corp. 2,100 272,212
-------
1,010,600
---------
OIL & GAS - 2.5%
Amoco Corp. 2,000 127,750
Occidental Petroleum Corp. 10,000 215,000
USX-Marathon Group Inc. 11,000 195,250
-------
538,000
-------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
OTHER - 2.2%
S&P Depositary Receipt 8,000 $466,500
-------
FOREST PRODUCTS - .9%
Mead Corp. 3,200 184,400
-------
PUBLISHING AND PRINTING -
.9% 4,500 194,625
-------
Banta Corp.
REAL ESTATE - 1.9%
New Plan Realty Trust 9,186 202,100
Washington Real Estate
Investment
Trust 14,399 214,178
-------
416,278
-------
RETAIL - 6.4%
DEPARTMENT STORE - 2.7%
Dollar General Corp. 7,700 188,650
May Department Stores Co. 5,500 215,875
Sears Roebuck & Co. 5,500 187,000
-------
591,525
-------
DRUG - .8%
Revco Drugs, Inc.* 6,830 162,213
-------
RETAIL-OTHER - .7%
Kroger Co. * 4,600 153,525
-------
SPECIALTY - 2.2%
Kellwood Co. 13,100 245,625
R.G. Barry Corp.* 5,733 108,933
Tandy Corp. 2,300 113,563
-------
468,121
-------
SAVINGS AND LOANS - .8%
John Hancock Bank & Thrift
Opportunity Fund 8,000 182,000
-------
TELEPHONE - 5.2%
AT&T Corp. 5,900 377,600
Alltel Corp. 11,200 343,000
Ameritech Corp. 6,300 340,200
Newbridge Networks Corp.* 2,100 64,050
------
1,124,850
---------
TOBACCO - 1.6%
Philip Morris Cos. 4,000 337,000
-------
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- --------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 2.4%
RAILROADS - 2.4%
Conrail, Inc. 4,000 $275,000
Illinois Central Corp Ser-A 6,300 240,975
-------
515,975
-------
- --------------------------------------------------------------
Total Common Stocks
(cost - $17,391,612) $20,683,304
- --------------------------------------------------------------
- --------------------------------------------------------------
CONVERTIBLE BONDS (1.3%) PAR VALUE
- --------------------------------------------------------------
COMMERCIAL SERVICES - .7%
Olsten Corp 4.875% Conv.
Deb. 5/15/03 $135,000 155,925
-------
HOSPITAL MANAGEMENT - .6%
Beverly Enterprises 7.625% Conv.
Deb. 3/15/03 126,000 121,905
-------
- --------------------------------------------------------------
Total Convertible Bonds
(cost - $262,802) $277,830
- --------------------------------------------------------------
- --------------------------------------------------------------
TOTAL INVESTMENTS (101.7%)
(cost - $18,626,926) $21,933,646
- --------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (-1.7%) ($368,514)
- --------------------------------------------------------------
- --------------------------------------------------------------
NET ASSETS (100%) $21,565,132
- --------------------------------------------------------------
NET ASSET VALUE PER SHARE $12.86
- --------------------------------------------------------------
*Non-income producing
</TABLE>
SHEFFIELD INTERMEDIATE TERM BOND FUND
Portfolio of Investments
October 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS (.1%) PAR VALUE
- ------------------------------------------------------------
<S> <C> <C>
United Missouri Bank Money Market
(cost - $10,014) $10,014 $10,014
- ------------------------------------------------------------
COMMON STOCKS (8.1%) SHARES
- ------------------------------------------------------------
BANKING - .9%
JP Morgan & Co. 900 $69,413
-------
CHEMICALS - 2.3%
BASIC - 1.5%
Dupont (E.I.) Denemours & Co. 965 60,192
Minnesota Mining & Mfg, Co. 1,000 56,875
------
117,067
-------
SPECIALTY - .8%
Witco Corp. 2,300 64,975
------
CONGLOMERATES - 1.6%
Tenneco, Inc. 1,265 55,502
United Technologies Corp. 750 66,562
------
122,064
-------
OIL & GAS - 2.4%
Chevron Corp. 1,165 54,464
Exxon Corp. 845 64,537
Texaco, Inc. 980 66,762
------
185,763
-------
TOBACCO - .9%
Philip Morris Cos. 825 69,506
------
- ------------------------------------------------------------
Total Common Stocks
(cost - $556,012) $628,788
--------
- ------------------------------------------------------------
- ------------------------------------------------------------
PREFERRED STOCKS (.7%)
- ------------------------------------------------------------
COMPUTER SOFTWARE - .7%
General Motors Corp. - E 3.25%
Conv. Pfd. Series C 800 53,600
------
- ------------------------------------------------------------
Total Preferred Stocks
(cost - $47,214) $53,600
- ------------------------------------------------------------
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (86.4%) PAR VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
BANKING - 9.7%
Bankamerica Corp. 9.2% Sub.
Notes 5/15/03 $200,000 $229,792
Chase Manhattan Bank, Inc. 8% Sub. 300,000 316,893
Notes 6/15/99
SunTrust Banks, Inc. 8.875% Notes
2/1/98 200,000 211,428
-------
758,113
-------
BUILDING MATERIALS - 1.5%
Masco Corp. 9% Deb. 10/1/01 100,000 112,164
-------
CHEMICALS - 1.8%
Eastman Chemical 6.375% Notes
1/15/04 140,000 138,208
-------
COMMERCIAL SERVICES - 2.6%
Hertz Corp. 7% Sr. Notes 4/15/01 200,000 204,890
-------
COMPUTER SYSTEMS - 1.3%
International Business Machines
Corp. 6.375% Notes 6/15/00 100,000 100,737
-------
ELECTRICAL EQUIPMENT - 3.7%
Eastman Kodak Co. 9.375%
Deb. 3/15/03 100,000 117,324
Westinghouse Electric Corp. 8.875%
Deb. 6/1/01 160,000 165,189
-------
282,513
-------
FINANCIAL SERVICES - 4.6%
Bear Stearns Co. 6.7% Sr. Notes
8/1/03 200,000 199,674
Salomon, Inc. 9.375% Sr. Notes
4/15/98 150,000 158,609
-------
358,283
-------
FOOD - 3.4%
General Foods Corp. 6% Deb.
6/15/01 270,000 262,159
-------
GOVERNMENT SECURITIES - 5.9%
Alberta Province Canada 9.2% Notes
11/1/97 150,000 159,423
Province of Ontario 7.625% Notes
6/22/04 280,000 299,429
-------
458,852
-------
HEALTHCARE - 3.4%
Rhone-Poulenc 7.75% Notes 1/15/02 250,000 263,620
-------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - 6.0%
Aetna Life & Casualty 7.25% Deb.
8/15/23 $250,000 $235,053
Progressive Corp. 10% Deb. 12/15/00 200,000 230,792
-------
465,845
-------
HOUSEHOLD PRODUCTS - 2.9%
Black & Decker 6.625% Notes
11/15/00 220,000 220,715
-------
OFFICE EQUIPMENT - 3.7%
Xerox Credit Corp. 9.75% Deb.
3/15/00 250,000 283,067
-------
OTHER - 3.6%
Swedish Export Credit 9.875% Deb.
3/15/38 250,000 276,408
-------
PERSONAL AND BUSINESS CREDIT - 8.4%
Ford Capital BV 9.375% Deb. 200,000 227,382
5/15/01
General Motors Acceptance Corp. 200,000 211,688
8.4% Notes 10/15/99
Transamerica Financial Corp. 7.5%
Sr. Notes 3/15/04 200,000 210,996
-------
650,066
-------
RETAIL - 13.9%
DEPARTMENT STORE - 8.9%
J.C. Penney & Co. 10% Notes
10/15/97 150,000 160,965
Kmart, Inc. 9.8% Med.-Term
Notes 6/15/98 250,000 261,650
Sears Roebuck & Co. 9.25%
Notes 4/15/98 150,000 160,801
Wal-mart Stores, Inc. 9.1%
Notes 7/15/00 100,000 111,775
-------
695,191
-------
SPECIALTY - 5.0%
Fruit of the Loom, Inc. 7.87%
Sr. Notes 10/15/99 210,000 220,840
The Limited, Inc. 8.875% Notes
8/15/99 150,000 162,044
-------
382,884
-------
SAVINGS AND LOANS - 2.2%
H.F. Ahmanson & Co. 9.875% Sub.
Notes 11/15/99 150,000 167,952
-------
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 4.2%
RAILROADS - 4.2%
Atchison Topeka & Santa Fe
Railroad Co. Equipment
8.875% Trust Certificate Series
W 6/1/99 $300,000 $322,626
-------
UTILITIES - 3.6%
Commonwealth Edison Co. Mortgage
9.375% Bonds 2/15/00 250,000 275,215
-------
- -------------------------------------------------------------------------
Total Corporate Bonds and Notes
(cost - $6,322,730) $6,679,508
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
CONVERTIBLE BONDS (2.7%)
- -------------------------------------------------------------------------
EMC Corp. 4.250% Conv. Sub Note
1/1/01 75,000 74,906
Olsten Corp. 4.875% Conv. Sub Deb.
5/15/03 115,000 132,825
-------
207,731
-------
- -------------------------------------------------------------------------
Total Convertible Bonds
(cost - $194,371) $207,731
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
TOTAL INVESTMENTS (98.0%)
(cost - $7,130,341) $7,579,641
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (2.0%) $154,278
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET ASSETS (100%) $7,733,919
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $9.59
- -------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of the Sheffield Funds, Inc.
- --------------------------------------------------------------------------------
We have audited the accompanying statements of assets and liabilities of The
Sheffield Funds, Inc. (consisting of the Sheffield Total Return Fund and the
Sheffield Intermediate Term Bond Fund), including the portfolios of
investments, 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 the financial highlights for each of
the five years in the period then ended. 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of 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 opinion, 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 Sheffield Funds, Inc. as of
October 31, 1995, the results of their operations, the changes in their net
assets and their financial highlights for each of the respective periods stated
in the first paragraph, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
December 19, 1995
<PAGE> 12
FINANCIAL STATEMENTS
- --------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------
<TABLE>
<CAPTION>
SHEFFIELD SHEFFIELD
TOTAL INTERMEDIATE
RETURN TERM BOND
FUND FUND
--------- --------------
<S> <C> <C>
ASSETS:
Investments at value (cost of
$18,626,926 and $7,130,341,
respectively) $21,933,646 $7,579,641
Receivables:
Interest 5,600 147,995
Dividends 14,533 650
Investment securities sold 342,422 100,541
Prepaid insurance 1,618 1,618
----------- ----------
Total assets 22,297,819 7,830,445
----------- ----------
LIABILITIES:
Investment securities
purchased 700,009 76,643
Accrued expenses 32,678 19,883
------- ------
Total liabilities 732,687 96,526
------- ------
NET ASSETS CONSISTING OF:
Undistributed net investment
income 117,607 29,456
Accumulated net realized gain 829,079 85,839
Unrealized appreciation on
investments 3,306,720 449,300
Paid-in capital applicable to
1,676,698 and 806,620 shares
outstanding, respectively, of
$.001 par value capital
stock; 5,000,000 shares
authorized in each fund 17,311,726 7,169,324
---------- ---------
Net Assets $21,565,132 $7,733,919
=========== ==========
NET ASSET VALUE PER SHARE $12.86 $9.59
====== =====
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
SHEFFIELD SHEFFIELD
TOTAL INTERMEDIATE
RETURN TERM BOND
FUND FUND
-------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 43,138 $683,319
Dividends 417,815 51,003
------- -------
Total income 460,953 734,322
------- -------
EXPENSES:
Investment advisory fee 184,252 99,403
Voluntary waiver of investment
advisory fee - (24,850)
Administration fee 48,000 48,000
Transfer agency fees 10,000 10,000
Distribution expenses 6,835 6,835
Custodian fees 13,122 6,421
Registration and filing fees 5,099 4,117
Professional fees 8,150 8,150
Directors' fees 4,800 4,800
Printing and postage 6,188 5,737
Insurance expense 4,992 4,992
Amortization of organization
expenses 3,105 3,105
Other 250 415
-------- --------
Total expenses 294,793 177,125
------- -------
Net investment income 166,160 557,197
------- -------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments 700,444 103,113
Net realized gain (loss) on 34,896 (17,333)
futures
Realized gain distributions from 93,822 ----
investment companies
Change in unrealized
appreciation on investments 1,681,089 641,710
--------- -------
Net gain on investments 2,510,251 727,490
--------- -------
Net increase in net assets from
operations $2,676,411 $1,284,687
========== ==========
</TABLE>
<PAGE> 13
- -----------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1995 AND 1994
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
SHEFFIELD TOTAL
RETURN FUND
------------------------
Year ended Year ended
10/31/95 10/31/94
----------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 166,160 $ 197,916
Net realized gain on investments 829,162 507,809
Change in unrealized appreciation
on investments 1,681,089 (1,463,173)
--------- ----------
Increase (decrease) in net assets
from operations 2,676,411 (757,448)
--------- ---------
Dividends to shareholders from:
Net investment income (178,351) (240,611)
Capital gains (507,787) (1,656,947)
--------- -----------
Total distributions to shareholders (686,138) (1,897,558)
--------- -----------
Capital transactions:
Proceeds from shares issued
through exchange 2,992,306 456,443
Proceeds from reinvestment of
dividends 686,138 1,897,558
Proceeds from other shares sold 618,904 1,418,666
Cost of shares reacquired through
exchange (1,199,058) (3,992,939)
Cost of other shares reacquired (1,708,560) (6,443,674)
----------- ----------
Increase (decrease) in net assets
from capital share transactions 1,389,730 (6,663,946)
--------- ----------
TOTAL INCREASE (DECREASE) 3,380,003 (9,318,952)
NET ASSETS:
Beginning of year 18,185,129 27,504,081
---------- ----------
End of year $21,565,132 $18,185,129
=========== ===========
Capital transactions in number of shares:
Shares issued through exchange
Shares issued in connection with 235,685 38,399
reinvestment of dividends 64,791 160,946
Other shares sold 53,872 118,829
Shares reacquired through
exchange
Other shares reacquired (108,650) (353,782)
Net decrease in shares outstanding (145,823) (551,182)
---------- --------
99,875 (586,790)
========== ========
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1995 AND 1994
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
SHEFFIELD
INTERMEDIATE
TERM BOND FUND
--------------------------
Year ended Year ended
10/31/95 10/31/94
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 557,197 $ 393,088
Net realized gain on investments 85,780 32,534
Change in unrealized appreciation
on investments 641,710 (599,036)
------- ---------
Increase (decrease) in net assets
from operations 1,284,687 (173,414)
--------- ---------
Dividends to shareholders from:
Net investment income (574,726) (374,256)
Capital gains (32,510) (295,493)
--------- --------
Total distributions to shareholders (607,236) (669,749)
---------- --------
Capital transactions:
Proceeds from shares issued
through exchange 1,199,058 3,992,939
Proceeds from reinvestment of
dividends 607,236 669,749
Proceeds from other shares sold 687,049 877,793
Cost of shares reacquired through
exchange (2,992,306) (456,443)
Cost of other shares reacquired (1,728,501) (2,655,151)
----------- ----------
Increase (decrease) in net assets
from capital share transactions (2,227,464) 2,428,887
---------- ----------
TOTAL INCREASE (DECREASE) (1,550,013) 1,585,724
NET ASSETS:
Beginning of year 9,283,932 7,698,208
---------- ----------
End of year $7,733,919 $9,283,932
========== ==========
Capital transactions in number of shares:
Shares issued through exchange 133,877 429,482
Shares issued in connection with
reinvestment of dividends 65,650 70,985
Other shares sold 75,598 93,683
Shares reacquired through
exchange (309,849) (48,054)
Other shares reacquired (183,156) (280,559)
---------- --------
Net decrease in shares outstanding (217,880) 265,537
========== ========
</TABLE>
<PAGE> 14
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout the year*
<TABLE>
<CAPTION>
SHEFFIELD TOTAL RETURN FUND
---------------------------
Year ended October 31,
-----------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.53 $12.71 $12.30 $11.82 $ 8.48
------ ------ ------ ------ ------
Income from investment operations:
Net investment income .11 .10 .12 .09 .09
Net gains (losses) on securities
(both realized and unrealized) 1.68 (.38) 1.75 .47 3.37
---- ----- ---- --- ----
Total from investment operations 1.79 (.28) 1.87 .56 3.46
---- ----- ---- --- ----
Less Distributions:
Dividends (from net investment income) (.12) (.11) (.12) (.08) (.12)
Distributions (from capital gains) (.34) (.79) (1.34) .--- .---
----- ----- ------ ------- ------
Total distributions (.46) (.90) (1.46) (.08) (.12)
----- ----- ------ ----- -----
Net Asset Value, end of period $12.86 $11.53 $12.71 $12.30 $11.82
======= ======= ======= ======= =======
Total return 16.33% -2.31% 16.59% 4.79% 41.26%
Ratios/supplemental data
Net assets, end of period $21,565 $18,18 $27,50 $19,37 $16,23
Ratio of expenses to average net assets ,132 5,129 4,081 9,670 1,542
Ratio of net investment income to average 1.60% 1.50% 1.47% 1.66% 1.86%
net assets
Portfolio turnover rate .90% .83% 1.0% .82% .90%
55.16% 51.25% 100.28% 119.87% 65.48%
</TABLE>
See accompanying notes to financial statements.
<PAGE> 15
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
For a share outstanding throughout the year*
SHEFFIELD INTERMEDIATE TERM BOND FUND
-------------------------------------
Year ended October 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.06 $10.14 $ 9.98 $ 9.81 $ 9.23
---- ------ ------ ------ ------
Income from investment operations:
Net investment income .53 .48 .52 .58 .59
Net gains (losses) on securities
(both realized and unrealized) .60 (.71) .32 .17 .70
--- ---- --- --- ---
Total from investment operations 1.13 (.23) .84 .75 1.29
---- ---- --- --- ----
Less Distributions:
Dividends (from net investment income) (.57) (.45) (.58) (.58) (.71)
Distributions (from capital gains) (.03) (.40) (.10) .-- .--
----- ---- ----- ----- ----
Total distributions (.60) (.85) (.68) (.58) (.71)
----- ---- ----- ----- -----
Net Asset Value, end of period $ 9.59 $ 9.06 $10.14 $ 9.98 $ 9.81
====== ====== ====== ====== ======
Total return 12.89% -2.42% 8.73% 7.78% 14.47%
Ratios/supplemental data
Net assets, end of period $7,733,919 $9,283,932 $7,698,208 $11,973,286 $9,873,704
Ratio of expenses to average net assets 1.78%+ 2.08%+ 2.04%+ 1.91% 2.30%
Ratio of net investment income to average 5.61% 5.01% 5.19% 5.87% 6.20%
net assets
Portfolio turnover rate 34.99% 30.38% 21.70% 59.54% 48.57%
</TABLE>
+ Without the waiver of advisory or administration fees, the ratios of
expenses to average net assets for the Intermediate Term Bond Fund would
have been 2.03%, 2.34%, and 2.17% for the years 1995, 1994, and 1993,
respectively.
See accompanying notes to financial statements.
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. The Sheffield
Funds, Inc. (SFI) is registered under the Investment Company Act of 1940 as an
open-end diversified management investment company. SFI consists of two
separate funds, the Sheffield Total Return Fund (the Total Return Fund) and the
Sheffield Intermediate Term Bond Fund (the Bond Fund), each of which represents
a separate portfolio of investments (collectively, "the Funds"). SFI commenced
operations on April 2, 1990. The following is a summary of significant
accounting policies followed by SFI:
A. Security Valuation - Equity securities listed or traded on a national
securities exchange are valued at the last sale price on the day of
valuation or, if no sale is reported, at the latest bid price. Bonds and
other fixed income securities are valued on the basis of prices furnished by
an independent pricing service. Convertible bonds are valued at the mean of
bid and asked prices if available, or if not available, on the basis of
prices furnished by an independent pricing service. Short-term obligations
with maturities of sixty days or less are valued at amortized cost, which
approximates market.
B. Security Transactions and Related Investment Income Security transactions
are accounted for on the trade date and dividend income is recorded on the
ex- dividend date. Interest income is recorded on the accrual basis and
includes the amortization of discounts and premiums on the purchase of debt
securities. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are reported on an
identified cost basis.
C. Futures Contracts - The Funds may purchase financial futures contracts in
order to invest excess cash or to provide liquidity for redemption
requests. The Funds may sell financial futures as a means to reduce market
risk. Upon entering into a futures contract, the Fund is required to
deposit with a broker an amount ("initial margin") equal to a certain
percentage of the purchase price indicated in the futures contract.
Subsequent payments ("variation margin") are made or received by the Fund
dependent on the daily fluctuations in the value of the unrealized gains
and losses by the Fund. If the Fund enters into a closing transaction, the
Fund will realize, for book purposes, a gain or loss equal to the
difference between the value of the futures contract to sell and the
futures contract to buy. The Fund may be subject to risk upon entering
into futures contracts resulting from the imperfect correlation of prices
between the futures and securities markets.
D. Federal Income Taxes - No provision for federal income taxes is required
since each Fund intends to continue to qualify as a regulated investment
company and make distributions of investment income and net realized
capital gain, if any, to relieve it from all federal income taxes.
At October 31, 1995, the aggregate cost of securities for federal income
tax and financial reporting purposes for the Total Return Fund was
$18,626,926 and net unrealized appreciation aggregated $3,306,720 of which
$3,735,140 related to appreciated securities and $428,420 related to
depreciated securities. The aggregate tax cost of securities for the Bond
Fund was $7,130,341 and net unrealized appreciation aggregated $449,300, of
which $480,562 related to appreciated securities and $31,262 related to
depreciated securities.
E. Dividends and Distributions to Shareholders - Dividends and distributions
are recorded by the Funds on the ex-dividend date. The primary reason for
the difference between net investment income and realized gains and the
related distributions relates to the regulatory timing and calculation of
distribution.
NOTE 2. INVESTMENT ADVISORY AND OTHER AGREEMENTS. Sheffield Investment
Management, Inc. (SIMI) serves as the investment adviser, transfer agent and
administrator for SFI. Pursuant to the terms of the Investment Advisory
Agreement between SIMI and SFI, SIMI receives an investment advisory fee
<PAGE> 17
from each fund. This fee is accrued daily and paid monthly. The fee is
based on an annual rate of 1% of the first $50 million of each fund's net
assets; .75% of the next $50 million of net assets and .6% of net assets in
excess of $100 million. Beginning April 1, 1993, SIMI has been waiving
advisory fees for the Bond Fund to a level of .75% of net assets. Total
advisory fees waived during the one year period ended October 31, 1995,
amounted to $24,850.
SFI has entered into an Administration Agreement with SIMI pursuant to which
SIMI provides various administrative services required by the funds. For its
services, SIMI receives a fee from each fund at the annual rate of the greater
of .15% of each fund's average daily net assets or the actual cost to SIMI to
provide such services up to $48,000 per fund.
In accordance with a Transfer Agency Agreement between SFI and SIMI, various
services are provided to the stockholders of the funds. These services
include, in part, the processing of purchase and redemption requests, transfer
and exchange requests, distributions and general stockholder inquiries. For
its services SIMI receives from each fund a monthly fee at an annual rate of
the greater of $10,000 per fund or $15 per stockholder account.
Alpha-Line Investments, Inc. (the Underwriter), an affiliate of SIMI, is the
principal underwriter for SFI pursuant to a Distribution Agreement. Each fund
has agreed to pay the Underwriter, pursuant to a Rule 12b-1 Plan of
Distribution, such amounts as necessary in order to reimburse distribution,
maintenance, and service cost with respect to marketing the shares of each
fund. The total allowable amount of fund reimbursement to the Underwriter is
limited to .0625% per quarter of each fund's net asset value.
NOTE 3. SECURITIES TRANSACTIONS. For the year ended October 31, 1995,
purchases and sales proceeds of securities, other than short-term and U.S.
Government Securities, for each of the funds were as follows:
<TABLE>
<CAPTION>
TOTAL RETURN INTERMEDIATE TERM
FUND BOND FUND
- --------------------- --------------------
<S> <C> <C> <C>
Purchases Sales Purchase Sales
- --------- ------- -------- --------
$10,734,926 $10,076,860 $3,298,669 $5,087,090
The Total Return Fund had transactions in call options as follows:
Number of
Contracts Premiums
--------- --------
Options outstanding at
October 31, 1994 0 $ 0
Options written 772 171,390
Options purchased 20 8,632
Options expired (128) (14,330)
Options closed (547) (132,739)
Options exercised (117) (32,953)
-------- ----------
Options outstanding at
October 31, 1995 0 $ 0
= =
</TABLE>
NOTE 4. RELATED PARTY STOCKHOLDERS. At October 31, 1995, the Sheffield
Investment Management, Inc. Profit Sharing Plan owned 5,287 shares of the Bond
Fund and 14,233 shares of the Total Return Fund. The president of SIMI and
related family members owned 15,174 shares of the Bond Fund and 14,342 shares
of the Total Return Fund.
