THE SHEFFIELD FUNDS, INC.
April 30, 1996
Dear Shareholder:
The six-months ended April 30, 1996 was an excellent period for the Total
Return Fund and the Intermediate Term Bond Fund, with both funds outperforming
their index proxies. The Total Return Fund's six-month return of 13.9%
benefitted from economic conditions which remained quite favorable for the
stock markets during this period. For example, within the S&P 500 Index,
companies whose earnings increased outnumbered those whose earnings decreased
by a margin of almost three to one. Furthermore, during the six months which
ended March 31, the average earnings increase for all S&P 500 stocks was just
under 12% per quarter.
The Bond Fund's philosophy of maintaining a small proportion of its portfolio
in equity securities enabled it to also benefit from the favorable stock market
conditions, and contributed to the Fund's outperformance of its Lehman index
proxy. The bond markets, however, were fairly lackluster for the six months.
While bonds enjoyed declining interest rates until February, 1996, subsequently
interest rates have increased across the entire yield curve, giving back the
gains from the first three months.
TOTAL RETURN FUND
This Fund's objective is to seek capital appreciation and dividend income from
a diversified portfolio of securities. The Fund's strategy to meet this
objective is to invest in companies whose earnings are growing faster than the
overall stock market. In addition, we focus on companies whose dividend growth
rates exceed that of the overall market. Finally, we prefer to buy a stock when
it is temporarily out of favor in the marketplace, causing its price to be
depressed and its dividend yield to be greater than usual.
The Fund also invests a portion of its assets in foreign securities including
those of emerging markets where it is anticipated that economic growth will
exceed that of the U.S. over a period of years. Securities included in the
portfolio from this category are typically country - or region - specific funds
whose managers are knowledgeable in their respective areas of expertise.
Diversification
The Fund held positions in 94 stocks as of April 30. Foreign securities
holdings were relatively minor during the six-month period, averaging between
.7% and 2.4% of the total. Broad diversification is one of the major
philosophical tenets of the Total Return Fund as is clearly illustrated in
the chart below. The chart compares the economic sector weightings of the
Fund to that of the S&P 500 Index as of April 30.
Industry Sector Analysis
April 30, 1996
Total Return Fund S&P 500 Index
Basic Materials 7.27% 5.50%
Conglomerates 5.07% .34%
Consumer Cyclical 11.35% 14.00%
Consumer Non Cyclical 17.46% 20.95%
Energy 6.12% 9.30%
Financial 10.79% 12.95%
Industrial 9.21% 11.00%
Technology 22.13% 13.00%
Utilities 9.86% 12.96%
Foreign .74% 0.00%
The one clear picture which emerges from the chart is that the Fund has made a
bet on the technology sector. Companies occupying this sector include not only
computer and software firms, but also firms such as aerospace, office
equipment,and precision instruments. The overriding theme among these various
companies is efficiency enhancement by creating products or services which
enable their customers to do things better or faster at lower cost.
Earnings Growth
The portfolio's earnings growth rate objective has been achieved during the
past six months with a median growth rate of approximately 15% compared to
the S&P 500 Index earnings growth rate of approximately 11.5%.
Dividend Growth
In structuring the portfolio, we emphasize stocks whose dividend growth rates
have a history of exceeding both the inflation rate and the stock market's
dividend growth rate. Measured on a 12-month rolling period, as of the date of
this report, the dividend-paying stocks in the portfolio increased their
dividends on average by approximately 11%, equivalent to almost three times
the inflation rate. For the S&P 500 Index, dividends increased at an
approximate 6% rate for the same time period.
Turnover
Low turnover of portfolio holdings means higher after-tax returns for
stockholders and less commissions paid to brokers. We manage the Total Return
Fund with an eye toward keeping turnover down. The portfolio turnover was 62%
on a twelve-month rolling average, and 71% for the six months on an annualized
basis. We continue to focus on further reductions in the turnover rate from
today's levels.
Hedging
The Fund will occasionally hedge a portion of its portfolio holdings if, in the
opinion of the portfolio manager, market conditions become unstable for any of
a variety of reasons. During the past six months, hedging activities were
initiated on four separate occasions. In each case, the hedging transaction
took the form of a sale of one or more S&P 500 futures contracts. The cost of
the hedges represents the majority of the realized loss on futures. Hedging in
this sense is analagous to the payment of a premium on an insurance policy
designed to reduce the risk of loss in a downward market.
Performance
The Fund enjoyed strong performance results during the past six months,
generating a total return (net of all fees and expenses) of 13.9%. This
compares favorably to the S&P 500 Index total return of 13.8% for the same
time period.
INTERMEDIATE TERM BOND FUND
The Bond Fund's primary objective is to seek current income by investing mainly
in intermediate-term corporate bonds and notes. The Fund's secondary objective
is capital appreciation derived from ownership of convertible bonds and high-
yielding common stock.
To achieve its objectives the Bond Fund employs a laddered maturity approach to
its holdings. Pursuant to this strategy the Fund acquires bonds typically
maturing in from one-to-ten years with approximately equal dollar amounts
maturing each year. The Fund will typically sell the bonds of a given issuer
when the remaining term-to-maturity decreases to one year, reinvesting the
proceeds in new bonds along the one-to-ten year range. The charts at the top of
the following page depict the Bond Fund's current maturity range and rating mix.
Maturity Range Rating Mix
1-3 Years 4% AA 12%
3-5 Years 56% A 48%
5-7 Years 28% BBB 24%
7-10 Years 8% BB 12%
10+ Years 4% NR 4%
Performance
The chart at the top of the next column tells the story of the bond market
during the past six months. Except for the shortest maturities (up to one
year), interest rates are higher today than at the beginning of our fiscal
year. When interest rates rise, the value of bonds declines. Declining prices
may be fully or partially offset by interest income received.
Yield Curve for U.S. Government Bonds
Active U.S. Government Bonds
10/31/95 4/30/96
3 Mos 5.49% 5.14%
6 Mos 5.55% 5.29%
1 Year 5.54% 5.61%
2 Year 5.61% 6.04%
3 Year 5.68% 6.18%
4 Year 5.74% 6.32%
5 Year 5.80% 6.40%
7 Year 5.94% 6.58%
10 Year 6.02% 6.67%
20 Year 6.18% 6.67%
30 Year 6.33% 6.90%
Our bond fund performed quite well (in a relative sense) in this environment.
The Fund's total return of 2.4% for the period was significantly ahead of our
proxy, the Lehman Corporate Intermediate Index, which generated a total return
of .9%.
During this period, the Fund benefited significantly from the high-yielding
common stock component of the portfolio. These holdings were not adversely
affected by the increase in interest rates.
Very truly yours,
Roger A. Sheffield, CFA
President
SHEFFIELD TOTAL RETURN FUND
Portfolio of Investments
April 30, 1996
(unaudited)
- --------------------------------------------------------------------
SHORT-TERM INVESTMENTS ( .3%) PAR VALUE
- --------------------------------------------------------------------
United Missouri Bank Money Market
(cost - $56,200) $56,200 $56,200
- --------------------------------------------------------------------
- --------------------------------------------------------------------
COMMON STOCKS (99.0%) SHARES
- ---------------------------------------------------------------------
AEROSPACE - .9%
Boeing Co. 2,800 229,950
-------
AUTO/TRUCK PARTS - 3.6%
Eaton Corp. 4,500 272,250
Genuine Parts Co. 5,300 234,525
TRW, Inc 3,900 366,112
-------
872,887
-------
BANKING - 4.9%
BankAmerica Corp. 2,000 151,500
First Tennessee National Corp. 8,400 277,200
First Union Corp. 4,100 252,150
NationsBank Corp. 3,140 250,808
Summit Bancorp 6,900 244,950
-------
1,176,608
---------
BEVERAGES - 4.4%
ALCOHOLIC - 1.3%
Anheuser Busch Cos., Inc. 4,700 315,488
-------
SOFT DRINK - 3.1%
Coca-Cola Co. 2,800 228,200
Pepsico, Inc. 8,000 508,000
-------
736,200
-------
CHEMICALS - 6.6%
BASIC - 4.3%
DuPont E.I. De Nemours & Co. 2,700 216,675
Monsanto Co. 3,600 545,400
Sherwin-Williams Co. 5,500 257,125
-------
1,019,200
---------
SPECIALTY - 2.3%
Avery Dennison Corp. 7,600 433,200
Engelhard Corp. 4,500 113,062
-------
546,262
-------
COMPUTER HARDWARE - 4.2%
Bay Network, Inc.* 3,750 118,125
Digital Equipment Corp. 2,000 119,750
EMC Corp.* 13,000 266,500
Hewlett Packard Co. 3,000 317,625
SCI Systems, Inc.* 4,400 188,650
-------
1,010,650
---------
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- ----------------------------------------------------------------------
COMPUTER SOFTWARE - 3.7%
Cerner Corp.* 2,500 $ 51,562
Computer Associates International Inc. 1,900 139,413
General Motors Class E 4,000 225,500
Microsoft Corp.* 3,100 351,075
Parametric Technology Corp.* 3,400 136,850
-------
904,400
-------
COSMETICS - .7%
Avon Products, Inc. 2,000 177,750
-------
DIVERSIFIED - 9.1%
Allied Signal, Inc. 8,900 516,200
Johnson Controls Industries, Inc. 7,000 500,500
PPG Industries, Inc. 6,900 349,312
Raytheon Co. 5,000 253,125
Rockwell International Corp. 4,100 239,850
Tenneco, Inc. 6,200 340,225
-------
2,199,212
---------
ELECTRICAL EQUIPMENT - 1.1%
Honeywell, Inc. 5,100 268,388
-------
ELECTRONICS - 7.3%
Avnet, Inc. 8,800 464,200
Diebold, Inc. 7,950 306,075
Eastman Kodak Co. 6,000 459,000
Motorola, Inc. 3,865 236,731
Pacific Scientific Co. 7,000 138,250
Sensormatic Electronics Corp. 7,800 158,925
-------
1,763,181
---------
ELECTRONICS - SEMICONDUCTOR - 1.0%
Intel Corp. 3,450 233,738
-------
ENTERTAINMENT/LEISURE - 1.7%
Brunswick Corp. 11,500 253,000
Harley Davidson, Inc. 3,950 174,294
-------
427,294
-------
FOOD PRODUCTS - 4.2%
Dole Food Co., Inc. 4,500 180,000
Hershey Foods Corp. 6,300 478,012
Philip Morris Cos. 4,000 360,500
-------
1,018,512
---------
FOREIGN - .7%
Vanguard Int'l Equity Index -
Pacific Fund 14,422 178,251
-------
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- ----------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.2%
Colgate Palmolive Co. 3,700 $ 283,512
-------
INSURANCE - 3.3%
Allstate Corp. 5,898 229,285
Beneficial Corp. 5,000 276,250
Reliastar Financial Corp. 6,600 287,925
-------
793,460
-------
MANUFACTURING - 2.0%
Donaldson Co., Inc. 8,500 223,125
Dover Corp. 5,000 257,500
-------
480,625
-------
MEDICAL - 5.9%
HEALTHCARE - .4%
United Healthcare Corp. 1,900 111,150
-------
PHARMACEUTICAL - 5.5%
Abbott Laboratories 5,000 203,125
Merck & Co. 4,000 242,000
Mylan Laboratories, Inc. 9,900 193,050
Pfizer, Inc. 6,400 440,800
Schering Plough Corp. 4,000 229,500
-------
1,308,475
---------
OFFICE EQUIPMENT - 3.1%
Office Depot, Inc.* 9,450 211,444
Pitney Bowes, Inc. 4,700 229,125
Xerox Corp. 2,100 307,650
-------
748,219
-------
OIL & GAS - 4.9%
Amoco Corp. 2,750 200,750
Exxon Corp. 3,000 255,000
Global Marine, Inc.* 19,000 216,125
Mobil Corp. 2,390 274,850
Tidewater, Inc. 5,800 246,500
-------
1,193,225
---------
PUBLISHING - .7%
Banta Corp. 6,750 165,375
-------
REAL ESTATE - 1.7%
New Plan Realty Trust 8,500 172,125
Washington Real Estate
Investment Trust 14,770 238,169
-------
410,294
-------
RESTAURANTS - .9%
Wendys Int'l, Inc. 11,600 221,850
-------
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- ----------------------------------------------------------------------
RETAIL - 6.8%
DEPARTMENT STORES - 2.2%
Dollar General Corp. 9,625 $ 252,656
Sears Roebuck & Co. 5,500 275,000
-------
527,656
-------
DRUG - .7%
Revco Drugs, Inc.* 6,830 161,359
-------
RETAIL - GROCERY - .9%
Albertsons, Inc. 5,350 205,975
-------
SPECIALTY - 3.0%
General Nutrition Cos., Inc.* 6,200 120,900
Kellwood Co. 13,100 212,875
Tandy Corp. 4,300 223,062
Zale Corp.* 9,000 167,625
-------
724,462
-------
SAVINGS AND LOANS - .9%
John Hancock Bank & Thrift
Opportunity Fund 9,600 219,600
-------
STEEL - .7%
Nucor Corp. 3,300 185,625
-------
TELEPHONE - 7.9%
AT&T Corp. 5,900 361,375
Alltel Corp. 11,200 368,200
Ameritech Corp. 6,300 367,762
Andrew Corp.* 5,070 243,360
Cincinnati Bell, Inc. 6,000 295,500
Newbridge Networks Corp.* 2,500 160,938
Nynex Corp. 2,200 108,075
-------
1,905,210
---------
TRANSPORTATION - 1.8%
Conrail, Inc. 2,300 160,425
Illinois Central Corp. Ser-A 9,450 283,500
-------
443,925
-------
UTILITIES - 3.1%
ELECTRIC & GAS - 1.9%
Baltimore Gas & Electric Co. 11,200 295,400
TNP Enterprises, Inc. 7,400 175,750
-------
471,150
-------
NATURAL GAS - 1.2%
Williams Co., Inc. 5,500 281,188
-------
- ----------------------------------------------------------------------
Total Common Stocks
(cost - $18,278,511) $23,920,306
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
CONVERTIBLE BONDS (.7%) PAR VALUE
- ----------------------------------------------------------------------
COMMERCIAL SERVICES - .7%
Olsten Corp. 4.875% Conv.
Deb. 5/15/03 $135,000 $177,356
--------
- ----------------------------------------------------------------------
Total Convertible Bonds
(cost - $139,587) $177,356
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (100%)
(cost - $18,474,298) $24,153,862
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (-0%) ($1,859)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET ASSETS (100%) $24,152,003
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET ASSET VALUE PER SHARE $13.98
======
- ----------------------------------------------------------------------
* Non-income producing
SHEFFIELD INTERMEDIATE TERM BOND FUND
Portfolio of Investments
April 30, 1996
(unaudited)
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS (3.4%) PAR VALUE
- -----------------------------------------------------------------------
UMB Bank Money Market
(cost - $201,734) $201,734 $201,734
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
COMMON STOCKS (12.7%) SHARES
- -----------------------------------------------------------------------
BANKING - 1.3%
JP Morgan & Co. 900 75,713
-------
CHEMICALS - 3.8%
Arco Chemical Co. 1,400 74,375
DuPont (E.I.) Denemours & Co. 965 77,441
Minnesota Mining & Mfg. Co. 1,055 69,366
-------
221,182
-------
ELECTRICAL EQUIPMENT - 1.2%
General Electric Co. 940 72,615
-------
FOOD PRODUCTS - 1.3%
Philip Morris Cos. 825 74,353
-------
OIL & GAS - 3.8%
Chevron Corp. 1,165 67,570
Exxon Corp. 845 71,825
Texaco, Inc. 980 83,790
-------
223,185
-------
TELEPHONE - 1.3%
Southern New England
Telecommunication Corp. 1,710 76,095
-------
- -----------------------------------------------------------------------
Total Common Stocks
(cost - $598,343) $743,143
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
CORPORATE BONDS AND NOTES (78.3%) PAR VALUE
- -----------------------------------------------------------------------
BANKING - 11.8%
Banc One Corp. 7.25%
Sub. Notes 8/1/02 $250,000 252,427
Bankamerica Corp 9.2%
Sub. Notes 5/15/03 200,000 221,968
Bankers Trust NY Corp.
9.0% Deb. 8/1/01 200,000 216,344
-------
690,739
-------
COMMERICAL SERVICES - 3.4%
Hertz Corp. 7.0% Sr. Notes 4/15/01 200,000 200,630
-------
COMPUTER SYSTEMS - 1.7%
International Business Machines
Corp. 6.375% Notes 6/15/00 100,000 98,847
-------
- ----------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- ----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 4.7%
Eastman Kodak Co. 9.375%
Deb. 3/15/03 $100,000 $111,748
Westinghouse Electric Corp.
8.875% Deb. 6/1/01 160,000 164,280
-------
276,028
-------
FINANCIAL SERVICES - 3.3%
Bear Stearns Co. 6.7% Sr.
Notes 8/1/03 200,000 193,390
-------
HEALTHCARE - 4.4%
Rhone-Poulenc 7.75% Notes 1/15/02 250,000 256,647
-------
HOUSEHOLD PRODUCTS - 5.4%
Black & Decker 6.625%
Notes 11/15/00 320,000 315,114
-------
INSURANCE - 3.8%
Progressive Corp. 10.0% Deb.
12/15/00 200,000 223,322
-------
OFFICE EQUIPMENT - 4.7%
Xerox Credit Corp. 9.75% Deb.
3/15/00 250,000 275,098
-------
OTHER - .5%
Swedish Export Credit 9.875% Deb.
3/15/38 30,000 32,628
-------
PERSONAL & BUSINESS CREDIT - 14.9%
Associate Corp. of N. America 6.375%
Sr. Notes 10/15/02 250,000 241,982
Ford Capital BV 9.375% Deb.
5/15/01 200,000 219,528
General Motors Acceptance Corp.
8.4% Notes 10/15/99 200,000 209,496
Transamerica Financial Corp. 7.5%
Sr. Notes 3/15/04 200,000 202,424
-------
873,430
-------
RETAIL - 12.3%
DEPARTMENT STORES - 6.0%
K-Mart Inc. 9.8% Med. Term
Notes 6/15/98 250,000 241,250
Wal-Mart Stores 9.1% Notes 7/15/00 100,000 108,338
-------
349,588
-------
SPECIALTY - 6.3%
Fruit of the Loom Inc. 7.875% Sr.
Notes 10/15/99 210,000 214,668
Limited Inc. 8.875% Notes 8/15/99 150,000 155,456
-------
370,124
-------
SAVINGS & LOANS - 2.8%
H.F. Ahmanson & Co. 9.875% Sub.
Notes 11/15/99 150,000 164,175
-------
- ----------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- ----------------------------------------------------------------------
UTILITIES - ELECTRIC & GAS - 4.6%
Commonwealth Edison Co. Mortgage
9.375% Bonds 2/15/00 $250,000 $267,855
-------
- -----------------------------------------------------------------------
Total Bonds and Notes
(cost - $4,522,436) $4,587,615
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
CONVERTIBLE BONDS - 4.0%
- -----------------------------------------------------------------------
EMC Corp. 4.25% Conv. Sub.
Note 1/1/01 75,000 85,500
Olsten Corp. 4.875% Conv.
Sub. Deb. 5/15/03 115,000 151,081
-------
236,581
-------
- ----------------------------------------------------------------------
Total Convertible Bonds
(cost - $194,426) $236,581
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (98.4%)
(cost - $5,516,939) $5,769,074
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (1.6%) $94,112
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET ASSETS (100%) $5,863,186
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
NET ASSET VALUE PER SHARE $9.45
====
- ----------------------------------------------------------------------
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITES
APRIL 30, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
--------------- ------------------
ASSETS:
Investments at value (cost of
$18,474,298 and $5,516,939,
respectively) $24,153,862 $5,769,074
Receivables:
Interest 2,568 100,254
Dividends 14,626 ---
Prepaid insurance 9,286 2,166
---------- ---------
Total assets 24,180,342 5,871,494
---------- ---------
LIABILITIES:
Investment securities purchased 220 ---
Variation margin due to broker --- 281
Accrued expenses 28,119 8,027
------ ------
Total liabilities 28,339 8,308
------ ------
NET ASSETS CONSISTING OF:
Undistributed net investment income 17,140 21,707
Accumulated net realized gain 605,304 215,896
Accumulated net realized gain (loss)
on futures (48,978) 6,360
Unrealized appreciation on investments 5,679,564 252,135
Unrealized gain (loss) on futures --- (281)
Paid-in capital applicable to 1,727,030
and 620,217 shares outstanding,
respectively, of $.001 par value capital
stock; 5,000,000 shares authorized in
each fund 17,898,973 5,367,369
---------- ---------
Net Assets $24,152,003 $5,863,186
---------- ---------
NET ASSET VALUE PER SHARE $13.98 $9.45
===== ====
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
--------------- ------------------
INVESTMENT INCOME:
Interest $ 9,675 $ 200,621
Dividends 242,766 13,476
------- -------
Total income 252,441 214,097
------- -------
EXPENSES:
Investment advisory fee 115,816 23,519
Administration fee 24,000 15,815
Transfer agency fee 5,000 5,000
12b-1 expenses 3,409 3,409
Custodian fees 6,545 3,202
Registration and filing fees 2,542 2,055
Professional fees 3,938 3,939
Directors fees 2,394 2,393
Printing and postage 1,762 1,776
Insurance expense 2,636 1,856
Other 295 203
------- ------
Total expenses 168,337 63,167
------- ------
Net investment income 84,104 150,930
------- -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 605,304 215,896
Net realized gain (loss) on futures (48,978) 6,360
Net unrealized gain (loss) on futures --- (281)
Change in unrealized appreciation
(depreciation) on investments 2,372,844 (197,165)
--------- --------
Net gain on investments 2,929,170 24,810
--------- ------
Net increase in net assets
from operations $3,013,274 $175,740
========== ========
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGE IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
AND THE YEAR ENDED OCTOBER 31, 1995
- -----------------------------------------------------------------------------
Sheffield Total
Return Fund
-----------------------------------
Six Months
ended Year ended
04/30/96 10/31/95
---------- ----------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 84,104 $ 166,160
Net realized gain on investments 605,304 829,162
Net realized (loss) on futures (48,978) ---
Change in unrealized appreciation
on investments 2,372,844 1,681,089
--------- ---------
Increase (decrease) in net assets
from operations 3,013,274 2,676,411
--------- ---------
Dividends to shareholders from:
Net investment income (184,571) (178,351)
Capital gains (829,079) (507,787)
--------- ---------
Total distributions to shareholders (1,013,650) (686,138)
----------- ---------
Capital transactions:
Proceeds from shares issued
through exchange 1,109,700 2,992,306
Proceeds from reinvestment of
dividends 1,013,650 686,138
Proceeds from other shares sold 163,574 618,904
Cost of shares reacquired
through exchange (249,660) (1,199,058)
Cost of other shares reacquired (1,450,017) (1,708,560)
---------- ----------
Increase (decrease) in net assets
from capital share transactions 587,247 1,389,730
------- ---------
TOTAL INCREASE (DECREASE) 2,586,871 3,380,003
--------- ---------
NET ASSETS:
Beginning of period 21,565,132 18,185,129
---------- ----------
End of period $24,152,003 $21,565,132
========== ==========
Capital transactions in number of shares:
Shares issued through exchange 84,570 235,685
Shares issued in connection with
reinvestment of dividends 79,878 64,791
Other shares sold 12,176 53,872
Shares reacquired through exchange (18,409) (108,650)
Other shares reacquired (107,883) (145,823)
-------- --------
Net decrease in shares outstanding 50,332 99,875
====== ======
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGE IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
AND THE YEAR ENDED OCTOBER 31, 1995
- -----------------------------------------------------------------------------
Sheffield Intermediate
Term Bond Fund
-------------------------------------
Six Months
ended Year ended
04/30/96 10/31/95
---------- ----------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $150,930 $557,197
Net realized gain on investments 215,896 85,780
Net realized gain on futures 6,360 ---
Net unrealized loss on futures (281) ---
Change in unrealized appreciation
on investments (197,165) 641,710
-------- -------
Increase in net assets from
operations 175,740 1,284,687
------- ---------
Dividends to shareholders from:
Net investment income (158,679) (574,726)
Capital gains (85,839) (32,510)
-------- --------
Total distributions to shareholders (244,518) (607,236)
-------- --------
Capital transactions:
Proceeds from shares issued
through exchange 249,660 1,199,058
Proceeds from reinvestment of
dividends 244,519 607,236
Proceeds from other shares sold 185,800 687,049
Cost of shares reacquired through
exchange (1,109,700) (2,992,306)
Cost of other shares reacquired (1,372,234) (1,728,501)
---------- ----------
Increase (decrease) in net assets
from capital share transactions (1,801,955) (2,227,464)
---------- ----------
TOTAL INCREASE (DECREASE) (1,870,733) (1,550,013)
NET ASSETS:
Beginning of period 7,733,919 9,283,932
--------- ----------
End of period $5,863,186 $7,733,919
========= =========
Capital transactions in number of shares:
Shares issued through exchange 26,288 133,877
Shares issued in connection with
reinvestment of dividends 25,848 65,650
Other shares sold 19,380 75,598
Shares reacquired through exchange (115,293) (309,849)
Other shares reacquired (142,626) (183,156)
-------- -------
Net decrease in shares outstanding (186,403) (217,880)
======== ========
- -----------------------------------------------------------------------------
Financial Highlights
- -----------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
<CAPTION>
SHEFFIELD TOTAL RETURN FUND
---------------------------
<S> <C>Six Months
ended Year ended October 31,
April 30, 1996 ------------------------------------------------
(unaudited) <C>1995 <C>1994 <C>1993 <C>1992 <C>1991
--------------------------------------------------------------
Net asset value, beginning
of period $12.86 $11.53 $12.71 $12.30 $11.82 $8.48
----- ----- ----- ----- ----- ----
Income from investment operations:
Net investment income .05 .11 .10 .12 .09 .09
Net gains (losses) on securities
(both realized and unrealized) 1.67 1.68 (.38) 1.75 .47 3.37
----- ----- ----- ----- ---- ----
Total from investment operations 1.72 1.79 (.28) 1.87 .56 3.46
----- ----- ----- ----- ---- ----
Less Distributions:
Dividends (from net investment
income) (.11) (.12) (.11) (.12) (.08) (.12)
Distributions (from capital gains) (.49) (.34) (.79) (1.34) --- ---
---- ---- ---- ----- ---- ----
Total distributions (.60) (.46) (.90) (1.46) (.08) (.12)
---- ---- ---- ----- ---- ----
Net Asset Value, end of period $13.98 $12.86 $11.53 $12.71 $12.30 $11.82
===== ===== ===== ===== ===== =====
Total return 13.90% 16.33% -2.31% 16.59% 4.79% 41.26%
Ratios/supplemental data:
Net assets, end of period (000's) $24,152 $21,565 $18,185 $27,504 $19,380 $16,232
Ratio of expenses to average net
assets 1.44%* 1.60% 1.50% 1.47% 1.66% 1.86%
Ratio of net investment income to
average net assets .72%* .90% .83% 1.00% .82% .90%
Portfolio turnover rate 71.20% 55.16% 51.25% 100.28% 119.87% 65.48%
</TABLE>
*Annualized.
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
Financial Highlights
- -----------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
<CAPTION>
SHEFFIELD INTERMEDIATE TERM BOND FUND
-------------------------------------
<S> <C>Six Months
ended Year ended October 31,
April 30, 1996--------------------------------------------------
(unaudited) <C>1995 <C>1994 <C>1993 <C>1992 <C>1991
----------------------------------------------------------------
Net asset value, beginning of
period $9.59 $9.06 $10.14 $9.98 $9.81 $9.23
---- ---- ----- ---- ---- ----
Income from investment operations:
Net investment income .22 .53 .48 .52 .58 .59
Net gains (losses) on securities
(both realized and unrealized) .01 .60 (.71) .32 .17 .70
---- ---- ---- ---- ---- ----
Total from investment operations .23 1.13 (.23) .84 .75 1.29
---- ---- ---- ---- ---- ----
Less Distributions:
Dividends (from net investment income) (.25) (.57) (.45) (.58) (.58) (.71)
Distributions (from capital gains) (.12) (.03) (.40) (.10) --- ---
---- ---- --- ---- ---- ----
Total distributions (.37) (.60) (.85) (.68) (.58) (.71)
---- ---- ---- ---- ---- ----
Net Asset Value, end of period $9.45 $9.59 $9.06 $10.14 $9.98 $9.81
==== ==== ==== ===== ==== ====
Total return 2.40% 12.89% -2.42% 8.73% 7.78% 14.47%
Ratios/supplemental data:
Net assets, end of period (000's) $5,863 $7,734 $9,284 $7,698 $11,973 $9,874
Ratio of expenses to average net assets 1.99%* 1.78%+ 2.08%+ 2.04%+ 1.91% 2.30%
Ratio of net investment income to average
net assets 4.76%* 5.61% 5.01% 5.19% 5.87% 6.20%
Portfolio turnover rate 25.40% 34.99% 30.38% 21.70% 59.54% 48.57%
</TABLE>
* Annualized.
+ Without the waiver of advisory and administration fees, the ratios of
expenses to average net assets for the Intermediate Term Bond Fund would
have been 2.50% for the six months ended April 30, 1996, and 2.03%, 2.34%,
and 2.17% for the years 1995, 1994, and 1993, respectively.
See accompanying notes to financial statements.
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 on the futures contracts. 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 April 30, 1996, the aggregate cost of securities for federal income tax and
financial reporting purposes for the Total Return Fund was $18,474,298 and net
unrealized appreciation aggregated $5,679,564 of which $5,793,656 related to
appreciated securities and $114,092 related to depreciated securities. The
aggregate tax cost of securities for the Bond Fund was $5,516,939 and net
unrealized appreciation aggregated $252,135, of which $320,771 related to
appreciated securities and $68,636 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 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 six-month period ended April 30, 1996, amounted to approximately $7,800.
SFI has entered into an Administrative 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. During the six-month period ended
April 30, 1996, SIMI waived administrative fees to the Bond Fund amounting to
approximately $8,200.
In accordance with a Transfer Agency Agreement with 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 and 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 six month period ended April 30,
1996, purchases and sales proceeds of securities, other than short-term and
U.S. Government Securities, for each of the funds were as follows:
Total Return Intermediate Term
Fund Bond Fund
-----------------------------------------------------
Purchases Sales Purchases Sales
$ 8,418,893 $ 8,233,271 $ 815,154 $2,059,806
The Total Return Fund had transactions in call options as follows:
Number of
Contracts Premiums
Options outstanding at
October 31, 1995 0 $ 0
Options written (74) (2,565)
Options purchased 104 7,532
Options closed (30) (4,967)
-------- --------
Options outstanding at
April 30, 1996 0 $ 0
===== ========
NOTE 4. RELATED PARTY STOCKHOLDERS. At April 30, 1996, the Sheffield
Investment Management, Inc. Profit Sharing Plan owned 4,711 shares of the Bond
Fund and 14,823 shares of the Total Return Fund. The President of SIMI and
related family members owned 15,555 shares of the Bond Fund and 13,651 shares
of the Total Return Fund.
