THE SHEFFIELD FUNDS, INC.
=============================================================================
April 30, 1997
Dear Shareholder:
The Sheffield Funds continue to benefit from the healthy economic environment
of low inflation coupled with strong corporate profit growth. The Total Return
Fund, during the first six months of its fiscal year, moved pretty much in
lock-step with the broader stock market indices. A hair-raising 10% stock
market decline in mid-April quickly reversed itself and the broad market
indices (and the Total Return Fund) thereafter moved on to a series of new
highs. Bonds did not fare as well as stocks as explained below, but our Bond
Fund did perform well relative to its proxy.
As mentioned in previous reports, the combination of a potential tax cut and
the probability of further declines in future budget deficits bodes well for
both stocks and bonds as we move towards summer.
TOTAL RETURN FUND
Philosophy
- ----------
The Total Return Fund is a broadly diversified portfolio invested in
securities across all economic sectors as illustrated in the chart on the
right. Within each sector we attempt to select companies which are
experiencing increasing cash flow returns on their invested capital.
INDUSTRY SECTOR ANALYSIS
April 30, 1997
S&P Sheffield Total
500 Index Return Fund
--------- ---------------
Basic Materials 5.1% 6.8%
Energy 8.9% 10.8%
Industrial 11.1% 14.5%
Conglomerates .3% 1.2%
Consumer Cyclical 12.7% 6.0%
Consumer Noncyclical 21.3% 21.7%
Technology 16.1% 21.2%
Financial 15.3% 14.3%
Utility 9.2% 3.4%
Foreign 0% 0%
Furthermore, we seek out those companies experiencing faster earnings growth
rates and faster dividend growth rates than the overall stock market. Growth
rates alone, however, do not make for a superior investment opportunity, as it
is easy to overpay for expected future growth. Our stock valuation model
therefore aides us in determining whether the current price of a stock is
reasonable relative to its expected future growth rate and other factors.
Diversification
- ---------------
During the past six months, the economic diversification of the Fund remained
fairly stable. Given its growth orientation, technology continues to have the
heaviest weighting in the Fund relative to its weighting within the S&P 500
Index. Companies in the industrial sector constitute another area of
relatively heavier concentration. Many of the companies in this sector have
had attractive valuations relative to the overall stock market for the past
few years. Now they represent many of the better investment opportunities in a
market where fewer attractive investment opportunities remain undiscovered.
Performance
- -----------
The Fund has gradually shifted emphasis to larger-capitalization companies
during the past 18 months. Presently, the median capitalization of the Fund's
security holdings is approximately $9.2 billion. During this period of time,
large-cap stocks have outperformed mid-cap stocks and small-cap stocks by a
substantial margin. This phenomenon has benefited those managers whose
portfolios contain a significant percentage of large-cap stocks. Considering
the relatively high valuations of many of these stocks today in relation to
their long-term earnings growth rates, further appreciation potential for
these bluest of blue chips seems more limited now than at any time in the past
few years.
During the past six months, the Fund has generated a total return of 13.8% net
of all fees and expenses. The S&P 500 Index has realized a total return of
14.7% during this same period of time.
INTERMEDIATE TERM BOND FUND
Philosophy
- ----------
Our investment goals for this Fund are twofold. First, we seek to manage a
portfolio of investment quality, intermediate-term corporate bonds.
Intermediate-term bonds 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 investment phenomena. Second,
we seek a modest degree of capital appreciation 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-
yielding common stocks.
Interest rates during the first six months of the Fund's fiscal year have
gradually increased due in part to the Federal Reserve increase in the
discount rate (see adjoining chart). We believe the impact of this action
will be short-lived in the bond markets as the more fundamental unfolding
economic events are favoring lower interest rates in the future.
YIELD CURVE FOR U.S. GOVERNMENT BONDS
10/31/96 4/30/97
Active Active
U.S. Govt U.S. Govt
Bonds Bonds
--------- ---------
3 mos. 5.14 5.23
6 mos. 5.26 5.52
1 year 5.40 5.88
2 year 5.73 6.27
3 year 5.86 6.39
4 year 5.89 6.47
5 year 6.07 6.56
7 year 6.14 6.64
10 year 6.34 6.70
20 year 6.69 7.03
30 year 6.64 6.95
Anticipating that rates will continue to decline by virtue of these economic
events for the foreseeable future, we have recently begun to increase the
average maturity of the bond portfolio. Lengthening the average maturity will
result in larger portfolio gains if, in fact, interest rates continue to
decline. As of April 30, the portfolio's average maturity was 5.3 years. The
Fund is allowed to vary its average maturity within a range of 3 to 7 years.
Other Characteristics
- ---------------------
While the Fund maintains a portfolio primarily consisting of investment grade
bonds (BBB or better) we may drop below this level for the purchase of
convertible bonds. Furthermore, if bonds which have been investment grade when
we bought them subsequently drop below BBB while we own them, the portfolio
managers decide whether to maintain or sell the holdings. The rating mix of
the bonds in the Fund's portfolio is presented in the chart to the left.
RATING MIX
AA 8.8%
A 58.9%
BBB 26.5%
BB 2.9%
B 2.9%
Performance
- -----------
The Bond Fund has continued to outperform its bond market proxy during the
first six months of the present fiscal year. Through April 30, 1997, the Fund
realized a total return of 2.3%, compared to 1.6% for the Lehman Intermediate
Term Bond Index. Rising interest rates during this period, as described
above, have modestly reduced the value of the portfolio's bond holdings. This
reduction has offset the interest income earned and the equity appreciation,
resulting in the total return figure presented above.
Very truly yours,
Roger A. Sheffield, CFA
President
SHEFFIELD TOTAL RETURN FUND
Portfolio of Investments
April 30, 1997
(unaudited)
- -----------------------------------------------------------------------------
Short-term Investments (.0%) Par Value
- -----------------------------------------------------------------------------
United Missouri Bank Money Market
(cost - $2,165) $2,165 $2,165
- -----------------------------------------------------------------------------
Common Stocks (99.4%) Shares
- -----------------------------------------------------------------------------
Aerospace - 1.1%
Boeing Co. 2,972 293,114
-------
Auto/Truck Parts - 1.3%
Autoliv, Inc. 2,114 75,054
Genuine Parts Co. 8,100 262,237
-------
337,291
-------
Banking - 4.9%
BankAmerica Corp. 2,000 233,750
First Union Corp. 4,100 344,400
NationsBank Corp. 6,280 379,155
Summit Bancorp 6,900 320,850
-------
1,278,155
---------
Beverages - 4.1%
Alcoholic - 1.5%
Anheuser Busch Cos., Inc. 9,400 403,025
-------
Soft Drink - 2.6%
Coca-Cola Co. 5,600 356,300
Pepsico, Inc. 9,000 313,875
-------
670,175
-------
Building Materials/Construction - .9%
Masco Corporation 6,000 226,500
-------
Chemicals - 6.1%
Basic - 4.0%
DuPont E.I. De Nemours & Co. 2,700 286,538
Monsanto Co. 10,000 426,250
Sherwin-Williams Co. 11,000 332,750
-------
1,045,538
---------
Specialty - 2.1%
Avery Dennison Corp. 15,200 558,600
-------
Commerical Services - .8%
Accustaff Inc.* 10,800 197,100
-------
Computer Hardware - 3.0%
Cisco Systems, Inc.* 4,400 227,700
Hewlett Packard Co. 6,115 321,037
SCI Systems, Inc.* 4,000 247,000
-------
795,737
-------
- -----------------------------------------------------------------------------
Common Stocks - continued Shares Value
- -----------------------------------------------------------------------------
Computer Software - 3.3%
Microsoft Corp.* 4,600 $558,900
Parametric Technology Corp.* 6,600 298,650
-------
857,550
-------
Cosmetics - .9%
Avon Products, Inc. 4,000 247,000
-------
Diversified - 4.4%
Allied Signal, Inc. 4,400 317,900
Johnson Controls Industries, Inc. 7,000 268,625
Morton International, Inc. 6,200 186,775
PPG Industries, Inc. 6,900 375,188
-------
1,148,488
---------
Electrical Equipment - 2.6%
Honeywell, Inc. 5,100 360,188
Baldor Electric Co. 12,700 325,437
-------
685,625
-------
Electronics - 7.4%
Avnet, Inc. 4,500 273,937
Diebold, Inc. 11,925 402,469
Eastman Kodak Co. 3,500 290,938
Eaton Corp. 2,700 202,162
Harris Corp. 3,100 265,050
Motorola, Inc. 3,865 220,788
Rockwell International Corp. 4,100 272,650
-------
1,927,994
---------
Electronics - Semiconductor - 4.4%
Applied Materials, Inc.* 6,260 343,518
Intel Corp. 3,860 591,062
Linear Technology Corp. 4,375 219,844
-------
1,154,424
---------
Financial Services - 2.3%
Franklin Resources, Inc. 5,550 328,144
MGIC Investment Corp. 3,400 276,250
-------
604,394
-------
Food Products - 4.7%
Conagra, Inc. 4,000 230,500
Dole Food Co., Inc. 5,240 212,875
Hershey Foods Corp. 6,000 325,500
Philip Morris Cos. 12,000 472,500
-------
1,241,375
---------
Household/Office Furnishings - .5%
Herman Miller, Inc.+ 3,600 116,550
-------
- -----------------------------------------------------------------------------
Common Stocks - continued Shares Value
- -----------------------------------------------------------------------------
Household Products - 3.1%
Colgate Palmolive Co. 3,700 $ 410,700
Procter & Gamble Co. 3,300 414,975
-------
825,675
-------
Insurance - 5.9%
Allstate Corp. 5,898 385,582
Beneficial Corp. 5,200 332,800
Cigna Corp. 1,800 270,675
Reliastar Financial Corp. 6,600 398,475
SunAmerica, Inc. 3,200 147,600
-------
1,535,132
---------
Manufacturing - 5.4%
Donaldson Co., Inc. 8,500 291,125
Dover Corp. 5,000 265,000
Illinois Tool Works Inc. 3,200 292,400
Manitowoc, Inc. 5,100 206,550
Stanley Works 9,000 349,875
-------
1,404,950
---------
Medical - Pharmaceutical - 7.7%
Abbott Laboratories 5,000 305,000
Boston Scientific Corp.* 3,000 144,750
Medtronic Inc. 4,000 277,000
Merck & Co. 4,000 361,500
Pfizer, Inc. 6,400 614,400
Schering Plough Corp. 4,000 319,000
-------
2,021,650
---------
Office Equipment - 2.6%
Pitney Bowes, Inc. 4,700 300,800
Xerox Corp. 6,300 387,450
-------
688,250
-------
Oil & Gas - 9.4%
Amoco Corp. 3,900 326,138
Ashland, Inc. 3,500 156,187
Exxon Corp. 6,000 339,750
Global Marine, Inc.*+ 16,000 322,000
Helmerich & Payne 4,700 224,425
Mobil Corp. 2,390 310,700
Smith International Inc.* 4,800 227,400
Tidewater, Inc. 5,920 237,540
Tosco Corp. 10,500 311,062
-------
2,455,202
---------
Restaurants - .9%
Wendy's International, Inc. 11,600 239,250
-------
- -----------------------------------------------------------------------------
Common Stocks - continued Shares Value
- -----------------------------------------------------------------------------
Retail - 3.4%
Department Stores - 2.5%
Dollar General Corp. 12,031 $ 380,480
Wal-Mart Stores, Inc. 10,000 281,250
-------
661,730
-------
Grocery - .9%
Albertsons, Inc. 7,000 231,000
-------
Savings and Loans - 1.2%
John Hancock Bank & Thrift Opportunity Fund 9,600 302,400
-------
Telephone - 3.4%
Ameritech Corp. 6,300 385,088
Cincinnati Bell, Inc. 7,000 392,000
Lucent Technologies, Inc. 1,912 112,808
-------
889,896
-------
Transportation - 2.3%
Canadian Pacific Ltd. 12,000 294,000
Illinois Central Corp. Series A 9,450 314,212
-------
608,212
-------
Utilities - 1.4%
Natural Gas - 1.4%
Williams Co., Inc. 8,512 374,528
-------
- -----------------------------------------------------------------------------
Total Common Stocks
(cost - $17,254,848) $26,026,510
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Total Investments (99.4%)
(cost - $17,257,013) $26,028,675
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Written Call Options Outstanding (0%) Shares Value
- -----------------------------------------------------------------------------
Global Marine Inc. Call Jul/27.50 7,000 ($1,316)
Herman Miller Inc. Call May/37.50 3,600 (1,127)
-------
(2,443)
-------
- -----------------------------------------------------------------------------
Total Short Options
(Premiums received - $12,836) ($2,443)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities (.6%) $168,016
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net Assets (100%) $26,194,248
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net Asset Value Per Share $16.07
=====
- -----------------------------------------------------------------------------
* Non-income producing.
+ Portion of the security is segragated as collateral for call options
written. Aggregate value of segregated securities - $257,425
SHEFFIELD INTERMEDIATE TERM BOND FUND
Portfolio of Investments
April 30, 1997
(unaudited)
- -----------------------------------------------------------------------------
Short-term Investments (1.6%) Par Value
- -----------------------------------------------------------------------------
UMB Bank Money Market
(cost - $114,038) $114,038 $114,038
- -----------------------------------------------------------------------------
Common Stocks (11.9%) Shares
- -----------------------------------------------------------------------------
Auto - 1.0%
General Motors Corp. 1,200 $69,450
------
Banking - 1.3%
JP Morgan & Co. 900 91,687
------
Chemicals - 2.7%
DuPont (E.I.) Denemours & Co. 965 102,411
Minnesota Mining & Mfg. Co. 1,055 91,785
-------
194,196
-------
Food Products - 1.4%
Philip Morris Cos. 2,475 97,453
------
Oil & Gas - 3.7%
Chevron Corp. 1,165 79,803
Exxon Corp. 1,690 95,696
Texaco, Inc. 980 103,390
-------
278,889
-------
Paper & Forest Products - 1.0%
International Paper Co. 1,700 71,825
------
Telephone - .8%
AT&T Corp. 1,600 53,600
------
- -----------------------------------------------------------------------------
Total Common Stocks
(cost - $592,786) $857,100
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Corporate Bonds and Notes (84.9%) Par Value
- -----------------------------------------------------------------------------
Aerospace - 1.4%
Lockheed Martin Corp. 7.250%
Guaranteed Notes 5/15/06 $100,000 100,158
-------
Banking - 9.5%
Banc One Corp. 7.25% Sub. Notes
8/1/02 250,000 252,442
Bankamerica Corp 9.2% Sub. Notes
5/15/03 200,000 219,900
Bankers Trust NY Corp. 9.0% Deb.
8/1/01 200,000 214,254
-------
686,596
-------
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - continued Par Value
- -----------------------------------------------------------------------------
Commerical Services - 7.5%
Browning-Ferris Industries, Inc. 6.375%
Notes 1/15/08 150,000 139,516
Hertz Corp. 7.0% Sr. Notes 4/15/01 200,000 200,196
Service Corp. International 7.375%
Notes 4/15/04 200,000 201,106
-------
540,818
-------
Computer Systems - 1.4%
International Business Machines Corp.
6.375% Notes 6/15/00 100,000 98,978
------
Containers - 3.4%
Crown Cork and Seal Co. 6.750%
Notes 4/15/03 250,000 245,168
-------
Diversified - 1.6%
Allied Signal Inc. 9.875% Deb. 6/1/02 100,000 112,228
-------
Electrical Equipment - 6.6%
Eastman Kodak Co. 9.375% Deb. 3/15/03 100,000 111,358
Honeywell, Inc. 7.00% Notes 3/15/07 200,000 196,982
Westinghouse Electric Corp. 8.875%
Deb. 6/1/01 160,000 166,920
-------
475,260
-------
Electronics - Semiconductor - 1.4%
Applied Material 8.00% Sr. Notes 9/1/04 100,000 103,682
-------
Financial Services - 7.9%
Bear Stearns Co. 6.7% Sr. Notes 8/1/03 200,000 194,788
Household Financial Corp. 6.7% Notes
6/15/02 180,000 177,057
Household Financial Corp. 7.25% Notes
5/15/06 200,000 198,084
-------
569,929
-------
Healthcare - 3.5%
Rhone-Poulenc 7.75% Notes 1/15/02 250,000 255,455
-------
Household Products - 4.4%
Black & Decker 6.625% Notes 11/15/00 320,000 317,341
-------
Insurance - 3.0%
Progressive Corp. 10.0% Deb. 12/15/00 200,000 219,496
-------
Office Equipment - 3.7%
Xerox Credit Corp. 9.75% Deb. 3/15/00 250,000 269,125
-------
Other - .4%
Swedish Export Credit 9.875% Deb.
3/15/38 30,000 32,048
------
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - continued Par Value
- -----------------------------------------------------------------------------
Personal & Business Credit - 14.0%
Associate Corp. of N. America 6.375%
Sr. Notes 10/15/02 250,000 243,270
Ford Capital BV 9.375% Deb. 5/15/01 200,000 216,494
General Motors Acceptance Corp. 8.4%
Notes 10/15/99 200,000 207,566
Sear Roebuck Acceptance Corp. 6.750%
Notes 9/15/05 150,000 144,916
Transamerica Financial Corp. 7.5% Sr.
Notes 3/15/04 200,000 202,622
-------
1,014,868
---------
Retail - 5.7%
Department Stores - 5.0%
K-Mart Inc. 9.8% Med. Term Notes
6/15/98 250,000 251,250
Wal-Mart Stores 9.1% Notes 7/15/00 100,000 106,773
-------
358,023
-------
Specialty - .7%
Fruit of the Loom Inc. 7.875% Sr.
Notes 10/15/99 50,000 51,053
------
Utilities - Electric & Gas - 6.9%
Baltimore Gas & Electric Co. 6.5%
1st Ref. Mortgage Bonds 2/15/03 140,000 135,954
Commonwealth Edison Co. Mortgage
9.375% Bonds 2/15/00 250,000 264,435
Public Service Oklahoma 7.25% 1st
Mortgage Bonds 1/1/99 100,000 100,354
-------
500,743
-------
Utilities - Natural Gas - 2.6%
Williams Corp. 6.25% Deb. 2/1/06 200,000 186,232
-------
- -----------------------------------------------------------------------------
Total Bonds and Notes
(cost - $6,072,427) $6,137,201
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Total Investments (98.4%)
(cost - $6,779,251) $7,108,339
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities (1.6%) $113,674
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net Assets (100%) $7,222,013
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Net Asset Value Per Share $9.31
=====
- -----------------------------------------------------------------------------
See accompanying notes to the financial statements.
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Statements of Assets and Liabilites
April 30, 1997 (unaudited)
- -----------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
--------- ------------
Assets:
Investments at value (cost of
$17,257,013 and $6,779,251,
respectively) $26,028,675 $7,108,339
Receivables:
Interest --- 121,946
Dividends 20,225 528
Portfolio securities sold 237,114 ---
Prepaid insurance 9,065 2,224
---------- ---------
Total assets 26,295,079 7,233,037
---------- ---------
Liabilities:
Variation Margin -Due to broker 1,800 1,532
Interest 1,363 ---
Investment securities purchased 67,682 ---
Oustanding call options written 2,443 ---
Redemptions payable --- ---
Accrued expenses 27,543 9,492
------- ------
Total liabilities 100,831 11,024
------- ------
Net Assets Consisting of:
Undistributed net investment income (1,877) 15,891
Accumulated net realized gain 994,693 80,302
Unrealized appreciation on
investments 8,782,055 329,088
Paid-in capital applicable to
1,630,201 and 775,517 shares
outstanding, respectively, of $.001
par value capital stock; 5,000,000
shares authorized in each fund 16,419,377 6,796,732
----------- ----------
Net Assets $26,194,248 $7,222,013
----------- ----------
Net Asset Value Per Share $16.07 $9.31
====== =====
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
Statements of Operations
For the six months ended April 30, 1997 (unaudited)
- -----------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
--------- ------------
Investment Income:
Interest $ 2,096 $ 206,990
Dividends 232,104 13,774
------- -------
Total income 234,200 220,764
------- -------
Expenses:
Investment advisory fee 130,832 33,116
Investment advisory fee waived --- (8,472)
Administration fee 24,000 24,000
Administrative fee waived --- (12,500)
Transfer agency fee 5,000 5,000
Distribution expenses 3,347 3,345
Custodian fees 5,951 2,500
Registration and filing fees 1,103 1,103
Professional fees 4,130 4,130
Directors fees 2,400 2,400
Printing and postage 3,053 3,052
Insurance expense 5,089 1,193
Other 723 386
------- -------
Total expenses 185,628 59,253
------- -------
Net investment income 48,572 161,511
------- -------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 1,022,695 80,137
Net realized gain (loss) on futures (28,002) 166
Change in unrealized appreciation
(depreciation) on investments 2,292,018 (64,720)
--------- -------
Net gain on investments 3,286,711 15,583
--------- ------
Net increase in net assets from
operations $3,335,283 $177,094
========== ========
- -----------------------------------------------------------------------------
Statements of Changes in Net Assets
For the six months ended April 30, 1997 (unaudited)
and for the year ended October 31, 1996
- -----------------------------------------------------------------------------
Sheffield Total
Return Fund
----------------------------------
Six Months
ended Year ended
4/30/97 10/31/96
----------- ----------
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 48,572 $ 156,995
Net realized gain on investments 1,022,695 1,446,749
Net realized loss on futures (28,002) (52,828)
Change in unrealized appreciation
on investments 2,292,018 3,183,317
--------- ---------
Increase in net assets from
operations 3,335,283 4,734,233
--------- ---------
Dividends to shareholders from:
Net investment income (140,480) (184,571)
Realized gains (1,393,921) (829,079)
---------- --------
Total distributions to shareholders (1,534,401) (1,013,650)
---------- ----------
Capital transactions:
Proceeds from shares issued
through exchange 299,900 1,148,180
Proceeds from reinvestment of
dividends 1,534,401 1,013,650
Proceeds from other shares sold 455,713 826,934
Cost of shares reacquired through
exchange (861,455) (589,520)
Cost of other shares reacquired (2,292,564) (2,427,588)
---------- ----------
Decrease in net assets from capital
share transactions (864,005) (28,344)
-------- -------
Total increase 936,877 3,692,239
------- ---------
Net Assets:
Beginning of period 25,257,371 21,565,132
---------- ----------
End of period $26,194,248 $25,257,371
========== ==========
Capital transactions in number of shares:
Shares issued through exchange 19,141 87,222
Shares issued in connection with
reinvestment of dividends 101,281 79,878
Other shares sold 29,101 57,467
Shares reacquired through exchange (54,693) (42,231)
Other shares reacquired (145,715) (177,948)
-------- --------
Net increase (decrease) in shares
outstanding (50,885) 4,388
====== =====
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
Statements of Changes in Net Assets
For the six months ended April 30, 1997 (unaudited)
and for the year ended October 31, 1996
- -----------------------------------------------------------------------------
Sheffield Intermediate
Term Bond Fund
----------------------------------
Six Months
ended Year ended
4/30/97 10/31/96
----------- ----------
Increase (Decrease) in Net Assets:
Operations:
Net investment income $161,511 $307,236
Net realized gain on investments 80,137 244,750
Net realized gain on futures 166 1,759
Change in unrealized appreciation
on investments (64,720) (55,492)
------- -------
Increase in net assets from
operations 177,094 498,253
------- -------
Dividends to shareholders from:
Net investment income (173,417) (308,895)
Realized gains (246,510) (85,839)
-------- --------
Total distributions to shareholders (419,927) (394,734)
-------- --------
Capital transactions:
Proceeds from shares issued
through exchange 861,455 589,520
Proceeds from reinvestment of
dividends 419,927 394,734
Proceeds from other shares sold 246,400 921,628
Cost of shares reacquired through
exchange (299,900) (1,148,180)
Cost of other shares reacquired (623,024) (1,735,152)
-------- ----------
Increase (decrease) in net assets
from capital share transactions 604,858 (977,450)
------- --------
Total increase (decrease) 362,025 (873,931)
------- --------
Net Assets:
Beginning of period 6,859,988 7,733,919
--------- ---------
End of period $7,222,013 $6,859,988
========= =========
Capital transactions in number of shares:
Shares issued through exchange 92,942 62,061
Shares issued in connection with
reinvestment of dividends 45,072 41,663
Other shares sold 26,530 96,899
Shares reacquired through exchange (31,496) (119,339)
Other shares reacquired (64,775) (180,660)
------- --------
Net increase (decrease) in shares
outstanding 68,273 (99,376)
====== =======
- -----------------------------------------------------------------------------
Financial Highlights
- -----------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
Sheffield Total Return Fund
---------------------------
Year ended October 31,
<CAPTION>
Six Months
ended
April 30, ------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.02 $12.86 $11.53 $12.71 $12.30 $11.82
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .03 .09 .11 .10 .12 .09
Net gains (losses) on securities
(both realized and unrealized) 1.98 2.67 1.68 (.38) 1.75 .47
---- ---- ---- ----- ---- ---
Total from investment operations 2.01 2.76 1.79 (.28) 1.87 .56
---- ---- ---- ----- ---- ---
Less Distributions:
Dividends (from net investment income) (.09) (.11) (.12) (.11) (.12) (.08)
Distributions (from realized gains) (.87) (.49) (.34) (.79) (1.34) ---
----- ----- ----- ----- ------ ----
Total distributions (.96) (.60) (.46) (.90) (1.46) (.08)
----- ----- ----- ----- ------ -----
Net Asset Value, end of period $16.07 $15.02 $12.86 $11.53 $12.71 $12.30
====== ====== ====== ====== ====== ======
Total return 13.80% 22.36% 16.33% -2.31% 16.59% 4.79%
Ratios/supplemental data:
Net assets, end of period (000's) $26,194 $25,257 $21,565 $18,185 $27,504 $19,380
Ratio of expenses to average
net assets 1.41%* 1.44% 1.60% 1.50% 1.47% 1.66%
Ratio of net investment income
to average net assets .37%* .66% .90% .83% 1.00% .82%
Portfolio turnover rate 33.26%* 57.17% 55.16% 51.25% 100.28% 119.87%
Average commission per share+ $.079 $.076 (a) (a) (a) (a)
</TABLE>
* Annualized.
+ Computed by dividing total amount of commission paid by total number of
shares purchased and sold during the period for which there was a commission
charged.
(a) Disclosure not applicable to prior periods.
See accompanying notes to financial statements.
- -----------------------------------------------------------------------------
Financial Highlights
- -----------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
Sheffield Intermediate Term Bond Fund
-------------------------------------
Year ended October 31,
<CAPTION>
Six Months
ended
April 30, -------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.70 $9.59 $9.06 $10.14 $9.98 $9.81
----- ----- ----- ------ ----- -----
Income from investment operations:
Net investment income .21 .46 .53 .48 .52 .58
Net gains (losses) on securities
(both realized and unrealized) .02 .24 .60 (.71) .32 .17
---- ---- ---- ----- ---- ----
Total from investment operations .23 .70 1.13 (.23) .84 .75
---- ---- ---- ----- ---- ----
Less Distributions:
Dividends (from net investment income) (.25) (.47) (.57) (.45) (.58) (.58)
Distributions (from realized gains) (.37) (.12) (.03) (.40) (.10) ---
----- ----- ----- ----- ----- -----
Total distributions (.62) (.59) (.60) (.85) (.68) (.58)
----- ----- ----- ----- ----- -----
Net Asset Value, end of period $9.31 $9.70 $9.59 $9.06 $10.14 $9.98
===== ===== ===== ===== ====== =====
Total return 2.28% 7.64% 12.89% -2.42% 8.73% 7.78%
Ratios/supplemental data:
Net assets, end of period (000's) $7,222 $6,860 $7,734 $9,284 $7,698 $11,973
Ratio of expenses to average net
assets 1.79%+* 1.86%+ 1.78%+ 2.08%+ 2.04%+ 1.91%
Ratio of net investment income
to average net assets 4.87%* 4.87% 5.61% 5.01% 5.19% 5.87%
Portfolio turnover rate 25.18%* 33.65% 34.99% 30.38% 21.70% 59.54%
Average commission per share++ $.080 $.079 (a) (a) (a) (a)
</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 2.39%, 2.47%, 2.03%, 2.34%, and 2.17% for the period ending
April 30, 1997 and for the years 1996, 1995, 1994, and 1993, respectively.
++ Computed by dividing total amount of commission paid by total number of
shares purchased and sold during the period for which there was a
commission charged.
(a) Disclosure not applicable to prior periods.
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. At April 30, 1997,
there were no open futures contracts.
D. Option Writing - When the Company writes an option, an amount equal to
the premium received by the Company is recorded as a liability and is
subsequently adjusted to the current market value of the option written.
Premiums received from writing options which expire unexercised are
treated by the Company on the expiration date as realized gains from
investments. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions,
is also treated as a realized gain, or if the premium is less than the
amount paid for the closing purchase transaction, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the
sale of the underlying security or currency in determining whether the
Company has realized a gain or loss. If a put option is exercised, the
premium reduces the cost basis of the securities purchased by the Company.
The Company as writer of an option bears the market risk of an unfavorable
change in the price of the security underlying the written option.
E. 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, 1997, the aggregate cost of securities for federal income tax
and financial reporting purposes for the Total Return Fund was $17,257,013
and net unrealized appreciation aggregated $8,771,662 of which $8,954,507
related to appreciated securities and $182,845 related to depreciated
securities. Net appreciation on call options outstanding amounted to
$10,393. The aggregate tax cost of securities for the Bond Fund was
$6,779,251 and net unrealized appreciation aggregated $329,088, of which
$386,559 related to appreciated securities and $57,471 related to
depreciated securities.
F. 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.
G. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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, 1997,
amounted to approximately $8,500.
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, 1997, SIMI waived administrative fees to the Bond Fund
amounting to approximately $12,500.
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, service cost, and overhead 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,
1997, 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
- ----------- ----------- ----------- ---------
$ 4,350,093 $ 5,852,847 $ 1,078,505 $ 745,539
The Total Return Fund had transactions in call options as follows:
Number of
Contracts Premiums
Options outstanding at
October 31, 1996 40 $11,920
Options written 116 16,056
Options bought back (40) (12,923)
Options purchased (130) (8,397)
Options sold 130 8,397
Options assigned (10) (2,217)
---- --------
Options outstanding at
April 30, 1997 106 $12,836
==== =======
Note 4. Related Party Stockholders. At April 30, 1997, the Sheffield
Investment Management, Inc. Profit Sharing Plan owned 9,509 shares of the Bond
Fund and 13,219 shares of the Total Return Fund. The President of SIMI and
related family members owned 2,570 shares of the Total Return Fund.
