THE SHEFFIELD FUNDS, INC.
=============================================================================
April 30, 1998
Dear Shareholder:
The stock and bond markets continued their winning ways during the past six
months as economic conditions in the U.S. continued to be robust. Economic
problems throughout Asia have had varying impacts on different industry
groups, with high-technology companies continuing to bear the brunt of the
Asian slowdown.
The Federal Reserve, while holding short-term interest rates steady for the
present, continues to send out warnings that interest rates will probably
rise later this year should the economy continue to grow at its current
rate.
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. Within
each sector, we attempt to select companies which are experiencing increasing
cash flow returns on their invested capital.
Industry Sector Analysis
4/30/98 10/31/97
------- --------
Basic Materials 3.9% 5.6%
Energy 11.7% 11.6%
Industrial 14.8% 16.6%
Conglomerates 2.7% 2.8%
Consumer Cyclical 9.6% 7.3%
Consumer Non Cyclical 16.7% 15.8%
Technology 19.7% 19.3%
Financial 15.2% 17.3%
Utilities 5.7% 3.8%
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.
PERFORMANCE
The Fund's asset mix experienced only modest changes during the past six
months. As illustrated in the chart on this page, our financial sector
stock percentage was reduced primarily because of the liquidation of our
Beneficial Finance Company ownership as a result of a takeover. Selling
activity occurred in a number of other stocks, including Illinois Central
(due to a takeover) and Dollar General, Monsanto, Stanley Works and Accustaff
(sale price targets achieved).
In spite of strong gains across a number of industries, the Fund under-
performed the S&P for the six-month period with a return of 16.6% as compared
to 22.5% for the S&P 500. The primary culprit was the Fund's significant
holdings of oil service stocks. The price of oil, which had held steady
during the first three quarters of 1997, began a precipitous decline in
October. From a level of approximately $21 a barrel, oil fell to its present
level of approximately $15 per barrel. The Fund was, and remains, over-
weighted in oil service stocks. In spite of the oil price decline, many of
the companies that service the oil and gas drilling industry continue to
experience strong increases in earnings. Our emphasis has been to invest in
those companies that service the offshore drilling market and that provide
technological services which help to lower the cost of finding and lifting
oil and gas from the ground.
While earnings are rising at very rapid rates for the companies we own,
short-sighted investors have dumped these stocks as the price of oil has
declined. We have chosen to ride out the storm by maintaining our holdings
in the face of 25-40% declines in their prices. In fact, we believe many of
these stocks are substantially undervalued in a stock market which is
generally acknowledged to be fully priced.
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.
Out of the broad universe of fixed- and variable-rate instruments traded in
the marketplace, our Fund focuses primarily on investment-quality corporate
bonds which typically mature 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 security holdings will help to offset the operating
expenses incurred by the Fund over a three-to-five year period of time.
Finally, we can acquire adjustable rate securities. Typically, the income
paid on these securities will change as the general level of interest rates
change. 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 does not own any variable-rate
securities at this time.
PERFORMANCE
Interest rates have experienced a negligible decline during the past six
months for intermediate and long-term bonds. The interest rate on short-term
paper (3 months to 2 years) remained virtually unchanged during this period.
As a result, bond returns have been very unexciting. The bond fund's total
return was 3.1% which compares favorably with the 3.3% return of the Lehman
Corporate Intermediate Bond Index.
Very truly yours,
Roger A. Sheffield, CFA Caroline L. Scott, CFA
President Treasurer
SHEFFIELD TOTAL RETURN FUND
Portfolio of Investments
April 30, 1998
(unaudited)
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.6%) PAR VALUE
- --------------------------------------------------------------------------
UMB Bank Money Market
(cost - $89,287) $ 89,287 $89,287
Cash pledged as collateral on option sold+
(cost - $90,000) 90,000 90,000
-------
179,287
- --------------------------------------------------------------------------
COMMON STOCKS (96.5%) SHARES
- --------------------------------------------------------------------------
AEROSPACE - 1.1%
Precision Castparts Corp. 5,630 349,764
-------
AUTO/TRUCK PARTS - 4.3%
Borg Warner Automotive 6,000 373,125
Eaton Corp. 4,000 369,500
Goodyear Tire & Rubber Co. 3,100 217,000
Magna International, Inc., Class A 4,300 320,619
---------
1,280,244
---------
BANKING - 5.5%
BankAmerica Corp. 4,000 341,500
Citicorp 2,200 331,100
First Union Corp. 8,200 495,075
NationsBank Corp. 6,280 477,280
---------
1,644,955
---------
BEVERAGES - 2.6%
Coca-Cola Co. 5,600 424,900
Pepsico, Inc. 9,000 357,188
-------
782,088
-------
BUILDING MATERIALS/CONSTRUCTION - 3.1%
Masco Corp. 6,770 392,660
PPG Industries, Inc. 7,600 537,225
-------
929,885
-------
CHEMICALS - 3.8%
Basic - 1.4%
DuPont E.I. De Nemours & Co. 6,000 436,875
-------
Specialty - 2.4%
Avery Dennison Corp. 8,000 419,000
Ecolab, Inc. 9,400 297,862
-------
716,862
-------
COMPUTER HARDWARE - 3.7%
Cisco Systems, Inc.*+ 6,600 483,450
SCI Systems, Inc.* 9,000 370,687
Unisys Corp. 12,000 267,750
---------
1,121,887
---------
COMPUTER SOFTWARE - 4.2%
Microsoft Corp.* 4,600 414,575
Network Associates, Inc.* 5,810 397,985
Parametric Technology Corp.* 14,000 447,563
---------
1,260,123
---------
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- --------------------------------------------------------------------------
DIVERSIFIED - 2.6%
Allied Signal, Inc. 8,800 385,550
Textron, Inc. 5,200 406,900
-------
792,450
-------
ELECTRICAL EQUIPMENT - 3.1%
Baldor Electric Co. 14,320 375,900
Honeywell, Inc. 5,900 549,437
-------
925,337
-------
ELECTRONICS - 1.2%
Harris Corp. 7,700 372,487
-------
ELECTRONICS - SEMICONDUCTOR - 3.2%
Applied Materials, Inc.* 7,000 252,875
Intel Corp. 3,540 286,076
Linear Technology Corp.+ 5,100 410,550
-------
949,501
-------
FINANCIAL SERVICES - 3.4%
Franklin Resources, Inc. 11,100 596,625
MGIC Investment Corp. 6,800 428,400
---------
1,025,025
---------
ENTERTAINMENT/LEISURE - 2.3%
Brunswick Corp. 9,100 295,750
Mattel, Inc. 10,000 383,125
-------
678,875
-------
FOOD PRODUCTS - 2.2%
Hershey Foods Corp. 5,000 366,250
Philip Morris Cos. 8,000 297,000
-------
663,250
-------
HOUSEHOLD/OFFICE FURNISHINGS - 1.4%
Leggett & Platt, Inc. 8,000 415,500
-------
HOMEBUILDING - 1.0%
Oakwood Homes Corp. 11,100 312,881
-------
HOUSEHOLD PRODUCTS - 2.8%
Colgate Palmolive Co. 4,200 376,688
Procter & Gamble Co. 5,600 460,250
-------
836,938
-------
INSURANCE - 5.6%
Allstate Corp. 5,000 481,250
Cigna Corp. 1,700 351,794
Reliastar Financial Corp. 13,240 604,075
SunAmerica, Inc. 4,800 239,700
---------
1,676,819
---------
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- --------------------------------------------------------------------------
MANUFACTURING - 7.1%
Deere & Co. 6,000 $350,625
Donaldson Co., Inc. 11,000 279,125
Dover Corp. 10,000 395,000
Illinois Tool Work, Inc. 6,400 451,200
Manitowoc, Inc. 7,650 356,681
Parker Hannifin Corp. 7,140 317,730
---------
2,150,361
---------
MEDICAL - PHARMACEUTICAL - 6.8%
Abbott Laboratories 5,500 402,188
ICN Pharmaceuticals 9,150 450,638
Medtronic Inc.+ 6,000 318,000
Merck & Co. 3,350 403,675
Schering Plough Corp. 6,000 481,875
---------
2,056,376
---------
OFFICE EQUIPMENT - 4.8%
Diebold, Inc. 9,700 397,700
Pitney Bowes, Inc. 7,000 336,000
Xerox Corp. 6,300 715,050
---------
1,448,750
---------
PETROLEUM (INTEGRATED) - 4.0%
Exxon Corp. 6,000 438,375
Mobil Corp. 4,780 378,218
Tosco Corp. 10,500 374,062
---------
1,190,655
---------
OILFIELD SERVICES/EQUIPMENT - 4.7%
Global Marine, Inc. 16,000 374,000
Helmerich & Payne 10,000 305,000
National Oilwell, Inc.* 8,000 303,500
Smith International, Inc. 3,100 182,125
Tidewater, Inc. 5,920 234,580
---------
1,399,205
---------
RETAIL - 2.6%
DEPARTMENT STORES - 1.6%
Wal-Mart Stores, Inc. 9,680 489,445
-------
GROCERY - 1.0%
Albertsons, Inc. 6,000 300,375
-------
SAVINGS AND LOANS - 0.7%
John Hancock Bank & Thrift
Opportunity Fund 15,460 204,845
-------
TELEPHONE - 5.7%
Ameritech Corp. 12,600 536,287
Bell Atlantic Corp. 5,380 503,366
Cincinnati Bell, Inc. 12,600 481,950
Worldcom, Inc.* 4,500 192,516
---------
1,714,119
---------
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- --------------------------------------------------------------------------
UTILITIES - NATURAL GAS - 3.0%
Columbia Gas Systems, Inc. 4,500 $ 365,625
Williams Co., Inc. 17,024 541,575
-------
907,200
-------
- --------------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost - $16,758,137) $29,033,077
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - (2.7%) PAR VALUE
- --------------------------------------------------------------------------
Adaptec Inc. 4.75% Conv. Sub. Notes
2/1/04 $200,000 $169,000
Dura Pharmaceuticals, Inc. 3.5% Conv.
Sub. Notes 7/15/02 $400,000 $339,000
National Data Corp 5.0% Conv. Sub.
Notes 11/1/03 $100,000 $102,500
Thermo Instrument Systems 4.5% Conv.
Deb. 10/15/03 $200,000 $206,750
--------
- --------------------------------------------------------------------------
Total Bonds and Notes
(cost $872,950) $817,250
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%)
(cost $17,810,374) $30,029,614
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
OPTIONS OUTSTANDING (0%) SHARES VALUE
- --------------------------------------------------------------------------
OPTIONS SOLD
Cisco Systems, Inc. Call Jun/70 2500 ($15,937)
Linear Technology Corp. Call Jun/85 2200 (8,250)
Medtronic, Inc. Call Aug/50 3500 (18,375)
Seagate Technology Inc. Put Jan'99/20 4500 (6,750)
---------
($49,312)
---------
OPTIONS PURCHASED
Seagate Technology, Inc. Call Jan'99/25 9000 $49,500
-------
- --------------------------------------------------------------------------
TOTAL OPTIONS OUTSTANDING
(Premiums received - $53,154)
(Premiums paid - $54,270) $188
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (0.2%) $70,830
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSETS (100%) $30,100,632
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $19.09
======
- --------------------------------------------------------------------------
* Non-income producing.
+ Portion of the security is segregated as collateral for options
outstanding. Aggregate value of segregated securities - $635,725
SHEFFIELD INTERMEDIATE TERM BOND FUND
Portfolio of Investments
April 30, 1998
(unaudited)
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.4%) PAR VALUE
- --------------------------------------------------------------------------
UMB Bank Money Market
(cost - $33,255) $33,255 $33,255
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
COMMON STOCKS (11.6%) SHARES
- --------------------------------------------------------------------------
AUTO - 1.2%
General Motors Corp. 1,450 $97,694
-------
BANKING - 1.4%
JP Morgan & Co. 900 118,125
-------
CHEMICALS - 2.2%
DuPont (E.I.) Denemours & Co. 1,330 96,841
Minnesota Mining & Mfg. Co. 855 80,690
-------
177,531
-------
ELECTRICAL EQUIPMENT - 1.0%
Eastman Kodak Co. 1,100 79,406
------
FOOD PRODUCTS - 1.1%
Philip Morris Cos. 2,475 91,884
------
PETROLEUM (INTEGRATED) - 2.4%
Chevron Corp. 905 74,832
Exxon Corp. 1,690 123,476
-------
198,308
-------
PAPER & FOREST PRODUCTS - 1.1%
International Paper Co. 1,700 88,719
------
TELEPHONE - 1.2%
AT&T Corp. 1,600 96,200
------
- --------------------------------------------------------------------------
Total Common Stocks
(cost - $569,934) $947,867
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (89.8%) PAR VALUE
- --------------------------------------------------------------------------
AEROSPACE - 5.0%
Lockheed Martin Corp. 7.25% Guaranteed
Notes 5/15/06 $100,000 $105,042
Raytheon Co. 6.50% Notes 7/15/05 300,000 302,718
-------
407,760
-------
AUTO/TRUCK PARTS - 1.8%
ITT Corp. Nevada 6.75% Notes 11/15/05 150,000 144,636
-------
COMMERCIAL SERVICES - 11.7%
Browning-Ferris Industries, Inc. 6.375%
Notes 1/15/08 150,000 149,372
Ford Motor Credit 6.125% Notes 1/09/06 300,000 296,670
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- --------------------------------------------------------------------------
COMMERCIAL SERVICES (CONT.)
MBNA Corporation 6.875% Sr. Notes
6/01/05 $250,000 $254,815
National Data Corp. 5.0% Conv. Sub.
Notes 11/01/03 100,000 102,500
Service Corp. International 6.875%
Notes 10/01/07 150,000 153,178
-------
956,535
-------
BANKING - 7.4%
Banc One Corp. 7.25% Sub. Notes
8/01/02 250,000 259,075
Bankers Trust NY Corp. 7.375% Sub.
Notes 5/01/08 45,000 47,413
Chase Manhattan Corp. 7.125% Sub.
Notes 2/01/07 115,000 119,875
First Union National Bank Newark
7.125% Med. Term Notes 10/01/06 100,000 104,366
Wells Fargo & Co. 7.125% Sub. Deb.
8/15/06 70,000 73,136
-------
603,865
-------
COMPUTER SYSTEMS - 2.8%
Adaptec Inc. 4.75% Conv. Sub. Notes
02/01/04 150,000 126,750
International Business Machines Corp.
6.375% Notes 6/15/00 100,000 100,899
-------
227,649
-------
CONTAINERS - 3.1%
Crown Cork and Seal Co. 6.75% Notes
4/15/03 250,000 254,020
-------
ELECTRICAL EQUIPMENT - 4.4%
Honeywell, Inc. 7.00% Notes 3/15/07 200,000 209,300
Rockwell International Corp. 6.15% Sr.
Notes 1/15/08 150,000 149,102
-------
358,402
-------
ELECTRONICS - 1.3%
Thermo Instrument 4.5% Conv. Deb.
10/15/03 100,000 103,375
-------
ELECTRONICS - SEMICONDUCTOR - 2.5%
Applied Material 8.00% Sr. Notes
9/01/04 190,000 204,987
-------
FINANCIAL SERVICES - 9.6%
Bear Stearns Co. 6.7% Sr. Notes 8/01/03 200,000 203,494
Countrywide Funding Corp. 6.875%
Notes 9/15/05 200,000 202,970
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- --------------------------------------------------------------------------
FINANCIAL SERVICES - 9.6% (CONT.)
CUC International Inc. 3.0% Conv. Sub.
Notes 2/15/02 150,000 157,500
Dean Witter Discover & Co. 6.3% Notes
1/15/06 220,000 218,814
-------
782,778
-------
FOOD - 7.8%
Nabisco Inc. 7.05% Notes 7/15/07 150,000 153,902
Philip Morris Cos., Inc. 6.375% Notes
2/01/06 250,000 246,710
Tyson Foods, Inc. 6.08% Notes 2/01/00 235,000 234,323
-------
634,935
-------
MEDICAL - 1.5%
Dura Pharmaceuticals, Inc. 3.5% Conv.
Sub. Notes 7/15/02 150,000 127,125
-------
OIL & GAS - 3.0%
KN Energy, Inc. 6.8% Sr. Notes 3/01/08 250,000 249,975
-------
PERSONAL & BUSINESS CREDIT - 12.7%
Associate Corp. of N. America 6.375% Sr.
Notes 10/15/02 250,000 251,625
Household Financial Corp. 6.7% Notes
6/15/02 180,000 182,119
Sears Roebuck Acceptance Corp. 6.7%
Notes 9/18/07 240,000 243,427
Sears Roebuck Acceptance Corp. 6.75%
Notes 9/15/05 150,000 152,793
Transamerica Financial Corp. 7.5% Sr.
Notes 3/15/04 200,000 210,842
---------
1,040,806
---------
RETAIL - SPECIALTY - .6%
Fruit of the Loom Inc. 7.875% Sr. Notes
10/15/99 50,000 50,468
------
UTILITIES - ELECTRIC & GAS - 1.7%
Baltimore Gas & Electric Co. 6.5% 1st
Ref. Mortgage Bonds 2/15/03 140,000 142,048
-------
UTILITIES - NATURAL GAS - 2.4%
Williams Corp. 6.25% Deb. 2/01/06 200,000 197,454
-------
UTILITIES - TELEPHONE - 10.5%
Airtouch Communication, Inc. 7.0% Notes
10/01/03 150,000 154,688
GTE Hawaiian Telephone 6.75% 1st
Mortgage 2/15/05 300,000 306,762
GTE North, Inc. 6.375% Deb. 2/15/10 250,000 246,597
Pacific Bell 5.875% Deb. 2/15/06 154,000 150,224
-------
858,271
-------
- --------------------------------------------------------------------------
Total Bonds and Notes
(cost - $7,221,413) $7,345,089
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
TOTAL INVESTMENTS (101.8%)
(cost - $7,824,602) $8,326,211
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (-1.8%) ($148,179)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSETS (100%) $8,178,032
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $9.55
- --------------------------------------------------------------------------
See accompanying notes to the financial statements.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
--------- ------------
ASSETS:
Investments at value (cost of
$17,810,374 and $7,824,602,
respectively) $30,029,614 $8,326,211
Receivables:
Interest 7,901 104,087
Dividends 24,971 528
Portfolio securities sold 108,958 ---
Outstanding options purchased 49,500 ---
Prepaid insurance 8,748 1,938
---------- ---------
Total assets 30,229,692 8,432,764
---------- ---------
LIABILITIES:
Investment securities purchased --- 237,278
Outstanding options written 49,312 ---
Redemptions payable 43,000 ---
Accrued expenses 36,748 17,454
------- -------
Total liabilities 129,060 254,732
------- -------
NET ASSETS CONSISTING OF:
Undistributed net investment income --- 23,420
Accumulated net realized gain 3,080,564 104,796
Unrealized appreciation on investments 12,218,312 501,609
Paid-in capital applicable to
1,576,830 and 856,715 shares
outstanding, respectively, of
$.001 par value capital stock;
5,000,000 shares authorized in
each fund 14,801,756 7,548,207
----------- ----------
Net Assets $30,100,632 $8,178,032
----------- ----------
NET ASSET VALUE PER SHARE $19.09 $9.55
====== =====
See accompanying notes to financial statements.
- -------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 998 (UNAUDITED)
- -------------------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
----------- -------------
INVESTMENT INCOME:
Interest $ 12,920 $ 223,963
Dividends 191,865 12,942
------- -------
Total income 204,785 236,905
------- -------
EXPENSES:
Investment advisory fee 149,259 38,279
Investment advisory fee waived --- (9,691)
Administration fee 24,000 24,000
Administrative fee waived --- (12,500)
Transfer agency fee 5,000 5,000
Distribution expenses 3,287 3,287
Custodian fees 5,838 1,929
Registration and filing fees 866 892
Professional fees 7,491 9,446
Directors fees 2,400 2,400
Printing and postage 799 736
Insurance expense 4,944 1,211
Other 901 367
--- ---
Total expenses 204,785 65,356
------- ------
Net investment income --- 171,549
------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments 3,115,695 104,787
Net realized loss on futures (1,403) ---
Change in unrealized appreciation
on investments 1,589,488 (38,011)
--------- -------
Net gain on investments 4,703,780 66,776
--------- ------
Net increase in net assets from
operations $4,703,780 $238,325
========== ========
- --------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
AND FOR THE YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------
Sheffield Total
Return Fund
---------------
Six Months
ended Year ended
4/30/98 10/31/97
------- --------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ --- $ 50,449
Net realized gain on investments 3,115,695 3,217,997
Net realized loss on futures (1,403) (29,618)
Change in unrealized appreciation
on investments 1,589,488 4,138,787
--------- ---------
Increase in net assets from operations 4,703,780 7,377,615
--------- ---------
Dividends to shareholders from:
Net investment income --- (140,480)
Realized gains (3,222,107) (1,393,921)
----------- -----------
Total distributions to shareholders (3,222,107) (1,534,401)
----------- -----------
Capital transactions:
Proceeds from shares issued
through exchange 632,603 607,700
Proceeds from reinvestment of
dividends 2,748,803 1,534,401
Proceeds from other shares sold 1,571,270 3,921,020
Cost of shares reaquired
through exchange (1,111,174) (1,428,074)
Cost of other shares reacquired (3,848,619) (7,109,556)
Decrease in net assets from capital
share transactions (7,117) (2,474,509)
------- -----------
TOTAL INCREASE 1,474,556 3,368,705
--------- ---------
NET ASSETS:
Beginning of period 28,626,076 25,257,371
---------- ----------
End of period $30,100,632 $28,626,076
=========== ===========
Capital transactions in number of shares:
Shares issued through exchange 36,828 35,258
Shares issued in connection with
reinvestment of dividends 167,202 101,281
Other shares sold 88,994 225,193
Shares reacquired through exchange (58,789) (85,920)
Other shares reacquired (206,893) (407,410)
--------- ---------
Net increase (decrease) in shares
outstanding 27,342 (131,598)
====== =========
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 Total
Return Fund
---------------
Six Months
ended Year ended
4/30/98 10/31/97
------- --------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $171,549 $361,056
Net realized gain on investments 104,787 175,789
Net realized gain on investments --- (4,672)
Change in unrealized appreciation
on investments (38,011) 145,812
-------- -------
Increase in net assets from
operations 238,325 677,985
------- -------
Dividends to shareholders from:
Net investment income (175,236) (361,746)
Realized gains (171,108) (246,509)
--------- ---------
Total distributions to shareholders (346,344) (608,255)
--------- ---------
Capital transactions:
Proceeds from shares issued
through exchange 1,111,174 1,428,074
Proceeds from reinvestment of
dividends 346,344 608,255
Proceeds from other shares sold 1,509,650 2,349,300
Cost of shares reaquired through
exchange (632,603) (607,700)
Cost of other shares reacquired (1,824,849) (2,931,312)
----------- -----------
Increase in net assets from
capital share transactions 509,716 846,617
------- -------
TOTAL INCREASE 401,697 916,347
------- -------
NET ASSETS:
Beginning of period 7,776,335 6,859,988
--------- ---------
End of period $8,178,032 $7,776,335
========== ==========
Capital transactions in number of shares:
Shares issued through exchange 115,109 152,250
Shares issued in connection with
reinvestment of dividends 36,407 64,672
Other shares sold 156,187 247,558
Shares reacquired through exchange (65,575) (63,344)
Other shares reacquired (188,971) (304,822)
--------- ---------
Net increase in shares outstanding 53,157 96,314
====== ======
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
SHEFFIELD TOTAL RETURN FUND
---------------------------
Year ended October 31,
<CAPTION>
Six Months
Ended -------------------------------------------------------------------
April 30,1998 1997 1996 1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.47 $15.02 $12.86 $11.53 $12.71 $12.30
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .00 .03 .09 .11 .10 .12
Net gains (losses) on securities (both
realized and unrealized) 2.72 4.38 2.67 1.68 (.38) 1.75
---- ---- ---- ---- ----- ----
Total from investment operations 2.72 4.41 2.76 1.79 (.28) 1.87
---- ---- ---- ---- ----- ---- -- --- ----
Less Distributions:
Dividends (from net investment income) (.00) (.09) (.11) (.12) (.11) (.12)
Distributions (from realized gains) (2.10) (.87) (.49) (.34) (.79) (1.34)
------ ----- ----- ----- ----- ------
Total distributions (2.10) (.96) (.60) (.46) (.90) (1.46)
------ ----- ----- ----- ----- ------
Net Asset Value, end of period $19.09 $18.47 $15.02 $12.86 $11.53 $12.71
====== ====== ====== ====== ====== ======
Total return 16.57% 30.79% 22.36% 16.33% -2.31% 16.59%
Ratios/supplemental data:
Net assets, end of period (000's) $30,101 $28,626 $25,257 $21,565 $18,185 $27,504
Ratio of expenses to average net assets 1.36%* 1.39% 1.44% 1.60% 1.50% 1.47%
Ratio of net investment income to
average net assets .00% .18% .66% .90% .83% 1.00%
Portfolio turnover rate 41.20%* 42.09% 57.17% 55.16% 51.25% 100.28%
Average commission per share+ $.0722 $.0769 $.0755 (a) (a) (a)
* 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>
<TABLE>
SHEFFIELD INTERMEDIATE TERM BOND FUND
-----------------------------------------
Year ended October 31,
<CAPTION>
Six Months
Ended ------------------------------------------------------------------
April 30,1998 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.68 $9.70 $9.59 $9.06 $10.14 $9.98
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .20 .45 .46 .53 .48 .52
Net gains (losses) on securities (both
realized and unrealized) .10 .37 .24 .60 (.71) .32
--- --- --- --- --- ---
Total from investment operations .30 .82 .70 1.13 (.23) .84
--- --- --- ---- --- ---
Less Distributions:
Dividends (from net investment income) (.23) (.47) (.47) (.57) (.45) (.58)
Distributions (from realized gains) (.20) (.37) (.12) (.03) (.40) (.10)
--- --- --- --- --- ---
Total distributions (.43) (.84) (.59) (.60) (.85) (.68)
--- --- --- --- --- ---
Net Asset Value, end of period $9.55 $9.68 9.70 $9.59 $9.06 $10.14
===== ===== ===== ===== ===== ======
Total return 3.06% 8.97% 7.64% 12.89% -2.42% 8.73%
Ratios/supplemental data:
Net assets, end of period (000's) $8,178 $7,776 $6,860 $7,734 $9,284 $7,698
Ratio of expenses to average net assets 1.71%*+ 1.69%+ 1.86%+ 1.78%+ 2.08%+ 2.04%+
Ratio of net investment income to
average net assets 4.48%* 4.87% 4.87% 5.61% 5.01% 5.19%
Portfolio turnover rate 44.71%* 46.54% 33.65% 34.99% 30.38% 21.70%
Average commission per share++ $.0800 $.0800 $.0791 (a) (a) (a)
* 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 2.29%, 2.28%, 2.47%, 2.03%, 2.34%, and 2.17% for
the period ending April 30, 1998 and for the years ending 1997, 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 Funds are 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 Funds
dependent on the daily fluctuations in the value of the unrealized gains
and losses on the futures contracts. If the Funds enter into a closing
transaction, the Funds 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 Funds 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, 1998, there
were no open futures contracts.
D. Option Writing - When the Funds write an option, an amount equal to the
premium received by the Funds 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 Funds 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 Funds have
realized a gain or loss. If a put option is exercised, the premium reduces
the cost basis of the securities purchased by the Funds. The Funds as
writer of an option bear 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, 1998, the aggregate cost of securities for federal income tax
purposes for the Total Return Fund was $17,810,374 and net unrealized
appreciation aggregated $12,219,240 of which $12,338,111 related to
appreciated securities and $118,871 related to depreciated securities. Net
depreciation on options outstanding amounted to $928. The aggregate tax
cost of securities for the Bond Fund was $7,824,602 and net unrealized
appreciation aggregated $501,609, of which $548,311 related to appreciated
securities and $46,702 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, 1998,
amounted to approximately $9,700.
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, 1998, 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 ended April 30, 1998,
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
----------- ----------- ----------- -----------
$ 6,205,987 $ 9,822,012 $ 2,256,964 $ 1,601,948
The Total Return Fund had transactions in call options as follows:
Number of
Contracts Premiums
--------- --------
Options outstanding at October 31, 1997 12 $ 4,464
Options written 495 146,135
Options bought back (300) (79,785)
Options written - expired (80) (17,659)
Options purchased (90) (54,270)
--- --------
Options outstanding at April 30, 1998 37 $(1,115)
=== ========
NOTE 4. RELATED PARTY STOCKHOLDERS. At April 30, 1998, the Sheffield
Investment Management, Inc. Profit Sharing Plan owned 7,251 shares of the
Bond Fund and 15,787 shares of the Total Return Fund. The President of SIMI
and related family members owned 3,542 shares of the Total Return Fund.
</TABLE>
