THE SHEFFIELD FUNDS, INC.
==========================================================================
April 30, 1999
DEAR SHAREHOLDER:
This report covers the six month period beginning November 1, 1998 and ending
April 30, 1999. Against the backdrop of a continuing robust economy, the stock
market (as measured by the S&P 500 Index) recovered from a period of weakness
and went on to a series of new all-time highs. Over-valued stocks (as
determined by our price-to-growth methodology) continued to outperform the
overall stock market. Interest rates during this period of time continued to
climb with a disturbing persistence.
Rising interest rates typically exert a negative influence on stock prices,
but this inverse relationship did not materialize during this six month period.
In fact, the market leaders of 1998 - primarily the Internet-related businesses
- - saw their share prices rise rapidly. The stock market can't ignore
fundamental economic principles indefinitely, and by the end of April, the
interest rate rise had shut down the stock market's advance.
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
10/31/98 4/30/99
-------- -------
Basic Materials 4.2% 3.8%
Energy 6.5% 9.8%
Industrial 9.8% 12.1%
Conglomerates 4.5% 4.0%
Consumer Cyclical 5.3% 6.5%
Cons. Non Cyc. 20.3% 20.2%
Technology 23.9% 18.5%
Financial 13.0% 16.4%
Utility 12.4% 8.7%
Foreign 0.0% 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.
PERFORMANCE
The asset mix of the Fund experienced some shifts during the six months. A
number of stocks reached our targeted sales price, while others were sold due
to reduced expectations of future earnings growth rates.
The Fund's six month return was 14% compared to a return of 22.3% for the S&P
500 Index. Primary contributors to the relative underperformance of the Fund
were its holdings of financial stocks, industrial stocks, and energy-related
securities. As shown in the chart above, we had reduced our investments in
these sectors during the past six months.
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.
PERFORMANCE
The rise in interest rates mentioned at the beginning of this report has
occurred across the entire yield curve. Short-term bonds maturing in 1-2 years
have seen their interest rise by approximately 60 basis points (0.6%) while
bonds maturing in ten years or longer have experienced interest rates increases
of approximately 55 basis points.
When interest rates increase, bond prices decline. For the six months ending
April 30, 1999 the Bond Fund's total return of 2.2% compared favorably to a
1.6% return for the Lehman Brothers Corporate Intermediate Term Bond Index.
Very truly yours,
Roger A. Sheffield, CFA
President
Caroline L. Scott, CFA
Treasurer
SHEFFIELD TOTAL RETURN FUND
Portfolio of Investments
April 30, 1999 (Unaudited)
- -------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.3%) PAR VALUE
- -------------------------------------------------------------
UMB Bank Money Market
(cost - $65,508) $65,508 $65,508
-------
- -------------------------------------------------------------
COMMON STOCKS (93.6%) SHARES
- -------------------------------------------------------------
BANKING - 5.1%
Bank of America Corp. 10,546 $754,698
MBNA Corp. 13,000 364,000
---------
1,118,698
---------
BEVERAGES - SOFT DRINK - 1.6%
Coca-Cola Co. 5,280 359,370
-------
CHEMICALS - SPECIALTY - 4.2%
Avery Dennison Corp. 7,540 514,605
Ecolab, Inc. 9,790 410,568
-------
925,173
-------
COMPUTER HARDWARE - 5.6%
Cisco Systems, Inc.* 7,845 894,820
SCI Systems, Inc.* 9,000 342,563
---------
1,237,383
---------
COMPUTER SOFTWARE - 5.6%
BMC Software, Inc.* 3,800 163,638
Microsoft Corp.* 8,700 707,419
Unisys Corp.* 11,330 356,187
---------
1,227,244
---------
DIVERSIFIED - 4.5%
AlliedSignal, Inc. 8,800 517,000
Textron, Inc. 5,200 479,050
-------
996,050
-------
ELECTRICAL EQUIPMENT - 3.2%
Baldor Electric Co. 7,894 152,946
Honeywell, Inc. 5,900 559,025
-------
711,971
-------
ELECTRONICS - SEMICONDUCTOR - 4.8%
Applied Materials, Inc.* 5,100 273,488
Intel Corp. 6,680 408,732
Linear Technology Corp. 6,516 370,597
---------
1,052,817
---------
FINANCIAL - MISC. - 2.3%
Fannie Mae 3,810 270,272
Household International, Inc. 4,900 246,531
-------
516,803
-------
FOOD PROCESSING - 2.6%
Hershey Foods Corp. 4,710 247,864
Philip Morris Cos., Inc. 9,500 333,094
-------
580,958
-------
- -------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS - 4.1%
Colgate-Palmolive Co. 3,960 $405,652
Procter & Gamble Co. 5,275 494,861
-------
900,513
-------
INSURANCE - 4.9%
American International Group, Inc. 2,673 312,741
Provident Cos., Inc. 7,200 283,500
Reliastar Financial Corp. 13,240 486,570
---------
1,082,811
---------
MANUFACTURING - 2.9%
Illinois Tool Works, Inc. 6,030 464,310
Parker Hannifin Corp. 3,860 181,179
-------
645,489
-------
MEDICAL - PHARMACEUTICAL - 8.2%
Abbott Laboratories 11,000 532,125
Johnson & Johnson 3,700 360,750
Merck & Co., Inc. 6,700 471,512
Schering-Plough Corp. 9,300 449,306
---------
1,813,693
---------
MEDICAL PRODUCTS - 0.7%
Medtronic, Inc. 2,160 155,385
-------
OFFICE EQUIPMENT - 5.4%
Diebold, Inc. 7,345 176,739
Pitney Bowes, Inc. 4,600 321,713
Xerox Corp. 11,880 697,950
---------
1,196,402
---------
OIL & GAS - 3.1%
Exxon Corp. 5,650 469,303
Tosco Corp. 7,500 200,625
-------
669,928
-------
RETAIL - 6.7%
DEPARTMENT STORES - 5.3%
Dollar General Corp. 10,270 360,092
Wal-Mart Stores, Inc. 17,360 798,560
---------
1,158,652
---------
FOOD - 1.4%
Albertson's, Inc. 6,000 309,000
-------
TRANSPORTATION - 2.2%
FDX Corp.* 4,240 478,060
-------
UTILITIES - 15.9%
ELECTRIC - 1.4%
Cinergy Corp. 10,000 298,125
-------
NATURAL GAS - 3.5%
Williams Cos., Inc. 16,224 766,584
-------
- -------------------------------------------------------------
COMMON STOCKS - CONTINUED SHARES VALUE
- -------------------------------------------------------------
UTILITIES (CONT.)
TELEPHONE - 11.0%
Ameritech Corp. 11,500 $787,031
AT&T Corp. 8,250 416,625
Bell Atlantic Corp. 10,760 620,045
MCI Worldcom, Inc.* 4,500 369,844
SBC Communications, Inc. 4,200 234,150
---------
2,427,695
---------
- -------------------------------------------------------------
TOTAL COMMON STOCKS
(cost - $9,753,768) $20,628,804
- -------------------------------------------------------------
- -------------------------------------------------------------
CONVERTIBLE BONDS (6.2%) PAR VALUE
- -------------------------------------------------------------
Adaptec, Inc. 4.75% Conv. Sub. Notes
2/1/04 $300,000 $254,250
CUC International, Inc. 3.0% Conv. Sub.
Notes 2/15/02 150,000 141,000
Dura Pharmaceuticals, Inc. 3.5% Conv.
Sub. Notes 7/15/02 475,000 351,500
National Data Corp. 5.0% Conv. Sub.
Notes 11/1/03 300,000 325,500
Thermo Instrument Systems 4.5% Conv.
Deb. 10/15/03 325,000 289,250
-------
- -------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(cost - $1,515,203) $1,361,500
- -------------------------------------------------------------
- -------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(cost - $11,334,479) $22,055,812
- -------------------------------------------------------------
- -------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (-0.1%) ($13,053)
- -------------------------------------------------------------
- -------------------------------------------------------------
NET ASSETS (100%) $22,042,759
- -------------------------------------------------------------
- -------------------------------------------------------------
NET ASSET VALUE PER SHARE $16.99
======
- -------------------------------------------------------------
* Non-income producing.
SHEFFIELD INTERMEDIATE TERM BOND FUND
Portfolio of Investments
April 30, 1999 (Unaudited)
- -------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.1%) PAR VALUE
- -------------------------------------------------------------
UMB Bank Money Market
(cost - $14,910) $14,910 $14,910
-------
- -------------------------------------------------------------
COMMON STOCKS (12.1%) SHARES
- -------------------------------------------------------------
AUTO - 1.0%
General Motors Corp. 1,450 $129,141
--------
AUTO/TRUCK PARTS - 1.1%
Goodyear Tire & Rubber Co. 2,635 150,689
-------
BANKING - 1.2%
JP Morgan & Co. 1,240 167,090
-------
CHEMICALS - 2.4%
DuPont (E.I.) De Nemours & Co. 2,379 168,166
Minnesota Mining & Mfg. Co. 1,695 150,855
-------
319,021
-------
ELECTRICAL EQUIPMENT - 1.1%
Eastman Kodak Co. 1,950 145,762
-------
FOOD PROCESSING - 0.7%
Philip Morris Cos., Inc. 2,735 95,896
------
MANUFACTURING - MACHINERY - 1.4%
Caterpillar, Inc. 2,890 186,044
-------
OIL & GAS - 2.3%
Chevron Corp. 1,610 160,597
Exxon Corp. 1,790 148,682
-------
309,279
-------
UTILITIES - TELEPHONE - 0.9%
AT&T Corp. 2,400 121,200
-------
- -------------------------------------------------------------
TOTAL COMMON STOCKS
(cost - $1,070,420) $1,624,122
- -------------------------------------------------------------
- -------------------------------------------------------------
CORPORATE BONDS AND NOTES (82.7%) PAR VALUE
- -------------------------------------------------------------
AEROSPACE - 3.0%
Lockheed Martin Corp. 7.25%
Guaranteed Notes 5/15/06 $100,000 $104,191
Raytheon Co. 6.5% Notes 7/15/05 300,000 304,716
-------
408,907
-------
BANKING - 7.6%
Banc One Corp. 7.25% Sub. Notes
8/1/02 250,000 259,743
BankBoston NA 7.0% Sub. Notes
9/15/07 170,000 176,397
Bankers Trust Corp. 7.375% Sub. Notes
5/1/08 45,000 46,593
- -------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- -------------------------------------------------------------
BANKING (CONT.)
Chase Manhattan Corp. 7.125% Sub.
Notes 2/1/07 $115,000 $119,868
First Union National Bank 7.125% Sub.
Notes 10/15/06 100,000 104,610
MBNA Corp. 6.875% Sr. Notes 6/1/05 250,000 245,795
Wells Fargo & Co. 7.125% Sub. Notes
8/15/06 70,000 73,378
---------
1,026,384
---------
BEVERAGES - 4.2%
ALCOHOLIC - 2.1%
Anheuser Busch Cos., Inc. 5.125%
Notes 10/1/08 300,000 278,829
-------
SOFT DRINK - 2.1%
Coca-Cola Enterprises 5.75% Notes
11/1/08 300,000 289,521
-------
CHEMICALS - 4.2%
BASIC - 1.9%
DuPont (E.I.) De Nemours & Co.
6.75% Notes 9/1/07 250,000 260,565
-------
SPECIALTY - 2.3%
Praxair, Inc. 6.75% Notes 3/1/03 300,000 303,324
-------
COMMERCIAL SERVICES - 1.0%
Browning-Ferris Industries, Inc. 6.375%
Sr. Notes 1/15/08 150,000 134,250
-------
COMPUTER SOFTWARE - 3.3%
First Data Corp. 5.8% Notes 12/15/08 200,000 190,934
First Data Corp. 6.625% Notes 4/1/03 250,000 253,743
-------
444,677
-------
COMPUTER SYSTEMS - 0.7%
International Business Machines Corp.
6.375% Notes 6/15/00 100,000 101,092
-------
CONTAINERS - 1.9%
Crown Cork & Seal Co. 6.75% Notes
4/15/03 250,000 250,518
-------
DIVERSIFIED - 2.9%
Service Corp. International 6.875%
Notes 10/1/07 150,000 147,492
Tyco International Group S.A. 6.125%
Guaranteed Notes 1/15/09 250,000 243,672
-------
391,164
-------
ELECTRICAL EQUIPMENT - 1.1%
Rockwell International Corp. 6.15%
Notes 1/15/08 150,000 148,545
-------
- -------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- -------------------------------------------------------------
FINANCIAL - INSURANCE - 2.2%
Loews Corp. 6.75% Notes 12/15/06 $300,000 $297,633
--------
FINANCIAL SERVICES - 4.6%
Bear Stearns Co., Inc. 6.7% Sr. Notes
8/1/03 200,000 203,008
Countrywide Funding Corp. 6.875%
Med. Term Notes 9/15/05 200,000 203,114
Dean Witter Discover & Co. 6.3% Notes
1/15/06 220,000 218,429
-------
624,551
-------
FOOD PROCESSING - 4.7%
Nabisco, Inc. 7.05% Notes 7/15/07 150,000 152,262
Philip Morris Cos., Inc. 6.375% Notes
2/1/06 250,000 246,940
Tyson Foods, Inc. 6.08% Bonds 2/1/00 235,000 235,430
-------
634,632
-------
HEALTHCARE - 3.7%
Abbott Laboratories 5.4% Notes 9/15/08 250,000 240,552
Cardinal Health, Inc. 6.5% Notes 2/15/04 250,000 253,753
-------
494,305
-------
HOUSEHOLD PRODUCTS - 2.2%
Procter & Gamble Co. 5.25% Notes
9/15/03 300,000 294,273
-------
OIL & GAS - 1.9%
KN Energy, Inc. 6.8% Sr. Notes 3/1/08 250,000 253,190
-------
PERSONAL & BUSINESS CREDIT - 10.5%
Ameritech Capital Funding Corp. 6.15%
Guaranteed Notes 1/15/08 150,000 148,644
Associate Corp. NA 6.375% Sr. Notes
10/15/02 250,000 253,635
Caterpillar Financial Services Corp.
5.836% Med. Term Notes 5/1/00 200,000 200,634
Ford Motor Credit Co. 6.125% Notes
1/9/06 50,000 49,204
General Electric Capital Corp. 6.5%
Notes 11/1/06 170,000 174,418
Household Finance Corp. 6.7% Notes
6/15/02 180,000 184,046
Sears Roebuck Acceptance Corp. 6.7%
Notes 9/18/07 240,000 243,929
Sears Roebuck Acceptance Corp. 6.75%
Notes 9/15/05 150,000 152,763
---------
1,407,273
---------
RECREATION - 1.1%
ITT Corp. 6.75% Notes 11/15/05 150,000 142,308
-------
- -------------------------------------------------------------
CORPORATE BONDS AND NOTES - CONTINUED PAR VALUE
- -------------------------------------------------------------
RETAIL - 4.6%
DEPARTMENT STORES - 1.9%
JC Penney Co., Inc. 6.125% Notes
11/15/03 $255,000 $250,650
--------
FOOD - 2.3%
Albertson's, Inc. 6.375% Notes 6/1/00 300,000 303,474
-------
SPECIALTY - 0.4%
Fruit of the Loom, Inc. 7.875% Sr.
Notes 10/15/99 50,000 50,401
------
TRANSPORTATION - RAILROAD - 1.9%
Union Pacific Corp. 7.375% Notes
5/15/01 250,000 257,038
-------
UTILITIES - 15.4%
ELECTRIC & GAS - 1.1%
Baltimore Gas & Electric Co. 6.5% 1st
Ref. Mortgage Bonds 2/15/03 140,000 142,745
-------
NATURAL GAS - 3.7%
Consolidated Natural Gas Co. 6%
Deb. 10/15/10 300,000 292,743
Williams Corp. 6.25% Deb. 2/1/06 200,000 198,568
-------
491,311
-------
TELEPHONE - 10.6%
Airtouch Communication, Inc. 7.0%
Notes 10/1/03 150,000 155,668
GTE Hawaiian Telephone 6.75% 1st
Mortgage 2/15/05 300,000 305,712
GTE North, Inc. 6.375% Deb. 2/15/10 250,000 253,003
MCI Worldcom, Inc. 6.125% Sr.
Notes 8/15/01 250,000 251,510
Northern Telecom 6.875% Notes
10/1/02 300,000 309,693
Pacific Bell 5.875% Deb. 2/15/06 154,000 151,524
---------
1,427,110
---------
- -------------------------------------------------------------
TOTAL BONDS AND NOTES
(cost - $11,174,777) $11,108,670
- -------------------------------------------------------------
- -------------------------------------------------------------
CONVERTIBLE BONDS (3.9%) PAR VALUE
- -------------------------------------------------------------
Adaptec, Inc. 4.75% Conv. Sub. Notes
2/1/04 $165,000 $139,837
Dura Pharmaceuticals, Inc. 3.5% Conv.
Sub. Notes 7/15/02 75,000 55,500
National Data Corp. 5.0% Conv. Sub.
Notes 11/1/03 100,000 108,500
Thermo Instrument Systems 4.5% Conv.
Deb. 10/15/03 250,000 222,500
-------
- -------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(cost - $569,322) $526,337
- -------------------------------------------------------------
- -------------------------------------------------------------
TOTAL INVESTMENTS (98.8%)
(cost - $12,829,429) $13,274,039
- -------------------------------------------------------------
- -------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES (1.2%) $163,731
- -------------------------------------------------------------
- -------------------------------------------------------------
NET ASSETS (100%) $13,437,770
- -------------------------------------------------------------
- -------------------------------------------------------------
NET ASSET VALUE PER SHARE $9.44
=====
- -------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
------------ ------------
ASSETS:
Investments at value (cost of
$11,334,479 and $12,829,429,
respectively) $22,055,812 $13,274,039
Receivables:
Interest 17,282 174,280
Dividends 25,168 1,395
Prepaid insurance 6,757 4,354
---------- ----------
Total assets 22,105,019 13,454,068
---------- ----------
LIABILITIES:
Redemptions 25,000 ---
Accrued expenses 37,260 16,298
------ ------
Total liabilities 62,260 16,298
------ ------
NET ASSETS CONSISTING OF:
Undistributed net investment
income 608 46,914
Accumulated net realized gain 1,480,461 3,187
Unrealized appreciation on
investments 10,721,333 444,610
Paid-in capital applicable to
1,297,554 and 1,423,918 shares
outstanding, respectively, of
$.001 par value capital stock;
5,000,000 shares authorized in
each fund 9,840,357 12,943,059
--------- ----------
Net Assets $22,042,759 $13,437,770
----------- -----------
NET ASSET VALUE PER SHARE $16.99 $9.44
====== =====
See accompanying notes to financial statements.
- --------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------
Sheffield Sheffield
Total Intermediate
Return Term Bond
Fund Fund
------------ ------------
INVESTMENT INCOME:
Interest $ 45,311 $ 317,314
Dividends 164,329 15,803
------- -------
Total income 209,640 333,117
------- -------
EXPENSES:
Investment advisory fee 122,140 57,797
Investment advisory fee waived --- (14,760)
Administration fee 24,000 24,000
Administrative fee waived --- (12,500)
Transfer agency fee 5,000 5,000
Distribution expenses 3,385 3,726
Custodian fees 7,387 2,556
Registration and filing fees 1,252 1,037
Professional fees 15,760 6,945
Directors fees 2,400 2,400
Printing and postage 354 1,433
Insurance expense 4,558 1,014
Other 1,011 482
------- ------
Total expenses 187,247 79,130
------- ------
Net investment income 22,393 253,987
------ -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments 1,620,417 3,126
Net gain on options 35,926 ---
Net realized loss on futures (16,926) ---
Change in unrealized appreciation
on investments 1,613,211 (29,020)
--------- --------
Net gain (loss) on
investments 3,252,628 (25,894)
--------- --------
Net increase in net assets from
operations $3,275,021 $228,093
========== ========
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
AND FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------
Sheffield Total
Return Fund
-----------------------------
Six Months
ended Year ended
4/30/99 10/31/98
------- --------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 22,393 $ 20,075
Net realized gain on investments 1,656,343 3,028,866
Net realized loss on futures (16,926) (3,930)
Change in unrealized appreciation
on investments 1,613,211 (1,520,702)
--------- -----------
Increase in net assets from
operations 3,275,021 1,524,309
--------- ---------
Dividends to shareholders from:
Net investment income (41,860) ---
Realized gains (3,150,164) (3,222,107)
----------- -----------
Total distributions to shareholders (3,192,024) (3,222,107)
----------- -----------
Capital transactions:
Proceeds from shares issued
through exchange --- 1,106,283
Proceeds from reinvestment of
dividends 2,611,176 2,748,803
Proceeds from other shares sold 778,485 3,012,819
Cost of shares reacquired
through exchange (3,778,884) (1,320,702)
Cost of other shares reacquired (3,791,968) (6,334,528)
----------- -----------
Decrease in net assets from
capital share transactions (4,181,191) (787,325)
----------- ---------
TOTAL DECREASE (4,098,194) (2,485,123)
----------- -----------
NET ASSETS:
Beginning of period 26,140,953 28,626,076
---------- ----------
End of period $22,042,759 $26,140,953
=========== ===========
Capital transactions in number of
shares:
Shares issued through exchange --- 65,332
Shares issued in connection with
reinvestment of dividends 170,665 167,202
Other shares sold 44,275 176,521
Shares reacquired through
exchange (227,332) (70,956)
Other shares reacquired (232,681) (344,960)
--------- ---------
Net decrease in shares
outstanding (245,073) (6,861)
========= =======
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
AND FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------
Sheffield Intermediate
Term Bond Fund
-----------------------------
Six Months
ended Year ended
4/30/99 10/31/98
------- --------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $253,987 $357,547
Net realized gain on investments 3,126 149,564
Change in unrealized
appreciation on investments (29,020) (65,990)
------- -------
Increase in net assets from
operations 228,093 441,121
------- -------
Dividends to shareholders from:
Net investment income (245,517) (346,210)
Realized gains (149,512) (171,108)
--------- ---------
Total distributions to shareholders (395,029) (517,318)
--------- ---------
Capital transactions:
Proceeds from shares issued
through exchange 3,778,884 1,320,702
Proceeds from reinvestment of
dividends 395,029 517,318
Proceeds from other shares sold 2,537,100 2,186,219
Cost of shares reacquired
through exchange --- (1,106,283)
Cost of other shares reacquired (923,147) (2,801,254)
--------- -----------
Increase in net assets from capital
share transactions 5,787,866 116,702
--------- -------
TOTAL INCREASE 5,620,930 40,505
--------- ------
NET ASSETS:
Beginning of period 7,816,840 7,776,335
--------- ---------
End of period $13,437,770 $7,816,840
=========== ==========
Capital transactions in number of
shares:
Shares issued through exchange 398,540 137,075
Shares issued in connection with
reinvestment of dividends 41,907 54,282
Other shares sold 265,811 227,176
Shares reacquired through
exchange --- (115,101)
Other shares reacquired (98,084) (291,246)
-------- ---------
Net increase in shares
outstanding 608,174 12,186
======= ======
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout the period.
<TABLE>
SHEFFIELD TOTAL RETURN FUND
---------------------------
Year ended October 31,
<CAPTION>
Six Months
Ended -------------------------------------------------------------
April 30, 1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $16.95 $18.47 $15.02 $12.86 $11.53 $12.71
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income .02 .01 .03 .09 .11 .10
Net gains (losses) on
securities (both
realized and
unrealized) 2.12 .57 4.38 2.67 1.68 (.38)
---- --- ---- ---- ---- -----
Total from investment
operations 2.14 .58 4.41 2.76 1.79 (.28)
---- --- ---- ---- ---- -----
Less Distributions:
Dividends (from net
investment income) (.03) ---- (.09) (.11) (.12) (.11)
Distributions (from
realized gains) (2.07) (2.10) (.87) (.49) (.34) (.79)
------ ------ ----- ----- ----- -----
Total distributions (2.10) (2.10) (.96) (.60) (.46) (.90)
------ ------ ----- ----- ----- -----
Net Asset Value,
end of period $16.99 $16.95 $18.47 $15.02 $12.86 $11.53
====== ====== ====== ====== ====== ======
Total return 13.97% 3.50% 30.79% 22.36% 16.33% -2.31%
Ratios/supplemental data:
Net assets, end of
period (000's) $22,043 $26,141 $28,626 $25,257 $21,565 $18,185
Ratio of expenses to
average net assets 1.53%* 1.45% 1.39% 1.44% 1.60% 1.50%
Ratio of net investment
income to average net
assets .18%* .07% .18% .66% .90% .83%
Portfolio turnover rate 32.17%* 49.62% 42.09% 57.17% 55.16% 51.25%
- --------------------------------------------------------------------------------------------------------
* Annualized
</TABLE>
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, 1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.58 $9.68 $9.70 $9.59 $9.06 $10.14
----- ----- ----- ----- ----- ------
Income from investment
operations:
Net investment income .21 .44 .45 .46 .53 .48
Net gains (losses) on
securities (both
realized and
unrealized) .00 .10 .37 .24 .60 (.71)
--- --- --- --- --- -----
Total from investment
operations .21 .54 .82 .70 1.13 (.23)
--- --- --- --- ---- -----
Less Distributions:
Dividends (from net
investment income) (.20) (.43) (.47) (.47) (.57) (.45)
Distributions (from
realized gains) (.15) (.21) (.37) (.12) (.03) (.40)
----- ----- ----- ----- ----- -----
Total distributions (.35) (.64) (.84) (.59) (.60) (.85)
----- ----- ----- ----- ----- -----
Net Asset Value,
end of period $9.44 $9.58 $9.68 $9.70 $9.59 $9.06
===== ===== ===== ===== ===== =====
Total return 2.20% 5.63% 8.97% 7.64% 12.89% -2.42%
Ratios/supplemental data:
Net assets, end of
period (000's) $13,438 $7,817 $7,776 $6,860 $7,734 $9,284
Ratio of expenses to
average net assets 1.37%*+ 1.59%+ 1.69%+ 1.86%+ 1.78%+ 2.08%+
Ratio of net investment
income to average net
assets 4.39%* 4.59% 4.87% 4.87% 5.61% 5.01%
Portfolio turnover rate 1.31%* 35.31% 46.54% 33.65% 34.99% 30.38
- ---------------------------------------------------------------------------------------------------------
* 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 1.84%, 2.16%, 2.28%, 2.47%, 2.03%, and 2.34% for the period ending
April 30, 1999 and for the years ending 1998, 1997, 1996, 1995, and 1994,
respectively.
</TABLE>
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, 1999, there were no open futures contracts.
D. OPTIONS WRITTEN & PURCHASED - 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. A
covered call option entitles the holder to the right to buy the underlying
security which the Funds own at any time during the option period at the
stated exercise price. A put option entitles the holder to the right to sell
the underlying security to the Funds at any time during the option period at
the stated exercise price. 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.
The Funds may purchase put options on securities in order to protect the
securities against a decline in market value. A purchased put option entitles
the Funds to sell the underlying security at the option exercise price at any
time during the option period. By purchasing a put option, the Funds are able
to protect the unrealized gain in the appreciated underlying security without
actually selling the security. Any losses realized by the Fund upon expiration
of the put options are limited to the premiums paid for the purchase of such
options plus any transaction costs.
The Funds may also buy call options on securities which they intend to purchase
in order to limit the risk of a substantial increase in the market price of
such securities. A call option entitles the Funds to the right to buy the
underlying securities from the option writer at a stated exercise price. Any
losses realized by the Funds upon expiration of the call options are limited
to the premiums paid for the purchase of such options, plus any transaction
costs.
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, 1999, the aggregate cost of securities for federal income tax
purposes for the Total Return Fund was $11,448,663 and net unrealized
appreciation aggregated $10,721,333 of which $10,926,502 related to
appreciated securities and $205,169 related to depreciated securities. The
aggregate tax cost of securities for the Bond Fund was $12,829,429 and net
unrealized appreciation aggregated $444,610, of which $666,858 related to
appreciated securities and $222,248 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 period ended April 30, 1999, amounted
to approximately $14,800.
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 period ended April 30,
1999, SIMI waived administrative fees to the Bond Fund amounting to $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 period ended April 30, 1999,
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
- ----------- --------- ------------ ---------
$3,880,585 $8,839,301 $5,693,254 $68,136
NOTE 4. RELATED PARTY STOCKHOLDERS. At April 30, 1999, the Sheffield
Investment Management, Inc. Profit Sharing Plan owned 16,477 shares of the
Bond Fund and 9,991 shares of the Total Return Fund. The President of SIMI
and related family members owned 2,925 shares of the Total Return Fund.
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The Sheffield Funds, Inc.
900 Circle 75 Parkway
Suite 750
Atlanta, Georgia 30339-3082
(770) 953-1597
LEGAL COUNSEL
Kilpatrick Stockton
Atlanta, Georgia 30309
CUSTODIAN
UMB Bank, n.a.
Kansas City, Missouri 64141
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP
Atlanta, Georgia 30309
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of The Sheffield Funds, Inc.
THE SHEFFIELD FUNDS, INC.
================================
SEMI ANNUAL REPORT
- ------------------
April 30, 1999
SHEFFIELD TOTAL RETURN FUND
SHEFFIELD INTERMEDIATE TERM BOND FUND
INVESTMENT ADVISOR
FUND ADMINISTRATOR
SHAREHOLDER SERVICING AGENT
- ---------------------------
Sheffield Investment Management, Inc.
900 Circle 75 Parkway, Suite 750
Atlanta, Georgia 30339-3082
(770) 953-1597
