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Previous: COVALENT GROUP INC, S-8, 2000-05-24 |
Next: PRICE T ROWE INDEX TRUST INC, 497K3B, 2000-05-24 |
The Sheffield Funds, Inc.
Semi-Annual Report
April 30, 2000
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
The Sheffield Funds, Inc.
April 30, 2000
Dear Shareholder:
This report covers the performance and investment activities of the Sheffield Total Return Fund and Intermediate Term Bond Fund for the six month period beginning November 1, 1999 and ending April 30, 2000.
During this period of time, economic indicators continued to strengthen, causing increasing concern at the Federal Reserve regarding the reemergence of inflation. Interest rates moved modestly higher during the six months, resulting in poor market returns for bonds.
During March and April, the technology stock market "bubble" began showing definite signs of deflating. Many stocks which we considered to be vastly overpriced under the most optimistic growth assumptions quickly declined by 50% or more from their previous highs. With no forewarning, momentum investing (always a dangerous approach) was out and the old rules regarding the relationships between stock prices, interest rates, and a company's growth prospects began to reemerge.
The fastest growing technology companies now appear to be undergoing a period of reevaluation in the market place as rising interest rates and increasing inflation become of greater concern to investors. The investor perception that "interest rates don't matter to a company whose sales are growing at 30% or more per year" is no longer in vogue. The reality is that rising interest rates will hurt the fastest growers as much as, if not more than, the slowest growers.
TOTAL RETURN FUND
Philosophy
The Total Return Fund is a broadly diversified portfolio invested in securities across all economic sectors, as illustrated in the accompanying chart. Within each sector, we attempt to select companies which are experiencing increasing cash flow returns on their invested capital.
| Industry Sector Analysis | ||
|
|
10/31/99 |
4/30/00 |
|
Basic Materials |
3.2% |
4.2% |
|
Conglomerates |
4.7% |
1.3% |
|
Consumer Cyclical |
6.8% |
9.6% |
|
Consumer Non-Cyclical |
20.7% |
17.1% |
|
Energy |
4.5% |
2.7% |
|
Financial |
13.7% |
12.0% |
|
Industrial |
8.2% |
8.6% |
|
Technology |
25.9% |
37.3% |
|
Utility |
12.3% |
7.1% |
Furthermore, we seek out those companies experiencing faster earnings and 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 aids us in determining whether the current price of a stock is reasonable relative to its expected future growth rate and other factors.
Investing Activities
During the past six months, we have taken substantial long-term capital gains from some of the Fund's most overvalued technology holdings. In a number of cases, stocks in the portfolio reached price levels which could not be justified given even the most optimistic assumptions for future growth in sales, assets, and profits.
These actions should not, however, be taken as a condemnation of the tech sector. In fact, our faith in the future desirability of owning high-tech companies is undiminished. Our style of investing calls for the patience to wait until we locate companies that can be acquired at reasonable prices in relation to their current and expected future profitability and asset growth rates. By mid-April, we were able to invest proceeds from the sale of higher-priced technology stocks in other tech stocks which had experienced significant price declines. The Fund now has a modestly overweighted position in the technology sector, as illustrated in the previous chart.
In addition to the gains taken in the technology sector, we sold the stocks of various financial and consumer products companies. The most pressing issues with financial companies are the future direction of interest rates and the concern about increasing inflation. There is no doubt about it - financial stocks are very cheap. Dividend levels are high and many of the companies represent solid "value" plays. When the tide begins to turn in favor of this sector, we expect to increase our ownership. Until the Federal Reserve declares victory in its battle to reverse today's inflationary trends, these stocks may continue to underperform. It seldom pays to fight the Fed.
Finally, we reduced or eliminated our holdings in consumer stocks such as Coca-Cola, Procter & Gamble, Colgate, and Hershey. According to our analysis, each of these stocks has been affected by declining sales growth rates coupled with low levels of asset growth. In mature companies as large as these, it is difficult to "grow the business" in a manner that creates new products with substantial sales growth opportunities. Thus, when sales of the "old" products lose some of their luster, there is little else about their business to keep investors enthused, who subsequently take their money and go elsewhere.
Performance
For the most of the six-month period ending April 30, the stock market's performance followed the script of 1998 and 1999. Value stocks, now nicknamed "old economy" stocks, continued to languish or decline in price while tech stocks continued to soar. This pattern, however, appears to have begun reversing course in mid-March. With another sharp drop in April, the recent pullback in technology stocks - although painful - should be healthy for attracting new investor capital to the area. This pullback also provides the opportunity for us to add a number of additional good tech stocks at more reasonable prices as mentioned above.
The Total Return Fund's return for the first six months was 4.5%, compared to a return of 7.2% for the S&P 500 Index and 1.5% for the Dow Jones Industrial Average.
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 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
Throughout the six month period, we have continued to reduce the Fund's average bond maturity to 3.9 years at the end of April 2000 from 4.5 years at the beginning of November 1999. These relatively short average maturities result in less price decline than that experienced by longer-term bonds during a period of rising interest rates.
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 rates rise by approximately 70 basis points (0.7%) while bonds maturing in ten years or longer have experienced interest rates increases of approximately 35-50 basis points.
When interest rates increase, bond prices decline. For the six months ending April 30, 1999 the Bond Fund's total return was -0.75%, compared to a 0.54% return for the Lehman Brothers Corporate Intermediate Term Bond Index.
Very truly yours,
Roger A. Sheffield, CFA Caroline L. Scott, CFA
President Treasurer
Sheffield Total Return Fund
Portfolio of Investments
April 30, 2000 (unaudited)
|
Short-Term Investments (0.6%) |
Par |
Value |
|
Common Stocks - continued |
Shares |
Value |
|
Common Stocks - continued |
Shares |
Value |
|
Total Investments (100.1%) |
|
|
|
UMB Bank Money Market |
|
|
|
Computer Software (cont.) |
|
|
|
Medical Products - 2.7% |
|
|
|
(cost - $9,474,719) |
|
$16,253,041 |
|
(cost - $96,625) |
$96,625 |
$96,625 |
|
Symantec Corp.* |
3,000 |
$187,313 |
|
Medtronic, Inc. |
8,600 |
$446,662 |
|
|
|
|
|
|
|
|
|
|
|
1,093,557 |
|
|
|
|
|
Options Outstanding (0.0%) |
Contracts |
Value |
|
Common Stocks (94.9%) |
Shares |
|
|
|
|
|
|
Oil & Gas - 2.7% |
|
|
|
Options Purchased |
|
|
|
Auto - 1.3% |
|
|
|
Conglomerates - 1.3% |
|
|
|
Exxon Mobil Corp. |
5,650 |
438,934 |
|
Parametric Technology Corp. |
|
|
|
General Motors Corp. |
2,200 |
$205,975 |
|
United Technologies Corp. |
3,400 |
211,438 |
|
|
|
|
|
Call May/20 |
40 + |
$250 |
|
|
|
|
|
|
|
|
|
Retail - 8.3% |
|
|
|
|
|
|
|
Banking - 8.5% |
|
|
|
Electrical Equipment - 3.4% |
|
|
|
Department Stores - 5.3% |
|
|
|
Total Options Outstanding |
|
|
|
Bank of New York Co., Inc. |
4,545 |
186,629 |
|
Honeywell, Inc. |
9,862 |
552,272 |
|
Dollar General Corp. |
12,837 |
293,646 |
|
(Premiums paid - $17,122) |
|
$250 |
|
Citigroup, Inc. |
3,850 |
229,316 |
|
|
|
|
|
Wal-Mart Stores, Inc. |
10,360 |
573,685 |
|
|
|
|
|
J.P. Morgan & Co., Inc. |
1,330 |
170,739 |
|
Electronics - 1.1% |
|
|
|
|
|
867,331 |
|
Other Assets, Less Liabilities (-0.1%) |
|
$(7,740) |
|
MBNA Corp. |
13,000 |
345,312 |
|
Symbol Technologies, Inc. |
3,200 |
178,400 |
|
|
|
|
|
|
|
|
|
State Street Corp. |
2,700 |
261,563 |
|
|
|
|
|
Drug Stores - 1.2% |
|
|
|
Net Assets (100%) |
|
$16,245,551 |
|
Wells Fargo & Co. |
4,570 |
187,656 |
|
Electronics - Semiconductor - 9.4% |
|
|
|
Walgreen Co. |
6,840 |
192,375 |
|
|
|
|
|
|
|
1,381,215 |
|
Intel Corp. |
6,680 |
847,107 |
|
|
|
|
|
Net Asset Value Per Share |
|
$15.69 |
|
|
|
|
|
Linear Technology Corp. |
8,832 |
504,528 |
|
Specialty - 1.8% |
|
|
|
|
|
|
|
Beverages - Soft Drink - 0.9% |
|
|
|
National Semiconductor Corp.* |
2,960 |
177,600 |
|
Gap, Inc. |
4,100 |
150,675 |
|
* Non-income producing |
|
|
|
Coca-Cola Co. |
3,180 |
150,255 |
|
|
|
1,529,235 |
|
Lowe's Cos. |
2,800 |
138,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,275 |
|
+ One contract is exercisable for 100 |
|
|
|
Chemicals - Specialty - 4.2% |
|
|
|
Financial - Misc/REIT - 1.2% |
|
|
|
Utilities - Telephone - 7.1% |
|
|
|
shares. |
|
|
|
Avery Dennison Corp. |
4,540 |
297,938 |
|
Apartment Investment & |
|
|
|
AT&T Corp. |
8,250 |
384,656 |
|
|
|
|
|
Ecolab, Inc. |
9,790 |
382,422 |
|
Management Co. |
4,800 |
190,800 |
|
Bell Atlantic Corp. |
3,720 |
220,410 |
|
|
|
|
|
|
|
680,360 |
|
|
|
|
|
MCI Worldcom, Inc.* |
6,750 |
306,703 |
|
|
|
|
|
|
|
|
|
Food Processing - 1.9% |
|
|
|
SBC Communications, Inc. |
5,500 |
240,969 |
|
|
|
|
|
Commercial Services - 1.0% |
|
|
|
Philip Morris Cos., Inc. |
14,500 |
317,187 |
|
|
|
1,152,738 |
|
|
|
|
|
Reynolds & Reynolds Co. |
6,600 |
156,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Household Products - 1.0% |
|
|
|
Total Common Stocks |
|
|
|
|
|
|
|
Communications Equip. Mfg. - 3.9% |
|
|
|
Clorox Co. |
4,500 |
165,375 |
|
(cost - $8,619,610) |
|
$15,416,891 |
|
|
|
|
|
Covad Communications Group, Inc.* |
6,400 |
177,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lucent Technologies, Inc. |
4,315 |
268,339 |
|
Insurance - 2.3% |
|
|
|
Convertible Bonds (4.6%) |
Par |
Value |
|
|
|
|
|
Nokia Corp. ADR |
3,200 |
183,200 |
|
American International Group, Inc. |
3,341 |
366,466 |
|
Commscope, Inc. Conv 4.0% |
|
|
|
|
|
|
|
|
|
629,139 |
|
|
|
|
|
Notes 12/15/06 |
$100,000 |
$122,875 |
|
|
|
|
|
|
|
|
|
Internet - 0.8% |
|
|
|
Dura Pharmaceuticals, Inc. 3.5% |
|
|
|
|
|
|
|
Computer Hardware - 13.1% |
|
|
|
America Online, Inc.* |
2,280 |
136,800 |
|
Conv. Sub Notes 7/15/02 |
135,000 |
110,025 |
|
|
|
|
|
American Power Conversion Corp.* |
4,400 |
155,375 |
|
|
|
|
|
National Data Corp. 5.0% |
|
|
|
|
|
|
|
Cisco Systems, Inc.* |
13,080 |
906,812 |
|
Manufacturing - 2.4% |
|
|
|
Conv. Sub. Notes 11/1/03 |
350,000 |
295,312 |
|
|
|
|
|
Hewlett Packard Co. |
1,200 |
162,000 |
|
Illinois Tool Works, Inc. |
6,030 |
386,297 |
|
Thermo Instrument Systems |
|
|
|
|
|
|
|
SCI Systems, Inc.* |
17,000 |
905,250 |
|
|
|
|
|
4.5% Conv. Deb. 10/15/03 |
230,000 |
211,313 |
|
|
|
|
|
|
|
2,129,437 |
|
Medical - Pharmaceutical - 9.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abbott Laboratories |
11,000 |
422,812 |
|
Total Convertible Bonds |
|
|
|
|
|
|
|
Computer Software - 6.7% |
|
|
|
Johnson & Johnson |
3,700 |
305,250 |
|
(cost - $758,484) |
|
$739,525 |
|
|
|
|
|
BMC Software, Inc.* |
4,700 |
220,019 |
|
Merck & Co., Inc. |
6,700 |
465,650 |
|
|
|
|
|
|
|
|
|
Microsoft Corp.* |
7,700 |
537,075 |
|
Schering-Plough Corp. |
9,300 |
374,906 |
|
|
|
|
|
|
|
|
|
Novell, Inc.* |
7,600 |
149,150 |
|
|
|
1,568,618 |
|
|
|
|
|
|
|
|
Sheffield Intermediate Term Bond Fund
Portfolio of Investments
April 30, 2000 (unaudited)
|
Short-term Investments (1.8%) |
Par |
Value |
Corporate Bonds and Notes - continued Par |
Value |
Corporate Bonds and Notes - continued Par |
Value |
|
Corporate Bonds and Notes - continued Par |
Value |
|||||
|
UMB Bank Money Market |
|
|
Chemicals - Specialty - 3.2% |
|
|
Household Products - 3.1% |
|
|
|
Utilities (cont.) |
|
|
||
|
(cost - $160,763) |
$160,763 |
$160,763 |
Praxair, Inc. 6.75% Notes 3/1/03 |
$300,000 |
$291,264 |
Procter & Gamble Co. 5.25% |
|
|
|
Telephone - 9.1% |
|
|
||
|
|
|
|
|
|
|
Notes 9/15/03 |
$300,000 |
$281,913 |
|
Airtouch Communications, Inc. |
|
|
||
|
Common Stocks (11.1%) |
Shares |
|
Commercial Services - 1.3% |
|
|
|
|
|
|
7.0% Notes 10/1/03 |
$150,000 |
$146,465 |
||
|
Auto - 1.5% |
|
|
Browning-Ferris Industries, Inc. |
|
|
Oil & Gas - 6.2% |
|
|
|
GTE Hawaiian Telephone Co., Inc. |
|
|
||
|
General Motors Corp. |
1,450 |
$135,756 |
6.375% Sr. Notes 1/15/08 |
150,000 |
113,418 |
Conoco, Inc. 5.9% Sr. Notes |
|
|
|
6.75% 1st Mortgage 2/15/05 |
300,000 |
285,798 |
||
|
|
|
|
|
|
|
4/15/04 |
350,000 |
330,865 |
|
MCI Worldcom, Inc. 6.125% Sr. |
|
|
||
|
Banking - 1.8% |
|
|
Computer Software - 2.7% |
|
|
Kinder Morgan, Inc. 6.8% Sr. |
|
|
|
Notes 8/15/01 |
250,000 |
246,792 |
||
|
J.P. Morgan & Co. |
1,240 |
159,185 |
First Data Corp. 6.625% Notes |
|
|
Notes 3/1/08 |
250,000 |
229,100 |
|
Pacific Bell 5.875% Deb. 2/15/06 |
154,000 |
142,593 |
||
|
|
|
|
4/1/03 |
250,000 |
241,635 |
|
|
559,965 |
|
|
|
821,648 |
||
|
Chemicals - 2.2% |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Du Pont (E.I.) De Nemours & Co. |
1,049 |
49,762 |
Containers - 2.6% |
|
|
Personal & Business Credit - 11.6% |
|
|
|
Total Bonds and Notes |
|
|
||
|
Minnesota Mining & Mfg. Co. |
1,695 |
146,830 |
Crown Cork & Seal Co., Inc. |
|
|
Associates Corp. NA 6.375% Sr. |
|
|
|
(cost - $7,417,828) |
|
$6,948,447 |
||
|
|
|
196,592 |
6.75% Notes 4/15/03 |
250,000 |
233,592 |
Notes 10/15/02 |
250,000 |
243,185 |
|
|
|
|
||
|
|
|
|
|
|
|
Caterpillar Financial Services Corp. |
|
|
|
Convertible Bonds (9.3%) |
Par |
Value |
||
|
Communications - 1.0% |
|
|
Diversified - 2.4% |
|
|
5.836% Med. Term Notes 5/1/00 |
200,000 |
200,000 |
|
ALZA Corp. 5.0% Conv. Sub. |
|
|
||
|
SBC Communications, Inc. |
2,070 |
90,692 |
ITT Corp. 6.75% Notes |
|
|
Ford Motor Credit Co. 6.125% |
|
|
|
Deb. 5/1/06 |
$250,000 |
$298,438 |
||
|
|
|
|
11/15/05 |
150,000 |
133,056 |
Notes 1/9/06 |
50,000 |
45,883 |
|
Dura Pharmaceuticals, Inc. 3.5% |
|
|
||
|
Electrical Equipment - 1.2% |
|
|
Service Corp. International |
|
|
Household Finance Corp. 6.7% |
|
|
|
Conv. Sub. Notes 7/15/02 |
75,000 |
61,125 |
||
|
Eastman Kodak Co. |
1,950 |
109,931 |
6.875% Notes 10/1/07 |
150,000 |
86,250 |
Notes 6/15/02 |
180,000 |
175,482 |
|
National Data Corp. 5.0% Conv. |
|
|
||
|
|
|
|
|
|
219,306 |
Sears Roebuck Acceptance Corp. |
|
|
|
Sub. Notes 11/1/03 |
300,000 |
253,125 |
||
|
Food Processing - 0.6% |
|
|
|
|
|
5.87% Notes 1/8/01 |
248,000 |
245,594 |
|
Thermo Instrument Systems, Inc. |
|
|
||
|
Philip Morris Cos., Inc. |
2,735 |
59,828 |
Entertainment/Leisure - 3.0% |
|
|
Sears Roebuck Acceptance Corp. |
|
|
|
4.5% Conv. Deb. 10/15/03 |
250,000 |
229,688 |
||
|
|
|
|
Mattel, Inc. 6.0% Notes 7/15/03 |
300,000 |
273,279 |
6.75% Notes 9/15/05 |
150,000 |
140,717 |
|
|
|
|
||
|
Manufacturing - Machinery - 1.3% |
|
|
|
|
|
|
|
1,050,861 |
|
Total Convertible Bonds |
|
|
||
|
Caterpillar, Inc. |
2,890 |
113,974 |
Financial - Insurance - 3.1% |
|
|
|
|
|
|
(cost - $865,762) |
|
$842,376 |
||
|
|
|
|
Loews Corp. 6.75% Notes 12/15/06 |
300,000 |
281,697 |
Retail - Department Stores - 2.4% |
|
|
|
|
|
|
||
|
Oil & Gas - 1.5% |
|
|
|
|
|
JC Penney Co., Inc. 6.125% Notes |
|
|
|
Total Investments (99.1%) |
|
|
||
|
Exxon Mobil Corp. |
1,790 |
139,061 |
Financial Services - 4.2% |
|
|
11/15/03 |
255,000 |
212,224 |
|
(cost - $9,267,070) |
|
$8,956,605 |
||
|
|
|
|
Bear Stearns Cos., Inc. 6.7% Sr. |
|
|
|
|
|
|
|
|
|
||
|
Total Common Stocks |
|
|
Notes 8/1/03 |
200,000 |
193,232 |
Transportation - Railroad - 2.8% |
|
|
|
Other Assets, Less Liabilities (0.9%) |
|
$84,795 |
||
|
(cost - $822,717) |
|
$1,005,019 |
Countrywide Funding Corp. 6.875% |
|
|
Union Pacific Corp. 7.375% Notes |
|
|
|
|
|
|
||
|
|
|
|
Guaranteed Notes 9/15/05 |
200,000 |
189,888 |
5/15/01 |
250,000 |
248,747 |
|
Net Assets (100%) |
|
$9,041,400 |
||
|
Corporate Bonds and Notes (76.9%) |
Par |
Value |
|
|
383,120 |
|
|
|
|
|
|
|
||
|
Banking - 9.2% |
|
|
|
|
|
Utilities - 12.6% |
|
|
|
Net Asset Value Per Share |
|
$8.73 |
||
|
Bank One Corp. 7.25% Sub. |
|
|
Food Processing - 3.9% |
|
|
Electric & Gas - 1.5% |
|
|
|
|
|
|
||
|
Notes 8/1/02 |
$250,000 |
$248,052 |
Nabisco, Inc. 7.05% Notes 7/15/07 |
150,000 |
132,984 |
Baltimore Gas & Electric Co. 6.5% |
|
|
|
|
|
|
||
|
First Union National Bank/NJ |
|
|
Philip Morris Cos., Inc. 6.375% |
|
|
1st Ref. Mortgage Bonds 2/15/03 |
140,000 |
136,095 |
|
|
|
|
||
|
7.125% Sub. Notes 10/15/06 |
100,000 |
95,994 |
Notes 2/1/06 |
250,000 |
217,288 |
|
|
|
|
|
|
|
||
|
J.P. Morgan & Co., Inc. 7.625% |
|
|
|
|
350,272 |
Natural Gas - 2.0% |
|
|
|
|
|
|
||
|
Sub. Notes 9/15/04 |
250,000 |
249,202 |
|
|
|
Williams Cos., Inc. 6.25% Deb. |
|
|
|
|
|
|
||
|
MBNA Corp. 6.875% Sr. Notes |
|
|
Healthcare - 2.6% |
|
|
2/1/06 |
200,000 |
183,600 |
|
|
|
|
||
|
6/1/05 |
250,000 |
233,975 |
Cardinal Health, Inc. 6.5% Notes |
|
|
|
|
|
|
|
|
|
||
|
|
|
827,223 |
2/15/04 |
250,000 |
238,588 |
|
|
|
|
|
|
|
||
Financial Statements
|
Statements of Assets and Liabilities |
|
Statements of Operations |
|
|
Statements of Changes in Net Assets |
|
|
|
Statements of Changes in Net Assets |
|
|
|||
|
April 30, 2000 (unaudited) |
|
|
For the six months ended April 30, 2000 (unaudited) |
For the six months ended April 30, 2000 (unaudited) |
|
For the six months ended April 30, 2000 (unaudited) |
||||||||
|
|
Sheffield |
Sheffield |
|
Sheffield |
Sheffield |
and for the year ended October 31, 1999 |
|
and for the year ended October 31, 1999 |
||||||
|
|
Total |
Intermediate |
|
Total |
Intermediate |
|
Sheffield Total |
|
|
Sheffield Intermediate |
||||
|
|
Return |
Term Bond |
|
Return |
Term Bond |
|
Return Fund |
|
|
Term Bond Fund |
||||
|
|
Fund |
Fund |
|
Fund |
Fund |
|
Six Months |
|
|
|
Six months |
|
||
|
Assets: |
|
|
Investment income |
|
|
|
ended |
Year ended |
|
|
ended |
Year ended |
||
|
|
|
|
|
|
|
|
4/30/00 |
10/31/99 |
|
|
4/30/00 |
10/31/99 |
||
|
Investments at value (cost of |
|
|
Interest |
$33,720 |
$314,725 |
Increase (Decrease) in Net Assets: |
|
|
|
Increase (Decrease) in Net Assets: |
|
|
||
|
$9,491,841 and $9,267,070 |
|
|
Dividends |
97,948 |
15,973 |
Operations: |
|
|
|
Operations: |
|
|
||
|
respectively) |
$16,253,291 |
$8,956,605 |
|
|
|
Net investment income |
$(17,787) |
$48,637 |
|
Net investment income |
$251,827 |
$530,229 |
||
|
|
|
|
Total income |
131,668 |
330,698 |
Net realized gain on investments |
4,273,895 |
2,186,575 |
|
Net realized gain on investments |
(169,293) |
(9,480) |
||
|
Receivables: |
|
|
|
|
|
Net gain (loss) on options |
(95,280) |
95,711 |
|
Change in unrealized |
|
|
||
|
Interest |
12,692 |
119,713 |
Expenses: |
|
|
Net realized loss on futures |
- |
(16,926) |
|
appreciation on investments |
(189,343) |
(594,752) |
||
|
Dividends |
9,856 |
939 |
|
|
|
Change in unrealized |
|
|
|
Increase in net assets from |
|
|
||
|
Portfolio securities sold |
29,308 |
- |
Investment advisory fee |
87,522 |
54,679 |
appreciation on investments |
(3,349,760) |
1,003,088 |
|
operations |
(106,809) |
(74,003) |
||
|
Prepaid insurance |
6,475 |
3,878 |
Investment advisory fee waived |
- |
(13,668) |
Increase in net assets from |
|
|
|
|
|
|
||
|
Total assets |
16,311,622 |
9,081,135 |
Administration fee |
24,000 |
24,000 |
operations |
811,068 |
3,317,085 |
|
|
|
|
||
|
|
|
|
Administration fee waived |
- |
(12,500) |
|
|
|
|
|
|
|
||
|
Liabilities: |
|
|
Transfer agency fee |
5,000 |
5,000 |
Dividends to shareholders from: |
|
|
|
Dividends to shareholders from: |
|
|
||
|
|
|
|
Distribution expenses |
3,751 |
3,429 |
Net investment income |
(14,781) |
(41,860) |
|
Net investment income |
(266,015) |
(524,355) |
||
|
Investment securities purchased |
31,335 |
- |
Custodian fees |
5,789 |
2,278 |
Realized gains |
(2,202,562) |
(3,150,164) |
|
Realized gains |
- |
(149,512) |
||
|
Redemptions |
- |
24,700 |
Registration and filing fees |
1,877 |
1,374 |
Total distributions to shareholders |
(2,217,343) |
(3,192,024) |
|
Total distributions to shareholders |
(266,015) |
(673,867) |
||
|
Accrued expenses |
34,736 |
15,035 |
Professional fees |
13,485 |
8,801 |
|
|
|
|
|
|
|
||
|
Total liabilities |
66,071 |
39,735 |
Directors fees |
2,400 |
2,400 |
Capital transactions: |
|
|
|
Capital transactions: |
|
|
||
|
|
|
|
Printing and postage |
549 |
75 |
Proceeds from shares issued |
|
|
|
Proceeds from shares issued |
|
|
||
|
Net Assets Consisting of: |
|
|
Insurance expense |
3,933 |
2,368 |
through exchange |
7,069 |
1,000 |
|
through exchange |
- |
3,899,334 |
||
|
|
|
|
Other |
1,149 |
635 |
Proceeds from reinvestment of |
|
|
|
Proceeds from reinvestment of |
|
|
||
|
Undistributed net investment |
|
|
|
|
|
dividends |
1,528,089 |
2,611,177 |
|
dividends |
266,015 |
673,867 |
||
|
income |
(5,716) |
30,130 |
Total expenses |
149,455 |
78,871 |
Proceeds from other shares sold |
19,000 |
1,032,871 |
|
Proceeds from other shares sold |
120,900 |
3,055,570 |
||
|
Accumulated net realized gain |
|
|
|
|
|
Cost of shares reacquired through |
|
|
|
Cost of shares reacquired through |
|
|
||
|
(loss) |
4,082,457 |
(178,712) |
Net investment income |
(17,787) |
251,827 |
exchange |
- |
(3,899,334) |
|
exchange |
(7,069) |
(1,000) |
||
|
Unrealized appreciation |
|
|
|
|
|
Cost of other shares reacquired |
(3,404,477) |
(6,509,583) |
|
Cost of other shares reacquired |
(3,646,127) |
(2,016,236) |
||
|
(depreciation) on investments |
6,761,450 |
(310,465) |
Realized and Unrealized Gain |
|
|
Decrease in net assets from |
|
|
|
(Increase) decrease in net assets |
|
|
||
|
Paid-in capital applicable to |
|
|
(Loss) on Investments: |
|
|
capital share transactions |
(1,850,319) |
(6,763,869) |
|
from capital share transactions |
(3,266,281) |
5,611,535 |
||
|
1,035,349 and 1,035,688 shares |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
outstanding, respectively, of |
|
|
Net realized gain (loss) on |
|
|
Total decrease |
(3,256,594) |
(6,638,808) |
|
Total increase (decrease) |
(3,639,105) |
4,863,665 |
||
|
$.001 par value capital stock; |
|
|
investments |
4,273,895 |
(169,293) |
|
|
|
|
|
|
|
||
|
5,000,000 shares authorized in |
|
|
Net realized loss on options |
(95,280) |
- |
Net Assets: |
|
|
|
Net Assets: |
|
|
||
|
each fund |
5,407,360 |
9,500,447 |
Change in unrealized |
|
|
Beginning of period |
19,502,145 |
26,140,953 |
|
Beginning of period |
12,680,505 |
7,816,840 |
||
|
|
|
|
appreciation on investments |
(3,349,760) |
(189,343) |
End of period |
$16,245,551 |
$19,502,145 |
|
End of period |
$9,041,400 |
$12,680,505 |
||
|
Net Assets |
$16,245,551 |
$9,041,400 |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Net gain (loss) on investments |
828,855 |
(358,636) |
Capital transactions in number of shares: |
|
|
|
Capital transactions in number of shares: |
|
|
||
|
Net Asset Value Per Share |
$15.69 |
$8.73 |
|
|
|
Shares issued through exchange |
446 |
60 |
|
Shares issued through exchange |
- |
411,348 |
||
|
|
|
|
Net increase (decrease) in net |
|
|
Shares issued in connection with |
|
|
|
Shares issued in connection with |
|
|
||
|
See accompanying notes to financial statements. |
assets from operations |
$811,068 |
$(106,809) |
reinvestment of dividends |
98,573 |
170,665 |
|
reinvestment of dividends |
30,206 |
72,353 |
||||
|
|
|
|
|
|
|
Other shares sold |
1,110 |
59,137 |
|
Other shares sold |
13,450 |
321,332 |
||
|
|
|
|
|
|
|
Shares reacquired through |
|
|
|
Shares reacquired through |
|
|
||
|
|
|
|
|
|
|
exchange |
- |
(234,312) |
|
exchange |
(798) |
(111) |
||
|
|
|
|
|
|
|
Other shares reacquired |
(215,270) |
(387,687) |
|
Other shares reacquired |
(412,891) |
(214,945) |
||
|
|
|
|
|
|
|
Net decrease in shares outstanding |
(115,141) |
(392,137) |
|
Net (increase) decrease in shares |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
outstanding |
(370,033) |
589,977 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
See accompanying notes to financial statements. |
|
|
|
|
||||
Financial Highlights
|
For a share outstanding throughout the period. |
|
|
|
|
|
|
|
|
|
|
Sheffield Total Return Fund |
|
||
|
|
Six Months |
|
Year ended October 31, |
|
||
|
|
Ended |
|
|
|
|
|
|
|
April 30, 2000 |
1999 |
1998 |
1997 |
1996 |
1995 |
|
Net asset value, beginning of period |
$ 16.95 |
$ 16.95 |
$ 18.47 |
$ 15.02 |
$ 12.86 |
$ 11.53 |
|
Income from investment operations: |
|
|
|
|
|
|
|
Net investment income |
(0.02) |
0.04 |
0.01 |
0.03 |
0.09 |
0.11 |
|
Net gains on securities (both realized |
|
|
|
|
|
|
|
and unrealized) |
0.75 |
2.06 |
0.57 |
4.38 |
2.67 |
1.68 |
|
Total from investment operations |
0.73 |
2.10 |
0.58 |
4.41 |
2.76 |
1.79 |
|
|
|
|
|
|
|
|
|
Less distributions: |
|
|
|
|
|
|
|
Dividends (from net investment income) |
(0.01) |
(0.03) |
- |
(0.09) |
(0.11) |
(0.12) |
|
Distributions (from realized gains) |
(1.98) |
(2.07) |
(2.10) |
(0.87) |
(0.49) |
(0.34) |
|
Total distributions |
(1.99) |
(2.10) |
(2.10) |
(0.96) |
(0.60) |
(0.46) |
|
|
|
|
|
|
|
|
|
Net Asset Value, end of period |
$ 15.69 |
$ 16.95 |
$ 16.95 |
$ 18.47 |
$ 15.02 |
$ 12.86 |
|
|
|
|
|
|
|
|
|
Total return |
4.50% |
13.71% |
3.50% |
30.79% |
22.36% |
16.33% |
|
Ratios/supplemental data: |
|
|
|
|
|
|
|
Net assets, end of period (000's) |
$16,246 |
$19,502 |
$26,141 |
$28,626 |
$25,257 |
$21,565 |
|
Ratio of expenses to average net assets |
1.70%* |
1.58% |
1.45% |
1.39% |
1.44% |
1.60% |
|
Ratio of net investment income to average net assets |
(0.20%) |
0.22% |
0.07% |
0.18% |
0.66% |
0.90% |
|
Portfolio turnover rate |
67.60%* |
36.48% |
49.62% |
42.09% |
57.17% |
55.16% |
|
|
|
|
|
|
|
|
|
* Annualized |
|
|
|
|
|
|
|
See accompanying notes to financial statements. |
|
|
|
|
|
|
Financial Highlights
|
For a share outstanding throughout the period. |
|
|
|
|
|
|
|
|
|
Sheffield Intermediate Term Bond Fund |
||||
|
|
Six Months |
|
Year ended October 31, |
|
||
|
|
Ended |
|
|
|
|
|
|
|
April 30, 2000 |
1999 |
1998 |
1997 |
1996 |
1995 |
|
Net asset value, beginning of period |
$ 9.02 |
$ 9.58 |
$ 9.68 |
$ 9.70 |
$ 9.59 |
$ 9.06 |
|
Income from investment operations: |
|
|
|
|
|
|
|
Net investment income |
0.20 |
0.41 |
0.44 |
0.45 |
0.46 |
0.53 |
|
Net gains (losses) on securities (both realized |
|
|
|
|
|
|
|
and unrealized) |
(0.27) |
(0.42) |
0.10 |
0.37 |
0.24 |
0.60 |
|
Total from investment operations |
(0.07) |
(0.01) |
0.54 |
0.82 |
0.70 |
1.13 |
|
|
|
|
|
|
|
|
|
Less distributions: |
|
|
|
|
|
|
|
Dividends (from net investment income) |
(0.22) |
(0.40) |
(0.43) |
(0.47) |
(0.47) |
(0.57) |
|
Distributions (from realized gains) |
- |
(0.15) |
(0.21) |
(0.37) |
(0.12) |
(0.03) |
|
Total distributions |
(0.22) |
(0.55) |
(0.64) |
(0.84) |
(0.59) |
(0.60) |
|
|
|
|
|
|
|
|
|
Net Asset Value, end of period |
$ 8.73 |
$ 9.02 |
$ 9.58 |
$ 9.68 |
$ 9.70 |
$ 9.59 |
|
|
|
|
|
|
|
|
|
Total return |
(0.75%) |
(0.22%) |
5.63% |
8.97% |
7.64% |
12.89% |
|
Ratios/supplemental data: |
|
|
|
|
|
|
|
Net assets, end of period (000's) |
$9,041 |
$12,681 |
$7,817 |
$7,776 |
$6,860 |
$7,734 |
|
Ratio of expenses to average net assets |
1.44%*+ |
1.37%+ |
1.59%+ |
1.69%+ |
1.86%+ |
1.78%+ |
|
Ratio of net investment income to average net assets |
4.61%* |
4.32% |
4.59% |
4.87% |
4.87% |
5.61% |
|
Portfolio turnover rate |
3.37%* |
23.75% |
35.31% |
46.54% |
33.65% |
34.99% |
|
|
|
|
|
|
|
|
|
* 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 1.91%, 1.83%, 2.16%, 2.28%, 2.47%, and 2.03% for the period ending April 20, 2000 |
||||||
|
and for the years ending 1999, 1998, 1997, 1996, and 1995, respectively. |
|
|
||||
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements. |
|
|
|
|
||
Notes to Financial Statements
Note 1. Organization and Significant Accounting Policies.
The Sheffield Funds, Inc. (SFI) is registered under the Investment Company Act of 1940 as an open-end diversified management investment company. SFI consists of two separate funds, the Sheffield Total Return Fund (the "Total Return Fund") and the Sheffield Intermediate Term Bond Fund (the "Bond Fund"), each of which represents a separate portfolio of investments (collectively, "the Funds"). SFI commenced operations on April 2, 1990. The following is a summary of significant accounting policies followed by SFI:A. Security Valuation - Equity securities listed or traded on a national securities exchange are valued at the last sale price on the day of valuation or, if no sale is reported, at the latest bid price. Bonds and other fixed income securities are valued on the basis of prices furnished by an independent pricing service. Convertible bonds are valued at the mean of bid and asked prices if available, or if not available, on the basis of prices furnished by an independent pricing service. Short-term obligations with maturities of sixty days or less are valued at amortized cost, which approximates market.
B. Security Transactions and Related Investment Income - Security transactions are accounted for on the trade date and dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis and includes the amortization of discounts and premiums on the purchase of debt securities. Realized gains and losses from investment transactions and unrealized appreciation and depreciation of investments are reported on an identified cost basis.
C. Futures Contracts - The Funds may purchase financial futures contracts in order to invest excess cash or to provide liquidity for redemption requests. The Funds may sell financial futures as a means to reduce market risk. Upon entering into a futures contract, the 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, 2000, 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, 2000, the aggregate cost of securities for federal income tax purposes for the Total Return Fund was $9,553,785 and net unrealized appreciation aggregated $6,761,450 of which $6,996,313 related to appreciated securities and $234,863 related to depreciated securities. The aggregate tax cost of securities for the Bond Fund was $9,267,070 and net unrealized depreciation aggregated $310,465, of which $279,592 related to appreciated securities and $590,057 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, 2000, amounted to approximately $14,100.
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, 2000, 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 six month period ended April 30, 2000, 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 |
| $5,934,531 | $5,838,333 | $181,972 | $3,315,602 |
For the six month period ended April 30, 2000, the Total Return Fund had the following transactions in written call options:
| Number of Contracts |
Costs |
|
|
Options outstanding at |
||
| October 31, 1999 | 50 | $32,345 |
| Options written | 95 | 42,045 |
| Options closed | (95) | (59,954) |
| Options expired | (50) | (14,436) |
| Options exercised | 0 | 0 |
| Options outstanding at | ||
|
April 30, 2000 |
0 |
$0 |
Note 4. Related Party Stockholders. At April 30, 2000, the Sheffield Investment Management, Inc. Profit Sharing Plan owned 11,911 shares of the Bond Fund and 10,770 shares of the Total Return Fund. The President of SIMI and related family members owned 704 shares of the Total Return Fund.
Note 5. Capital Loss Carryover. At October 31, 1999, capital loss carryovers available to offset possible future capital gains of the Bond Fund were $9,480, expiring in 2007.
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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.
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