CAPITAL VALUE FUND, INC.
ANNUAL FINANCIAL REPORT
MARCH 31, 1996
EQUITY PORTFOLIO
TOTAL RETURN PORTFOLIO
FIXED INCOME PORTFOLIO
SHORT-TERM GOVERNMENT PORTFOLIO
PRIME MONEY MARKET PORTFOLIO
<PAGE>
May 1996
Dear Shareholders:
We are pleased to present the investment results for your Capital Value Fund for
the fiscal year ending, March 31, 1996. Nearing three years since inception (May
31, 1993), we are pleased with both the performance of the five Capital Value
Fund Portfolios, and by the support shown by shareholders. Combined Fund assets
reached $63 million on March 31, up from $53 million a year prior.
The last 12 months have been a period of above-average returns for the stock and
bond markets overall. The S&P 500 was up 32.10 percent over the period. The bond
market, as measured by the Lehman Aggregate Index, returned 10.78 percent over
the period. Shorter-term bonds were up less dramatically, but also offered
favorable returns.
The Portfolios performed competitively with the market indices, particularly in
the first nine months of the period. Throughout the period, our investment
strategy anticipated slowing economic growth, a virtual absence of inflationary
pressures, and a deceleration in the rate of profit growth. The Portfolios
benefited from the outlook in calendar 1995. However, fears of economic
expansion during the first quarter hurt our relative performance in the first
quarter of 1996.
Looking forward, we are well positioned for the slower growth, low inflation
economic environment, which we continue to expect. Our rationale is explained
very well in the portfolio managers' commentaries that follow this letter.
As always, we thank you for investing in the Capital Value Fund. Please call
1-800-798-1819 with any questions about the Fund or its performance.
Sincerely,
Robert G. Millen
Chairman, Capital Value Fund, Inc.
President, Capital Value Corporation
David W. Miles
President, Capital Value Fund, Inc.
Senior Managing Director
Investors Management Group
<PAGE>
CAPITAL VALUE EQUITY PORTFOLIO
For the 12-month period ended March 31, 1996, the Equity Portfolio generated
total returns of 23.90 percent and 24.52 percent for the Initial and Select
shares, respectively. These returns fell short of the 32.10 percent return
generated by the S&P 500 Composite for the period and the 28.31 percent return
produced by the average equity mutual fund tracked by Lipper Analytical
Services.
The stock market has produced phenomenal gains over the last 16 months, with the
S&P 500 climbing 44.91 percent from its December 1994 low through March 31,
1996. The market has been propelled by the favorable combination of strong
growth in corporate profits, falling long-term interest rates, and a healthy
stream of money flowing into stock mutual funds. In addition, the market
benefited in a contrary fashion from the lingering bearishness among many
investment professionals during the period; the stock market usually does best
when it must climb the proverbial "wall of worry".
Last year's report discussed the shift in the Equity Portfolio's sector emphasis
favoring economically defensive and interest-sensitive areas of the stock
market, including consumer nondurables (household products, drug and food
stocks), utilities and financial stocks. Our belief had been that fears of
inflationary growth were overdone and that the economy would cool off in 1995.
In particular, we argued that long-term interest rates were too high in relation
to underlying trends in inflation and economic growth and we therefore expected
a sharp decline in long-term interest rates. Based on this outlook, we
maintained our emphasis on two sectors of the market. The first is what we would
characterize as "bond-like" stocks. These would include the shares of electric
utilities, telecommunications companies and banks, which typically benefit from
declines in long-term interest rates. The second area of emphasis is
manufacturers of consumer nondurables, such as foods and drugs, whose growth in
earnings is relatively insensitive to swings in the economic cycle. During the
last 12 months, we maintained minimal exposure to the industrial capital goods,
technology, basic materials, and energy sectors.
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with a similar investment
in the Standard & Poor's 500 Stock Index ("S&P"). The shares of the Fund are
divided into "Initial Shares" and "Select Shares". Generally, only Initial
Shares of the Porfolio may be purchased directly by certain persons and in
certain situtations. (See "ADDITIONAL INVESTMENT INFORMATION" in the
prospectus.) Initial Shares of the Portfolio automatically convert to Select
Shares of the same Portfolio eight years after issuance of the Initial Shares.
Initial Shares of the Portfolio pay distribution fees based upon average daily
net assets of the Portfolio. Select Shares of the Portfolio do not pay
distribution fees. Results include the reinvestment of all dividends and capital
gains distributions. The S&P 500 is an unmanaged index of common stocks.
Performance data quoted represents past performance, which is no indication of
future performance. Investment return and principal value will fluctuate so that
an investors' shares, when redeemed, may be worth more or less than their
original cost. An additional fee of $10 will be charged for redemption from a
retirement plan account and redemptions payable by wire transfer. If investors
redeem shares, they may be subject to a maximum contingent deferred sales charge
("CDSC") of 4 percent, which has not been reflected in the above graph.
The key elements of our investment strategy unfolded much as we had hoped over
the past year. Momentum in the U.S. economy cooled, inflation remained in check
and long-term interest rates fell to near their late 1993 lows before retracing
some of the decline in February and March. The sharp deceleration in economic
growth drove investors into economically defensive areas of the market,
benefiting many of the Equity Portfolio's holdings in the pharmaceutical and
food industries. Moreover, the high-yielding shares of utilities,
telecommunications and finance companies benefited from the decline in long-term
interest rates before surrendering some of the gains late in the period. Shares
of industrial and consumer cyclical companies, which we avoided throughout the
period, lagged the market averages for most of the period before staging a
rebound late in the first quarter. The year witnessed the spectacular rise and
fall of the technology sector, with the shares of many semiconductor and
software companies doubling and then halving during the course of the year. We
reduced our already underweighted position in technology groups during the third
quarter of 1995. The value of the Treasury bond holdings in the portfolio
declined during the first quarter of 1996 as long-term interest rates ratcheted
higher on the belief that the economy was set to accelerate. Our performance
shortfall, relative to the S&P 500, primarily reflects the poor first quarter
performance of the utilities and telecommunications stocks and the decline in
the value of the Treasury bond holdings.
Our sector strategy has undergone little change in the last several months.
Recent declines in the utilities and telecommunications stocks have helped
reestablish better value in these sectors and both industries should benefit if
our expectations of lower interest rates are realized. Regional banks also stand
to benefit from lower rates and we continue to overweight them. We are
maintaining overweighted positions in the health care and consumer nondurables
sectors on the belief that investors will assign increasing value to their
steady earnings streams as growth in the economy and corporate profits weakens.
We believe it is dangerous to climb onto the bandwagon now chasing the cyclical
stocks; valuations among the cyclicals appear expensive and we believe that
profit growth in many cyclical industries is vulnerable to further slowdown in
coming quarters. Despite the steep decline in technology shares over the last
several months, we think that profit estimates for the sector are still too
optimistic and we therefore continue to underweight this area.
We made earlier mention of the three key drivers of the market's tremendous
advance: strong profit growth, falling long-term interest rates and a flood of
new money into equity mutual funds. While we believe it is dangerous to bet
against a continuation of this bull market in 1996, we are concerned that the
first two of these three supports have begun to weaken at a time when most
measures of market valuation are near historic highs. We believe that as fears
of slowing growth in corporate profits continue to climb and as long-term
interest rates resume their decline, investor interest should begin to flow back
toward the economically defensive and interest-sensitive sectors, including the
consumer nondurables, utilities and financial services stocks. The Equity
Portfolio remains positioned to capitalize on this rotation.
DOUGLAS R. RAMSEY JAMES W. PAULSEN, PH.D.
PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
CAPITAL VALUE TOTAL RETURN PORTFOLIO
For the 12-month period ended March 31, 1996, the Total Return Portfolio
increased in value with Initial and Select shares achieving total returns of
17.12 percent and 17.70 percent respectively. For the same period, the benchmark
index, which is comprised of 50 percent of the S&P 500 Index and 50 percent of
the Lehman Aggregate Bond Index, generated a total return of 21.05 percent.
The stock market has outperformed the bond market by a large margin over this
period: 32.10 percent versus 10.78 percent. The Portfolio has had a heavier
weighting to bonds with an asset allocation of 60 percent bonds and 40 percent
stocks. This is the primary reason for the underperformance of the Portfolio. In
addition, the conservative posture of the stock portion of the portfolio and the
longer average maturity of the bond portion of the portfolio hindered
performance in the last few months of this period.
Due to the recent large gains in employment, the financial markets are factoring
in faster economic growth. In the stock market, cyclical stocks have been
outperforming noncyclicals. The potential for faster economic growth leading to
higher inflation has caused long-term interest rates to rise by nearly 1 percent
over the last two months.
In our view, economic growth is still modest and may prove disappointing before
the end of the year. The strength in the economy over the last two years has
primarily come from three sectors: housing, business investment spending, and
exports. All of these sectors show signs of slowing.
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with a similar investment
in the Standard & Poor's 500 Stock Index ("S&P 500") and in the Lehman Aggregate
Index. The shares of the Fund are divided into "Initial Shares" and "Select
Shares". Generally, only Initial Shares of the Portfolio may be purchased
direcly by certain persons and in certain situations. (See "ADDITIONAL
INVESTMENT INFORMATION" in the prospectus.) Initial Shares of the Portfolio
automatically convert to Select Shares of the same Portfolio eight years after
issuance of the Initial Shares. Initial Shares of the Portfolio pay distribution
fees based upon average daily net assets of the Portfolio. Select Shares of the
Portfolio do not pay distribution fees. Results include the reinvestment of
dividends and capital gains distributions. The S&P 500 is an unmanaged index of
common stocks. The Lehman Aggregate includes fixed rate debt issues rated
investment grade or higher by Moody's Investors Service, Standard and Poor's
Corporation, or Fitch Investor's Service. All issues have at least one year to
maturity and an outstanding par value of at least $100 million. The Lehman
Aggregate Index includes bonds with maturities of 1-30 years. Price, coupon, and
total return are reported for all sectors on a month-end to month-end basis.
Performance data quoted represents, which is no indication of future
performance. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. An additional fee of $10 will be charged for redemption from a retirement
plan account and redemptions payable by wire transfer. IF INVESTORS REDEEM
SHARES, THEY MAY BE SUBJECT TO A MAXIMUM CONTINGENT DEFERRED SALES CHARGE
("CDSC") OR 4 PERCENT, WHICH HAS NOT BEEN REFLECTED IN THE ABOVE GRAPH.
The large employment number is not likely to lead to a consumer spending boom.
First, it is not corroborated by other indicators of employment. Initial
unemployment claims are above levels of a year ago. The help-wanted advertising
index is not rising. In addition, delinquencies on consumer loans have increased
over the last several months and income growth is the lowest since 1991.
Consumers are short on income and high on debt, not a good combination for
robust spending.
Other indicators paint a picture of an economy struggling to maintain sluggish
growth. The index of Leading Economic Indicators has declined in the last 12
months. The National Association of Purchasing Management's manufacturing index
has been below the neutral 50 level for eight straight months. Loan growth among
both businesses and consumers continues to slow.
For policy officials, however, even the possibility of stronger growth will keep
policies restrictive. The Federal Reserve held the federal funds rate constant
at its most recent meeting. Though 1996 is an election year, neither Congress
nor the President is calling for stimulative fiscal policy. Until policies are
eased, the economy is not likely to grow rapidly.
The inflation outlook remains quite good. Industrial commodity price indexes hit
12-month lows recently. Consumer prices have risen at an annual rate of just 2.7
percent over the last 12 months. The prices-paid index in the March Purchasing
Management survey has steadily fallen since November 1994 from 87.5 percent to
39.5 percent last month. Labor costs continue to be restrained by corporate
downsizing.
In 1995, the stock market was propelled higher by three powerful forces: (1)
falling long-term interest rates, (2) rising corporate earnings, and (3) an
enormous amount of cash flowing into the stock market. Two of these factors have
reversed: long-term interest rates have risen recently and corporate profits
have plateaued. The only force that remains is cash flow. Nearly $50 billion of
new cash went into equity mutual funds in the first two months of 1996. Due to
the high current valuation of the stock market, the potential for downside risk
has increased.
In our view, bonds offer much more compelling value than stocks. If inflation
remains under control, long-term interest rates should decline and bond prices
should appreciate. The stock market, meanwhile, may not keep pace since
corporate profits are no longer rising. Therefore, we have overweighted bonds in
the Portfolio. The current asset allocation is 60 percent bonds and 40 percent
stocks.
With these thoughts in mind, the equity portion of the Portfolio continues to
overweight stocks that offer consistent earnings growth regardless of economic
conditions and those that offer above-average yields. Stocks with these
characteristics will hold their value better if the stock market does decline.
Sectors which we are emphasizing include: utilities, finance, and consumer
nondurables.
Weaker economic growth and moderate inflation should allow long-term interest
rates to decline in the last half of 1996. We plan to take advantage of the
recent rise in interest rates by increasing the duration of the Portfolio to a
level 30 percent longer than the index over the next few months. We also plan to
emphasize intermediate maturities. Typically, during an economic slowdown the
yield curve steepens as short-term rates fall faster than long-term rates.
Overweighting intermediate maturities should enhance the portfolio's
performance, if the yield curve does steepen. We remain significantly
underweighted in mortgage pass-throughs. Mortgages have recently outperformed
comparable Treasuries, but if long-term interest rates decline from here
mortgages will lag. We continue to be selective in the corporate bond market,
since corporate bonds may also underperform, if the economy continues to weaken.
In conclusion, the Portfolio is positioned for slowing economic growth, lower
interest rates, and stable inflation. In this environment, long-term interest
rates should decline as inflation fears dissipate. Bonds should outperform stock
and stocks which exhibit consistent unit growth should outperform cyclical
stocks.
KATHRYN D. BEYER, CFA JEFFREY D. LORENZEN, CFA JAMES W. PAULSEN, PH.D.
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
CAPITAL VALUE FIXED INCOME PORTFOLIO
The Capital Value Fixed Income Portfolio's objective is to provide as high a
level of income as is consistent with preservation of capital. The portfolio
produced a 12-month total return for Initial and Select Shares of 10.28 percent
and 10.84 percent, respectively, compared to the Lehman Aggregate Index of 10.78
percent.
During the first nine months of this period, the bond market experienced a
dramatic downward trend in interest rates. This decline in rates was due to an
economy which was weakening and an inflation level which was well under control.
With inflation in control and an economy which was weak, bond yields took a
natural course lower.
Recently, that perception has changed and the trend toward lower interest rates
has reversed and turned upward. This change in perception is largely due to
several recent economic reports which suggest a higher level of growth in the
economy. A strong employment report, accelerating industrial production,
increased retail sales, and a growing money supply have altered the consensus
view toward an economy which is growing, not weakening. This optimism has sent
bond prices down and yields up.
While some reports have admittedly caused us to question our own outlook, we
believe the primary trend is still toward slower growth. Initial unemployment
gains are trending higher, raw industrial commodity prices are trending lower,
Leading Economic Indicators have declined over the last year, debt loads in the
household sector remain too high, corporate profit levels have declined for the
first time in several quarters all pointing to an economy that is not
necessarily picking up steam. To add to the list, economic policy remains in a
restrictive mode. Although some money aggregates are rising, overall money
growth still remains sluggish by historic standards and the Federal Reserve is
unlikely to move to an easing policy anytime soon. Until the policies become
more obviously stimulative, the economy will not likely sustain any meaningful
growth.
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception with a similar investment
in the Lehman Aggregate Index. The shares of the Fund are divided into "Initial
Shares" and "Select Shares". Generally, only Initial Shares of the Portfolio may
be purchased directly be certain persons and in certain situations. (See
"ADDITIONAL INVESTMENT INFORMATION" in the prospectus.) Initial Shares of the
Portfolio automatically convert to Select Shares of the same Portfolio eight
years after issuance of the Initial Shares. Initial Shares of the Portfolio pay
distribution fees based upon average daily net assets of the Portfolio. Select
Shares of the Portfolio do not pay distribution fees. Results include the
reinvestment of all dividends and capital gains distributions. The Lehman
Aggregate Index includes fixed rate debt issues rated investment grade or higher
by Moody's Investors Service, Standard and Poo'rs Corporation, of Fitch
Investor's Service. All issues have at least one year to maturity and an
outstanding par value of at least $100 million. The Lehman Aggregate Index
includes bonds with maturities of 1-30 years. Price, coupon, and total return
are reported for all sectors on a month-end to month-end basis. All returns are
market value weighted inclusive of accrued interest. The inception date for the
Aggregate Index is 12-31-75. Performance data quoted represents past
performance, which is no indication of future performance, investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. An additional fee of $10 will be
charged for redemption from a retirement plan account and redemptions payable by
wire transfer. IF INVESTORS REDEEM SHARES, THEY MAY BE SUBJECT TO A MAXIMUM
CONTINGENT DEFERRED SALES CHARGE ("CDSC") OF 4 PERCENT, WHICH HAS NOT BEEN
REFLECTED IN THE ABOVE GRAPH.
While long-term bond yields do not respond to accelerating growth per se, they
respond to changes in inflation. Faster economic growth is only worrisome if it
causes inflationary pressures to rise. Economic growth or not, the outlook for
inflation is quite optimistic. The annual rate of inflation is about 2 percent
while long-term bond yields are 6.75 percent. This represents a 4.75 percent
difference between inflation and long-term yields, substantially higher than
historic norms.
Our current fixed income strategy is focused on an economy which is weakening.
We believe the recent rise in interest rates is a temporary spike in a longer
downward trend in interest rates. We are taking advantage of these higher yields
by adding to longer-term bonds and by stretching the average maturity of the
portfolio. We remain overweighted in Treasuries and underweighted in
mortgage-backed and corporate bonds. We have also added several taxable
municipals as a way to diversify risk and add yield. We are currently 51 percent
in U.S. government securities, 13 percent in corporate bonds, 8 percent in
taxable municipals, 26 percent in mortgage-backed securities, and 2 percent
cash. At this time, the portfolio is best postured for a declining to stable
interest rate environment.
We appreciate your confidence and support in the Capital Value Fixed Income
Portfolio and look forward to serving you in the future.
JEFFREY D. LORENZEN, CFA KATHRYN D. BEYER, CFA JAMES W. PAULSEN, PH.D.
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
CAPITAL VALUE SHORT-TERM GOVERNMENT PORTFOLIO
The investment objective of the Short-Term Government Portfolio is to provide as
high a level of current income as is consistent with minimum fluctuations in
principal value. Under normal circumstances, the Portfolio invests at least 75
percent of its total assets in U.S. government securities. The Portfolio seeks
to maintain a dollar weighted average portfolio maturity between one and three
years.
For the last twelve months, the total return of Initial and Select shares was
7.27 percent and 7.81 percent, respectively. Initial Shares underperformed and
Select Shares outperformed the Lehman 1-3 Year Government Index.
During the last twelve months, short-term interest rates have declined by
approximately 0.25 percent. The economy has been growing at a moderate pace and
inflation has remained under control. This has allowed the Federal Reserve to
cut the federal funds rate by 0.50 percent during the period.
The yield curve began to steepen during the past six months as intermediate and
long-term interest rates rose slightly, while short-term interest rates
declined. At the end of March, the differential between three-month Treasury
bills and 30-year Treasury bonds was more than 1.50 percent. Six months ago the
differential was only 1.10 percent.
Due to the recent large gains in employment, the bond market has become
concerned that faster economic growth will lead to higher inflation. In our
view, economic growth is still modest and may prove disappointing before the end
of the year. The strength in the economy over the last two years has primarily
come from three sectors: housing, business investment spending, and exports. All
of these sectors show signs of slowing.
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception with a similar investment
in the Lehman 1-3 Year Government Index. The shares of the Fund are divided into
"Initial Shares" and "Select Shares". Generally only Initial Shares of the
Portfolio may be purchased directly by certain persons and in certain
situations. (See "ADDITIONAL INVESTMENT INFORMATION" in the prospectus.) Initial
Shares of the Portfolio automatically convert to Select Shares of the same
Portfolio eight years after issuance of the Initial Shares. Initial Shares of
the Portfolio pay distribution fees based upon average daily net assets of the
Portfolio. Select Shares of the Portfolio do not pay distribtion fees. Results
include the reinvestment of all dividends and capital gains distributions. The
Lehman 1-3 Year Government Index includes fixed rate debt issues rated
investment grade or higher by Moody's Investor's Services, Standand & Poor's
Corporation, or Fitch Investor's Service. All issues have maturities of one to
three years and an outstanding par value of at least $100 million. Price,
coupon, and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value weighted inclusive of accrued
interest. The inception date for the 1-3 Year Government Index is 12/31/75.
Performance data quoted represents past performance, which is no indication of
future performance. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. An additional fee of $10 will be charged for redemption from a
retirement plan account and redeptions payable by wire transfer. Inception date
of the Initial Shares of the Capital Value Fund Short-Term Government Portfolio
is 9/8/93. IF INVESTORS REDEEM SHARES, THEY MAY BE SUBJECT TO A MAXIMUM
CONTINGENT DEFERRED SALES CHARGE ("CDSC") OF 4 PERCENT, WHICH HAS NOT BEEN
REFLECTED IN THE ABOVE GRAPH.
The large employment number is not likely to lead to a consumer spending boom.
First, it is not corroborated by other indicators of employment. Initial
unemployment claims are above levels of a year ago. The help-wanted advertising
index is not rising. In addition, delinquencies on consumer loans have increased
over the last several months and income growth is the lowest since 1991.
Consumers are short of income and high on debt, not a good combination for
robust spending.
Other indicators paint a picture of an economy struggling to maintain sluggish
growth. The index of Leading Economic Indicators has declined in the last 12
months. The National Association of Purchasing Management's manufacturing index
has been below the neutral 50 level for eight straight months. Loan growth among
both businesses and consumers continues to slow.
For policy officials, however, even the possibility of stronger growth will keep
policies restrictive. The Federal Reserve held the federal funds rate constant
at its most recent meeting. Though 1996 is an election year, neither Congress
nor the President is calling for stimulative fiscal policy. Until policies are
eased, the economy is not likely to grow rapidly.
The inflation outlook remains quite good. Industrial commodity price indexes hit
12-month lows recently. Consumer prices have risen at an annual rate of just 2.7
percent over the last 12 months. The prices-paid index in the March Purchasing
Management survey has steadily fallen since November 1994 from 87.5 to 39.5 last
month. Labor costs continue to be restrained by corporate downsizing.
With these thoughts in mind, we have emphasized securities with two- to
four-year maturities. If the economy continues to grow at a slow to moderate
pace and inflation remains under control, short-term interest rates should
continue to decline and the yield curve is likely to steepen further. Securities
in the two- to four-year maturity range will perform well under this scenario.
During the last six months, the average maturity of the portfolio has been near
2.5 years. We plan to increase the average maturity to approximately three years
over the next few months.
In summary, the Portfolio is positioned for an environment in which interest
rates decline and the yield curve steepens. We plan to increase the average
maturity of the portfolio to near three years. As always, we continue to analyze
yield enhancement opportunities within the parameters outlined in the
prospectus.
KATHRYN D. BEYER, CFA JEFFREY D. LORENZEN, CFA JAMES W. PAULSEN, PH.D.
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
CAPITAL VALUE PRIME MONEY MARKET PORTFOLIO
The Prime Money Market Portfolio is managed for high current income,
preservation of capital, and liquidity. The portfolio seeks to maintain a net
asset value of $1.00 per share for purchases and redemptions.
As of March 31, 1996, the Prime Money Market portfolio 7-day yield was 4.76
percent compared to the Donoghue First Tier Money Fund Composite of 4.68
percent.
The Prime Money Market Portfolio currently holds 23.12 percent in repurchase
agreements, 39.71 percent in corporate obligations, 25.38 percent in government
and agency securities, 2.74 percent in taxable municipal bonds, and 8.52 percent
in high grade commercial paper. Within these, 50 percent adjust within a one
week period and are very sensitive to interest rates. The remaining 50 percent
of the holdings mature between 14 and 397 days.
During the last 12 months, the one year Treasury bill yield has declined from
6.50 percent to 5.45 percent, reaching a low in February of 4.78 percent. In the
last 60 days, short-term interest rates have risen 60 basis points or just over
0.50 percent due to concerns of an accelerating economy. We believe this is a
temporary move and look for short-term interest rates to decline again.
With this view, we are extending the average maturity of the portfolio to
maintain a higher yield over a longer period of time. We see this as a time to
add longer, short-term securities due to the steepening which has occurred in
the short-term portion of the yield curve. It is a way to add yield without
adding a lot of extension risk.
Regardless of the economic environment, we are committed to providing quality
returns with a high degree of safety and liquidity. We believe the portfolio is
structured to perform well in the future and will continue to use our best
efforts.
JEFFREY D. LORENZEN, CFA KATHRYN D. BEYER, CFA JAMES W. PAULSEN, PH.D.
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
<PAGE>
CAPITAL VALUE FUND MANAGEMENT TEAM
KATHRYN D. BEYER, CFA, MANAGING DIRECTOR.
Ms. Beyer serves as a fixed income strategist. Prior to joining IMG, she served
as the director of mortgage-backed securities and as a corporate bond fixed
income analyst for Central Life Assurance Company. She received her M.B.A.
degree from Drake University and her B.S. degree from Iowa State University.
JEFFREY D. LORENZEN, CFA, MANAGING DIRECTOR.
Mr. Lorenzen serves as a fixed income strategist. Prior to joining IMG, he
served as a senior analyst for The Statesman Group under both the corporate and
mortgage-backed portfolios. He received his M.B.A. degree from Drake University
and his B.B.A. degree from the University of Iowa.
JAMES W. PAULSEN, PH.D., SENIOR MANAGING DIRECTOR.
Dr. Paulsen is the advisor's chief portfolio strategist and chairs IMG's
Investment Policy Committee. Prior to joining IMG, he served as president of a
Cedar Rapids, Iowa investment firm. He received his Doctorate in economics
degree and his B.S. degree from Iowa State University.
DOUGLAS R. RAMSEY, SENIOR EQUITY ANALYST.
Mr. Ramsey serves as IMG's senior equity analyst. Prior to joining IMG, he was a
securities analyst at a Minneapolis-based regional brokerage firm and a
securities analyst and economist at a Cedar Rapids, Iowa-based investment firm.
Doug received his B.A. degree in business administration and economics from Coe
College and his M.A. degree in economics from Ohio State University.
<PAGE>
CAPITAL VALUE FUND, INC.
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (79.20%)
UTILITIES (17.69%)
20,300 Central & S.W. Corp. $ 578,550
21,700 Central Louisiana Electric 583,187
18,400 Consolidated Edison of NY 586,500
14,600 DTE Energy Company 490,925
23,500 Enova Corporation 537,562
11,800 Santa Fe Pacific Pipe 439,550
25,500 South Jersey Industries 545,063
16,800 WPS Resources Corp. 564,900
-------------
4,326,237
-------------
FINANCE (18.91%)
11,400 Ambac Inc. 548,625
23,800 American Heritage Life 499,800
13,970 Banc One Corp. 497,681
13,300 Comerica, Inc. 555,275
18,400 First Hawaiian 508,300
14,600 Key Corp. 563,925
15,100 PNC Bank Corp. 464,325
11,500 Providian 513,188
10,800 Regions Financial Corp. 473,850
-------------
4,624,969
-------------
RETAIL TRADE (2.77%)
19,800 Liz Claiborne, Inc. 678,150
-------------
CONSUMER SERVICES (2.26%)
8,100 Knight-Ridder Inc. 551,812
-------------
CONSUMER NON-DURABLES (10.10%)
17,400 American Greetings 480,675
8,400 General Mills Inc. 490,350
18,900 Hormel Foods Corp. 496,125
7,000 Kimberly-Clark Corp. 521,500
17,000 Rubbermaid, Inc. 482,375
-------------
2,471,025
-------------
HEALTH TECHNOLOGY (6.20%)
4,400 American Home Products 476,850
5,800 Bristol-Meyers Squibb Co. 496,625
13,630 Pharmacia & Upjohn, Inc. 543,496
-------------
1,516,971
-------------
ELECTRONIC TECHNOLOGY (10.78%)
17,400 MCI Communications 526,350
9,300 Ameritech Corporation 506,850
10,700 Nynex Corp. 533,663
20,900 Tele Danmark 540,788
10,000 U.S. Media Group 206,250
10,000 U.S. West, Inc. 323,750
-------------
2,637,651
-------------
COMMERCIAL SERVICES (2.06%)
8,300 Dun & Bradstreet Corporation 503,187
-------------
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
EQUITY PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
PROCESS INDUSTRIES (2.01%)
7,300 Great Lakes Chemical $ 491,838
-------------
INDUSTRIAL SERVICES (4.47%)
10,500 Flightsafety International 585,375
16,000 WMX Technologies, Incorporated 508,000
-------------
1,093,375
-------------
ENERGY (1.95%)
4,000 Atlantic Richfield Co. 476,000
-------------
Total Common Stocks
(Cost $15,837,819) 19,371,215
-------------
U.S. GOVERNMENT SECURITIES (15.42%)
5,900,000 Treasury Principal Strips, Zero Coupon, 05/15/20, 6.47%* 1,103,949
2,555,000 U.S. Treasury Bond, 7.25%, 05/15/16 2,666,654
-------------
Total U.S. Government Securities 3,770,603
(Cost $3,881,672) -------------
CASH EQUIVALENTS (5.84%)
1,214,418 Norwest Cash Investment Fund, 4.94% (cost $1,214,418) 1,214,418
213,816 Norwest U.S. Government Fund, 4.75% (cost $213,816) 213,816
-------------
1,428,234
-------------
TOTAL INVESTMENTS IN SECURITIES (100.46%)
(Cost $21,147,725) 24,570,052
-------------
Other Assets and Liabilities, Net (-0.46%) (115,218)
-------------
NET ASSETS 100.0% $ 24,454,834
=============
Based on the cost of investments of $21,147,725 for federal income tax purposes
at March 31, 1996, the aggregate gross unrealized appreciation was $3,768,021,
the aggregate gross unrealized depreciation was $345,690, and the net unrealized
appreciation was $3,422,327.
*Interest presented for zero coupon security equates effective yield at date of
purchase.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
TOTAL RETURN PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (38.71%)
UTILITIES (13.42%)
4,300 Ameritech Coporation $ 234,350
8,300 Central & S.W. Corp. 236,550
8,800 Central Louisiana Electric 236,500
7,500 Consolidated Edison of NY 239,062
7,300 DTE Energy Company 245,463
10,800 Enova Corporation 247,050
5,300 Nynex Corp. 264,338
5,600 Sante Fe Pacific Pipe 208,600
9,000 South Jersey Industries 192,375
9,000 Tele Danmark 232,875
4,800 U.S. Media Group 99,000
4,800 U.S. West, Incorporated 155,400
6,600 WPS Resources Corp. 221,925
-------------
2,813,488
-------------
FINANCE (9.66%)
4,900 Ambac Inc. 235,812
9,800 American Heritage Life 205,800
8,140 Banc One Corp. 289,988
6,300 Comerica, Inc. 263,025
7,100 Key Corp. 274,237
8,600 PNC Bank Corp. 264,450
5,600 Providian 249,900
5,500 Regions Financial Corp. 241,313
-------------
2,024,525
-------------
RETAIL TRADE (1.57%)
9,600 Liz Claiborne, Inc. 328,800
-------------
CONSUMER SERVICES (1.14%)
3,500 Knight-Ridder Inc. 238,437
-------------
CONSUMER NON-DURABLES (4.20%)
6,800 American Greetings 187,850
4,300 General Mills Inc. 251,013
8,700 Hormel Foods Corp. 228,375
7,500 Rubbermaid Inc. 212,812
-------------
880,050
-------------
HEALTH TECHNOLOGY (4.70%)
2,775 American Home Products 300,741
3,600 Bristol-Meyer Squibb Co. 308,250
9,425 Pharmacia & Upjohn, Inc. 375,822
-------------
984,813
-------------
ELECTRONIC TECHNOLOGY (1.31%)
9,100 MCI Communications 275,275
-------------
INDUSTRIAL SERVICES (1.23%)
8,100 WMX Technologies, Incorporated 257,175
-------------
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
TOTAL RETURN PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
ENERGY (1.48%)
2,600 Atlantic Richfield $ 309,400
-------------
Total Common Stocks
(Cost $6,676,599) 8,111,963
-------------
U.S. GOVERNMENT SECURITIES (33.95%)
U.S. TREASURY BONDS (12.90%)
2,350,000 U.S. T-Bond, 7.25%, 05/15/16 2,452,695
205,000 U.S. T- Bond, 8.875%, 02/15/19 251,904
-------------
2,704,599
-------------
U.S. TREASURY NOTES (21.05%)
1,725,000 U.S. T-Note, 6.875%, 03/31/00 1,773,024
1,340,000 U.S. T-Note, 6.25%, 02/15/03 1,336,060
650,000 U.S. T-Note, 7.875%, 08/15/01 699,842
600,000 U.S. T-Note, 6.375%, 08/15/02 603,450
-------------
4,412,376
-------------
Total Government Securities
(Cost $7,014,868) 7,116,975
-------------
CORPORATE BONDS (7.81%)
150,000 Ford Capital BV, 10.125%, 11/15/00 170,812
420,000 GMAC, 8.875%, 06/01/10 480,900
250,000 Hydro-Quebec, 8.25%, 01/15/27 261,563
50,000 Iowa Electric Light & Power, 6.25%, 09/01/96 50,125
250,000 Lehman Brothers, 8.05%, 01/15/19 255,815
242,000 Manitoba, 7.75%, 07/17/16 252,346
150,000 Nova Scotia, 8.25%, 11/15/19 165,937
-------------
Total Corporate Bonds
(Cost $1,631,981) 1,637,498
-------------
MUNICIPAL BONDS (3.37%)
172,570 Oregon Department of Transportation, 9.00%, 06/15/00 178,952
205,000 Berry Creek Met. Dist, Co., 6.65%, 12/01/01 199,618
200,000 Longview, Texas Economic Dev., 8.25%, 09/15/07 214,810
100,000 Texas St. G.O. Taxable, 8.70%, 12/01/09 112,375
-------------
Total Municipal Bonds
(Cost $702,233) 705,755
-------------
MORTAGE-BACKED SECURITIES (13.40%)
COLLATERALIZED MORTGAGE OBLIGATIONS (11.35%)
178,880 Chase Mtge. Finance Corp, 5.75%, 04/25/09 176,211
90,271 Citicorp Mtge. Sec. 1987-13 a3, 9.35%, 06/01/10 90,299
175,000 Collateralized Mtge. SEC Corp., 7.0%, 09/20/21 168,000
250,000 FHLMC 1250F, 7.00%, 04/15/19 250,920
135,715 FHLMC 91 Series 188 Class F, 7.50%, 05/15/20 136,754
162,000 FNMA 1990-130E, Zero Coupon, 08/25/19, 11.14%** 107,906
61,286 FNMA 1991-126B, 8.00%, 09/25/98 61,080
** Interest presented for zero coupon bond equates effective yield at date of
purchase.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
TOTAL RETURN PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
217,406 FNMA 1991-8 E, 7.50%, 06/25/17 $ 218,778
196,012 Green Tree Acceptance 1987B Class A, 9.55%, 05/15/07 204,222
214,618 Housing Securities, Inc. 1993-E, E-14, Zero Coupon,
09/25/08,10.33%** 152,665
182,390 Housing Securities, Inc. 1992-F F11, Zero Coupon,
11/25/07, 9.06%** 131,727
145,971 Kidder Peabody Mtge. Asset Trust Class 5G, 8.45%, 05/20/18 145,333
54,075 Morgan Stanley Class E3, 8%, 07/20/17 53,839
76,744 Prudential Home Mortgage Sec., 7.50%, 05/25/22 76,968
130,462 Residential Funding Mtg Sec. I Series 1993-S7 Class A6,
7.15%, 02/25/08 130,157
286,422 Salomon Mortgage Sec. VII, Zero Coupon, 02/25/25,
10.609%** 195,864
77,773 Resolution Trust Corp. Series 1992-17 Class A1,
12/25/20, 8.86%* 79,212
-------------
2,379,935
-------------
FHLMC MORTGAGE-BACKED POOLs (0.24%)
48,196 FHLMC #A00851, 8.50%, 12/01/19 49,694
-------------
GNMA MORTGAGE-BACKED POOLS (1.81%)
182,534 GNMA Pool #305975, 9.00%, 07/15/21 191,770
90,383 GNMA Pool #318184, 8.50%, 11/15/21 93,913
92,851 GNMA Pool #359600, 7.50%, 07/15/23 92,804
-------------
378,487
-------------
Total Mortgage-Backed Securities
(Cost $2,750,332) 2,808,116
-------------
CASH EQUIVALENTS (2.93%)
613,600 Norwest Cash Investment Fund, 4.94% (cost $613,600) 613,600
-------------
TOTAL INVESTMENTS IN SECURITIES (100.17%)
(Cost $19,389,613) 20,993,907
-------------
Other Assets and Liabilities, Net (-0.17%) (30,660)
-------------
NET ASSETS 100.0% $ 20,963,247
=============
* Denotes a floating rate investment with interest rate as of March 31, 1996.
** Interest presented for zero coupon bond equates effective yield at date of
purchase.
Based on the cost of investments of $19,389,613 for federal income tax purposes
at March 31, 1996, the aggregate gross unrealized appreciation was $1,764,584,
the aggregate gross unrealized depreciation was $160,285, and the net unrealized
appreciation was $1,604,294.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (49.31%)
U.S. TREASURY BONDS (13.73%)
575,000 U.S. T-Bond, 7.25%, 05/15/16 $ 600,128
300,000 U.S. T-Bond, 8.125%, 05/15/21 344,133
300,000 U.S. T-Bond, 8.875%, 02/15/19 368,640
-------------
1,312,901
-------------
U.S. TREASURY NOTES (35.58%)
505,000 U.S. T-Note, 6.25%, 02/15/03 503,515
250,000 U.S. T-Note, 6.50%, 04/30/99 253,730
900,000 U.S. T-Note, 6.875%, 03/31/00 925,056
990,000 U.S. T-Note, 7.875%, 08/15/01 1,065,913
650,000 U.S. T-Note, 6.375%, 08/15/02 653,738
-------------
3,401,952
-------------
Total Government Securities
(Cost $4,669,857) 4,714,853
-------------
CORPORATE BONDS (12.93%)
350,000 GMAC, 8.875%, 06/01/10 400,750
220,000 Lehman Brothers, 8.05%, 01/15/19 225,118
315,000 Manitoba, 7.75%, 07/17/16 328,466
255,000 Nova Scotia, 8.25%, 11/15/19 282,094
-------------
Total Corporate Bonds
(Cost $1,238,342) 1,236,428
-------------
MUNICIPAL BONDS (8.44%)
220,000 Berry Creek Met. Dist, Co., 6.85%, 12/01/02 213,400
172,570 Oregon D.O.T, 9.00%, 06/15/00 178,952
350,000 San Antonio, Texas Cert. Oblig. Taxable, 6.65%, 08/10/09 330,313
75,000 Texas St. G.O. Taxable, 8.70%, 12/01/09 84,281
-------------
Total Municipal Bonds
(Cost $817,309) 806,946
-------------
MORTAGE-BACKED SECURITIES (26.46%)
COLLATERALIZED MORTGAGE OBLIGATIONS (15.61%)
84,046 Citicorp Mortgage Securities 1987-13, 9.35% 06/01/10 84,072
240,712 Countrywide Funding Corp. 1994-9 A2, 6.50%, 05/25/24 236,885
215,000 FHLMC Series 1561 Class TA, Zero Coupon, 08/15/08, 9.24%* 107,205
21,749 FHLMC 1201C, 6.50%, 12/15/19 21,715
150,477 FHLMC 91 Series 188 Class F, 7.50%, 05/15/20 151,630
72,542 FNMA Series 1991 Class E, 8.50%, 04/25/05 73,519
89,550 FNMA 1991-91A, Zero Coupon, 07/25/98, 7.73%* 80,162
179,098 GE Cap Mtge. Serv. 1994-1 A1, 5.70%, 01/25/24 176,229
202,470 Housing Securities, Inc. 1993-E E-14, Zero Coupon,
09/25/08, 10.33%* 144,023
155,364 Housing Securities, Inc. 1993-C C3, Zero Coupon,
05/25/08, 9.24%* 112,336
54,075 Morgan Stanley Class E 3, 8.00%, 07/20/17 53,839
76,250 Prudential Home Mort. Securities, 1992-6 Class A3,
7.00%, 04/25/99 75,927
143,211 Salomon Mortgage Sec. VII, Zero Coupon, 02/25/25, 10.609%* 76,968
76,744 Prudential Home Mortgage Securities, 7.50%, 05/25/22 97,930
-------------
1,492,440
-------------
* Interest presented for zero coupon bond equates effective yield at date of
purchase.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
FIXED INCOME PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
FHLMC MORTGAGE-BACKED POOLS (1.24%)
114,534 FHLMC Pool #C00126, 8.50%, 06/01/22 $ 118,134
-------------
GNMA MORTGAGE-BACKED POOLS (9.61%)
246,371 GNMA Pool #315929, 9.00%, 06/15/22 259,305
304,494 GNMA Pool #341681, 8.50%, 01/15/23 316,764
343,545 GNMA Pool #354189, 7.50%, 05/15/23 343,353
-------------
919,422
-------------
Total Mortgage-Backed Securities
(Cost $2,483,547) 2,529,996
-------------
CASH EQUIVALENTS (1.92%)
183,537 Norwest Cash Investment Fund, 4.94% (cost $183,537) 183,537
-------------
TOTAL INVESTMENTS IN SECURITIES (99.06%)
(Cost $9,392,592) 9,471,760
-------------
Other Assets and Liabilities, Net (0.94%) 90,633
-------------
NET ASSETS 100.0% $ 9,562,393
=============
Based on the cost of investments of $9,392,592 for federal income tax purposes
at March 31, 1996, the aggregate gross unrealized appreciation was $205,385, the
aggregate gross unrealized depreciation was $126,217, and the net unrealized
appreciation was $79,168.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
SHORT-TERM GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (59.21%)
GOVERNMENT AGENCIES (47.03%)
550,000 Farmer Mac MTN, 6.69%, 02/10/00 $ 558,118
200,000 Federal Farm Credit Inverse Floater, 4.334%, 07/28/97*** 192,224
50,000 FFCB Structured Note, 4.65%, 03/02/98 48,660
250,000 FHLMC, 7.685%, 03/02/00 257,557
150,000 FNMA, 6.05%, 01/12/98 150,482
100,000 Government Export Trust, 4.85%, 11/01/97 99,360
12,831 Government TR Cert. Israel, 9.25%, 11/15/96 13,007
134,846 Greece Trust, 8.00%, 05/15/98 137,789
500,000 SLMA 7.50%, 03/08/00 522,185
100,000 SLMA Floater, 4.745%, 06/01/98* 96,844
50,000 SLMA Floater, 5.30%, 05/14/96* 49,999
-------------
2,126,225
-------------
U.S. TREASURY NOTES (10.83%)
425,000 U.S. T-Note, 6.875%, 03/31/00 436,832
50,000 U.S. T-Note, 7.25%, 05/15/04 52,687
-------------
489,519
-------------
U.S. TREASURY BILLS (1.35%)
65,000 Federal Farm Credit Disc. Note, 03/17/97, 5.46%** 60,970
-------------
Total Government Securities
(Cost $2,661,250) 2,676,714
-------------
CORPORATE BONDS (7.04%)
205,000 Associates Corp. MTN, 5.55%, 07/15/98 202,337
45,000 Becton Dickinson, 8.80%, 03/01/01 49,500
65,000 Lehman Brothers MTN, 8.05%, 01/15/19 66,512
-------------
Total Corporate Bonds
(Cost $318,732) 318,349
-------------
MUNICIPAL BONDS (1.68%)
25,000 Broken Arrow, Oklahoma, 7.50%, 11/01/98 25,813
50,000 Columbia University, 8.35%, 11/13/01 50,125
-------------
Total Municipal Bonds
(Cost $76,811) 75,938
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (28.87%)
175,000 FHLMC 1250F, 7.00%, 04/15/19 175,644
73,069 FHLMC 1299N, Zero Coupon, 06/15/97, 7.476%** 68,581
101,684 FHLMC 1358E 6.50%, 03/15/17 101,631
200,000 FNMA 1990 104G CMO, 9.00%, 05/25/03 203,322
113,816 FNMA 1991-126B, 8.00%, 09/25/98 113,434
150,000 FNMA 1991-137 G, 8.30%, 06/25/20 154,278
175,000 Green Tree 1993-3 A3, 5.20%, 10/15/18 172,972
151,892 Housing Securities 1992-EA A6, Zero Coupon,
10/25/07, 9.128%** 110,324
* Denotes a floating rate investment with interest rate as of March 31, 1996.
** Interest presented for zero coupon bonds equates effective yield at date of
purchase.
***Denotes an inverse floater which pays interest at a rate which adjusts
inversely with changes in a index.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
SHORT-TERM GOVERNMENT PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
151,079 Housing Securities 92-EB B1A, 6.75%, 05/25/20 $ 150,519
54,000 Standard Credit Card Master, 6.75%, 06/07/00 54,626
-------------
Total Collateralized Mortgage Obligations
(Cost $1,299,419) 1,305,331
-------------
CASH EQUIVALENTS (2.60%)
117,656 Norwest Cash Investment Fund, 4.94% (cost $117,656) 117,656
-------------
TOTAL INVESTMENTS IN SECURITIES (99.40%)
(Cost $4,473,868) $ 4,493,989
-------------
Other Assets and Liabilities, Net (0.60%) 26,923
-------------
NET ASSETS 100.0% $ 4,520,912
=============
Based on the cost of investments of $4,473,868 for federal income tax purposes
at March 31, 1996, the aggregate gross unrealized appreciation was $54,031, the
aggregate gross unrealized depreciation was $33,910, and the net unrealized
appreciation was $20,121.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (25.38%)
250,000 FNMA MTN, 4.78%, Due 02/14/97 $ 248,240
150,000 FNMA Discount Note, 04/01/96, 5.43%* 150,000
200,000 FNMA Discount Note, 04/05/96, 5.44%* 199,881
325,000 Freddie Mac Discount Note, 04/03/96, 5.44%* 324,903
-------------
Total U.S. Government Securities
(Cost $923,024) 923,024
-------------
CORPORATE BONDS (39.71%)
95,000 American Express, 7.875%, 12/01/96 96,226
100,000 Chase Manhattan, 7.875%, 01/15/97 101,955
85,000 Citicorp, 8.75%, 11/01/96 86,500
200,000 Dean Witter Discover, 5.00%, 04/01/96 200,000
150,000 Deere and Co., 8.25%, 06/01/96 150,546
200,000 Ford MTN, 9.07%, 07/05/96 201,540
251,000 General Electric, 7.875, 05/01/96 251,405
85,000 Wachovia Bank, 4.25%, 09/20/96 84,332
122,000 Wal-Mart Stores, 8.00%, 05/01/96 122,210
150,000 WMX Technologies, 4.875%, 06/15/96 149,743
-------------
Total Corporate Bonds
(Cost $1,444,457) 1,444,457
-------------
MUNICIPAL BONDS (2.74%)
100,000 Lee County, FL Airport Rev., 5.45%, 10/01/96 100,000
-------------
Total Municipal Bonds
(Cost $100,000) 100,000
-------------
COMMERCIAL PAPER (8.52%)
150,000 Cargill Commercial Paper, 04/08/96 149,843
160,000 Merrill Lynch Commercial Paper, 04/01/96 160,000
-------------
Total Commercial Paper
(Cost $309,843) 309,843
-------------
REPURCHASE AGREEMENTS (23.12%)
840,915 Cantor Fitzgerald Repo, 5.20%, 04/01/96 840,915
(Cost $840,915)** -------------
TOTAL INVESTMENTS IN SECURITIES (99.47%)
(Cost $3,618,239) 3,618,239
-------------
Other Assets and Liabilities, Net (0.53%) 19,207
-------------
NET ASSETS 100.0% $ 3,637,446
=============
* Interest presented for zero coupon bonds equates effective yield at date of
purchase.
** The market value of the security collateralizing this repurchase agreement
(including accrued interest) is in excess of 102 percent of the resale price,
and will not be less than 100 percent of the resale price over the term of the
agreement. At March 31, 1996, the repurchase agreement was collateralized by a
mortgage-backed security with a market value of $867,437.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
<TABLE>
<CAPTION>
TOTAL FIXED SHORT-TERM PRIME MONEY
EQUITY RETURN INCOME GOVERNMENT MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in Securities at Value
(Cost $21,147,725, $19,389,613, $9,392,592,
$4,473,868, and $3,618,239, respectively) $ 24,570,052 $ 20,993,907 $ 9,471,760 $ 4,493,989 $ 3,618,239
Dividends & Interest Receivable 112,312 226,071 137,331 51,427 37,756
----------------------------------------------------------------------
Total Assets 24,682,364 21,219,978 9,609,091 4,545,416 3,655,995
LIABILITIES:
Income Distribution Payable 189,189 224,074 32,716 18,083 13,492
Accrued Operating Expenses and
Other Liabilities 38,341 32,657 13,982 6,421 5,057
----------------------------------------------------------------------
Total Liabilities 227,530 256,731 46,698 24,504 18,549
----------------------------------------------------------------------
NET ASSETS $ 24,454,834 $ 20,963,247 $ 9,562,393 $ 4,520,912 $ 3,637,446
======================================================================
ANALYSIS OF NET ASSETS
Excess of amounts received from issuance of
shares over amounts paid on redemptions
of shares $ 20,299,110 $ 19,021,350 $ 9,451,325 $ 4,525,722 $ 3,637,446
Undistributed net realized gain (loss) 729,216 329,921 27,936 (26,854) --
Unrealized appreciation (depreciation) 3,422,327 1,604,294 79,168 20,120 --
Undistributed net investment income 4,181 7,682 3,964 1,924 --
----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 24,454,834 $ 20,963,247 $ 9,562,393 $ 4,520,912 $ 3,637,446
======================================================================
PRICING OF INITIAL SHARES
Net assets applicable to Initial Shares outstanding $ 6,371,666 $ 3,435,711 $ 1,855,470 $ 237,507
========================================================
Shares outstanding, $ .001 par value* 507,337 304,438 184,048 24,195
========================================================
Net asset value, offering price and redemption
price (subject to contingent deferred sales
charge) per Initial Shares $ 12.559 $ 11.285 $ 10.081 $ 9.816
========================================================
PRICING OF SELECT SHARES
Net assets applicable to Select Shares outstanding $ 18,083,168 $ 17,527,536 $ 7,706,923 $ 4,283,405 $ 3,637,446
=====================================================================
Shares outstanding, $ .001 par value* 1,441,166 1,582,638 771,732 430,305 3,637,446
=====================================================================
Net asset value, offering price and redemption
price per Select Shares $ 12.548 $ 11.075 $ 9.987 $ 9.954 $ 1.000
=====================================================================
</TABLE>
* Shares outstanding reflect rounding to the nearest whole share.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
TOTAL FIXED SHORT-TERM PRIME MONEY
EQUITY RETURN INCOME GOVERNMENT MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME:
Interest Income $ 246,839 $ 823,685 $ 649,852 $ 292,160 $ 325,100
Dividend Income 644,829 287,451 2,304 -- --
----------------------------------------------------------------------------
Total Income 891,668 1,111,136 652,156 292,160 325,100
----------------------------------------------------------------------------
EXPENSES:
Advisory Fees-CVC 21,498 19,412 9,229 4,300 2,738
Sub-Advisory Fees-IMG 92,443 83,473 39,685 18,494 12,597
Administration Fee 53,746 48,531 23,073 10,752 13,692
Distribution Fee-Initial Shares 28,701 16,013 8,887 1,135 --
Fund Accounting/Custody Fee 32,247 29,118 9,230 4,302 5,476
Transfer Agent Fee 10,749 9,706 4,615 2,151 2,738
Other Expenses 21,498 19,412 9,229 4,300 5,478
----------------------------------------------------------------------------
Total Expenses 260,882 225,665 103,948 45,434 42,719
----------------------------------------------------------------------------
NET INVESTMENT INCOME 630,786 885,471 548,208 246,726 282,381
----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net Realized Gain on Investments 1,370,448 774,602 99,565 1,847 604
Net Change in Unrealized Appreciation 2,508,254 1,368,714 245,203 66,868 --
----------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 3,878,702 2,143,316 344,768 68,715 604
----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,509,488 $ 3,028,787 $ 892,976 $ 315,441 $ 282,985
============================================================================
</TABLE>
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
TOTAL FIXED
EQUITY RETURN INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
1996 1995 1996 1995 1996 1995
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 630,786 $ 374,932 $ 885,471 $ 663,351 $ 548,208 $ 432,010
Net Realized Gain (Loss) on Investments 1,370,448 218,270 774,602 (41,836) 99,565 (71,440)
Net Change in Unrealized Appreciation 2,508,254 923,101 1,368,714 480,336 245,203 28,322
----------------------------------------------------------------------------------------
Increase in Net Assets from Operations 4,509,488 1,516,303 3,028,787 1,101,851 892,976 388,892
----------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividend Distributions Paid
Initial Shares 145,991 63,948 130,387 95,506 97,005 42,033
Select Shares 482,975 309,894 752,055 565,168 447,900 390,180
Capital Gain Distribution Paid
Initial Shares 132,107 106,426 28,764 66,102 0 871
Select Shares 361,786 451,896 147,053 335,698 0 6,814
----------------------------------------------------------------------------------------
Total Distributions 1,122,859 932,164 1,058,259 1,062,474 544,905 439,898
----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Sales- Initial Shares 1,973,830 4,288,941 794,383 1,818,665 864,965 1,165,760
Select Shares 2,772,570 2,630,529 1,698,714 2,905,801 345,520 338,704
Reinvestments- Initial Shares 260,543 145,431 168,974 125,084 98,380 36,456
Select Shares 793,866 714,632 886,410 803,554 460,835 383,560
Exchanges- Initial Shares (76,000) 844,253 (1,154) 1,322,062 (18,409 255,292
Select Shares 81,620 (797,490) 5,729 (1,595,405) 20,060 (178,506)
Redemptions- Initial Shares (1,093,665) (1,417,420) (1,580,664) (683,287) (440,459) (367,262)
Select Shares (1,244,635) (382,736) (690,807) (564,823) (109,325) (32,308)
----------------------------------------------------------------------------------------
Increase in Net Assets from Capital
Shares Transactions 3,468,129 6,026,140 1,281,585 4,131,651 1,221,567 1,601,696
----------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 6,854,758 6,610,279 3,252,113 4,171,028 1,569,638 1,550,690
NET ASSETS:
Beginning of Period 17,600,076 10,989,797 17,711,134 13,540,106 7,992,755 6,442,065
----------------------------------------------------------------------------------------
End of Period $ 24,454,834 $ 17,600,076 $ 20,963,247 $ 17,711,134 $ 9,562,393 $ 7,992,755
========================================================================================
Undistributed net investment income
at end of period $ 4,181 $ 1,756 $ 7,682 $ 4,380 $ 3,964 $ 457
========================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT PRIME MONEY MARKET
PORTFOLIO PORTFOLIO
1996 1995 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 246,726 $ 199,542 $ 282,381 $ 235,223
Net Realized Gain (Loss) on Investments 1,847 (28,828) 604 (289)
Net Change in Unrealized Appreciation (Depreciation) 66,868 (8,202) 0 0
------------------------------------------------------------
Increase in Net Assets from Operations 315,441 162,512 282,985 234,934
------------------------------------------------------------
DISTRIBUTIONS:
Dividend Distributions Paid
Initial Shares 12,082 10,616 0 0
Select Shares 233,160 188,842 282,381 234,934
Capital Gain Distribution Paid
Initial Shares 0 329 604 0
Select Shares 0 3,755 0 0
------------------------------------------------------------
Total Distributions 245,242 203,542 282,985 234,934
------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Sales- Initial Shares 12,133 27,962 0 0
Select Shares 313,123 175,604 3,986,258 3,758,731
Reinvestments- Initial Shares 12,200 10,154 0 0
Select Shares 228,316 180,692 294,280 222,482
Exchanges- Initial Shares (667) 186,715 0 0
Select Shares 0 (53) (11,180) (36,869)
Redemptions- Initial Shares (2,071) (72,366) 0 0
Select Shares (105,664) (66,826) (6,154,280) (3,543,249)
------------------------------------------------------------
Increase in Net Assets from Capital
Shares Transactions 457,370 441,882 (1,884,922) 401,095
------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 527,569 400,852 (1,884,922) 401,095
NET ASSETS:
Beginning of Period 3,993,343 3,592,491 5,522,368 5,121,273
------------------------------------------------------------
End of Period $ 4,520,912 $ 3,993,343 $ 3,637,446 $ 5,522,368
============================================================
Undistributed net investment income
at end of period $ 1,924 $ 425 $ 0 $ 0
============================================================
</TABLE>
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Capital Value Fund, Inc. (the Fund) was incorporated on October 7, 1992 and
capitalized on May 6, 1993. The Fund is registered under the Investment
Company Act of 1940 (the 1940 Act) as a diversified open-end management
investment company issuing its shares in five series, each series
representing a diversified portfolio with distinct investment objectives
and policies. The Equity Portfolio seeks capital appreciation in a manner
consistent with the preservation of capital through a diversified portfolio
of common stocks and other equity-type securities. The Total Return
Portfolio seeks a high total return from capital appreciation and current
income, consistent with the preservation of capital, through a diversified
portfolio of common stocks, other equity-type securities, bonds and money
market instruments. The Fixed Income Portfolio seeks to provide a high
level of income consistent with the preservation of capital and prudent
investment risk through a diversified portfolio of marketable U.S.
government and corporate debt securities. The Short-Term Government
Portfolio seeks a high level of current income, consistent with minimum
fluctuations in principal value, from investments primarily in U.S.
government securities. The Prime Money Market Portfolio seeks preservation
of capital, liquidity, and consistent with these objectives, the highest
current income, through a diversified portfolio of high quality debt
obligations with maturities of 397 days or less, issued or guaranteed by
the U.S. government, its agencies and instrumentalities, repurchase
agreements thereon, and corporate debt securities including commercial
paper.
The shares of each portfolio, except Prime Money Market Portfolio, are
divided into Initial Shares and Select Shares. The Initial Shares of a
portfolio may be purchased directly and may be subject to a CDSC charge if
redeemed within six years. Select Shares are only available through
conversion of Initial Shares after eight years, except for limited direct
sales as defined in the prospectus. Each class of shares has equal rights
as to earnings, assets, and voting privileges except that the Initial Share
class pays distribution expenses. Each class of shares has exclusive voting
rights with respect to matters that effect just that class. Income,
expenses (other than expenses attributable to a specific class), realized
and unrealized gains or losses on investments are allocated to each class
of shares based upon its relative net assets.
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 increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
SECURITY VALUATION
Equity securities are valued at the last sales price on the national
securities exchange. Fixed Income securities are valued on the basis of
valuations furnished by a pricing service that utilizes electronic data
processing techniques to determine valuations for normal institutional
sized trading units of Fixed Income securities without regard to sale or
bid prices when such valuations are believed to more accurately reflect the
fair market value of such institutional securities. Otherwise sale or bid
prices are used. Any securities or other assets for which market quotations
are not readily available are valued at fair value as determined by the
Portfolio Manager. Fixed Income securities in a portfolio having maturities
of 60 days or less are valued by the amortized cost method.
The Fund seeks to maintain a $1.00 per share net asset value for the Prime
Money Market Portfolio and has adopted certain investment portfolio
valuation and dividend and distribution policies to enable it to do so.
SECURITY TRANSACTIONS
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis.
INVESTMENT INCOME
Interest income is recorded on an accrual basis and dividend income is
recorded on the ex-dividend date. Original issue discounts and premiums on
securities purchased are amortized over the expected life of the respective
securities.
DISTRIBUTION OF INCOME AND GAINS
Any dividends from the net income of the Fixed Income and Short-Term
Government Portfolios will be distributed monthly and any dividend from the
net income of the Equity and Total Return Portfolios will be distributed
quarterly. The Prime Money Market Portfolio declares daily and pays monthly
dividends from net investment income. Any net realized capital gains will
be distributed annually, after using any available capital loss carry-over.
FEDERAL TAXES
The Fund's policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
its income to shareholders in amounts that will avoid or minimize federal
income or excise taxes for the funds. Net investment income and net
realized gains (losses) for the funds may differ for financial statement
and tax purposes. The character of distributions made during the year from
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing
of dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains (losses) were
recorded by the Funds. For federal income tax purposes, the Short-Term
Government Portfolio has a capital loss carry-over at March 31, 1996 of
$26,981 expiring in 2004 if not offset by subsequent capital gains. It is
unlikely the Board of Directors will authorize a distribution of any net
realized capital gain until the available capital loss carry-over has been
offset or expires.
2. TRANSACTIONS WITH AFFILIATES
FEES AND EXPENSES
The Fund has entered into an investment advisory agreement with Capital
Value Corporation, (the Advisor), which, in turn, has entered into a
sub-advisory agreement with Investors Management Group, (the Sub-Advisor),
for management of each portfolio's assets. The annual fees for such
services are 0.53 percent of the average daily net assets of the Equity,
Total Return, Fixed Income, and Short-Term Government Portfolios and 0.28
percent of the average daily net assets of the Prime Money Market
Portfolio.
The Fund will also pay the Sub-Advisor annually the lesser of $24,000 or
0.15 percent of the average daily net assets of each of the Equity and
Total Return Portfolios or 0.10 percent of the average daily net assets of
each of the Fixed Income and Short-Term Government Portfolios for fund
accounting services. The annual fee for the Prime Money Market Portfolio is
the lesser of $18,000 or 0.10 percent of the daily net assets of the
portfolio. This fee is for fund accounting and custodial services, however,
custodial fees are not limited. The Sub-Advisor will also be paid annually
0.05 percent of the average daily net assets of each portfolio for services
of Transfer and Dividend Disbursing Agent.
The Fund has also entered into an administrative services agreement with
the Advisor to provide certain information and administrative services to
the Fund. The annual fees for such services are not to exceed 0.25 percent
of average daily net assets of the portfolios of the Fund.
In addition, the Fund is responsible for paying most other operating
expenses including outside directors' fees and expenses, registration fees,
printing and shareholder reports, transfer agent fees and expenses, legal,
auditing, and accounting services, insurance, interest, and other
miscellaneous expenses.
DISTRIBUTION PLAN
The Fund has entered into a distribution agreement, pursuant to Rule 12b-1
under the 1940 Act, with IMG Financial Services, Inc., (the Distributor),
for the marketing and distribution of the Initial Shares of the Fund. The
fees for such services are 0.50 percent of the average daily net assets of
the Initial Shares class of each portfolio, except the Prime Money Market
Portfolio for which the Distributor receives no fees.
RELATED SHAREHOLDERS
IASD Health Services Corp., IASD Health Services Savings and Investment
Plans and Investors Management Group 401K/ESOP and Money Purchase Plans are
all shareholders of the Fund as of March 31, 1996. A breakdown of each of
their holdings is listed below.
SHARES
------
IASD Health Services Corp.
Equity Portfolio 687,889
Total Return Portfolio 1,164,154
Fixed Income Portfolio 712,042
Short-Term Government Portfolio 348,308
Prime Money Market Portfolio 2,479,609
IASD Health Services Savings and Investment Plan
Equity Portfolio 692,573
Total Return Portfolio 416,946
Fixed Income Portfolio 40,160
Short-Term Government Portfolio 59,403
IMG 401K/ESOP and Money Purchase Plan
Equity Portfolio 64,435
Total Return Portfolio 13,490
Fixed Income Portfolio 6,377
Short-Term Government Portfolio 18
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term securities except for the
Prime Money Market Portfolio) for the year ended March 31, 1996, are as
follows (in thousands):
<TABLE>
<CAPTION>
FIXED SHORT-TERM PRIME
EQUITY TOTAL RETURN INCOME GOVERNMENT MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Purchases $6,483,397 $ 9,509,799 $ 5,864,189 $5,087,785 $ 517,076,531
Proceeds from sales $ 6,835,286 $ 8,653,153 $ 4,860,967 $4,741,442 $ 519,019,353
</TABLE>
4. CAPITAL TRANSACTIONS
CONTINGENT DEFERRED SALES CHARGE
The Fund may impose a contingent deferred sales charge against the original
purchase price of all Initial Shares except those acquired by reinvestment
of dividends. There is no charge upon redemption of any share appreciation
or reinvested dividends on Initial Shares, or redemption of any Select
Shares.
During the period April 1, 1995 to March 31, 1996, no contingent deferred
sales charges were collected.
<PAGE>
4. CAPITAL TRANSACTIONS, CON'T.
SHARE ACTIVITY
The following table summarizes the activity in each class of capital
shares of the Portfolios:
<TABLE>
<CAPTION>
EQUITY TOTAL RETURN FIXED INCOME
INITIAL SHARES PORTFOLIO PORTFOLIO PORTFOLIO
- - --------------
For the years ended
March 31, 1996, 1995, and 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 171,419 417,064 38,888 73,861 185,100 126,501 85,630 123,030 18,121
Shares issued in reinvestment of dividends 21,443 14,429 48 15,528 12,726 26 9,677 3,793 154
Shares exchanged (5,901) 81,956 163 (50) 131,778 638 (1,779) 26,548 921
Shares redeemed (93,542) (137,271) (1,386) (153,532) (67,692) (20,444) (43,016) (38,373) (658)
----------------------------------------------------------------------------------------
Net increase from capital share transactions 93,419 376,178 37,713 (64,193) 261,912 106,721 50,512 114,998 18,538
========================================================================================
EQUITY TOTAL RETURN FIXED INCOME
SELECT SHARES PORTFOLIO PORTFOLIO PORTFOLIO
- - -------------
For the years ended
March 31, 1996, 1995, and 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 228,877 256,010 1,029,488 155,831 294,364 1,242,805 33,954 35,704 619,200
Shares issued in reinvestment of dividends 65,708 71,158 10,883 82,591 82,943 20,707 45,806 40,567 25,706
Shares exchanged 6,407 (77,664) 993 497 (161,076) (58) 1,960 (18,690) 2
Shares redeemed (105,396) (36,651) (10,645) (64,171) (58,472) (15,322) (10,794) (3,404) (279)
----------------------------------------------------------------------------------------
Net increase from capital share transactions 195,596 212,853 1,030,719 174,748 157,758 1,248,132 70,926 54,177 644,629
========================================================================================
</TABLE>
<PAGE>
4. CAPITAL SHARE TRANSACTIONS, CONT.
SHARE ACTIVITY
The following tables summarize the activity in each class of capital shares
of the Portfolios.
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT
INITIAL SHARES PORTFOLIO
- - --------------
For the period ended
March 31, 1996, 1995, and 1994 1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Shares Sold 1,228 2,891 10,488
Shares issued in reinvestment of dividends 1,240 1,051 64
Shares exchanged (67) 19,262 (1,746)
Shares redeemed (210) (7,594) (2,411)
-------------------------------
Net increase (decrease) from capital share transactions 2,191 15,610 6,395
===============================
</TABLE>
<TABLE>
<CAPTION>
Short-Term Government Prime Money Market
SELECT SHARES Portfolio Portfolio
- - -------------
For the period ended
March 31, 1996, 1995, and 1994 1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 31,175 18,016 367,388 3,986,258 3,758,731 5,017,807
Shares issued in reinvestment of dividends 22,891 18,551 9,418 294,820 222,482 98,348
Shares exchanged 0 (5) 0 (11,180) (36,869) (10,051)
Shares redeemed (10,446) (6,852) (21,741) (6,154,280) (3,543,249) (4,831)
---------------------------------------------------------------------------
Net increase (decrease) from capital share transactions 43,620 29,710 355,065 (1,884,382) 401,095 5,101,273
===========================================================================
</TABLE>
<PAGE>
CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
EQUITY TOTAL RETURN FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
1996 1995 1994* 1996 1995 1994* 1996 1995 1994*
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.615 $ 10.280 $ 0.000 $ 10.113 $ 10.131 $ 0.000 $ 9.654 $ 9.769 $ 0.000
Shares Issued** $ 0.000 $ 0.000 $ 10.000 $ 0.000 $ 0.000 $ 10.000 $ 0.000 $ 0.000 $ 10.000
-------------------------------------------------------------------------------------------------------
$ 10.615 $ 10.280 $ 10.000 $ 10.113 $ 10.131 $ 10.000 $ 9.654 $ 9.769 $ 10.000
-------------------------------------------------------------------------------------------------------
Net Investment Income 0.305 0.227 0.067 0.454 0.364 0.129 0.571 0.534 0.323
Net Realized and Unrealized
Gains on Investments 2.214 0.758 0.353 1.263 0.233 0.223 0.417 (0.092) (0.131)
-------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 2.519 0.985 0.420 1.717 0.597 0.352 0.988 0.442 0.192
-------------------------------------------------------------------------------------------------------
LESS:
Distributions from Net
Investment Income 0.301 0.234 0.113 0.446 0.364 0.192 0.560 0.547 0.373
Distributions from Net
Realized Gains 0.274 0.416 0.270 0.098 0.251 0.029 0.000 0.010 0.050
-------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.575 0.650 0.140 0.544 0.615 0.221 0.560 0.557 0.423
-------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 12.559 $ 10.615 $ 10.280 $ 11.285 $ 10.113 $ 10.131 $ 10.081 $ 9.654 $ 9.769
=======================================================================================================
Total Return 23.90% 9.78% 3.59% 17.12% 6.16% 2.72% 10.28% 4.59% 1.23%
Net Assets, End Of Period $6,371,666 $4,393,338 $387,682 $3,435,711 $3,727,846 $1,081,193 $1,855,470 $1,289,091 $181,094
Ratio of Expenses to
Average Net Assets 1.57% 1.57% 1.52% 1.57% 1.57% 1.52% 1.52% 1.52% 1.47%
Ratio of Net Investment Income
to Average Net Assets 2.56% 2.31% 1.28% 4.13% 4.04% 2.25% 5.52% 6.10% 4.21%
Portfolio Turnover Rate 35.91% 55.19% 12.52% 52.11% 67.00% 38.74% 57.15% 60.36% 70.83%
Average Commission Rate Paid
to Brokers 0.27% 0.00% 0.00% 0.27% 0.00% 0.00% -- -- --
* From inception of the Fund May 20, 1993.
** First purchase of Initial Shares occurred subsequent to May 20, 1993.
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year and does not
reflect the effect of any deferred sales charges.
</TABLE>
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
SHORT-TERM
GOVERNMENT
PORTFOLIO
1996 1995 1994**
- - --------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.649 $ 9.765 $ 0.000
Shares Issued** $ 0.000 $ 0.000 $ 10.000
--------------------------------------------
$ 9.649 $ 9.765 $ 10.000
--------------------------------------------
Net Investment Income 0.522 0.452 0.211
Net Realized and Unrealized
Gains on Investments 0.172 (0.098) (0.248)
--------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.693 0.354 (0.037)
--------------------------------------------
LESS:
Distributions from Net
Investment Income 0.526 0.460 0.188
Distributions from Net
Realized Gains 0.000 0.010 0.010
--------------------------------------------
TOTAL DISTRIBUTIONS 0.526 0.470 0.198
--------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 9.816 $ 9.649 $ 9.765
============================================
Total Return 7.27% 3.73% -0.10%
Net Assets, End Of Period $237,507 $212,334 $ 62,450
Ratio of Expenses to
Average Net Assets 1.52% 1.52% 1.48%
Ratio of Net Investment Income
to Average Net Assets 5.26% 4.87% 3.50%
Portfolio Turnover Rate 145.86% 79.19% 69.79%
Average Commission Rate Paid
to Brokers -- -- --
* From inception of the Fund May 20, 1993.
** First purchase of Initial Shares occurred subsequent to May 20, 1993.
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year and does not
reflect the effect of any deferred sales charges.
<PAGE>
CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS (CONT.)
The following presents information relating to a Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
EQUITY TOTAL RETURN FIXED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
1996 1995 1994* 1996 1995 1994* 1996 1995 1994*
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.603 $ 10.266 $ 10.000 $ 9.932 $ 9.966 $ 10.000 $ 9.566 $ 9.682 $ 10.000
-----------------------------------------------------------------------------------------------------------
Net Investment Income 0.359 0.271 0.146 0.500 0.418 0.225 0.611 0.580 0.414
Net Realized and Unrealized
Gains on Investments 2.219 0.750 0.291 1.241 0.215 (0.007) 0.419 (0.109) (0.269)
-----------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 2.578 1.021 0.437 1.741 0.633 0.218 1.030 0.471 0.145
-----------------------------------------------------------------------------------------------------------
LESS:
Distributions from Net
Investment Income 0.359 0.268 0.144 0.500 0.416 0.223 0.609 0.577 0.413
Distributions from Net
Realized Gains 0.274 0.416 0.027 0.098 0.251 0.029 0.000 0.010 0.050
-----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.633 0.684 0.171 0.598 0.667 0.252 0.609 0.587 0.463
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 12.548 $ 10.603 $ 10.266 $ 11.075 $ 9.932 $ 9.966 $ 9.987 $ 9.566 $ 9.682
===========================================================================================================
Total Return 24.52% 10.31% 4.38% 17.70% 6.69% 2.18% 10.84% 5.12% 1.20%
Net Assets,
End of Period $18,083,168 $13,206,738 $10,602,115 $17,527,536 $13,983,288 $12,458,913 $7,706,923 $6,703,664 $6,260,971
Ratio of Expenses to
Average Net Assets 1.07% 1.07% 1.03% 1.07% 1.07% 1.03% 1.02% 1.02% 0.98%
Ratio of Net Investment Income
to Average Net Assets 3.06% 2.68% 1.76% 4.63% 4.30% 2.63% 6.03% 6.14% 4.73%
Portfolio Turnover Rate 35.91% 55.19% 12.52% 52.11% 67.00% 38.74% 57.15% 60.36% 70.83%
Average Commission Rate Paid
to Brokers 0.27% 0.00% 0.00% 0.27% 0.00% 0.00% -- -- --
</TABLE>
*From inception of the Fund May 20, 1993.
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year and does not
reflect the effect of any deferred sales charges.
See notes to financial statements.
<PAGE>
CAPITAL VALUE FUND, INC.
FINANCIAL HIGHLIGHTS (CONT.)
The following presents information relating to a Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
Short-Term Government Prime Money Market
Portfolio Portfolio
1996 1995 1994* 1996 1995 1994*
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.776 $ 9.886 $ 10.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------------
Net Investment Income 0.578 0.507 0.309 0.051 0.042 0.022
Net Realized and Unrealized
Gains on Investments 0.175 (0.101) (0.105) 0.000 0.000 0.000
----------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.753 0.406 0.204 0.051 0.042 0.022
----------------------------------------------------------------------------------
LESS:
Distributions from Net
Investment Income 0.574 0.506 0.308 0.051 0.042 0.022
Distributions from Net
Realized Gains 0.000 0.010 0.010 0.000 0.000 0.000
----------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.574 0.516 0.318 0.051 0.042 0.022
----------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 9.954 $ 9.776 $ 9.886 $ 1.000 $ 1.000 $ 1.000
==================================================================================
Total Return 7.81% 4.25% 2.05% 5.13% 4.20% 2.18%
Net Assets, End of Period $ 4,283,405 $ 3,781,009 $ 3,530,041 $ 3,637,446 $ 5,522,368 $ 5,121,273
Ratio of Expenses to
Average Net Assets 1.03% 1.02% 0.98% 0.78% 0.77% 0.74%
Ratio of Net Investment Income
to Average Net Assets 5.76% 5.21% 3.62% 5.15% 4.27% 2.53%
Portfolio Turnover Rate 145.86% 79.19% 69.79%
</TABLE>
*From inception of the Fund May 20, 1993.
Note for all Portfolios: Ratios have been determined on an annualized basis.
Total return is not annualized for periods less than a full year and does not
reflect the effect of any deferred sales charges.
See notes to financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Capital Value Fund, Inc.:
We have audited the statements of assets and liabilities for the year ended
March 31, 1996, including the schedules of investments of the Equity Portfolio,
Total Return Portfolio, Fixed Income Portfolio, Short-Term Government Portfolio,
and the Prime Money Market Portfolio, and the related statements of operations
for the year then ended, and the statements of changes in net assets for each of
the years in the 2-year period then ended, and financial highlights for each of
the years in the 2-year period then ended and the period May 6, 1993 (date of
inception) through March 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investment securities held in custody were confirmed to us by the custodian. As
to securities purchased and sold but not received or delivered, we requested
confirmations from brokers, and where replies are not received, we carry out
other appropriate auditing procedures. An audit includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Equity Portfolio, Total Return Portfolio, Fixed Income Portfolio, Short-Term
Government Portfolio, and the Prime Money Market Portfolio as of March 31, 1996,
and the results of their operations for the year then ended, and the changes in
their net assets for each of the years in the 2-year period then ended, and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
April 26, 1996
<PAGE>
IMG Financial Services, Inc.
2203 Grand Avenue
Des Moines, Iowa 50312-5338
1-800-798-1819
