CAPITAL VALUE FUND, INC.
ANNUAL FINANCIAL REPORT
MARCH 31, 1997
EQUITY PORTFOLIO
TOTAL RETURN PORTFOLIO
FIXED INCOME PORTFOLIO
SHORT-TERM GOVERNMENT PORTFOLIO
PRIME MONEY MARKET PORTFOLIO
<PAGE>
May 1997
Dear Shareholders:
We are pleased to present the investment results for your Capital Value Fund for
the fiscal year ending, March 31, 1997. Combined assets of the Fund totaled $47
million at year end.
The last twelve months have provided a wide range of investment experiences to
investors. The bond market returned an uninspiring, if fairly typical, 4.91
percent over the period. But much of that return came in the last quarter of
1996. Prior to that time, bond investors struggled to stay even.
The stock market was even more of a mixed bag. Measured by the S&P 500 -- which
is heavily market-weighted to very large capitalization, international companies
- - -- the stock market went up 19.83 percent during the period. Domestic stock
funds, however, returned an average of only 11.75 percent (as measured by Lipper
Analytical Services). Smaller companies, as measured by the Russell 2000 index,
rose only 3.56 percent (down from their May 1996 peaks).
Why this dichotomy in relative performance? Bonds and the vast majority of
stocks have been hampered in the last year by concerns over rising inflation,
particularly in the area of wages. Inflation concerns have caused bond yields to
rise, hurting bond prices. Higher yields traditionally begin to hurt stock
valuations at around the 7 percent level, as more investors are persuaded to
move money from stocks to bonds. In our view, the real anomaly has been the
strong return in the S&P 500 stocks. To some extent, we see this as a flight to
quality following strong gains in 1995 and early 1996, and record inflows into
passively managed index funds.
Going forward we are positioned for continued low inflation, somewhat higher
bond yields in the near term, and a long term scenario of slower earnings
growth. While overall this presents a favorable climate for both the stock and
bond market, we do expect some choppiness along the way. Our investment
rationale is discussed in greater detail in the portfolio managers' commentaries
which follow.
Thank you for your investment in the Capital Value Fund. Please call
1-800-798-1819 with any questions you may have.
Sincerely,
Robert G. Millen David W. Miles
Chairman, Capital Value Fund, Inc. President, Capital Value Fund, Inc.
President, Capital Value Corporation Senior Managing Director
Investors Management Group
<PAGE>
Capital Value Equity Portfolio
For the 12-month period ended March 31, 1997, the Equity Portfolio generated
total returns of 6.79 percent and 7.33 percent for the Initial and Select
shares, respectively. These returns fell short of the 19.83 percent return
generated by the S&P 500 Composite and the 11.75 percent return produced by the
average equity mutual fund tracked by Lipper Analytical Services.
The bull run in equities during the period was interrupted only by a brief
correction in July and by another modest decline in late March. However, the
second drop did not prevent the market from posting its ninth consecutive
quarter of positive returns, the longest such streak since the 1950s. The S&P
500 has now climbed a phenomenal 69.97 percent from December 1994 through March
1997, ranking among the best two-year market rallies on record.
The Portfolio's shortfall relative to the S&P 500 primarily resulted from (1)
general underrepresentation of the core group of blue-chip stocks in which the
market's advance has recently been concentrated and (2) an overemphasis on
interest-sensitive sectors of the market.
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 S & P 500, a broad
market-weighted average dominated by blue-chip stocks, is an unmanaged group of
stocks whose composition is different from the Fund. Total returns include
changes in share prices and the reinvestment of all dividends and capital gain
distributions. Performance data quoted represents past performance, which is no
indication of future performance, and will differ for each share class.
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. A
$10,000 investment in the Fund's initial shares at inception on 5/30/93 would
have been valued at $14,219 on 3/31/97. 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 amounts.
<PAGE>
First, although the duration and magnitude of this advance have been impressive,
its breadth has left something to be desired. Market leadership has become
progressively more selective as the up cycle has matured, particularly following
the June-July correction that hit secondary stocks especially hard. While the
blue-chip S&P 500 and Dow Jones Industrials both gained 17-18 percent on a
capital appreciation basis in the 12-month period, the NASDAQ Composite and
Russell 2000 rose 10.92 percent and 3.56 percent, respectively, with both
indexes closing out the period below their May 1996 peaks. Moreover, performance
was highly concentrated even within the major blue-chip averages. The largest 10
companies in the S&P 500 were up 29.20 percent in the 12 months ended March 31,
compared with a median gain of 10.50 percent for the remaining 490 companies in
the index.
With regard to the interest-sensitive sectors, the Portfolio had been
significantly overweighted in electric and telecommunications utilities during
the latter half of 1995 and throughout 1996 based on our expectations that
market leadership would rotate into interest-sensitive and economically
defensive stocks. However, the utilities stocks peaked in January 1996 and have
substantially underperformed the market in the period since, reflecting
heightening fears over the impact of power-market deregulation as well as the
sharp increase in long-term interest rates over the period. We have sharply
pared back our exposure to this sector, as discussed below. In addition to its
utilities position, the Portfolio held an approximate 16 percent position in
long-term Treasury bonds during mid-1995 through late 1996. After initially
performing well, the bonds came under pressure in the first half of 1996 on
fears that the economy and inflation were set to heat up. The bonds recouped
some of their losses during the October-November rally and were sold in November
and December. Nonetheless, the bond position significantly underperformed the
stock market during the period in which it was held.
On the positive side, the Portfolio's positions in drug and regional bank stocks
performed well throughout the period. In addition, the Portfolio's
underweighting in both cyclical and technology stocks throughout the year paid
off as both areas lagged the broader market during the period.
On a sector basis, we have implemented a number of changes in the past two
quarters. First, we have pared back the interest-sensitivity of the portfolio
with the sale of the Portfolio's Treasury bond position in the fourth quarter
and a sharp reduction in the Portfolio's weighting in electric utilities in the
fourth and first quarters. Second, we have pulled up the Portfolio's position in
energy stocks to roughly a market weight. Energy has historically been a solid
defensive haven of the marketplace and the group continues to represent good
relative value, in our opinion. Finally, we have boosted the Portfolio's
position in the consumer nondurables sector to modestly above its weighting in
our benchmark from an underweighted position. In addition to these sector moves,
we added two new cyclical stocks and a new holding in the technology sector.
Our stock selection strategy is to continue to emphasize companies with the
ability to expand earnings in an environment characterized by modest real growth
and little corporate pricing power. With the economic expansion embarking on its
seventh year and with enormous gains from corporate downsizing already booked,
the leverage for the sizable profit gains of recent years is diminishing. In
addition, wage pressures are heating up and the U.S. dollar has appreciated
dramatically, both of which will put the squeeze on profits. Several profit
"pre-announcements" for the first quarter already suggest that Wall Street
earnings estimates for 1997 may need to be revised downward.
Our sector strategy continues to emphasize consumer nondurables and
interest-sensitive groups, including banks, insurance companies,
telecommunications utilities and electric utilities. We remain underexposed to
technology and cyclical stocks, although valuations in both groups have improved
to the point where we have initiated small new positions in both areas.
Douglas R. Ramsey, CFA
Portfolio Manager
<PAGE>
Capital Value Total Return
For the 12-month period ended March 31, 1997, the Total Return Portfolio
increased in value with Initial and Select shares achieving total returns of
4.65 percent and 5.16 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 12.30 percent.
The stock market outperformed the bond market dramatically over the last year.
19.83 percent versus 4.91 percent. The Total Return Portfolios were penalized
during the year primarily due to our expectations for a slowing economy. Based
on this outlook, we allocated 60 percent of the Portfolio to bonds and 40
percent to stocks during most of the last twelve months. In addition, we
selected defensive stocks and held long-term bonds.
Due to large employment gains over the last twelve months, the financial markets
have anticipated faster economic growth and the potential for higher inflation
As a result, long-term interest rates rose to 7.20 percent during the period.
Wage increases have averaged 4 percent this year from 3 percent a year ago, and
the unemployment rate has declined to near 5 percent.
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". Each of the indexes is an unmanaged group of securities whose
composition is different from the Fund. The S & P 500 is a broad market-weighted
average dominated by blue-chip stocks. The Lehman Aggregate includes fixed rate
debt issues rated investment grade or higher. Total returns include changes in
share prices and reinvestment of all dividends and capital gain distributions.
Performance data quoted represents past performance, which is no indication of
future performance, and will differ for each share class. 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. A $10,000 investment in the
Fund's initial shares at inception on 5/30/93 would have been valued at $12,838
on 3/31/97. 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 amounts.
<PAGE>
Neverthless, we expect inflation to stay low. U.S. corporations lack pricing
power. Gold prices are hovering near $350 per ounce, down from $410 per ounce a
year ago. Industrial commodity prices have been flat. The strength of the U.S.
dollar also restrains inflation as domestic producers struggle to compete with
imported goods.
Most importantly the Federal Reserve has adopted price stability as their
primary policy objective. The Fed raised the Federal Funds rate by 0.25 percent
at the end of March. This action was taken as a preemptive step. As long as the
Fed continues to err on the side of price stability, fears of inflation will
dissipate. For now, long-term bond yields are likely to be volatile, but
inflation pressures are limited and eventually long-term bond yields are likely
to move lower.
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 profit growth is slowing. Therefore, we continue to overweight bonds
in the Portfolio. The current asset allocation is 57 percent bonds and 43
percent stocks.
The equity portion of the Portfolio continues to emphasize companies with the
ability to expand earnings in an environment characterized by modest real growth
and little corporate pricing power. With the economic expansion embarking on its
seventh year and the enormous profit gains from corporate downsizing already
realized, the potential for the sizable profit gains of recent years is
diminishing. In addition, wages are rising and the U.S. dollar has appreciated
dramatically, both of which will also pressure profits.
On an equity sector basis, we have implemented a number of changes in the past
two quarters. First, we have pared back the interest-sensitivity of the
portfolio by reducing the weighting in electric utilities, although the
Portfolio is still overweighted in this sector. Second, we have increased the
Portfolio's weighting in energy stocks to a market weight. Energy has
historically been a solid defensive haven of the marketplace and the group
continues to represent good relative value. Finally, we have boosted the
Portfolio's position in the consumer nondurables sector to a modest
overweighting. In addition, two new cyclical stocks and a new holding in the
technology sector were added, since valuations in both groups have improved.
Since inflation pressures are limited in our view, long-term bond yields are
likely to move lower over the next twelve months. The duration of the fixed
income portion of the Portfolio is currently 10 percent longer than the index.
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 corporate
profitability weakens. We have augmented the yield of the Portfolio by
purchasing taxable municipal bonds. These bonds provide yields greater than
corporate bonds and are less sensitive to the economic cycle.
In conclusion, the Portfolio is positioned for an environment of slowing
corporate profitability and moderate inflation. In this environment long-term
interest rates should eventually decline as inflation fears dissipate. Bonds
should provide attractive returns relative to stocks and stocks which
demonstrate the ability to continue to generate profit growth should outperform
those with more volatile earnings.
Douglas R. Ramsey, CFA Kathryn D. Beyer, CFA
Portfolio Manager Portfolio Manager
<PAGE>
Capital Value Fixed Income Portfolio
The Capital Value Fixed Income Portfolio's investment objective is to provide
the highest level of income possible consistent with preservation of capital.
The Portfolio produced a 12-month total return for Initial and Select Shares of
3.63 percent and 4.15 percent respectively, compared to the Lehman Aggregate
Index of 4.91 percent.
The last twelve months in the bond market have continued to be volatile with
long-term interest rates fluctuating between 6.35 percent and 7.20 percent. This
increased volatility has been driven by inconsistent economic data and a more
cautious bond investor.
Recently, that data suggests an economy that is growing faster than expected.
Domestic car sales remain strong, manufacturing activity is picking up, and
housing activity is robust. These are all signs of an expanding economy. Much of
this growth is primarily due to strong consumer spending. With consumer spending
accounting for about two-thirds of overall economic activity, one would expect
somewhat accelerated growth in the near term. Although the economy demonstrates
continued strength, the inflation environment remains benign. The only upward
sign of inflationary pressure is in employee wages. A relatively tight labor
market has accelerated wage growth this year to 4 percent from last years 3
percent, while forcing the unemployment rate to near 5 percent. While this is
concerning, most other signs of inflation remain quite low. Gold prices have
fallen to $350 per ounce from a high last year near $410. The Consumer Price
Index and the Producer Price Index both show inflation rising about 3 percent
year over year. Most recently the National Purchasing Managers Index pointed to
lower prices amongst general businesses.
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 Lehman Aggregate, which includes fixed rate
debt issues rated investment grade or higher, is an unmanaged group of
securities whose composition is different from the Fund. Total returns include
changes in share prices and reinvestment of all dividends and capital gain
distributions. Performance data quoted represents past performance, which is no
indication of future performance, and will differ for each share class.
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. A
$10,000 investment in the Fund's initial shares at inception on 5/30/93 would
have been valued at $11,686 on 3/31/97. 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 amounts.
<PAGE>
With the persistent strength of the economy and wage pressures mounting, we
believe further short term interest rate hikes are probable. Historically, the
Fed has never moved just once, upward or downward. However, we do believe future
hikes will be limited to a total of 25 to 50 basis points. We also feel that
consumer spending growth is likely to decline going forward. The higher level of
consumer debt, with a rising delinquency rate, will curtail consumer spending.
This should lead to slower GDP growth by late this year.
Our outlook calls for inflation to remain low. The recent hike in the Fed Funds
target, together with further hikes we expect, should reduce the tightness in
labor and force the unemployment rate back toward 6 percent. Remaining
inflationary indicators should remain contained. A rising production capacity
with few supply bottlenecks will limit businesses from raising prices at the
sacrifice of market share.
Our current fixed income strategy focuses on a weakening economy by later this
year. We remain cautious in the near term of further short term rate hikes.
These hikes tend to push long rates higher as well. We believe that a possible
7.20 percent long bond will provide attractive opportunities for long term
profits. We are currently neutral to the shape of the yield curve and remain
underweighted in bonds which carry call risk. We emphasize a portfolio which is
higher in yield to capture incremental income. We remain cautious toward higher
rates, but will become more aggressive as rates reach excessive levels relative
to inflation.
We appreciate your confidence in and support of the Capital Value Fixed Income
Portfolio and look forward to serving you in the future.
Jeffrey D. Lorenzen, CFA Kathryn D. Beyer, CFA
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
4.23 percent and 4.76 percent respectively, versus the total return of the
Lehman 1-3 year Government Index of 5.37 percent. Since inception, Initial and
Select Shares have provided an annualized return of 4.22 percent at 4.86
percent, ranking them in the top one-third of all Short-Term U.S. Government
Funds tracked by Lipper Analytical Services.
During the last twelve months, short-term interest rates have risen over
one-half percent. The Federal Reserve recently raised the Federal Funds rate by
one-quarter percent and is expected to raise this rate further. The Federal
Reserve's biggest concern is the potential for increased inflation due to the
tightness of the labor market. The unemployment rate has declined to near 5
percent and average hourly earnings have accelerated to a 4 percent annual rate
from 3 percent a year ago.
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 Lehman 1-3 Years Government Index,
which includes fixed rate debt issues rated investment grade or higher, is an
unmanaged group of securities whose composition is different from the Fund.
Total returns include changes in share prices and reinvestment of all dividends
and capital gain distributions. Performance data quoted represents past
performance, which is no indication of future performance, and will differ for
each share class. 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. A $10,000 investment in the Fund's initial shares at inception on
5/30/93 would have been valued at $11,178 on 3/31/97. 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 amounts.
<PAGE>
The short-term portion of the yield curve has steepened over the last twelve
months, since more rate hikes are anticipated. The yield differential between
three-month Treasury bills and three-year Treasury notes has increased from 0.75
percent to 1.25 percent.
Despite a recent jump in wages, most inflation indicators remain subdued. Gold
prices are hovering near $350 per ounce down from $410 per ounce a year ago, and
industrial commodity prices have been flat over the last year. The strength of
the dollar also restrains inflation as U.S. manufacturers struggle to compete
with imported products.
Most importantly, the Federal Reserve has adopted price stability as their
primary policy objective. The Fed raised rates in March as preemptive measure to
avoid inflation. As long as the Fed continues to err on the side of price
stability, inflation is likely to remain under control.
Over the past 40 years the inflation-adjusted or "real" Federal Funds rate has
averaged about 1.75 percent. At 5.50 percent, the "real" Federal Funds rate is
now more than 2.50 percent. Typically, when the real Funds rate has exceeded
3.00 percent, the U.S. economy has dipped into recession. The Federal Reserve is
likely to raise short-term interest rates further near-term; it is clearly not
their intention to push the economy into a recession.
Since short-term interest rates are likely to rise further over the next six
months, the average maturity of the portfolio has been reduced from 2.5 years to
1.9 years. We plan to maintain this posture, until the potential for further
short-term interest rate hikes diminishes.
In summary, the Portfolio is positioned for a higher short-term interest rate
environment. We plan to closely monitor the average maturity and yield curve
posture of the portfolio as market conditions change. As always, we continue to
analyze yield enhancement opportunities within the parameters outlined in the
prospectus.
Kathryn D. Beyer, CFA Jeffrey D. Lorenzen, CFA
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, 1997, the Prime Money Market portfolio 7-day yield was 4.84
percent compared to the Donoghue First Tier Money Fund Composite of 4.74
percent.
The Prime Money Market Portfolio currently holds 24.81 percent in repurchase
agreements, 21.57 percent in corporate obligations, 22.56 percent in government
and agency securities, 1.46 percent in agency mortgage-backed pools, 10.21
percent in taxable municipal bonds, and 19.04 percent in high grade commercial
paper. Within these, 47.7 percent adjust within a one week period and are very
sensitive to interest rates. The remaining 52.3 percent of the holdings mature
between 14 and 397 days.
During the last 12 months, the one-year Treasury bill yield has increased
sixty-two basis points from 5.39 percent to 6.01 percent, reaching a low in
November of 5.36. Over this period, the short-term portion of the yield curve
has steepened with a 35 basis point increase in 6-month yields and a 62 basis
point increase in 1-year yields.
This increase in short-term rates can be attributed to the shift in Federal
Reserve Monetary Policy. Recently, the Fed tightened policies by increasing the
fed funds rate by a quarter percent as a means to slow economic growth.
Short-term interest rates stabilized and then increased over the last quarter as
investors expected the Fed Funds rate to rise after the March FOMC meeting. At
this time, we look for short-term interest rates to continue to rise.
Histroically, the Fed's decision to raise short-term rates is typically followed
by a second rate hike. With this view, we continue to purchase first tier
corporate securities in the 6-month to 12-month part of the yield curve to
capture more yield without adding a large amount of risk and at the same time,
continue to hold a large amount of the portfolio in the 1-week range in order to
capture higher yields as rates increase.
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
Portfolio Manager Portfolio Manager
<PAGE>
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. from Drake University and her B.S.
from Iowa State University.
MR. RAMSEY SERVES AS IMG'S EQUITY STRATEGIST. 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.
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. from Drake University and his B.B.A. from the University of
Iowa.
<PAGE>
EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (94.93%)
BASIC MATERIALS (6.69%)
7,100 Great Lakes Chemical $ 326,600
11,700 International Paper Co. 454,838
12,600 Sonoco Products Co. 340,200
--------------
1,121,638
--------------
CONSUMER CYCLICALS (10.63%)
10,900 American Greetings 348,116
10,700 Genuine Parts Co. 498,888
9,200 Goodyear Tire & Rubber Co. 480,700
11,400 Knight-Ridder Inc. 454,575
--------------
1,782,279
--------------
CONSUMER STAPLES (17.86%)
14,600 Albertson's Inc. 496,400
12,900 Hormel Foods Corp. 330,562
4,800 Kimberly-Clark Corp. 477,000
17,700 Luby's Cafeterias, Inc. 329,663
13,800 Newell Company 462,300
14,800 Sysco Corp. 505,050
14,200 UST, Inc. 395,825
--------------
2,996,800
--------------
HEALTH CARE (8.50%)
8,600 Abbott Laboratories 482,675
7,600 Bristol-Meyers Squibb Co. 448,400
13,530 Pharmacia & Upjohn, Inc. 495,536
--------------
1,426,611
--------------
ENERGY (9.13%)
3,800 Atlantic Richfield Co. 513,000
7,200 Chevron Corp. 501,300
4,800 Exxon Corp. 517,200
--------------
1,531,500
--------------
FINANCIALS (19.67%)
6,100 Ambac Inc. 393,450
16,200 American Heritage Life 384,750
10,570 Banc One Corp. 420,158
8,600 Chubb Corp. 463,324
4,800 J.P. Morgan & Co. 471,600
7,400 Key Corp. 360,750
8,700 National City Corp. 405,638
7,500 Providan 401,250
--------------
3,300,920
--------------
See notes to financial statements.
<PAGE>
EQUITY PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
INDUSTRIAL SERVICES (4.91%)
6,200 Grainger (W.W.), Inc. $ 458,800
11,900 WMX Technologies, Incorporated 364,438
--------------
823,238
--------------
TECHNOLOGY (2.86%)
11,900 Electronic Data Systems 480,463
--------------
COMMUNICATIONS SERVICES (6.96%)
5,400 Ameritech Corporation 332,100
14,700 AT&T Corp. 510,825
7,100 Nynex Corporation 323,938
--------------
1,166,863
--------------
UTILITIES (7.72%)
15,000 Central & Southwest Corporation 320,625
12,500 Central Louisiana Electric 328,125
15,300 South Jersey Industries 327,038
12,300 WPS Resources Corp. 319,800
--------------
1,295,588
--------------
Total Common Stocks
(Cost $14,265,281) 15,925,900
--------------
CASH EQUIVALENTS (2.33%)
COMMERCIAL PAPER (2.32%)
391,000 Merrill Lynch Commercial Paper, 4/01/97 391,000
MONEY MARKET MUTUAL FUNDS (0.01%)
378 Norwest Cash Investment Fund, 5.10% 378
--------------
Total Cash Equivalents
(Cost $391,308) 391,378
--------------
TOTAL INVESTMENTS IN SECURITIES (97.26%)
(Cost $14,656,589) 16,317,278
Other Assets and Liabilities, Net (2.74%) 459,962
--------------
NET ASSETS 100.0% $16,777,240
==============
Based on the cost of investments of $14,656,589 for federal income tax purposes
at March 31, 1997, the aggregate gross unrealized appreciation was $2,252,485,
the aggregate gross unrealized depreciation was $591,796 and the net unrealized
appreciation was $1,660,689
See notes to financial statements.
<PAGE>
TOTAL RETURN PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
COMMON STOCK (43.17%)
BASIC MATERIALS (2.59%)
3,700 International Paper Co. $ 143,838
6,300 Sonoco Products Co. 170,100
--------------
313,938
--------------
CONSUMER CYCLICALS (5.62%)
5,100 American Greetings 162,881
4,200 Genuine Parts Co. 195,825
3,100 Goodyear Tire and Rubber Co. 161,975
4,000 Knight-Ridder Inc. 159,500
--------------
680,181
--------------
CONSUMER STAPLES (8.04%)
5,300 Albertson's Inc. 180,200
6,200 Hormel Foods Corp. 158,875
6,700 Luby's Cafeterias 124,788
5,900 Newell Company 197,650
4,800 Sysco Corp. 163,800
5,300 UST, Inc. 147,736
--------------
973,049
--------------
HEALTH CARE (4.04%)
2,700 Abbott Laboratories 151,538
2,400 Bristol-Meyer Squibb Co. 141,600
5,325 Pharmacia & Upjohn, Inc. 195,028
--------------
488,166
--------------
ENERGY (4.38%)
1,200 Atlantic Richfield 162,000
2,500 Chevron Corp. 174,062
1,800 Exxon Corp. 193,950
--------------
530,012
--------------
FINANCIALS (8.97%)
2,300 Ambac Inc. 148,350
6,500 American Heritage Life 154,375
3,440 Banc One Corp 136,740
2,900 Chubb Corp. 156,238
3,000 Key Corp. 146,250
3,800 National City Corp. 177,175
3,100 Providian 165,850
--------------
1,084,978
--------------
INDUSTRIALS (2.45%)
2,100 Grainger (W.W.), Inc. 155,400
4,600 WMX Technologies, Incorporated 140,875
--------------
296,275
--------------
See notes to financial statements.
<PAGE>
TOTAL RETURN PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
TECHNOLOGY (1.10%)
3,300 Electronic Data Systems $ 133,238
--------------
COMMUNICATIONS SERVICES (2.88%)
1,800 Ameritech Corporation 110,700
4,200 AT&T Corp. 145,950
2,000 Nynex Corporation 91,250
--------------
347,900
--------------
UTILITIES (3.10%)
4,200 Central & S.W. Corp. 89,775
3,800 Central Louisiana Electric 99,750
4,200 South Jersey Industries 89,775
3,700 WPS Resources Corp 96,200
--------------
375,500
--------------
Total Common Stocks
(Cost $4,784,166) 5,223,237
--------------
U.S. GOVERNMENT SECURITIES (8.98%)
U.S. TREASURY BONDS (5.32%)
400,000 U.S. T-Bond, 7.25%, 5/15/16 402,168
205,000 U.S. T- Bond, 8.875%, 2/15/19 241,617
--------------
643,785
--------------
U.S. TREASURY NOTES (3.66%)
440,000 U.S. T-Note, 6.875%, 3/31/00 443,005
--------------
Total Government Securities
(Cost $1,089,768) 1,086,790
--------------
CORPORATE BONDS (14.32%)
150,000 Ford Capital BV, 10.125%, 11/15/00 164,436
170,000 GMAC, 8.875%, 6/1/10 189,338
210,000 Hubco, Inc., 7.75%, 1/15/04 206,182
250,000 Hydro-Quebec, 8.25%, 1/15/27 255,938
250,000 Lehman Brothers, 8.05%, 1/15/19 250,688
242,000 Manitoba, 7.75%, 7/17/16 243,890
261,250 Naples, City of, Italy, 7.52%, 7/15/06 261,516
150,000 Nova Scotia, 8.25%, 11/15/19 160,313
--------------
Total Corporate Bonds
(Cost $1,767,978) 1,732,301
--------------
See notes to financial statements.
<PAGE>
TOTAL RETURN PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
TAXABLE MUNICIPAL BONDS (16.35%)
205,000 Berry Creek Met Dist, Co., 6.65%, 12/01/01 $ 196,800
240,000 Cohasset, Mn, Taxable-Tax Increment Series B,
7.40%, 6/01/04 231,300
195,000 Fulton, Mo, 7.60%, 7/01/11 194,126
200,000 Longview, Tx Economic Dev, 8.25%, 9/15/07 208,430
200,000 New Orleans, La Housing Development, 8.00%, 12/01/03 198,600
155,000 Northwest Nazarene College, Id, 6.75%, 11/01/99 153,644
136,831 Oregon Department of Transportation, 9.00%, 6/15/00 142,979
250,000 Portland, Or Multifamily Housing, 7.63%, 12/01/01 239,688
100,000 Texas St. G.O. Taxable, 8.70%, 12/01/09 109,750
300,000 Volusia County, Fl, 7.40%, 6/01/03 302,319
--------------
Total Municipal Bonds
(Cost $1,993,327) 1,977,636
--------------
MORTGAGE-BACKED SECURITIES (15.55%)
COLLATERALIZED MORTGAGE OBLIGATIONS (10.68%)
138,128 Chase Mtge. Finance Corp, 5.75%, 4/25/09 135,514
8,976 Citicorp Mtge. Sec. 1987-13 a3, 9.35%, 6/1/10 8,873
175,000 Collateralized Mtge. SEC Corp., 7.00%, 9/20/21 164,260
55,405 FHLMC 91 Series 188 Class F, 7.50%, 5/15/20 55,475
66,346 FNMA 1991-8 E, 7.50%, 6/25/17 66,328
141,454 Green Tree Acceptance 1987B Class A, 9.55%, 5/15/07 146,322
156,234 Housing Securities, Inc 1992-F F11, p/o,
9.06%, 11/25/07** 112,831
195,812 Housing Securities, Inc 1993-E, E-14, p/o,
10.33%, 9/25/08** 138,743
134,398 Kidder Peabody Mtge Asset Trust Class 5G,
8.45%, 5/20/18 133,810
17,088 Prudential Home Mortgage Sec, 7.50%, 5/25/22 17,069
93,237 Residential Funding Mtg Sec. I Series 1993-S7
Class A6, 7.15%, 2/25/08 93,142
41,932 Resolution Trust Corp. Series 1992-17 Class A1,
Variable Rate, 8.86%, 12/25/20* 41,997
262,076 Salomon Mortgage Sec. VII, p/o, 2/25/25, 10.609%** 177,423
--------------
1,291,787
--------------
FHLMC MORTGAGE-BACKED POOLS (0.36%)
43,234 FHLMC #A00851, 8.50%, 12/1/19 44,252
GNMA MORTGAGE-BACKED POOLS (4.51%)
141,707 GNMA #305975, 9.00%, 7/15/21 147,939
65,669 GNMA #318184, 8.50%, 11/15/21 67,214
88,156 GNMA #359600, 7.50%, 7/15/23 86,365
248,437 GNMA Pool #376218, 7.50%, 8/15/25 243,538
--------------
545,056
--------------
Total Mortgage-Backed Securities
(Cost $1,878,456) 1,881,095
--------------
* Denotes a floating rate investment with interest rate as of March 31, 1997.
** Interest presented for p/o bond equates effective yield at date of purchase.
See notes to financial statements.
<PAGE>
TOTAL RETURN PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
CASH EQUIVALENTS (2.13%)
COMMERCIAL PAPER (2.12%)
257,000 Merrill Lynch Commercial Paper, 4/1/97 $ 257,000
MONEY MARKET MUTUAL FUNDS (0.01%)
404 Norwest Cash Investment Fund, 5.10% 404
--------------
Total Cash Equivalents
Cost ($257,359) 257,404
--------------
TOTAL INVESTMENTS IN SECURITIES (100.50%)
(Cost $11,771,054) 12,158,463
Other Assets and Liabilities, Net (-0.50%) (60,285)
--------------
NET ASSETS 100.0% $12,098,178
==============
Based on the cost of investments of $11,771,054 for federal income tax purposes
at March 31, 1997, the aggregate gross unrealized appreciation was $717,091 the
aggregate gross unrealized depreciation was $329,682 and the net unrealized
appreciation was $387,409
See notes to financial statements.
<PAGE>
FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (34.40%)
GOVERNMENT AGENCIES (2.81%)
250,000 FNMA Medium-Term Note, 6.59%, 5/24/01 $ 247,483
--------------
U.S. TREASURY BONDS (11.60%)
525,000 U.S. T-Bond, 7.25%, 5/15/16 527,845
450,000 U.S. T-Bond, 8.13%, 5/15/21 495,320
--------------
1,023,165
--------------
U.S. TREASURY NOTES (19.99%)
200,000 U.S. T-Note, 6.25%, 2/15/03 194,691
550,000 U.S. T-Note, 6.88%, 3/31/00 553,757
250,000 U.S. T-Note, 7.88%, 8/15/01 260,495
250,000 U.S. T-Note, 5.00%, 12/15/99 243,810
350,000 U.S. T-Note, 6.50%, 5/15/05 340,932
175,000 U.S. T-Note, 5.75%, 10/31/00 169,874
--------------
1,763,559
--------------
Total Government Securities
(Cost $3,115,062) 3,034,207
--------------
CORPORATE BONDS (20.59%)
225,000 Analog Devices, 6.63%, 3/01/00 220,831
350,000 GMAC, 8.88%, 6/1/10 389,813
160,000 Hubco, Inc., 7.75% 1/15/04 157,091
220,000 Lehman Brothers, 8.05%, 1/15/19 220,605
315,000 Manitoba, 7.75%, 7/17/16 317,460
237,500 Naples, City of, Italy, 7.52%, 7/15/06 237,742
255,000 Nova Scotia, 8.25%, 11/15/19 272,531
--------------
Total Corporate Bonds
(Cost $1,855,395) 1,816,073
--------------
TAXABLE MUNICIPAL BONDS (18.32%)
220,000 Berry Creek Met Dist, Co, 6.85%, 12/01/02 210,100
120,000 Cottonwood County, Mn, 7.30%, 2/01/00 119,550
105,000 Iowa Lakes Community College, 7.70%, 6/01/04 106,246
100,000 Kirkwood Community College, 7.65%, 6/01/01 101,507
136,831 Oregon Department of Transportation, 9.00%, 6/15/00 142,979
225,000 Portland, Or Multifamily Housing, 7.63%, 12.01/01 215,719
350,000 San Antonio, Tx Cert Oblig Taxable, 6.65%, 8/01/09 319,729
165,000 St. Paul, Mn Port. Authority, 6.65%, 9/01/99 163,763
75,000 Texas St. G.O. Taxable, 8.70%, 12/1/09 82,313
155,000 Washington State Housing Antioch University,
7.55%, 1/01/03 154,685
--------------
Total Municipal Bonds
(Cost 1,644,410) 1,616,591
--------------
See notes to financial statements.
<PAGE>
FIXED INCOME PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES (23.98%)
COLLATERALIZED MORTGAGE OBLIGATIONS (11.10%)
8,357 Citicorp Mortgage Securities 1987-13, 9.35% 6/1/10 $ 8,261
240,712 Countrywide Funding Corp 1994-9 A2, 6.50%, 5/25/24 235,448
215,000 FHLMC Series 1561 Class TA, p/o, 9.24%, 8/15/08* 110,959
61,432 FHLMC 91 Series 188 Class F, 7.50%, 5/15/20 61,509
24,100 FNMA Series 1991 Class E, 8.50%, 4/25/05 24,191
63,508 FNMA 1991-91A, p/o, 7.73%, 7/25/98* 59,005
126,488 GE Cap Mtge. Serv. 1994-1 A1, 5.70%, 1/25/24 124,892
135,533 Housing Securities, Inc. 1993-C C3, p/o,
9.24%, 5/25/08* 97,855
184,728 Housing Securities, Inc 1993-E E-14, p/o,
10.33%, 9/25/08* 130,889
20,322 Prudential Home Mort Securities, 1992-6 Class A3,
7.00%, 4/25/99 20,252
17,088 Prudential Home Mort Securities, 7.50%, 5/25/22 17,069
131,038 Salomon Mortgage Sec. VII, p/o, 10.61%, 2/25/25* 88,711
--------------
979,041
--------------
FHLMC MORTGAGE-BACKED POOLS (1.12%)
96,245 FHLMC #C00126, 8.50%, 6/1/22 98,529
--------------
GNMA MORTGAGE-BACKED POOLS (11.76%)
176,754 GNMA #315929, 9.0%, 6/15/22 185,040
235,438 GNMA #341681, 8.5%, 1/15/23 241,124
322,420 GNMA #354189, 7.5%, 5/01/23 316,855
300,991 GNMA Pool, #376218, 7.50%, 8/15/25 295,055
--------------
1,038,074
--------------
Total Mortgage-Backed Securities
(Cost $2,152,145) 2,115,644
--------------
CASH EQUIVALENTS (1.93%)
COMMERCIAL PAPER (1.92%)
170,000 Merrill Lynch Commercial Paper, 4/1/97 170,000
MONEY MARKET MUTUAL FUNDS (0.01%)
658 Norwest Cash Investment Fund, 5.10% 658
--------------
Total Cash Equivalents
Cost ($170,626) 170,658
--------------
TOTAL INVESTMENTS IN SECURITIES (99.22%)
(Cost $8,937,638) 8,753,173
Other Assets and Liabilities, Net (.78%) 68,987
--------------
NET ASSETS 100.0% $8,822,160
==============
* Interest presented for p/o bond equates effective yield at date of purchase.
Based on the cost of investments of $8,937,638 for federal income tax purposes
at March 31, 1997, the aggregate gross unrealized appreciation was $32,453, the
aggregate gross unrealized depreciation was $216,918 and the net unrealized
depreciation was $184,465.
See notes to financial statements.
<PAGE>
SHORT TERM GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (56.84%)
GOVERNMENT AGENCIES (48.73%)
550,000 Federal Agricultural Mtge. MTN, 6.69%, 2/10/00 $ 548,807
200,000 Federal Farm Credit Inverse Floater, 5.04%, 7/28/97* 197,996
150,000 Federal Home Loan Bank, 5.60%, 4/16/97 149,991
50,000 FFCB Structured Note, 4.65%, 3/2/98 49,303
250,000 FHLMC, 7.66%, 3/2/00 252,935
150,000 FNMA, 6.05%, 1/12/98 149,835
50,000 Government Export Trust, 4.85%, 11/01/97 49,911
51,142 Govt TR Cert. Israel, 9.25%, 11/15/01 53,886
73,521 Greece Trust, 8.00%, 5/15/98 74,249
500,000 SLMA 7.50%, 3/08/00 509,530
100,000 SLMA Floater, 4.65%, 6/1/98* 98,146
--------------
2,134,589
--------------
U.S. TREASURY NOTES (2.30%)
100,000 U.S. T-Note, 6.88%, 3/31/00 100,683
--------------
U.S. TREASURY BILLS (5.81%)
255,000 Farmer Mac Discount Note, 4/09/97 254,686
--------------
Total Government Securities
(Cost $2,496,029) 2,489,958
--------------
CORPORATE BONDS (9.63%)
205,000 Associates Corp. MTN, 5.55%, 7/15/98 202,573
45,000 Becton Dickinson, 8.80%, 3/01/01 47,475
102,000 Ford Motor Credit Corp., 8.875%, 6/15/99 106,335
65,000 Lehman Brother MTN, 8.05%, 1/15/19 65,179
--------------
Total Corporate Bonds
(Cost $435,700) 421,562
--------------
TAXABLE MUNICIPAL BONDS (3.50%)
130,000 Berry Creek Met Dist., 6.35%, 12/1/99 127,888
25,000 Broken Arrow, Oklahoma, 7.50%, 11/01/98 25,343
--------------
Total Municipal Bonds
(Cost $153,215) 153,231
--------------
* Denotes a floating rate investment with interest rate as of March 31, 1997.
See notes to financial statements.
<PAGE>
SHORT TERM GOVERNMENT PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES (18.18%)
COLLATERALIZED MORTGAGE OBLIGATIONS (17.42%)
130,214 FHLMC 1250F, 7.00%, 4/15/19 $ 130,142
51,445 FHLMC 1299N, p/o, 7.476%, 6/15/97* 51,006
36,264 FNMA 1990 104G CMO, 9.00%, 5/25/03 36,188
150,000 FNMA 1991-137 G, 8.30%, 6/25/20 151,964
122,208 Green Tree 1993-3 A3, 5.20%, 10/15/18 121,873
142,634 Housing Securities 1992-EA A6, p/o, 9.13%, 10/25/07* 103,377
81,000 Nations Bank Credit Card Master Trust Ser 1995-1
Class A, 6.45%, 4/15/03 79,219
89,000 Standard Credit Card Master, 6.75%, 6/7/00 89,417
--------------
763,186
--------------
FHLMC MORTGAGE BACKED POOLS (0.76%)
34,257 FHLMC Pool #E5364, 6.00%, 11/01/03 33,323
--------------
Total Mortgage Backed Securities
(Cost $799,559) 796,509
--------------
CASH EQUIVALENTS (11.51%)
CERTIFICATES OF DEPOSIT (2.92%)
100,000 Manufacturers and Traders Bank CD, 5.65%, 3/4/03 95,181
33,000 MBNA Certificate of Deposit, 5.75%, 4/24/98 32,706
--------------
127,887
--------------
COMMERCIAL PAPER (7.58%)
158,000 USASMA (SLMA LOC) Commercial Paper, 4/23/97 157,464
175,000 USASMA (SLMA LOC) Commercial Paper, 4/11/97 174,730
--------------
332,194
--------------
MONEY MARKET MUTUAL FUNDS (1.01%)
43,941 Norwest U.S. Government Fund, 5.11% 43,941
--------------
Total Cash Equivalents
(Cost $502,429) 504,022
--------------
TOTAL INVESTMENTS IN SECURITIES (99.66%)
(Cost $4,386,932) $4,365,282
Other Assets and Liabilities, Net (.34%) 15,057
--------------
NET ASSETS 100.0% $4,380,339
==============
* Interest presented for p/o bond equates effective yield at date of purchase.
Based on the cost of investments of $4,386,932 for federal income tax purposes
at March 31, 1997, the aggregate gross unrealized appreciation was $8,058, the
aggregate gross unrealized depreciation was $29,708 and the net unrealized
depreciation was $21,650.
See notes to financial statements.
<PAGE>
PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (22.56%)
GOVERNMENT AGENCIES (11.54%)
120,000 Federal Home Loan Bank, 5.94%, 6/06/97 $ 120,054
195,000 Federal Home Loan Bank, 6.35%, 6/02/97 195,222
250,000 HUD GTD 92A Providence, RI (Taxable), 6.28%, 8/01/97 250,608
--------------
565,884
--------------
U.S. Treasury Bills (11.02%)
200,000 FHLB Discount Note, 10/08/97 194,386
200,000 FHLB Discount Note, 7/25/97 196,639
150,000 FNMA Discount Note, 4/08/97 149,845
--------------
540,870
--------------
Total U.S. Government Securities
(Cost $1,106,754) 1,106,754
--------------
CORPORATE BONDS (21.57%)
175,000 American General Finance Corp., 7.15%, 5/15/97 175,268
100,000 Eastman Kodak, 8.55%, 5/01/97 100,213
125,000 Ford Motor Credit, 6.80%, 8/15/97 125,434
100,000 J.C. Penney & Co., 10.00%, 10/15/97 102,165
145,000 Morgan Stanley Group Inc., 9.25%, 3/01/98 149,058
50,000 National Rural Utility Corp., 9.50%, 5/15/97 50,209
200,000 Pepsico Inc., 6.13%, 1/15/98 200,411
155,000 Waste Management, 6.38%, 7/01/97 155,112
--------------
Total Corporate Bonds
(Cost $ 1,057,870) 1,057,870
--------------
TAXABLE MUNICIPAL BONDS (10.21%)
200,000 Dade Cnty, Fl Expressway Authority,
Variable Rate, 5.65%, 7/01/97* 200,000
50,000 Fairfax County, VA RHA, 5.75%, 6/15/97 50,000
185,000 Montgomery County, Tx Hosp Dist, 9.35%, 4/01/97 186,395
65,000 Suffolk County, NY, 4.75%, 11/01/97 64,448
--------------
Total Taxable Municipal Bonds
(Cost $500,843) 500,843
--------------
MORTGAGE BACKED SECURITIES (1.46%)
70,816 FNMA Pool #50345, 9.50%, 9/01/97
(Cost $ 71,479) 71,479
--------------
* Denotes a floating rate investment with interest rate as of March 31, 1997.
See notes to financial statements.
<PAGE>
PRIME MONEY MARKET PORTFOLIO (CONT.)
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
SHARE/
PAR VALUE DESCRIPTION VALUE
- - --------------------------------------------------------------------------------
CASH EQUIVALENTS (43.85%)
COMMERCIAL PAPER (19.04%)
245,000 Bell Atlantic Commercial Paper, 4/02/97 $ 244,964
200,000 Cargill Commercial Paper, 4/07/97 199,808
245,000 Merrill Lynch Commercial Paper, 4/1/97 245,000
245,000 USA SMS (SLMA LOC) Commercial Paper, 4/21/97 244,275
--------------
934,047
--------------
REPURCHASE AGREEMENTS (24.81%)
1,216,950 Merrill Lynch LMS Repuchase Agreement,
6.49%, 4/01/97* 1,216,950
--------------
Total Cash Equivalents
(Cost 2,150,997) 2,150,997
--------------
TOTAL INVESTMENTS IN SECURITIES (99.65%)
(Cost $4,887,943) 4,887,943
Other Assets and Liabilities, Net (.35%) 16,994
--------------
NET ASSETS 100.00% $4,904,937
==============
*The market value of the security collateralizing this repurchase agreement
(including accrued interest) is in excess of 102% of the resale price, and will
not be less than 100% of the resale price over the term of the agreement. At
March 31, 1997, the repurchase agreement was collateralized by a mortgage-backed
security with a market value of $1,243,694.
See notes to financial statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1997
<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 $14,656,589, $11,771,054, $8,937,638,
$4,386,932, and $4,887,943, respectively) $ 16,317,278 $ 12,158,463 $ 8,753,173 $ 4,365,282 $ 4,887,943**
Dividends & Interest Receivable 27,001 107,009 126,847 41,225 43,282
Investment Securities Sold 2,564,232 0 0 0 0
-----------------------------------------------------------------
Total Assets 18,908,511 12,265,472 8,880,020 4,406,507 4,931,225
LIABILITIES:
Income Distribution Payable 98,005 144,903 45,655 20,412 20,187
Investment Securities Purchased -- -- -- -- --
Capital Shares Redeemed 2,000,000 -- -- -- --
Accrued Operating Expenses and
Other Liabilities 33,266 22,391 12,205 5,756 6,101
-----------------------------------------------------------------
Total Liabilities 2,131,271 167,294 57,860 26,168 26,288
-----------------------------------------------------------------
NET ASSETS $ 16,777,240 $ 12,098,178 $ 8,822,160 $ 4,380,339 $ 4,904,937
=================================================================
ANALYSIS OF NET ASSETS
Excess of amounts received from issuance of
shares over amounts paid on redemptions
of shares $ 14,031,433 $ 10,886,707 $ 8,910,107 $ 4,431,023 $ 4,904,887
Undistributed net realized gain (loss) 1,083,958 821,513 74,863 (29,307) 50
Unrealized appreciation (depreciation) 1,660,689 387,409 (184,465) (21,650) --
Undistributed net investment income 1,160 2,549 20,655 273 --
-----------------------------------------------------------------
Net assets applicable to shares outstanding $ 16,777,240 $ 12,098,178 $ 8,822,160 $ 4,380,339 $ 4,904,937
=================================================================
PRICING OF INITIAL SHARES
Net assets applicable to Initial
Shares outstanding $ 3,541,358 $ 611,904 $ 746,665 $ 20,068
====================================================
Shares outstanding, $ .001 par value* 304,652 58,178 75,568 2,063
====================================================
Net asset value, offering price and redemption
price (subject to contingent deferred sales
charge) per Initial Shares $ 11.624 $ 10.518 $ 9.881 $ 9.728
====================================================
PRICING OF SELECT SHARES
Net assets applicable to Select Shares outstanding $ 13,235,882 $ 11,486,274 $ 8,075,495 $ 4,360,271 $ 4,904,937
=================================================================
Shares outstanding, $ .001 par value* 1,140,059 1,116,960 825,564 441,856 4,904,937
=================================================================
Net asset value, offering price and redemption
price per Select Shares $ 11.610 $ 10.284 $ 9.782 $ 9.868 $ 1.000
=================================================================
* Shares outstanding reflect rounding to the nearest whole share.
**Includes repurchase agreement of $1,216,950.
See notes to financial statements.
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<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 $ 335,107 $ 795,794 $ 661,015 $ 294,046 $ 204,526
Dividend Income 694,426 267,990 -- -- --
---------------------------------------------------------
Total Income 1,029,533 1,063,784 661,015 294,046 204,526
EXPENSES:
Sub-Advisory Fees-IMG 98,482 79,180 40,739 19,484 8,475
Advisory Fees-CVC 22,903 18,414 9,474 4,531 1,842
Administration Fee 57,256 46,035 23,687 11,328 9,211
Distribution Fee-Initial Shares 28,125 12,900 7,289 953 --
Fund Accounting/Custody Fee 34,353 27,621 9,474 4,531 3,684
Transfer Agent Fee 11,451 9,207 4,737 2,266 1,842
Other Expenses 22,902 18,414 9,474 4,531 3,684
---------------------------------------------------------
Total Expenses 275,472 211,771 104,874 47,624 28,738
---------------------------------------------------------
NET INVESTMENT INCOME 754,061 852,013 556,141 246,422 175,788
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net Realized Gain (Loss) on Investments 2,726,997 1,497,988 75,196 (2,412) (83)
Net Change in Unrealized Appreciation (1,737,112) (1,188,703) (230,819) (34,784) --
---------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS 989,885 309,285 (155,623) (37,196) (83)
---------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,743,946 $ 1,161,298 $ 400,518 $ 209,226 $ 175,705
=========================================================
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL FIXED
EQUITY RETURN INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
1997 1996 1997 1996 1997 1996
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 754,061 $ 630,786 $ 852,013 $ 885,471 $ 556,141 $ 548,209
Net Realized Gain (Loss) on Investments 2,726,997 1,370,44 1,497,988 774,602 75,196 99,565
Net Change in Unrealized Appreciation
(Depreciation) (1,737,112) 2,508,254 (1,188,703) 1,368,714 (230,819) 245,203
-----------------------------------------------------------------------------------
Increase in Net Assets from Operations 1,743,946 4,509,488 1,161,298 3,028,787 400,518 892,976
-----------------------------------------------------------------------------------
Distributions:
Dividend Distributions Paid
Initial Shares 166,679 145,991 97,802 130,387 73,225 97,005
Select Shares 588,825 482,975 758,686 752,055 465,673 447,900
Capital Gain Distribution Paid
Initial Shares 476,157 132,107 103,385 28,764 3,724 0
Select Shares 1,895,734 361,786 902,900 147,053 24,401 0
-----------------------------------------------------------------------------------
Total Distributions 3,127,395 1,122,859 1,862,773 1,058,259 567,023 544,905
-----------------------------------------------------------------------------------
Capital Share Transactions
Sales- Initial Shares 1,899,240 1,973,830 900,813 794,383 1,539,778 864,965
Select Shares 2,697,586 2,772,570 1,725,766 1,698,714 418,401 345,520
Reinvestments- Initial Shares 634,196 260,543 218,994 168,974 78,780 98,380
Select Shares 2,549,173 793,866 1,714,583 886,410 474,980 460,835
Exchanges- Initial Shares 0 (76,000) 0 (1,154) 37,459 (18,409)
Select Shares 0 81,620 0 5,729 0 20,060
Redemptions- Initial Shares (5,172,074) (1,093,665) (3,932,334) (1,580,664) (2,762,269) (440,459)
Select Shares (8,902,266) (1,244,635) (8,791,416) (690,807) (360,857) (109,325)
-----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets from
Capital Share Transactions (6,294,145) 3,468,129 (8,163,594) 1,281,585 (573,728) 1,221,567
-----------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (7,677,594) 6,854,758 (8,865,069) 3,252,113 (740,233) 1,569,638
Net Assets:
Beginning of Period 24,454,834 17,600,076 20,963,247 17,711,134 9,562,393 7,992,755
-----------------------------------------------------------------------------------
End of Period $ 16,777,240 $ 24,454,834 $ 12,098,178 $ 20,963,247 $ 8,822,160 $ 9,562,393
===================================================================================
Undistributed net investment
income at end of period $ 2,738 $ 4,181 $ 3,207 $ 7,682 $ 1,153 $ 3,964
===================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
SHORT-TERM PRIME
GOVERNMENT MONEY MARKET
PORTFOLIO PORTFOLIO
1997 1996 1997 1996
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 246,422 $ 246,726 $ 175,788 $ 282,381
Net Realized Gain (Loss) on Investments (2,412) 1,847 (83) 604
Net Change in Unrealized Appreciation (Depreciation) (34,784) 66,868 0 0
-----------------------------------------------------------
Increase in Net Assets from Operations 209,226 315,441 175,705 282,985
-----------------------------------------------------------
DISTRIBUTIONS:
Dividend Distributions Paid
Initial Shares 9,518 12,082 0 0
Select Shares 238,478 233,160 175,654 282,381
Capital Gain Distribution Paid
Initial Shares 0 0 0 0
Select Shares 0 0 0 604
-----------------------------------------------------------
Total Distributions 247,996 245,242 175,654 282,985
-----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Sales- Initial Shares 16,340 12,133 0 0
Select Shares 333,003 313,123 6,384,369 3,986,258
Reinvestments- Initial Shares 10,303 12,200 0 0
Select Shares 229,052 228,316 168,954 294,280
Net Exchanges- Initial Shares 0 (667) 0 0
Select Shares 0 0 (37,459) (11,180)
Redemptions- Initial Shares (243,437) (2,071) 0 0
Select Shares (447,064) (105,664) (5,248,424) (6,154,280)
-----------------------------------------------------------
Increase (Decrease) in Net Assets from
Capital Share Transactions (101,803) 457,370 1,267,440 (1,884,922)
-----------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (140,573) 527,569 1,267,491 (1,884,922)
NET ASSETS:
Beginning of Period 4,520,912 3,993,343 3,637,446 5,522,368
-----------------------------------------------------------
End of Period $ 4,380,339 $ 4,520,912 $ 4,904,937 $ 3,637,446
===========================================================
Undistributed net investment
income at end of period $ 350 $ 1,924 $ 0 $ 0
===========================================================
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 with in 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), and
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.
<PAGE>
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, 1997 of
$29,393 expiring in 2004 and 2005 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.
<PAGE>
RELATED SHAREHOLDERS
IASD Health Services Corp., IASD Health Services Savings and Investment
Plan and Investors Management Group 401K/ESOP and Money Purchase Plan are
all shareholders of the Fund as of March 31, 1997. A breakdown of each of
their holdings is listed below.
IASD Health Services Corp. SELECT SHARES
Equity Portfolio 535,824
Total Return Portfolio 740,364
Fixed Income Portfolio 756,883
Short-Term Government Portfolio 367,962
Prime Money Market Portfolio 1,558,771
IASD Health Services Savings and Investment Plan
Equity Portfolio 530,338
Total Return Portfolio 362,871
Fixed Income Portfolio 57,955
Short-Term Government Portfolio 60,155
Prime Money Market Portfolio 1,843,159
IMG 401K/ESOP and Money Purchase Plan
Equity Portfolio 70,842
Total Return Portfolio 18,260
Fixed Income Portfolio 8,304
Short-term Government Portfolio 123
3. INVESTMENT TRANSACTIONS
Investment transactions for the period ended March 31, 1997, are as
follows:
_______________________________________________________________________________
| |
| FIXED SHORT-TERM PRIME |
| EQUITY TOTAL RETURN INCOME GOVERNMENT MONEY MARKET|
| PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO |
|______________________________________________________________________________|
|Purchases $11,935,660 6,934,352 5,007,176 697,661 290,811,282|
|______________________________________________________________________________|
|Proceeds from sales $21,732,915 16,374,568 5,769,807 1,518,363 289,586,836|
|______________________________________________________________________________|
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.
For Equity, Total Return, Fixed Income, and Short-Term Government,
contingent deferred sales charges of $6,339, $1,053, $14,340, and $205
respectfully, were collected by the distributor for the year ended March
31, 1997.
<PAGE>
4. CAPITAL TRANSACTIONS, Cont.
SHARE ACTIVITY
The following tables summarize the activity in each class of capital shares
of the Portfolios:
<TABLE>
<CAPTION>
EQUITY TOTAL RETURN FIXED INCOME
INITIAL SHARES PORTFOLIO PORTFOLIO PORTFOLIO
- - --------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
For the years ended
March 31, 1997, 1996: 1997 1996 1997 1996 1997 1996
Shares sold 151,845 171,419 80,000 73,861 153,339 85,630
Shares issued in reinvest-
ment of dividends 53,119 21,443 19,845 15,528 7,883 9,677
Shares exchanged 0 (5,901) 0 (50) 3,805 (1,779)
Shares redeemed (407,649) (93,542) (346,105) (153,532) (273,506) (43,016)
-------------------------------------------------------------------
Net increase/decrease from
capital share transactions (202,685) 93,419 (246,260) (64,193) (108,479) 50,512
===================================================================
<CAPTION>
EQUITY TOTAL RETURN FIXED INCOME
SELECT SHARES PORTFOLIO PORTFOLIO PORTFOLIO
For the years ended
March 31, 1997, 1996: 1997 1996 1997 1996 1997 1996
Shares sold 218,361 228,877 158,085 155,831 42,195 33,954
Shares issued in reinvest-
ment of dividends 214,408 65,708 159,285 82,591 47,857 45,806
Shares exchanged 0 6,407 0 497 0 1,960
Shares redeemed (733,876) (105,396) (783,048) (64,171) (36,220) (10,794)
-------------------------------------------------------------------
Net increase/decrease from
capital share transactions (301,107) 195,596 (465,678) 174,748 53,832 70,926
===================================================================
</TABLE>
<PAGE>
4. CAPITAL TRANSACTIONS, Cont.
SHARE ACTIVITY
The following tables summarize the activity in each class of capital shares
of the Portfolios:
SHORT-TERM
GOVERNMENT
INITIAL SHARES PORTFOLIO
- - -------------- -------------
For the years ended
March 31, 1997, 1996: 1997 1996
---------------
Shares sold 1,671 1,228
Shares issued in reinvest-
ment of dividends 1,055 1,240
Shares exchanged 0 (67)
Shares redeemed (24,858) (210)
--------------------
Net increase/decrease from
capital share transactions (22,132) 2,191
====================
SHORT-TERM PRIME
GOVERNMENT MONEY MARKET
SELECT SHARES PORTFOLIO PORTFOLIO
- - ------------- ---------- ------------
For the years ended
March 31, 1997, 1996: 1997 1996 1997 1996
-----------------------------------------------
Shares sold 33,524 31,175 6,384,369 3,986,258
Shares issued in reinvest-
ment of dividends 23,106 22,891 168,954 294,820
Shares exchanged 0 0 (37,459) (11,180)
Shares redeemed (45,079) (10,446) (5,248,423) (6,154,280)
-----------------------------------------------
Net increase/decrease from
capital share transactions 11,551 43,620 1,267,441 (1,884,382)
===============================================
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
EQUITY PORTFOLIO
1997 1996 1995 1994*
- - --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.559 $ 10.615 $ 10.280 $ 0.000
Shares Issued** 0.000 0.000 0.000 10.000
-------------------------------------------
12.559 10.615 10.280 10.000
-------------------------------------------
Net Investment Income 0.371 0.305 0.227 0.067
Net Realized and Unrealized Gains
on Investments 0.467 2.214 0.758 0.353
--------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.838 2.519 0.985 0.420
--------------------------------------------
LESS:
Distributions from
Net Investment Income 0.362 0.301 0.234 0.113
Distributions from
Net Realized Gains 1.411 0.274 0.416 0.270
--------------------------------------------
TOTAL DISTRIBUTIONS 1.773 0.575 0.650 0.140
--------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.624 $ 12.559 $ 10.615 $ 10.280
============================================
Total Return 6.79% 23.90% 9.78% 3.59%
Net Assets, End of Period $3,541,358 $6,371,666 $4,393,338 $387,682
Ratio of Expenses
to Average Net Assets 1.58% 1.57% 1.57% 1.52%
Ratio of Net Investment Income
to Average Net Assets 3.02% 2.56% 2.31% 1.28%
Portfolio Turnover Rate 56.00% 35.91% 55.19% 12.52%
Average Commission Paid
to Broker $ 0.961 $ 0.0792 $ 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.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
TOTAL RETURN PORTFOLIO
1997 1996 1995 1994*
- - --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.285 $ 10.113 $ 10.131 $ 0.000
Shares Issued** 0.000 0.000 0.000 10.000
-------------------------------------------
11.285 10.113 10.131 10.000
-------------------------------------------
Net Investment Income 0.474 0.454 0.364 0.129
Net Realized and Unrealized Gains
on Investments 0.048 1.263 0.233 0.223
-------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.522 1.717 0.597 0.352
-------------------------------------------
LESS:
Distributions from
Net Investment Income 0.476 0.446 0.364 0.192
Distributions from
Net Realized Gains 0.813 0.098 0.251 0.029
-------------------------------------------
TOTAL DISTRIBUTIONS 1.289 0.544 0.615 0.221
-------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.518 $ 11.285 $ 10.113 $ 10.131
===========================================
Total Return 4.65% 17.12% 6.16% 2.72%
Net Assets, End of Period $611,904 $3,435,711 $3,727,846 $1,081,193
Ratio of Expenses
to Average Net Assets 1.58% 1.57% 1.57% 1.52%
Ratio of Net Investment Income
to Average Net Assets 4.19% 4.13% 4.04% 2.25%
Portfolio Turnover Rate 40.62% 52.11% 67.00% 38.74%
Average Commission Paid
to Broker $ 0.1047 $ 0.0768 $ 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.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
FIXED INCOME PORTFOLIO
1997 1996 1995 1994*
- - --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.081 $ 9.654 $ 9.769 $ 0.000
Shares Issued** 0.000 0.000 0.000 10.000
-------------------------------------------
10.081 9.654 9.769 10.000
-------------------------------------------
Net Investment Income 0.566 0.571 0.534 0.323
Net Realized and Unrealized Gains
on Investments (0.210) 0.417 (0.092) (0.131)
-------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.356 0.988 0.442 0.192
-------------------------------------------
LESS:
Distributions from
Net Investment Income 0.547 0.560 0.547 0.373
Distributions from
Net Realized Gains 0.009 0.000 0.010 0.050
-------------------------------------------
TOTAL DISTRIBUTIONS 0.556 0.560 0.557 0.423
-------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.881 $ 10.081 $ 9.654 $ 9.769
===========================================
Total Return 3.63% 10.28% 4.59% 1.23%
Net Assets, End of Period $746,665 $1,855,470 $1,289,091 $181,094
Ratio of Expenses to
to Average Net Assets 1.53% 1.52% 1.52% 1.47%
Ratio of Net Investment Income
to Average Net Assets 5.43% 5.52% 6.10% 4.21%
Portfolio Turnover Rate 55.50% 57.15% 60.36% 70.83%
*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.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Initial Share of Capital Stock
of the Fund outstanding for the entire period.
SHORT-TERM GOVERNMENT PORTFOLIO
1997 1996 1995 1994*
- - --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.816 $ 9.649 $ 9.765 $ 0.000
Shares Issued** 0.000 0.000 0.000 10.000
------------------------------------------
9.816 9.649 9.765 10.000
------------------------------------------
Net Investment Income 0.489 0.522 0.452 0.211
Net Realized and Unrealized Gains
on Investments (0.086) 0.172 (0.098) (0.248)
------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.403 0.693 0.354 (0.037)
------------------------------------------
LESS:
Distributions from
Net Investment Income 0.491 0.526 0.460 0.188
Distributions from
Net Realized Gains 0.000 0.000 0.010 0.010
------------------------------------------
TOTAL DISTRIBUTIONS 0.491 0.526 0.470 0.198
------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.728 $ 9.816 $ 9.649 $ 9.765
==========================================
Total Return 4.23% 7.27% 3.73% -0.10%
Net Assets, End of Period $ 20,068 $237,507 $212,334 $ 62,450
Ratio of Expenses
to Average Net Assets 1.53% 1.52% 1.52% 1.48%
Ratio of Net Investment Income
to Average Net Assets 4.93% 5.26% 4.87% 3.50%
Portfolio Turnover Rate 21.55% 145.86% 79.19% 69.79%
*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.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
EQUITY PORTFOLIO
1997 1996 1995 1994*
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.548 $ 10.603 $ 10.266 $ 10.000
------------------------------------------------------
Net Investment Income 0.424 0.359 0.271 0.146
Net Realized and Unrealized Gains
on Investments 0.476 2.219 0.750 0.291
------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.900 2.578 1.021 0.437
------------------------------------------------------
LESS:
Distributions from
Net Investment Income 0.427 0.359 0.268 0.144
Distributions from
Net Realized Gains 1.411 0.274 0.416 0.027
------------------------------------------------------
TOTAL DISTRIBUTIONS 1.838 0.633 0.684 0.171
------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.610 $ 12.548 $ 10.603 $ 10.266
======================================================
Total Return 7.33% 24.52% 10.31% 4.38%
Net Assets, End of Period $13,235,882 $18,083,168 $13,206,738 $10,602,115
Ratio of Expenses
to Average Net Assets 1.08% 1.07% 1.07% 1.03%
Ratio of Net Investment Income
to Average Net Assets 3.38% 3.06% 2.68% 1.76%
Portfolio Turnover Rate 56.00% 35.91% 55.19% 12.52%
Average Commission Paid
to Broker $ 0.0961 $ 0.0792 $ 0.000 $ 0.000
</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>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
TOTAL RETURN PORTFOLIO
1997 1996 1995 1994*
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.075 $ 9.932 $ 9.966 $ 10.000
----------------------------------------------------------
Net Investment Income 0.542 0.500 0.418 0.225
Net Realized and Unrealized Gains
on Investments 0.024 1.241 0.215 (0.007)
----------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.566 1.741 0.633 0.218
----------------------------------------------------------
LESS:
Distributions from
Net Investment Income 0.544 0.500 0.416 0.223
Distributions from
Net Realized Gains 0.813 0.098 0.251 0.029
----------------------------------------------------------
TOTAL DISTRIBUTIONS 1.357 0.598 0.667 0.252
----------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.284 $ 11.075 $ 9.932 $ 9.966
==========================================================
Total Return 5.16% 17.70% 6.69% 2.18%
Net Assets, End of Period $ 11,486,274 $ 17,527,536 $ 13,983,288 $ 12,458,913
Ratio of Expenses
to Average Net Assets 1.08% 1.07% 1.07% 1.03%
Ratio of Net Investment Income
to Average Net Assets 4.69% 4.63% 4.30% 2.63%
Portfolio Turnover Rate 40.62% 52.11% 67.00% 38.74%
Average Commission Paid
to Broker $ 0.1047 $ 0.0768 $ 0.000 $ 0.000
</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>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
FIXED INCOME PORTFOLIO
1997 1996 1995 1994*
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.987 $ 9.566 $ 9.682 $ 10.000
------------------------------------------------------
Net Investment Income 0.617 0.611 0.580 0.414
Net Realized and Unrealized Gains
on Investments (0.215) 0.419 (0.109) (0.269)
------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.402 1.030 0.471 0.145
------------------------------------------------------
LESS:
Distributions from
Net Investment Income 0.598 0.609 0.577 0.413
Distributions from
Net Realized Gains 0.009 0.000 0.010 0.050
------------------------------------------------------
TOTAL DISTRIBUTIONS 0.607 0.609 0.587 0.463
------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.782 $ 9.987 $ 9.566 $ 9.682
======================================================
Total Return 4.15% 10.84% 5.12% 1.20%
Net Assets, End of Period $ 8,075,495 $ 7,706,923 $ 6,703,664 $ 6,260,971
Ratio of Expenses
to Average Net Assets 1.03% 1.02% 1.02% 0.98%
Ratio of Net Investment Income
to Average Net Assets 5.94% 6.03% 6.14% 4.73%
Portfolio Turnover Rate 55.50% 57.15% 60.36% 70.83%
</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>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT PORTFOLIO
1997 1996 1995 1994*
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.954 $ 9.776 $ 9.886 $ 10.000
------------------------------------------------------
Net Investment Income 0.542 0.578 0.507 0.309
Net Realized and Unrealized Gains
on Investments (0.083) 0.175 (0.101) (0.105)
------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.459 0.753 0.406 0.204
------------------------------------------------------
LESS:
Distributions from
Net Investment Income 0.545 0.574 0.506 0.308
Distributions from
Net Realized Gains 0.000 0.000 0.010 0.010
------------------------------------------------------
TOTAL DISTRIBUTIONS 0.545 0.574 0.516 0.318
------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.868 $ 9.954 $ 9.776 $ 9.886
======================================================
Total Return 4.76% 7.81% 4.25% 2.05%
Net Assets, End of Period $ 4,360,271 $ 4,283,405 $ 3,781,009 $ 3,530,041
Ratio of Expenses
to Average Net Assets 1.03% 1.03% 1.02% 0.98%
Ratio of Net Investment Income
to Average Net Assets 5.45% 5.76% 5.21% 3.62%
Portfolio Turnover Rate 21.55% 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>
FINANCIAL HIGHLIGHTS
The following presents information relating to an Select Share of Capital Stock
of the Fund outstanding for the entire period.
<TABLE>
<CAPTION>
PRIME MONEY MARKET PORTFOLIO
1997 1996 1995 1994*
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------------------------------------------------
Net Investment Income 0.047 0.051 0.042 0.022
Net Realized and Unrealized Gains
on Investments 0.000 0.000 0.000 0.000
------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.047 0.051 0.042 0.022
------------------------------------------------------
LESS:
Distributions from
Net Investment Income 0.047 0.051 0.042 0.022
Distributions from
Net Realized Gains 0.000 0.000 0.000 0.000
------------------------------------------------------
TOTAL DISTRIBUTIONS 0.047 0.051 0.042 0.022
------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
======================================================
Total Return 4.70% 5.13% 4.20% 2.18%
Net Assets, End of Period $ 4,904,937 $ 3,637,446 $ 5,522,368 $ 5,121,273
Ratio of Expenses
to Average Net Assets 0.78% 0.78% 0.77% 0.74%
Ratio of Net Investment Income
to Average Net Assets 4.76% 5.15% 4.27% 2.53%
Portfolio Turnover Rate 35.20%
</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
MARCH 31, 1997
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, 1997, 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 (portfolios within Capital Value Fund,
Inc.); the related statements of operations for the year then ended; 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 3-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 were not received, we carried 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, 1997,
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 25, 1997
