<PAGE>
ANNUAL REPORT
[LOGO OF THE GRIFFIN FUNDS]
SEPTEMBER 30, 1995
<PAGE>
TABLE OF CONTENTS
Message to Shareholders 1
Glossary of Terms 2
Performance Highlights of the Funds 3
MANAGEMENT DISCUSSIONS AND SCHEDULES OF INVESTMENTS
The Griffin Money Market Fund 4
The Griffin Tax-Free Money Market Fund 5
The Griffin Short-Term Bond Fund 7
The Griffin U.S. Government Income Fund 10
The Griffin Bond Fund 13
The Griffin Municipal Bond Fund 17
The Griffin California Tax-Free Fund 21
The Griffin Growth & Income Fund 25
The Griffin Growth Fund 29
FINANCIAL STATEMENTS
Statements of Assets and Liabilities 35
Statements of Operations 37
Statements of Changes in Net Assets 39
Financial Highlights 41
Notes to Financial Statements 43
Independent Auditors Report 50
---------------------
Special Meetings of Shareholders 51
Distributions 51
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ISSUED, ENDORSED
OR GUARANTEED BY HOME SAVINGS OF AMERICA, FSB ("HOME SAVINGS"), SAVINGS OF
AMERICA OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN ANY OF THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
Dear Fellow Shareholder:
Favorable reports on the U.S. economy and adherence to our value-based
investment discipline helped The Griffin Funds, Inc. ("The Griffin Funds") post
strong returns during its second fiscal year. While the financial markets
provided much of the gains for each of The Griffin Funds over the past twelve
months, our disciplined approach to investing provided the framework for adding
value to the investment process. The success of this approach is evidenced in
the superior performance of the funds relative to their respective peer groups.
The Griffin Growth & Income Fund for example, continued to be a star performer,
ranking ninth among four hundred funds with similar investment objectives as
determined by Morningstar, Inc. The other funds followed suit, with returns
that place them in the top twenty to thirty percent among funds with comparable
investment objectives tracked by Morningstar, Inc.
Market Overview
A myriad of economic factors, including the largest shrinkage in payrolls in
four years, weak new home sales, as well as sluggish retail sales, industrial
production and durable goods orders helped bolster the financial markets in
1995. These indications of a slowdown in economic growth, which historically
reduce inflationary pressures, drove interest rates down during the first nine
months of 1995. Strong corporate earnings and a favorable interest rate
environment helped the U.S. stock market post strong returns for the twelve
months ended September 30, 1995. The Standard & Poor's 500 Composite Index,
commonly used as a yardstick for the overall stock market's performance,
finished the period with a total return of 29.71%, well above its historical
average annual return of roughly 12%. The municipal bond market overcame
several significant obstacles during the year, including the bankruptcy
declaration by Orange County, California and talks of federal tax reform, to
produce significant positive returns.
Caution for the Future
Coming on the heels of a difficult year during which many investments
declined in value, the past twelve months have been a welcome change. However,
it is unlikely that the performance we've seen during the past months can be
sustained. Staying with an investment program through these market ups and
downs requires patience and dedication to long-range goals. It's important to
keep in mind that daily, monthly, and even yearly fluctuations are a normal
part of the financial markets. Unfortunately, these fluctuations are not always
predictable, and past results cannot be used as a guarantee of future
performance. It also is important to remember that mutual funds
are not insured or guaranteed by any agency of the U.S. government.
Managing Risk
There are several strategies an investor can utilize to help mitigate the
effects of market volatility. Selection of an investment program whose goals
are compatible with your own is the first step. The Griffin Funds were created
for those investors who seek a consistent, careful and committed approach to
investing in the capital markets. A second strategy you can employ is a
systematic, regular investment of the same amount of money over a period of
time, called "dollar cost averaging." Purchasing shares in installments reduces
exposure to extremes in price and introduces discipline, affording greater
peace of mind. A third risk-diminishing strategy is to diversify your
investment holdings across a variety of asset classes, since different types of
securities often respond in dissimilar ways to changes in the economic
environment. We are pleased to have launched a new program this year, the
Griffin Portfolio Builder Account. This asset allocation system seeks to target
each investor's personal goals by tailoring a combination of investment
vehicles which best conforms to those objectives, utilizing The Griffin Funds'
portfolios along with a third-party international equity fund.
New Products and Services
We at The Griffin Funds are committed to providing the right products and
services to meet your investment needs. We've expanded our family by
introducing two new funds: the Griffin Growth Fund and the Griffin Short-Term
Bond Fund. The Griffin Growth Fund was developed for more aggressive investors
seeking to capitalize on the growth of mid-sized companies, while the Griffin
Short-Term Bond Fund was created for more conservative investors seeking income
with some protection from market fluctuations. For those investors who want to
put all of their money to work without paying a sales charge up-front, we
instituted Class B shares. Class B shares are subject to a contingent deferred
sales charge if redeemed before the end of certain holding periods, and carry a
higher ongoing level of expenses than Class A shares. Finally, our customer
service representatives have just completed extensive training which emphasized
a thirty-three point plan for providing courteous and efficient processing of
your individual requests.
Thank you for selecting The Griffin Funds for your financial management
needs. We will do our best to continue to deserve your confidence and loyalty.
Sincerely,
/s/ William A. Hawkins
William A. Hawkins
Chairman
The Griffin Funds, Inc.
1
<PAGE>
GLOSSARY OF TERMS
American Depositary Receipt (ADR)
Receipt for shares of foreign-based corporations held in the vault of a U.S.
bank. These securities allow Americans to purchase shares of foreign companies
without accessing overseas markets. These securities are denominated and pay
dividends in U.S. Dollars, and are typically stocks of large multinational
corporations.
"Asked" or "Offering" Price
The price at which a mutual fund's shares can be purchased, usually the
current Net Asset Value (NAV) per share, plus sales charges, if any.
Capital Gain Distribution
Payments to mutual fund shareholders representing profits realized on the
sale of the fund's securities. For tax purposes, these gains are considered
long-term and are thus taxed at a maximum federal tax rate of 28%.
Commercial Paper
Short-term obligations issued by banks, corporations and others to investors
who wish to put uninvested cash into short-term instruments.
Custodian
The organization, usually a bank or trust company, that keeps custody of
securities and other assets of a mutual fund.
Exempt Interest Dividends
Payments to mutual fund shareholders representing interest on the fund's
securities which are exempt from federal and/or state income taxes. Exempt
interest dividends will be designated in the back of the annual report.
Net Asset Value Per Share
The market value of one share of a mutual fund. NAV equals the fund's total
assets minus total liabilities divided by the number of shares outstanding.
Ordinary Income Dividends
Payments to mutual fund shareholders representing dividends, interest and
short-term capital gains on the fund's securities, after deducting operating
expenses. These payments are taxed at the shareholder's ordinary federal tax
rate.
Total Return
Dividend income plus capital appreciation or depreciation. Total return is
normally stated two ways. Cumulative or aggregate total return represents the
change in value of an investment over time. Average annual total return
represents the average annual rate of return required to reach the cumulative
return over a period of time greater than one year.
Yankee Bonds
Dollar denominated bonds issued in the U.S. by foreign banks and
corporations.
Yield Curve
The relationship between interest rates and length of maturity. A yield
curve is said to be steep when longer-term bonds pay a great deal more interest
than short-term bonds. A yield curve is said to be flat when investors do not
receive much more interest income from the purchase of a longer-term bond.
2
<PAGE>
PERFORMANCE HIGHLIGHTS OF THE FUNDS (Unaudited)
The table below provides yield and total return information for the periods
ended September 30, 1995 for The Griffin Funds. The seven day yields of the
money market funds refer to the income generated by an investment in a Fund
over a seven day period, expressed as an annual percentage rate. The seven day
effective yields are calculated similarly but assume that the income earned
from a Fund is reinvested in the Fund. The total returns indicate the
percentage an investment in a Fund would have changed in value had shares been
purchased at the beginning of each period, with all dividends and capital gains
being reinvested. The table also indicates the average performance of mutual
funds with investment objectives that are similar to each of the respective
non-money market funds of The Griffin Funds. For each of the non-money market
funds, the group average reflects the performance of a universe of mutual funds
tracked by Morningstar, Inc. Additional information with respect to the
Morningstar, Inc. group average performance information provided below is
included in the appropriate Fund's "Management Discussion." The mutual fund
averages do not reflect the imposition of sales charges, but do reflect the
reinvestment of all dividends and capital gains, if any. Of course, past
performance is not an indicator of future results.
For Periods Ended September 30, 1995
<TABLE>
<CAPTION>
Seven Day
Seven Day Effective
Yield Yield
--------- ---------
<S> <C> <C>
Money Market Fund(1)............. 5.32% 5.46%
Tax-Free Money Market Fund(1).... 3.99% 4.07%
<CAPTION>
Class A Class B
-------------------------------- -------------------------
Since Since
Past Six Past Inception Past Six Inception
Months Year (10/19/93)(2) Months (11/1/94)
--------- ------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Government Income Fund............... 7.29% 13.00% 5.46% 7.12% 13.08%
U.S. Government Income Fund (incl.
sales charge)(3)........................ 2.46% 7.95% 2.99% 2.12% 8.08%
Average U.S. Government General Bond
Fund.................................... 6.50% 10.85% n/a 6.50% n/a
Bond Fund................................. 8.41% 13.53% 3.68% 8.01% 13.58%
Bond Fund (incl. sales charge)(3)......... 3.58% 8.41% 1.25% 3.01% 8.58%
Average High Quality Bond Fund............ 6.47% 10.56% n/a 6.47% n/a
California Tax-Free Fund.................. 4.55% 10.13% 1.48% 4.27% 12.60%
California Tax-Free Fund (incl. sales
charge)(3).............................. -0.19% 5.15% -0.88% -0.73% 7.60%
Average California Municipal Bond Fund.... 4.29% 9.20% n/a 4.29% n/a
Municipal Bond Fund....................... 4.52% 10.18% 2.28% 4.20% 12.86%
Municipal Bond Fund (incl. sales charge)
(3)..................................... -0.23% 5.16% -0.12% -0.80% 7.86%
Average Municipal Bond Fund............... 4.31% 9.06% n/a 4.31% n/a
Growth & Income Fund...................... 19.63% 31.93% 17.19% 19.37% 29.54%
Growth & Income Fund (incl. sales charge)
(3)..................................... 14.23% 26.05% 14.45% 14.37% 24.54%
Average Growth & Income Fund.............. 16.02% 23.50% n/a 16.02% n/a
<CAPTION>
Class A Class B
-------------------------------- -------------------------
Since Since
Past Six Past Inception Past Six Inception
Months Year (6/12/95) Months (6/12/95)
--------- ------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Short-Term Bond Fund...................... n/a n/a 2.32% n/a 2.51%
Short-Term Bond Fund (incl. sales charge)
(4)..................................... n/a n/a -1.24% n/a -1.49%
Growth Fund............................... n/a n/a 16.60% n/a 16.50%
Growth Fund (incl. sales charge)(3)....... n/a n/a 11.37% n/a 11.50%
</TABLE>
(1) Investments in the Money Market Funds are neither insured nor guaranteed by
the U.S. Government. There can be no assurance that either of the Money
Market Funds will be able to maintain a stable net asset value of $1.00 per
share.
(2) This figure has been annualized.
(3) The deduction of the maximum initial sales charge with respect to Class A
shares (4.5%) and the deduction of a contingent deferred sales charge of 5%
with respect to Class B shares has been factored into these calculations.
(4) The deduction of the maximum initial sales charge with respect to Class A
shares (3.5%) and the deduction of a contingent deferred sales charge of 4%
with respect to Class B shares has been factored into these calculations.
3
<PAGE>
Schedule of Investments
GRIFFIN MONEY MARKET FUND
September 30, 1995
[PIE CHART APPEARS HERE]
Corporate Notes 8%
Asset Backed Securities 4%
Commercial Paper 49%
U.S. Agency Discount Notes 39%
Investment Categories Reflect Percentages of Invesments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- --------------------------------------------------------------------------------
(Percentages of each invesment category relate to total net assets)
<S> <C> <C>
Asset-Backed Securities (4.4%):
Financial Services (4.4%):
Navistar Financial Corporation,
5.90%, 5/20/96 $1,233,014 $1,232,705
Olympic Auto Receivables Trust
5.76%, 9/15/96 2,000,000 2,000,000
6.25%, 3/15/96 274,543 274,465
----------
3,507,170
----------
Total Asset-Backed Securities
(cost: $3,507,170) 3,507,170
----------
Commercial Paper (48.6%):
Financial Services (36.1%):
Abbey National North America
Corporation, 5.67%, 11/07/95 (b) 3,000,000 2,982,518
American Express, 6.08%, 11/20/95 3,000,000 3,000,000
American General Finance Corporation,
5.67%, 11/17/95 4,000,000 4,000,000
American Telephone & Telegraph
Capital Corporation, 5.63%,
11/22/95 (b) 4,000,000 3,967,471
Bayerische Vereinsbank, 5.68%,
10/04/95 (b) 3,000,000 2,998,580
Canadian Wheat Board, 5.55%,
12/18/95 (b) 4,000,000 3,951,900
Export Developmental Corporation,
5.50%, 10/25/95 (b) 4,000,000 3,985,333
General Electric Capital Corporation,
5.74%, 10/30/95 4,000,000 4,000,000
----------
28,885,802
----------
Industrial Conglomerate (2.5%):
Shell Oil Company, 5.82%,
11/20/95 (b) 2,000,000 1,983,833
----------
Manufacturing (5.0%):
Dupont, 5.66%, 10/06/95 (b) 4,000,000 3,996,856
----------
Telecommunications (5.0%):
Bell Atlantic Network Funding
Corporation, 5.72%, 10/12/95 (b) 4,000,000 3,993,009
----------
Total Commercial Paper (cost:$38,859,500) 38,859,500
----------
Corporate Notes (7.9%):
Financial Services (7.9%):
CIT Group Holdings, 8.88%, 6/15/96 $3,265,000 $3,330,343
Comerica Bank Note, 6.20%, 5/28/96 3,000,000 3,005,717
----------
6,336,060
----------
Total Corporate Notes (cost: $6,336,060) 6,336,060
----------
U.S. Government And Agency Securities (39.0%):
Federal Home Loan Bank Notes (25.3%):
5.43%, 3/15/96 (b) 5,000,000 4,874,808
5.51%, 12/26/95 (b) 2,000,000 1,973,674
5.60%, 10/02/95 (b) 5,000,000 4,999,222
6.23%, 4/24/96 (b) 4,000,000 3,995,235
6.30%, 10/02/95 (b) 4,380,000 4,379,234
----------
20,222,173
----------
Federal Home Loan Mortgage
Discount Notes (5.0%):
5.53%, 10/03/95 (b) 4,000,000 3,998,771
----------
Federal National Mortgage Association
Notes (8.7%):
5.57%, 10/16/95 (b) 5,000,000 4,988,396
6.43%, 4/18/96 2,000,000 2,000,955
----------
6,989,351
----------
Total U.S. Government And Agency Securities
(cost: $31,210,295) 31,210,295
----------
Repurchase Agreements (0.0%):
State Street Bank & Trust Co. Master
Repurchase Agreement, 4.5%, 10/02/95,
102% Collateralized by
U.S. Government Securities 7,000 7,000
----------
Total Repurchase Agreements (cost:$7,000) 7,000
----------
Total Investments In Securities
(cost: $79,920,025) (c) (99.9%) 79,920,025
Other Assets Less Liabilities (0.1%) 43,978
----------
Net Assets (100%) $79,964,003
==========
</TABLE>
- --------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) Rate represents annualized yield to maturity at September 30, 1995.
(c) Cost is the same for federal income tax purposes.
See accompanying notes to financial statements.
4
<PAGE>
Schedule of Investments
GRIFFIN TAX-FREE MONEY MARKET FUND
September 30, 1995
[PIE CHART APPEARS HERE]
Pre-refunded 15%
Revenues 6%
Variable Rate Demand Notes 46%
Commercial Paper 22%
Other 11%
Invesment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
(Percentages of each invesment category relate to total net assets)
<S> <C> <C>
Municipal Short-Term Securities (99.8%):
Alabama (3.5%):
Phenix City, Alabama Industrial Development
Board Environmental Improvement
Revenue, Mead Coated Board
Project-A, 4.80%, 10/02/95 $300,000 $300,000
--------
Arizona (1.1%):
Maricopa County, Arizona Pollution
Control Corporation - Arizona
Public Service Co. Project, 4.45%,
10/02/95 (b) 100,000 100,000
--------
California (3.5%):
California Higher Education Loan
Authority, Student Loan Revenue
5/1/94, 4.35%, 10/04/95 (b) 300,000 300,000
--------
Colorado (3.5%):
Colorado Student Obligation Board
Authority Student Loan Revenue,
4.30%, 10/04/95 (b) 300,000 300,000
--------
Florida (3.5%):
Orlando, Florida Utilities Community
Water & Electric Revenue, 8.50%,
Prerefunded to 10/01/95 300,000 306,000
--------
Georgia (3.5%):
Burke County, Georgia Development
Authority - Oglethorpe Power
Corporation Project, 3.60%, 12/05/95 300,000 300,000
--------
Hawaii (4.2%):
Hawaii State Department of Budget
& Finance Special Purpose Mortgage
Revenue, 7.70%,
Prerefunded to 7/01/96 350,000 366,872
--------
Indiana (1.1%):
Indianapolis, Indiana Multi-Family
Revenue Housing, Canal Square
Project, 4.25%, 10/04/95 (b) 100,000 100,000
--------
Kansas (7.0%):
Burlington, Kansas Pollution Control,
Kansas City Power & Light
Project B, 3.70%, 11/01/95 300,000 300,000
Kansas State Department of Transportation
Highway Revenue, 4.45%, 10/04/95 (b) 300,000 300,000
--------
600,000
--------
Louisiana (1.1%):
East Baton Rouge Parish, Louisiana
Pollution Control Revenue, Georgia-
Pacific Corporation, 4.35%,
10/04/95 (b) 100,000 100,000
--------
Massachusetts (8.1%):
Massachusetts State, General Obligation,
4.60%, 10/04/95 (b) 400,000 400,000
Massachusetts State Water Resources
Authority, 3.65%, 11/06/95 300,000 300,000
--------
700,000
--------
Michigan (9.3%):
Delta County, Michigan Economic
Development Corporation Environmental
Improvement Revenue, Mead Escanaba
Paper, 3.55%, 10/12/95 400,000 400,000
University of Michigan Hospital
Revenue, 4.50%, 10/02/95 (b) 400,000 400,000
--------
800,000
--------
Minnesota (3.5%):
Rochester, Minnesota Health Care
Facilities - Mayo Foundation/Mayo
Medical Center Revenue,
3.80%, 10/26/95 300,000 300,000
--------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Schedule of Investments
GRIFFIN TAX-FREE MONEY MARKET FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Mississippi (3.5%):
Jackson County, Mississippi Industrial
Sewer Facilities Revenue,
Chevron USA Incorporated Project,
4.60%, 10/04/95 (b) $300,000 $300,000
--------
Missouri (7.0%):
Columbia, Missouri Special Revenue
4.40%, 10/04/95 100,000 100,000
Missouri Higher Education Loan
Authority, Student Loan Senior Lein
Revenue, 4.88%, 2/15/96 500,000 500,802
--------
600,802
--------
Nevada (3.5%):
Clark County, Nevada Airport Improvement
Revenue, 4.35%, 10/04/95 (b) 100,000 100,000
Clark County, Nevada Industrial
Development Revenue, Nevada
Cogeneration I Project,
4.60%, 10/02/95 (b) 200,000 200,000
--------
300,000
--------
North Carolina (3.5%):
North Carolina Eastern Municipal
Power Agency - Power System
Revenue, 3.80%, 11/02/95 300,000 300,000
--------
Pennsylvania (4.6%):
Pennsylvania State Higher Education,
4.50%, 10/04/95 (b) 300,000 300,000
St. Mary Hospital Authority Langhorne
Pennsylvania Hospital Revenue,
Franciscan Health Sys, 4.75%,
10/02/95 (b) 100,000 100,000
--------
400,000
--------
Tennessee (4.8%):
Knox County, Tennessee General Obligation,
3.75%, 3/01/96 260,000 260,000
Metropolitan Government Nashville
& Davidson County Tennessee Water &
Sewer, 8.75%, Prerefunded to 1/01/96 150,000 154,807
--------
414,807
--------
Texas (15.9%):
Austin, Texas Utilities Systems
Revenue, 7.75%, Prerefunded to 5/15/96 400,000 416,308
Grapevine, Texas Industrial Development
Corporation Revenue,
American Airlines Project,
4.75%, 10/02/95 (b) 100,000 100,000
Hunt County, Texas Health Facilities
Development Corporation, Universal
Health Services of Greenville, Inc-
4.40%, 10/04/95 (b) 300,000 300,000
Southwest Higher Education Authority
Inc, Southern Methodist
University, 4.40%, 10/02/95 (b) 200,000 200,000
Texas State Tax & Revenue Anticipation
Notes, 4.75%, 8/30/96 350,000 352,152
----------
1,368,460
----------
Virginia (4.1%):
Virginia State Housing Development
Authority Commonwealth Mortgage,
3.55%, 11/16/95 350,000 350,000
----------
Total Municipal Short-Term Securities
(cost: $8,606,941) 8,606,941
----------
Total Investments In Securities
(cost: $8,606,941) (c) (99.8%) 8,606,941
Other Assets Less Liabilities (0.2%) 14,393
----------
Net Assets (100%) $8,621,334
==========
</TABLE>
- -------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) These variable rate securities have maturities greater than one year but
are redeemable upon demand. For purposes of calculating the fund's
weighted average maturity, the length to maturity of these investments
is considered to be the greater of the period until the interest rate is
adjusted or until the principal can be recovered by demand.
(c) Cost is the same for federal income tax purposes.
See accompanying notes to financial statements.
6
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN SHORT-TERM BOND FUND
Portfolio Manager: Edmund M. Notzon, III,
T. Rowe Price Associates, Inc.
What were the significant market factors that affected performance?
Yields on short term bonds dropped significantly during the second quarter
of 1995, as the fixed income market became more optimistic about a cut in the
Federal Funds Rate. While the Federal Reserve Board uses this rate to guide the
amount banks charge each other for overnight investments, the fixed income
market uses the rate as a gauge of the prospect for inflation in the near
future. The Federal Reserve Board lowered the Federal Funds Rate to 5.75% in
July, the first rate cut in three years. Since then long-term interest rates
have remained fairly stable at historically low levels, with moderate growth in
the economy and little inflationary pressure. These economic factors bode well
for investors, as inflation tends to erode the value of their fixed income
investments.
What strategies and techniques were implemented since the Fund commenced
operations?
The Fund commenced operations on June 12, 1995, and shortly thereafter a
diverse portfolio was created consisting of Treasury bonds, U.S. agency bonds,
corporate bonds and federally-guaranteed mortgage securities. Our favorable
outlook for the U.S. economy led us to slightly overweight our position in
corporate bonds relative to the Fund's benchmark, the Merrill Lynch
1-4.99 Year Government/Corporate Index. We also initiated a position in
federally-guaranteed mortgage-backed securities which should perform well if
interest rates stabilize.
What themes can be seen in the current portfolio (industry weightings) and
why?
We have a 5% position in industrial bonds, a 1% position in utility
corporate bonds, and a 10% position in financial corporate bonds. The larger
holdings in industrial and financial bonds reflect their relative value and
greater availability in the market. We also have slightly more interest rate
sensitivity than the market to reflect our view that rates are unlikely to rise
sharply in the near future.
What individual security holdings changed since the Fund commenced operations?
All (except one) of our trades have been to add positions to the portfolio,
thus increasing the diversification of the fund. As the fund increases in size,
we will continue to add new corporate names.
What is the strategy for the next six to twelve months?
We have no present plans to change the structure of the portfolio. If
mortgage prepayments appeared likely to speed up (due to interest rates
decreasing further), we might decrease our mortgage exposure and increase the
interest rate sensitivity of the portfolio. If interest rates appeared likely
to increase, we might increase our mortgage exposure and decrease both the
corporate bond exposure and the interest rate sensitivity of the portfolio. In
both cases, we are unlikely to carry a significant cash position.
7
<PAGE>
THE GRIFFIN SHORT-TERM BOND FUND
The two charts below show the performance of both classes of shares of the
Griffin Short-Term Bond Fund compared with the Merrill Lynch
Government/Corporate 1-4.99 Year Index and the Lipper Short-Term High Quality
Bond Fund Average. If you had invested $10,000 in Class A shares of the Griffin
Short-Term Bond Fund when the fund commenced operations on June 12, 1995,
reinvesting all dividends, the top chart would track the value of your
investment through the period ended September 30, 1995. If you had invested
$10,000 in Class B shares of the Fund when they were first offered on June 12,
1995, assuming all dividends were reinvested, the bottom chart would track the
performance of your investment through the period ended September 30, 1995. The
Merrill Lynch Government/Corporate 1-4.99 Year Index is an unmanaged index of
debt obligations with maturities ranging from one to five years. The Lipper
Short-Term High Quality Bond Fund Average is based on a universe of mutual
funds tracked by Lipper Analytical Services, Inc. that have investment
objectives similar to The Griffin Short-Term Bond Fund. It is important to keep
in mind that fund performance reflects the deduction of the maximum front-end
sales charge of 3.5% with respect to Class A shares and the deduction of the
maximum contingent deferred sales charge (CDSC) of 4% with respect to Class B
shares, while no such charges are deducted from the indexes. Of course, past
performance is not an indicator of future results.
Griffin Short-Term Bond Fund Class A
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 3.5% sales charge)
One year ................. N/A
Since inception .......... -1.24%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Lipper
Griffin Short-Term Bond Fund Merrill Lynch Govt./Corp. 1 - 4.99 Year Index Short-Term High Quality Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $9,650 Initial $10,000 Initial $10,000
Jun '95 $9,722 Jun '95 $10,065 Jul $10,024
Jul $9,758 Jul $10,091 Aug $10,093
Aug $9,826 Aug $10,160 Sep $10,145
Sep $9,873 Sep $10,218
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin Short-Term Bond Fund Class B
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4% sales charge)
One year ................. N/A
Since inception .......... -1.49%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Lipper
Griffin Short-Term Bond Fund Merrill Lynch Govt./Corp. 1 - 4.99 Year Index Short-Term High Quality Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Jun '95 $10,079 Jun '95 $10,065 Jul $10,024
Jul $10,118 Jul $10,091 Aug $10,093
Aug $10,192 Aug $10,160 Sep $10,145
Sep $9,851 Sep $10,218
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
8
<PAGE>
Schedule of Investments
GRIFFIN SHORT-TERM BOND FUND
September 30, 1995
[PIE CHART APPEARS HERE]
Cash 3%
U.S. Treasury Notes 71%
Corporate Bonds 17%
U.S. Agency Securities 10%
Invesment Categories Reflect Percentages of Invesments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Corporate Bonds (15.9%):
Banking (5.0%):
Bankers Trust - New York, 7.25%, 11/01/96 $30,000 $30,338
First Chicago, 9.00%, 6/15/99 30,000 32,475
MBNA Corporation, 6.88%, 10/01/99 10,000 10,163
Northern Trust, 9.00%, 5/15/98 100,000 106,250
-----------
179,226
-----------
Electric Utilities (0.8%):
Alabama Power, 6.38%, 8/01/99 30,000 30,150
-----------
Financial Services (4.7%):
Associates Corporation, 6.75%, 7/15/97 37,000 37,272
Associates Corporation, 6.75%, 10/15/99 16,000 16,200
Bear Stearns Company, 9.13%, 4/15/98 30,000 31,875
Ford Motor Credit Corporation,
9.38%, 12/15/97 50,000 53,015
General Motors Acceptance Corporation,
8.38%, 5/01/97 30,000 30,938
-----------
169,300
-----------
Industrial Conglomerate (4.6%):
Lockheed Martin Corporation,
9.38%, 10/15/99 71,000 78,194
Mobil Corporation, 6.50%, 2/15/97 15,000 15,075
Texaco Capital, 9.00%, 12/15/99 65,000 71,003
-----------
164,272
-----------
Retailing (0.8%)
Wal-Mart Stores, 5.50%, 9/15/97 30,000 29,663
-----------
Total Corporate Bonds
(cost: $570,485) 572,611
-----------
U.S. Government And Agency Securities (77.3%):
U.S. Treasury Notes (67.9%):
4.75%, 2/15/97 100,000 98,603
5.75%, 10/31/97 150,000 149,729
6.00%, 12/31/97 400,000 401,280
6.00%, 10/15/99 100,000 100,209
6.13%, 5/15/98 200,000 201,154
6.25%, 8/31/96 100,000 100,440
6.38%, 1/15/99 225,000 227,923
6.50%, 5/15/97 100,000 101,043
6.88%, 3/31/00 150,000 154,985
7.25%, 11/30/96 100,000 101,616
7.25%, 2/15/98 150,000 154,500
7.38%, 11/15/97 350,000 360,318
8.13%, 2/15/98 100,000 104,931
8.25%, 7/15/98 170,000 180,100
----------
2,436,831
----------
U.S. Agency Securities (9.4%):
Federal Home Loan Bank (1.9%):
6.84%, 4/20/99 70,000 70,024
----------
Federal Home Loan Mortgage
Corporation (7.5%)
6.00%, 4/01/99 217,393 215,830
7.75%, 11/07/01 50,000 53,828
----------
269,658
----------
Total U.S. Government And Agency Securities
(cost: $2,767,388) 2,776,513
----------
Short-Term Securities (2.8%):
Repurchase Agreements (2.8%)
State Street Bank & Trust Co. Master Repurchase
Agreement, 4.5%, 10/02/95, 102% Collateralized
by U.S. Government Securities 102,000 102,000
----------
Total Short-Term Securities
(cost: $102,000) 102,000
----------
Total Investments In Securities
(cost: $3,439,873)(b)(96.0%) 3,451,124
Other Assets Less Liabilities (4.0%) 144,434
----------
Net Assets (100%) $3,595,558
==========
</TABLE>
- ------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities
based on this cost as follows:
Gross unrealized appreciation $12,138
Gross unrealized depreciation (887)
-------
Net unrealized appreciation $11,251
=======
See accompanying notes to financial statements.
9
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN U.S. GOVERNMENT INCOME FUND
Portfolio Manager: Executive Policy Committee,
Payden & Rygel Investment Counsel
What were the significant market factors that affected performance?
The most significant factor that affected the Fund's performance over the
past year was the cyclical shift in policy by the Federal Reserve Board (the
"Fed") from that of monetary restraint to a policy of interest rate easing. The
latter represented the first reduction in the Federal Funds Rate, the overnight
rate at which banks lend to each other, in three years and caused interest
rates to drop significantly for bonds of all maturities.
During much of 1994 the U.S. economy appeared to be heading toward more
robust economic growth. In an effort to control economic expansion, and to
reduce the risk of inflation, the Fed implemented seven consecutive increases
in the Federal Funds Rate, culminating with an increase to 6.0% in February
1995. Growth in the economy began to show signs of slowing in the first half of
1995, in part due to the increases in short term interest rates and inventory
accumulation, both of which acted as a drag on the manufacturing sector. The
slowing economy, coupled with consistently low inflation, set the stage for the
Fed to reverse its previous position and lower short term borrowing rates in
July, sending yields on U.S. Treasury bonds downward. The sharp drop in the
yield on the 30-year Treasury bond, which amounted to a change of nearly 1.5%
from the prior year, provided equity-like returns for fixed income investors.
What strategies and techniques were implemented during the year?
The Fund implemented two distinct strategies during the past year. During
the first four months of the year, we adopted a more conservative approach
while striving to maintain an attractive yield. This strategy was achieved
primarily by holding mortgage-backed securities that had been carefully
screened to reduce the risk of prepayment. As the interest rate environment
improved in the second half of the year, the Fund gradually implemented the
second strategy by extending its duration. This strategy was implemented by
increasing the proportion of U.S. Treasury securities in the portfolio. This
shift in portfolio composition benefited the Fund as interest rates fell,
producing strong returns for the period. Treasuries generally outperform
mortgage-backed securities during periods of declining interest rates as more
homeowners refinance their mortgages, forcing the investors who held those
mortgages to reinvest at lower yield levels.
What themes can be seen in the current portfolio and why?
The most significant theme of the Fund's portfolio is the overweighting in
U.S. Treasury securities. Currently, 36% of the portfolio is invested in U.S.
Treasury notes and bonds, and 64% is invested in mortgage pass-through
securities issued by U.S. Government agencies. This mix stood at 18% U.S.
Treasury securities and 82% mortgages for most of 1994. The current composition
of the Fund's portfolio indicates our optimistic view on interest rates.
What individual security holdings changed significantly during the year?
The most significant security holdings that changed during the year were the
inclusion of long maturity U.S. Treasury issues. The Fund was positioned with
approximately an 18% position in 25-30 year U.S. Treasury bonds at fiscal
year-end.
What is the strategy for the next six to twelve months?
Our strategy will remain much the same over the next six to twelve months.
Our outlook for a low inflation, slow growth economy is consistent with the
current portfolio's structure and duration. We may continue to add Treasury
securities in lieu of the more defensive mortgage-backed securities in the
short run. However, given the significant structural change in interest rates
that was experienced this year, any future changes will be modest. Although we
remain optimistic about the next year, we do not necessarily believe that we
will experience the total returns that were realized during the last six months.
10
<PAGE>
GRIFFIN U.S. GOVERNMENT INCOME FUND
The two charts below show the performance of both classes of shares of the
Griffin U.S. Government Income Fund compared with the Lehman Brothers
Government Bond Index and the Morningstar U.S. Government Bond Fund Average.
If you had invested $10,000 in Class A shares of the Griffin U.S. Government
Income Fund when the fund commenced operations on October 19, 1993, reinvesting
all dividends, the top chart would track the value of your investment through
the period ended September 30, 1995. If you had invested $10,000 in Class B
shares of the Fund when they were first offered on November 1, 1994, assuming
all dividends were reinvested, the bottom chart would track the performance of
your investment through the period ended September 30, 1995. The Lehman
Brothers Government Bond Index is an unmanaged index of debt obligations issued
by the U.S. Treasury and its agencies. The Morningstar U.S. Government Bond
Fund Average is based on a universe of approximately 374 mutual funds tracked
by Morningstar, Inc. that have investment objectives similar to that of the
Griffin U.S. Government Income Fund. It is important to keep in mind that fund
performance reflects the deduction of the maximum front-end sales charge of
4.5% with respect to Class A shares and the deduction of the maximum contingent
deferred sales charge (CDSC) of 5% with respect to Class B shares, while no
such charges are deducted from the indexes. Of course, past performance is not
an indicator of future results.
Griffin U.S. Government Income Fund Class A
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year..................................... 7.95%
Since inception.............................. 2.99%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin U.S. Government Lehman Bros. Government Morningstar U.S.
Income Fund Bond Index Government Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000
Nov $9,530 Nov $9,884 Nov $9,919
Dec $9,601 Dec $9,923 Dec $9,963
Jan '94 $9,720 Jan '94 $10,059 Jan '94 $10,064
Feb $9,586 Feb $9,845 Feb $9,903
Mar $9,316 Mar $9,624 Mar $9,709
Apr $9,242 Apr $9,548 Apr $9,623
May $9,282 May $9,535 May $9,601
Jun $9,289 Jun $9,513 Jun $9,575
Jul $9,445 Jul $9,688 Jul $9,705
Aug $9,464 Aug $9,690 Aug $9,714
Sep $9,375 Sep $9,554 Sep $9,600
Oct $9,355 Oct $9,547 Oct $9,584
Nov $9,358 Nov $9,530 Nov $9,551
Dec $9,449 Dec $9,588 Dec $9,603
Jan '95 $9,615 Jan '95 $9,766 Jan '95 $9,752
Feb $9,836 Feb $9,976 Feb $9,943
Mar $9,874 Mar $10,039 Mar $9,993
Apr $9,989 Apr $10,171 Apr $10,103
May $10,304 May $10,581 May $10,419
Jun $10,389 Jun $10,662 Jun $10,478
Jul $10,332 Jul $10,623 Jul $10,451
Aug $10,480 Aug $10,747 Aug $10,557
Sep $10,594 Sep $10,850 Sep $10,642
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin U.S. Government Income Fund Class B
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year..................................... N/A
Since inception.............................. 8.08%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin U.S. Government Lehman Bros. Government Morningstar U.S.
Income Fund Bond Index Government Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Nov $10,027 Nov $9,982 Nov $9,966
Dec $10,114 Dec $10,043 Dec $10,020
Jan '95 $10,288 Jan '95 $10,230 Jan '95 $10,176
Feb $10,521 Feb $10,450 Feb $10,375
Mar $10,557 Mar $10,515 Mar $10,427
Apr $10,687 Apr $10,653 Apr $10,542
May $11,007 May $11,083 May $10,872
Jun $11,092 Jun $11,168 Jun $10,933
Jul $11,039 Jul $11,127 Jul $10,905
Aug $11,180 Aug $11,257 Aug $11,016
Sep $10,808 Sep $11,365 Sep $11,104
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
11
<PAGE>
Schedule of Investments
GRIFFIN U.S GOVERNMENT INCOME FUND
September 30, 1995
[PIE CHART APPEARS HERE]
U.S. Treasury Notes 15%
U.S. Treasury Bonds 18%
GNMA 52%
Agency Discount Notes 8%
Other 7%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Mortgage-Backed Securities (55.1%):
Government National Mortgage Association
(52.0%):
6.50%, 10/15/23-1/15/24 $1,917,730 $1,851,204
7.00%, 1/15/23-1/15/24 5,060,563 5,006,774
7.50%, 6/15/17-9/15/24 3,786,601 3,827,988
8.00%, 10/15/24-12/15/24 986,080 1,015,041
9.50%, 8/15/09-8/15/20 3,502,747 3,737,938
11.00%, 2/15/10-10/15/18 357,567 399,132
12.50%, 12/15/10-6/15/15 116,787 134,560
13.00%, 8/15/12 66,627 77,454
-----------
16,050,091
-----------
Collateralized Mortgage Obligations (3.1%):
Federal Home Loan Mortgage
Corporation (2.0%):
Series 80, Class E, 8.60%, 6/15/19 353,907 359,506
Series 76, Class F, 9.13%, 6/15/20 258,581 267,200
-----------
626,706
-----------
Federal National Mortgage Association (1.1%):
Series 1989-48, Class G, 8.00%, 3/25/18 338,579 343,235
-----------
Total Mortgage-Backed Securities
(cost: $17,029,421) 17,020,032
-----------
U.S. Government and Agency Securities (36.6%):
Federal National Mortgage
Association (3.7%):
8.10%, 8/12/19 1,000,000 1,136,740
-----------
U.S. Treasury Notes (14.6%):
6.13%, 5/15/98 500,000 502,885
6.25%, 5/31/00 1,200,000 1,211,916
6.88%, 10/31/96 375,000 379,369
7.50%, 2/15/05 1,200,000 1,307,688
7.88%, 11/15/04 1,000,000 1,113,020
-----------
4,514,878
-----------
U.S. Treasury Bonds (18.3%):
7.25%, 8/15/22 1,000,000 1,074,540
7.50%, 11/15/16 1,000,000 1,098,000
7.88%, 2/15/21 1,500,000 1,720,080
8.00%, 11/15/21 1,500,000 1,747,080
-----------
5,639,700
-----------
Total U.S. Treasury Notes and Bonds
(cost: $11,060,964) 11,291,318
-----------
Short-Term Securities (7.6%):
Federal National Mortgage Association
Discount Notes (7.6%):
6.30%, 10/02/95 (b) 2,345,000 2,344,590
Total Short-Term Securities (cost:$2,344,590) 2,344,590
-----------
Total Investments In Securities
(cost: $30,434,974)(c)(99.3%) 30,655,940
Other Assets Less Liabilities (0.7%) 215,631
-----------
Net Assets (100%) $30,871,571
===========
</TABLE>
- ------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) Rate represents annualized yield to maturity at September 30, 1995.
(c) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities
based on this cost were as follows:
Gross unrealized appreciation $389,244
Gross unrealized depreciation (168,278)
--------
Net unrealized appreciation $220,966
========
See accompanying notes to financial statements.
12
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN BOND FUND
Portfolio Manager: Matthew N. Fontaine and
Arthur J. MacBride, The Boston Company Asset Management, Inc.
What were the significant factors that affected performance?
For the first nine months of the fiscal year, we evaluated the performance
of the Griffin Bond Fund against the Lehman Brothers Government/Corporate Bond
Index. Beginning June 30, 1995, it was decided that the Fund's portfolio would
place a greater emphasis on corporate bonds and lesser emphasis on U.S.
Government issues. In light of this, we decided that, going forward, the Lehman
Brothers Corporate Bond Index would be a better benchmark against which to
evaluate the Fund's performance than the Lehman Brothers Corporate/Government
Bond Index. Although the line graph describing the performance of the Fund
during the past year includes both the Lehman Brothers Corporate Bond Index and
the Lehman Brothers Corporate/Government Bond Index, future annual reports will
illustrate the Fund's performance against only the Lehman Brothers Corporate
Bond Index. It should be noted that the Bond Fund was positioned with less
interest rate sensitivity than its respective benchmark for the first seven
months of the Fund's year because we expected the volatility of the fixed
income markets in 1994 to continue. This conservative strategy was primarily
responsible for the respective underperformance during the period.
What strategies and techniques were implemented during the year?
The Boston Company Asset Management, Inc. assumed sub-advisory
responsibilities for the Fund from Piper Capital Management, Inc. on December
1, 1994. Since then, the Fund has had less of an emphasis on cyclical
industries such as steel, paper and chemicals because we feel that pricing
power has peaked in these commodity products at this point in the cycle. We
have, however, maintained an overweighted position in the financial services
sector. This sector has added value due to improved profitability in the
brokerage industry stemming from the significant returns in both the equity and
fixed income markets over the last nine months, and an improved corporate
underwriting calendar. Strategically, we extended the duration of the portfolio
(so as to be neutral to the Lehman Brothers Corporate Bond Index) at the end of
April as more signs of economic slowing and moderating inflation became
apparent.
What themes can be seen in the current portfolio (industry weightings) and
why?
Currently the portfolio duration is positioned neutral to its benchmark
index because we feel that interest rates are unlikely to move out of their
current trading range. The portfolio is underweighted in corporate bonds
relative to the Lehman Brothers Corporate Bond Index because we feel that
corporate spreads are unsustainably tight and that investors are not being paid
to own many cyclical corporate issuers, especially at the longer maturity
range. In addition, the portfolio's corporate bond holdings have a higher
average quality than the Lehman Brothers Corporate Bond Index. Currently the
portfolio has approximately 20% in mortgage-backed securities which are trading
at attractive historical levels.
What individual security holdings changed significantly during the year?
During the year the portfolio reduced its holdings of mortgage-backed
securities, and the percentage in corporate securities was increased to
approximately 65%. The portfolio has increased holdings in Yankee securities
(dollar denominated securities of foreign issuers) such as Midland Bank, Abbey
National, Aegon, China International Trust, Repsol International, and Carter
Holt Harvey, which should help to diversify the corporate holdings in the event
of a U.S. economic slowdown. We also reduced the portfolio's holdings of
certain collateralized mortgage obligations that rebounded from 1994 levels and
no longer offered attractive risk/return attributes.
What is the strategy for the next six to twelve months?
For the remainder of 1995 we expect the economy to continue growing at a
somewhat slower pace than the last twelve months. The Bond Fund continues to
underweight corporate securities. We have taken this defensive position
relative to the Lehman Brothers Corporate Bond Index because we feel that the
combination of a slowing economy and increased corporate issuance will cause
credit spreads to widen. We expect corporate issuance to accelerate due to the
recent decline in interest rates. We will look to take advantage of this
widening in corporate credit spreads by purchasing securities that meet our
consistent criteria. We will continue to focus on fundamental credit research,
which is the main component of our corporate philosophy. We feel this
disciplined process will provide a high level of current income consistent with
prudent investment management, preservation of capital and liquidity.
13
<PAGE>
GRIFFIN BOND FUND
The two charts below show the performance of both classes of shares of the
Griffin Bond Fund compared with the Lehman Brothers Government/Corporate Bond
Index, the Lehman Corporate Bond Index and the Morningstar Corporate High
Quality Bond Fund Average. If you had invested $10,000 in Class A shares of the
Griffin Bond Fund when the fund commenced operations on October 19, 1993,
reinvesting all dividends, the top chart would track the value of your
investment through the period ended September 30, 1995. If you had invested
$10,000 in Class B shares of the Fund when they were first offered on November
1, 1994, assuming all dividends were reinvested, the bottom chart would track
the performance of your investment through the period ended September 30, 1995.
The Lehman Brothers Government/Corporate Bond Index is an unmanaged index of
U.S. Treasury and agency securities and investment grade corporate debt
securities. The Lehman Brothers Corporate Bond Index is an unmanaged index of
only investment grade corporate debt securities. The Morningstar Corporate
High Quality Bond Fund Average is based on a universe of approximately 210
mutual funds tracked by Morningstar, Inc. that have investment objectives
similar to that of the Griffin Bond Fund. It is important to keep in mind that
fund performance reflects the deduction of the maximum front-end sales charge
of 4.5% with respect to Class A shares and the deduction of the maximum
contingent deferred sales charge (CDSC) of 5% with respect to Class B shares,
while no such charges are deducted from the indexes. Of course, past
performance is not an indicator of future results.
Griffin Bond Fund Class A
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year.................... 8.41%
Since Inception............. 1.25%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Lehman Bros. Morningstar Corporate
Griffin Bond Fund Lehman Bros. Corporate Bond Index Government/Corporate Bond Index High Quality Bond Fund Average
Dollar Dollar Dollar Dollar
Months Value Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000 Initial $10,000
Nov $9,361 Nov $9,806 Nov $9,903 Nov $9,931
Dec $9,412 Dec $9,864 Dec $9,946 Dec $9,978
Jan '94 $9,552 Jan '94 $10,055 Jan '94 $10,096 Jan '94 $10,080
Feb $9,381 Feb $9,818 Feb $9,876 Feb $9,943
Mar $9,139 Mar $9,516 Mar $9,634 Mar $9,794
Apr $9,008 Apr $9,425 Apr $9,554 Apr $9,729
May $8,996 May $9,390 May $9,536 May $9,718
Jun $8,981 Jun $9,367 Jun $9,514 Jun $9,708
Jul $9,146 Jul $9,603 Jul $9,705 Jul $9,830
Aug $9,166 Aug $9,614 Aug $9,709 Aug $9,845
Sep $9,025 Sep $9,435 Sep $9,562 Sep $9,765
Oct $9,004 Oct $9,413 Oct $9,552 Oct $9,760
Nov $8,981 Nov $9,398 Nov $9,534 Nov $9,740
Dec $9,034 Dec $9,476 Dec $9,597 Dec $9,782
Jan '95 $9,207 Jan '95 $9,677 Jan '95 $9,782 Jan '95 $9,910
Feb $9,408 Feb $9,956 Feb $10,008 Feb $10,078
Mar $9,452 Mar $10,037 Mar $10,076 Mar $10,140
Apr $9,584 Apr $10,206 Apr $10,216 Apr $10,246
May $9,963 May $10,687 May $10,644 May $10,533
Jun $10,034 Jun $10,783 Jun $10,729 Jun $10,596
Jul $9,984 Jul $10,736 Jul $10,687 Jul $10,585
Aug $10,116 Aug $10,909 Aug $10,824 Aug $10,686
Sep $10,247 Sep $11,038 Sep $10,934 Sep $10,796
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin Bond Fund Class B
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year.................... N/A
Since Inception............. 8.58%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Lehman Bros. Morningstar Corporate
Griffin Bond Fund Lehman Bros. Corporate Bond Index Government/Corporate Bond Index High Quality Bond Fund Average
Dollar Dollar Dollar Dollar
Months Value Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000 Initial $10,000
Nov $10,012 Nov $9,984 Nov $9,982 Nov $9,980
Dec $10,066 Dec $10,066 Dec $10,048 Dec $10,023
Jan '95 $10,240 Jan '95 $10,280 Jan '95 $10,241 Jan '94 $10,154
Feb $10,472 Feb $10,576 Feb $10,478 Feb $10,326
Mar $10,516 Mar $10,662 Mar $10,549 Mar $10,390
Apr $10,659 Apr $10,842 Apr $10,695 Apr $10,498
May $11,076 May $11,353 May $11,143 May $10,793
Jun $11,135 Jun $11,455 Jun $11,232 Jun $10,857
Jul $11,075 Jul $11,405 Jul $11,189 Jul $10,846
Aug $11,230 Aug $11,589 Aug $11,332 Aug $10,949
Sep $10,858 Sep $11,725 Sep $11,447 Sep $11,062
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
14
<PAGE>
Schedule of Invesments
GRIFFIN BOND FUND
September 30, 1995
[PIE CHART APPEARS HERE]
U.S. Treasury Bonds 8%
U.S. Agency Securities 21%
Corporate Bonds 66%
Other 5%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Asset Backed Securities (1.1%)
Corporate (1.1%):
General Motor Acceptance Corporation
Grantor Trust, 6.30%, 6/15/99 $128,744 $128,985
----------
128,985
----------
Total Asset Backed Securities (cost: $128,682) 128,985
----------
Corporate Bonds (66.2%):
Banking (6.9%):
Chemical Banking Corporation,
7.13%, 3/01/05 250,000 253,940
Midland Bank, 8.63%, 12/15/04 (b) 175,000 194,079
Nationsbank Corporation, 5.38%, 4/15/00 200,000 190,704
Norwest Corporation, 7.70%, 11/15/97 200,000 206,072
----------
844,795
----------
Electric Utilities (2.3%):
Florida Power & Light, 5.38%, 4/01/00 155,000 148,995
Virginia Electric & Power, 8.88%, 6/01/99 125,000 134,358
----------
283,353
----------
Financial Services (24.1%):
Abbey National First Capital
Corporation, 8.20%, 10/15/04 (b) 175,000 190,563
Aegon, 8.00%, 8/15/06 (b) 214,000 232,389
American Express Credit, 7.88%, 12/01/96 50,000 50,909
Associates Corporation, 10.75%, 11/01/95 50,000 50,159
BHP Finance, 7.00%, 12/01/97 (b) 200,000 202,634
Charles Schwab Corporation, 6.30%, 9/30/03 250,000 235,478
China International Trust, 9.00%,
10/15/06(b) 150,000 163,500
Ford Motor Credit Corp., Ford -
Global Bond, 6.25%, 2/26/98 350,000 350,298
Golden West Financial, 7.88%, 1/15/02 175,000 183,218
Lincoln National Corporation,
7.25%, 5/15/05 120,000 123,000
Merrill Lynch, 6.25%, 1/15/06 230,000 216,888
Morgan J.P. & Company, 7.63%, 11/15/98 250,000 259,318
Paine Webber Group, 7.31%, 8/09/00 300,000 304,500
Repsol International Finance,
7.00%, 8/01/05 (b) 200,000 204,500
Smith Barney Holdings Incorporated,
6.00%, 3/15/97 150,000 149,477
----------
2,916,831
----------
Industrial Conglomerate (29.2%):
American Brands, 7.50%, 5/15/99 120,000 123,827
American Home Products
7.70%, 2/15/00 90,000 94,064
7.90%, 2/15/05 180,000 194,261
Carter Holt Harvey, 8.38%, 4/15/15 (b) 128,000 138,616
Coca-Cola Co., 7.88%, 9/15/98 200,000 208,712
Columbia/HCA Healthcare,
6.91%, 6/15/05 200,000 200,634
CRS America Incorporated, 6.88%, 7/21/05 150,000 150,563
General Foods, 6.00%, 6/15/01 200,000 191,854
General Motors Corp., 9.63%, 12/01/00 350,000 394,580
GTE Corporation, 8.85%, 3/01/98 200,000 210,768
International Business Machines
Corporation, 6.38%, 6/15/00 200,000 200,138
International Paper, 9.70%, 3/15/00 160,000 179,186
Lockheed Martin Corporation,
4.88%, 2/15/96 200,000 199,250
Pepsico Inc., 7.75%, 10/01/98 300,000 310,812
Sears Roebuck Company, 9.25%, 4/15/95 110,000 117,206
Tele-Communications Inc., 7.38%, 2/15/00 200,000 203,148
Wal-Mart Stores, 8.63%, 4/01/01 200,000 219,720
WMX Technologies Incorporated,
8.25%, 11/15/99 200,000 212,802
----------
3,550,141
----------
Transportation (3.7%):
Federal Express
9.75%, 5/15/96 50,000 51,003
10.00%, 9/01/98 175,000 190,918
Southwest Airlines, 7.88%, 9/01/07 200,000 213,372
----------
455,293
----------
Total Corporate Bonds
(cost: $7,933,048) 8,050,413
----------
Collateralized Mortgage Obligations (1.6%):
U.S. Agency (1.1%):
Federal Home Loan Mortgage Corporation(c):
Series 1439, Class QA, inverse
COFI floater, 10.77%, 11/15/22 22,616 19,733
Series 1435, Class FA, LIBOR
floater, 7.24%, 12/15/22 114,463 118,397
----------
138,130
----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Schedule of Invesments
GRIFFIN BOND FUND
September 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Corporate (0.5%):
Security Pacific National Bank,
9.30%, 8/25/19 $64,024 $66,765
-----------
66,765
-----------
Total Collateralized Mortgage Obligations
(cost: $204,205) 204,895
-----------
U.S. Government And Agency Securities (29.4%):
U.S. Government Securities (8.1%):
U.S. Treasury Strips (8.1%):
6.80%, 8/15/21 (d) 5,570,000 986,948
-----------
U.S. Agency Securities (21.3%):
Government National Mortgage
Association (11.3%):
8.00%, 9/15/25 1,107,600 1,141,172
8.50%, 10/15/25 230,000 239,559
-----------
1,380,731
Federal National Mortgage Association (10.0%):
7.50%, 6/01/10 - 10/01/25 780,000 789,745
8.00%, 9/01/10 410,850 422,789
----------
1,212,534
----------
Total U.S. Government And Agency Securities
(cost: $3,557,669) 3,580,213
----------
Short-Term Securities (1.8%):
Repurchase Agreement (1.8%):
State Street Bank & Trust Co. Master
Repurchase Agreement, 4.5%, 10/02/95,
102% Collateralized by U.S.
Government Securities 218,000 218,000
----------
Total Short-Term Securities
(cost: $218,000) 218,000
----------
Total Investments In Securities
(cost: $12,041,604)(e)(100.1%) 12,182,506
Other Assets Less Liabilities (-0.1%) (10,846)
----------
Net Assets (100%) $12,171,660
==========
</TABLE>
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) U.S. dollar denominated securities issued by foreign corporations and/or
governments.
(c) Descriptions of certain collateralized mortgage obligations are as
follows:
LIBOR - London InterBank Offered Rate.
COFI (11th District) - Cost of Funds Index of the Federal Reserve's 11th
District.
Inverse floater - represent securities that pay interest at rates that
increase (decrease) with a decline (increase) in a specific
index. Interest rate disclosed was in effect on September 30, 1995.
Floater - represent securities that pay interest at rates that increase
(decrease) with an increase (decrease) in a specific index. Interest
rate disclosed was in effect on September 30, 1995.
(d) Rate on these zero coupon bonds represents annualized yield to maturity
at September 30, 1995.
(e) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities
based on this cost were as follows:
Gross unrealized appreciation $156,896
Gross unrealized depreciation (15,994)
--------
Net unrealized appreciation $140,902
========
See accompanying notes to financial statements.
16
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN MUNICIPAL BOND FUND
Portfolio Manager: Executive Policy Committee,
Payden & Rygel Investment Counsel
What were the significant market factors that affected performance?
Many of the factors that affected the performance of the Municipal Bond Fund
also impacted the California Tax-Free Fund. These factors include the solvency
of municipalities across the nation, the change in fiscal policy by the Federal
Reserve Board, and the threat of federal tax reform. The first two of these
issues is discussed in more detail under the Management Discussion of the
Griffin California Tax-Free Fund, so we'll concentrate on the latter for the
Municipal Bond Fund.
The uncertainty surrounding the tax reform debate impacted the municipal
market significantly during the past year. Beginning in April 1995 when senior
Congressional leaders in Washington began to talk seriously about this issue,
the municipal bond market reacted negatively. By the end of the first hundred
days of the new Republican Congress, the tax reform movement had gained
additional momentum. Many investors feared that tax reform would eliminate the
benefits of the income derived from municipal securities, and they took to the
sidelines while the new Congress worked through the details. Long term
municipal yields have remained high due to the continued uncertainty, and
shorter maturities have rallied as investors have placed emphasis on these
securities.
What strategies and techniques were implemented during the year?
The Fund had a defensive position at the end of the fourth quarter of 1994
as we shortened duration and held higher-coupon bonds. As bond valuations
reached historically low levels, we reallocated the Fund's assets into longer
non-callable bonds. Non-callable bonds are especially valuable when interest
rates decline because they cannot be repurchased by their issuers before the
final maturity date. These securities participated more fully in the 1995
interest rate rally.
What themes can be seen in the current portfolio and why?
The Griffin Municipal Bond Fund is structured to capture the yield available
from longer maturity bonds and benefit from positive price performance as
interest rates decline. The inclusion of longer, non-callable bonds further
contributes to this portfolio structure theme.
The second theme pertains to mitigation of credit risk. The Fund holds
geographically diverse securities, with no single state representing more than
13% of the Fund's portfolio. Nearly a quarter of the Fund's assets are invested
in bonds whose principal and interest payments are insured by an outside,
non-governmental, agency. Most of the revenue bonds held by the Fund are backed
by user fees for essential services, which provide strong support for the
underlying securities. The Fund has attempted to limit its holdings in general
obligation bonds to a number of top credit quality issuers, and has sought
additional diversification through allocating purchases among different regions
of the country.
What individual security holdings changed significantly during the year?
Payden & Rygel took over management of the portfolio on December 1, 1994
from Piper Capital Management, Inc. We took this opportunity to increase the
geographical diversification away from the Midwest, and added exposure to the
Southeast and Southwest, two regions that are showing solid economic growth. We
also swapped out some callable issues to reduce the portfolio's exposure to
interest rate declines. Of the securities sold during the year approximately
three quarters were callable, compared to one third of the securities purchased
were subject to similar provisions.
What is the strategy for the next six to twelve months?
Because our outlook calls for benign inflation and slow growth over the next
several quarters, we will maintain the current structure and duration targets
of the Fund. The Griffin Municipal Bond Fund is a diversified fund that invests
in intermediate to long-term investment grade municipal securities. While our
outlook remains positive for the fixed income markets, we cannot guarantee that
the recent strong performance will continue at the same rate.
17
<PAGE>
GRIFFIN MUNICIPAL BOND FUND
The two charts below show the performance of both classes of shares of the
Griffin Municipal Bond Fund compared with the Lehman Brothers Municipal Bond
Index and the Morningstar Municipal Bond Fund Average. If you had invested
$10,000 in Class A shares of the Griffin Municipal Bond Fund when the fund
commenced operations on October 19, 1993, reinvesting all dividends, the top
chart would track the value of your investment through the period ended
September 30, 1995. If you had invested $10,000 in Class B shares of the Fund
when they were first offered on November 1, 1994, assuming all dividends were
reinvested, the bottom chart would track the performance of your investment
through the period ended September 30, 1995. The Lehman Brothers Municipal Bond
Index is an unmanaged index of debt obligations issued by U.S. states and
municipalities. The Morningstar Municipal Bond Fund Average is based on a
universe of approximately 495 mutual funds tracked by Morningstar, Inc. that
have investment objectives similar to that of the Griffin Municipal Bond Fund.
It is important to keep in mind that fund performance reflects the deduction of
the maximum front-end sales charge of 4.5% with respect to Class A shares and
the deduction of the maximum contingent deferred sales charge (CDSC) of 5% with
respect to Class B shares, while no such charges are deducted from the indexes.
Of course, past performance is not an indicator of future results.
Grifffin Municipal Bond Fund Class A
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year.................... 5.16%
Since Inception............. -0.12%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Municipal Bond Fund Lehman Bros. Municipal Bond Index Morningstar Municipal Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000
Nov $9,423 Nov $9,798 Nov $9,917
Dec $9,641 Dec $10,005 Dec $10,097
Jan '94 $9,773 Jan '94 $10,119 Jan '94 $10,204
Feb $9,465 Feb $9,857 Feb $9,967
Mar $8,941 Mar $9,456 Mar $9,604
Apr $9,019 Apr $9,536 Apr $9,640
May $9,068 May $9,619 May $9,717
Jun $9,006 Jun $9,560 Jun $9,671
Jul $9,213 Jul $9,735 Jul $9,819
Aug $9,235 Aug $9,769 Aug $9,846
Sep $9,058 Sep $9,626 Sep $9,716
Oct $8,858 Oct $9,454 Oct $9,568
Nov $8,665 Nov $9,283 Nov $9,401
Dec $8,888 Dec $9,487 Dec $9,590
Jan '95 $9,165 Jan '95 $9,759 Jan '95 $9,825
Feb $9,430 Feb $10,043 Feb $10,075
Mar $9,548 Mar $10,158 Mar $10,160
Apr $9,547 Apr $10,170 Apr $10,171
May $9,852 May $10,495 May $10,443
Jun $9,679 Jun $10,404 Jun $10,364
Jul $9,774 Jul $10,502 Jul $10,436
Aug $9,894 Aug $10,636 Aug $10,541
Sep $9,980 Sep $10,703 Sep $10,598
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin Municipal Bond Fund Class B
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year.................... N/A
Since Inception............. 7.86%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Municipal Bond Fund Lehman Bros. Municipal Bond Index Morningstar Municipal Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Nov $9,846 Nov $9,819 Nov $9,826
Dec $10,083 Dec $10,035 Dec $10,024
Jan '95 $10,405 Jan '95 $10,322 Jan '94 $10,269
Feb $10,701 Feb $10,622 Feb $10,530
Mar $10,830 Mar $10,745 Mar $10,619
Apr $10,825 Apr $10,757 Apr $10,630
May $11,167 May $11,101 May $10,915
Jun $10,963 Jun $11,004 Jun $10,832
Jul $11,065 Jul $11,109 Jul $10,908
Aug $11,206 Aug $11,250 Aug $11,017
Sep $10,786 Sep $11,321 Sep $11,076
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
18
<PAGE>
Schedule of Investments
GRIFFIN MUNICIPAL BOND FUND
September 30, 1995
[PIE CHART APPEARS HERE]
General Obligations 46%
Transportation 12%
Water Revenue 10%
Electric 9%
Sewer 6%
Other 17%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Municipal Long-Term Securities (92.1%):
Arizona (3.8%):
Phoenix, Arizona, Series A,
6.25%, 7/01/17 $200,000 $213,000
--------
California (5.7%):
California State Department of Water
Resources, 6.00%, 12/01/06 140,000 151,025
California State General Obligation,
6.60%, 2/01/10 150,000 165,000
--------
316,025
--------
Florida (6.3%):
Dade County, Florida Aviation
Revenue, 5.50%, 10/01/07 200,000 204,000
Florida State Board of Education
Capital Outlay Public Education,
Series B, 5.75%, 6/01/15 150,000 148,500
--------
352,500
--------
Georgia (3.2%):
Georgia State General Obligation,
7.20%, 3/01/08 150,000 180,000
--------
Illinois (1.9%):
Will County, Illinois Community,
District #161 Summit Hill,
6.10%, 1/01/09 100,000 103,500
--------
Indiana (1.9%):
Wa-Nee Elementary/High School
Building Corporation,
6.50%, 7/15/10 100,000 105,500
--------
Louisiana (1.9%):
Louisiana Public Facilities Authority
Revenue, General Health Project
6.20%, 11/01/09 $100,000 104,125
--------
Massachusetts (9.9%):
Massachusetts Bay Transportation
Authority General Transportation
System, 5.60%, 3/01/08 200,000 206,250
Massachusetts State General
Obligation, Series A,
5.75%, 2/01/15 150,000 148,875
Massachusetts State Water Resources
Authority, 6.00%, 8/01/14 100,000 101,000
Massachusetts State Water Resources
Authority, 5.50%, 11/01/15 100,000 94,375
--------
550,500
--------
Michigan (1.2%):
Michigan State Hospital Financing
Authority, 5.88%, 7/01/14 75,000 69,094
--------
Nevada (1.9%):
Nevada State General Obligation,
5.80%, 7/15/08 100,000 103,750
--------
New Jersey (3.8%):
New Jersey State General Obligation,
6.00%, 2/15/11 200,000 210,750
--------
New York (2.0%):
New York State Environmental
Facilities Corporation Pollution
Control Revenue Revolving Fund,
6.80%, 6/15/01 100,000 111,000
--------
Ohio (3.7%):
Ohio State Water Development
Authority Revenue, Fresh Water
Series, 5.70%, 6/01/09 200,000 205,000
--------
Oregon (1.9%):
Oregon State Department of
Transportation Revenue, Regional
Light Rail Fund - Westside
Project, 6.25%, 6/01/09 100,000 106,000
--------
Pennsylvania (4.6%)
Commonwealth of Pennsylvania, General
Obligation, 5.20%, 6/15/04 250,000 256,250
--------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
Schedule of Investments
GRIFFIN MUNICIPAL BOND FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name Of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Puerto Rico (3.8%):
Puerto Rico Electric Power Authority
Power Revenue, 6.13%, 7/01/08 $200,000 $212,750
----------
South Carolina (3.5%):
Columbia, South Carolina Water
Works & Sewer Systems Revenue,
5.38%, 2/01/12 200,000 195,000
----------
South Dakota (1.9%):
South Dakota Housing Development
Authority, Homeownership
Mortgage, 6.65%, 5/01/14 100,000 103,500
----------
Tennessee (3.5%):
Shelby County, Tennessee, General
Obligation, 5.63%, 4/01/13 200,000 197,250
----------
Texas (12.8%):
Austin, Texas General Obligation,
5.70%, 9/01/07 200,000 211,750
Harris County, Texas Tax and Revenue
Certificate of Obligation, 6.00%,
12/15/10 200,000 212,000
San Antonio, Texas Electric &
Gas Revenue, 5.00%, 2/01/14 100,000 90,000
Texas Municipal Power Agency
Revenue, 5.25%, 9/01/08 200,000 198,500
----------
712,250
----------
Virginia (2.2%):
Virginia State Transportation
Board Revenue, North Virginia
Transportation District
Program, 6.25%, 5/15/12 120,000 124,650
----------
Washington (3.7%):
Washington State General Obligation,
5.75%, 9/01/09 200,000 205,750
----------
Wisconsin (7.0%):
Wisconsin State Transportation,
5.50%, 7/01/14 200,000 188,500
Wisconsin State General Obligation,
5.13%, 11/01/07 200,000 199,250
----------
387,750
----------
Total Municipal Long-Term Securities
(cost: $5,025,870) 5,125,894
----------
Municipal Short-Term Securities (5.4%):
Minnesota (1.8%):
Beltrami County, Minnesota Environmental
Control Revenue, Northwood Panelboard
Company Project, 4.65%, 10/02/95 (b) 100,000 100,000
----------
Texas (3.6%):
Grapevine, Texas Industrial Development
Corporation, Multiple Mode -
American Airlines-B4, 4.75%, 10/02/95 (b) 200,000 200,000
----------
Total Municipal Short-Term Securities
(cost: $300,000) 300,000
----------
Total Investments In Securities
(cost: $5,325,870) (c) (97.5%) 5,425,894
Other Assets Less Liabilities (2.5%) 142,235
----------
Net Assets (100%) $5,568,129
==========
Long Futures Contracts
- ----------------------
<CAPTION>
Unrealized
Number of Notional Appreciation
Contracts Description Contract Value (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
2 Municipal Bond, December 1995 $230,563 ($2,375)
</TABLE>
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1
to the financial statements.
(b) These variable rate securities have maturities greater than one year but
are redeemable upon demand. For purposes of calculating the fund's
weighted average maturity, the length to maturity of these investments
is considered to be the greater of the period until the interest rate is
adjusted or until the principal can be recovered by demand. These
securities were pledged as collateral for futures contracts.
(c) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities
based on this cost were as follows:
Gross unrealized appreciation $115,448
Gross unrealized depreciation (17,799)
--------
Net unrealized appreciation $97,649
========
See accompanying notes to financial statements.
20
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN CALIFORNIA TAX-FREE FUND
Portfolio Manager: Executive Policy Committee,
Payden & Rygel Investment Counsel
What were the significant market factors that affected performance?
The three most significant factors that affected the performance of the Fund
over the past year were changes in the fiscal policy of the Federal Reserve
Board, the bankruptcy declaration by Orange County and the fear of federal tax
reform. The tax reform issue is described in more detail under the Management
Discussion of the Griffin Municipal Bond Fund.
The Federal Reserve Board lowered short term interest rates for the first
time in three years, reversing the aggressive tightening that was implemented
during 1994. Municipal bond yields (and prices) are generally related to a
percentage of U.S. Treasury yields, and therefore are sensitive to changes in
the taxable bond markets. As a result of the Federal Reserve Board's change in
fiscal policy, the fixed income market psychology turned positive, and the
municipal bond market participated in the strong rally. Interest rates on long
term municipal bonds declined significantly from their peak in November of
1994, leading to favorable performance for the California Tax-Free Fund.
The Orange County bankruptcy announcement in December 1994 was a shot across
the bow to the municipal bond market. Bonds issued within the State's borders
experienced significant short-term volatility, and the importance of financial
flexibility and in-depth credit analysis of each issuer took on renewed
importance. After a brief period of uncertainty, though, the municipal market
regained its strength, as the issues relating to the bankruptcy filing were
addressed throughout the year.
What strategies and techniques were implemented during the year?
At the beginning of the fiscal year the Fund emphasized a defensive
strategy, which was implemented by holding municipal bonds with above market
coupons. This strategy led to a reduction in duration and a diminished exposure
to changes in interest rates. Toward the end of 1994 municipal bond valuations
were at historically low levels. During the year, as the market rallied, we
reallocated the fund's assets into longer non-callable bonds from cash and
shorter maturity securities. These longer non-callable bonds participated more
fully in this bullish interest rate environment and thus produced historically
high returns for the year.
What themes can be seen in the current portfolio and why?
We have structured the current portfolio to capture the yield available from
longer maturity securities while maintaining our exposure to positive interest
rate movements. We continue to focus on high credit quality bonds in the Fund,
and have maintained a "AA" average credit quality. It is important to note that
we did not own any securities issued by municipalities in Orange County, nor do
we own securities issued by the County of Los Angeles. We focus on revenue
bonds issued with respect to essential services and which have a strong revenue
stream, and we avoid many of the California counties that are burdened with the
enormous financial pressures imposed by Proposition 13, and the growing health
and welfare services they must provide.
What individual security holdings changed significantly during the year?
We increased the fund's holdings of general obligation bonds of the State of
California during the year. Subsequent to the state's downgrade to a rating of
Al/A a year ago, economic prospects for the State have improved and the State
Treasurer has overseen an improved balance sheet. We purchased these bonds when
yield differentials for the State general obligations were attractive compared
to other bonds.
What is the strategy for the next six to twelve months?
The California Tax-Free Fund seeks to provide investors with a high level of
income exempt from federal income taxes and California personal income taxes,
while preserving capital. It invests primarily in intermediate to long-term
investment grade municipal securities. Our strategy will be to maintain our
current exposure to changes in interest rates. We feel the recent low inflation
levels and moderate economic growth indicate a stable or declining interest
rate environment for the next six months. Although we remain optimistic about
the next year, we do not necessarily believe that we will experience the total
returns that were realized during the last six months.
21
<PAGE>
GRIFFIN CALIFORNIA TAX-FREE FUND
The two charts below show the performance of both classes of shares of the
Griffin California Tax-Free Fund compared with the Lehman Brothers California
Municipal Bond Index and the Morningstar California Municipal Bond Fund
Average. If you had invested $10,000 in Class A shares of the Griffin
California Tax-Free Fund when the fund commenced operations on October 19,
1993, reinvesting all dividends, the top chart would track the value of your
investment through the period ended September 30, 1995. If you had invested
$10,000 in Class B shares of the Fund when they were first offered on November
1, 1994, assuming all dividends were reinvested, the bottom chart would track
the performance of your investment through the period ended September 30, 1995.
The Lehman Brothers California Municipal Bond Index is an unmanaged index of
debt obligations issued by the State of California and its municipalities. The
Morningstar California Municipal Bond Fund Average is based on a universe of
approximately 162 mutual funds tracked by Morningstar, Inc. that have
investment objectives similar to that of the Griffin California Tax-Free Fund.
It is important to keep in mind that fund performance reflects the deduction of
the maximum front-end sales charge of 4.5% with respect to Class A shares and
the deduction of the maximum contingent deferred sales charge (CDSC) of 5% with
respect to Class B shares, while no such charges are deducted from the indexes.
Of course, past performance is not an indicator of future results.
Griffin California Tax-Free Fund Class A
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year.................... 5.15%
Since Inception............. -0.88%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin California Tax-Free Fund Lehman Bros. California Morningstar California Municipal
Municipal Bond Index Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000
Nov $9,306 Nov $9,772 Nov $9,891
Dec $9,548 Dec $9,984 Dec $10,088
Jan '94 $9,645 Jan '94 $10,099 Jan '94 $10,195
Feb $9,272 Feb $9,820 Feb $9,941
Mar $8,828 Mar $9,376 Mar $9,524
Apr $8,872 Apr $9,447 Apr $9,545
May $8,928 May $9,532 May $9,623
Jun $8,847 Jun $9,451 Jun $9,564
Jul $9,024 Jul $9,637 Jul $9,738
Aug $9,050 Aug $9,672 Aug $9,760
Sep $8,924 Sep $9,517 Sep $9,611
Oct $8,727 Oct $9,340 Oct $9,433
Nov $8,590 Nov $9,195 Nov $9,242
Dec $8,737 Dec $9,348 Dec $9,399
Jan '95 $9,041 Jan '95 $9,660 Jan '95 $9,687
Feb $9,332 Feb $9,983 Feb $9,977
Mar $9,400 Mar $10,094 Mar $10,063
Apr $9,395 Apr $10,095 Apr $10,070
May $9,682 May $10,449 May $10,384
Jun $9,495 Jun $10,308 Jun $10,245
Jul $9,584 Jul $10,408 Jul $10,311
Aug $9,737 Aug $10,539 Aug $10,423
Sep $9,828 Sep $10,618 Sep $10,495
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin California Tax-Free Fund Class B
ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year.................... N/A
Since Inception............. 7.60%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin California Tax-Free Fund Lehman Bros. California Morningstar California Municipal
Municipal Bond Index Bond Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Nov $9,886 Nov $9,844 Nov $9,797
Dec $10,050 Dec $10,008 Dec $9,964
Jan '95 $10,382 Jan '95 $10,342 Jan '94 $10,268
Feb $10,726 Feb $10,688 Feb $10,576
Mar $10,799 Mar $10,807 Mar $10,667
Apr $10,775 Apr $10,808 Apr $10,675
May $11,114 May $11,187 May $11,008
Jun $10,894 Jun $11,036 Jun $10,860
Jul $10,991 Jul $11,143 Jul $10,930
Aug $11,162 Aug $11,283 Aug $11,049
Sep $10,760 Sep $11,368 Sep $11,125
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
22
<PAGE>
Schedule of Investments
GRIFFIN CALIFORNIA TAX-FREE FUND
September 30, 1995
[PIE CHART APPEARS HERE]
General Obligations 30%
Water 10%
Sales Tax 11%
Sewer 6%
Housing 11%
Leasing 6%
Other 8%
Airport 10%
Transportation 8%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- -----------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Municipal Long-Term Securities (97.0%):
Airport Revenue (10.4%):
Los Angeles, California Department of
Airports, 6.50%, 5/15/04 $1,430,000 $1,590,875
Port of Oakland, California Port Revenue,
Capital Appreciation, Zero Coupon,
11/01/08 1,045,000 508,131
----------
2,099,006
----------
Electric Revenue (3.7%):
Puerto Rico Electric Power Authority
Power Revenue, Series U,
6.00%, 7/01/14 750,000 744,375
----------
General Obligations (29.5%):
State of California, 5.50%, 4/01/13 2,000,000 1,927,500
State of California, 6.00%, 8/01/10 550,000 567,875
State of California, 6.60%, 2/01/10 1,000,000 1,100,000
City of Los Angeles, California,
5.80%, 9/01/07 700,000 728,875
East Bay, California Regional
Park District, 5.50%, 9/01/00 500,000 525,625
Folsom, California School Facilities
Project, 6.00%, 8/01/10 300,000 309,750
Puerto Rico Commonwealth,
5.65%, 7/01/15 800,000 805,000
----------
5,964,625
----------
Housing Revenue (11.3%):
California Housing Finance Agency
Revenue, Home Mortgage,
6.50%, 2/01/08 1,070,000 1,144,900
California Housing Finance Agency
Revenue, Multi-Unit Rental
Housing, 6.88%, 8/01/24 500,000 515,625
Perris, California Single Family Mortgage
Revenue Bonds, GNMA Mortgage Backed
Securities, 6.20%, 6/01/23(b) 3,000,000 567,780
----------
2,228,305
----------
Public Improvements (9.0%):
California State Public Works
Board Leasing Revenue, Various
University of California Projects,
6.60%, 12/01/22 500,000 569,375
Sacramento, California Certificates
of Participation, Public Facilities
Project, 6.00%, 7/01/12 750,000 747,187
Santa Barbara, County California
Certificates of Participation,
6.40%, 2/01/11 500,000 505,000
----------
1,821,562
----------
Sewer Revenue (4.1%):
San Francisco, California City
& County Sewer Revenue Capital
Appreciation, 5.87%, 10/01/10 (b) 500,000 212,500
San Francisco, California City &
County Sewer Revenue,
5.90%, 10/01/08 600,000 621,750
----------
834,250
----------
Transportation Revenue (17.6%):
Contra Costa, California Transportation
Authority Sales Tax Revenue,
5.60%, 3/01/09 800,000 806,000
Riverside County, California Transportation
Community Sales Tax Revenue,
5.75%, 6/01/08 500,000 521,250
San Diego County, California Regional
Transportation Community Sales
Tax Revenue, 4.75%, 4/01/08 765,000 721,013
San Francisco, California Bay
Area Rapid Transit District Sales
Tax Revenue, 5.35%, 7/01/07 1,500,000 1,507,500
----------
3,555,763
----------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Schedule of Investments
GRIFFIN CALIFORNIA TAX-FREE FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- -----------------------------------------------------------------------------
<S> <C> <C>
University/Education Revenue (1.9%):
University of California Certificate
of Participation, UCLA Center
Chiller/Cogeneration Project,
6.00%, 11/01/21 $400,000 $ 386,500
-----------
386,500
-----------
Water Revenue (9.5%):
California State Department of Water
Resources, 6.00%, 12/01/06 500,000 539,375
Los Angeles, California Department
of Water & Power, Waterworks
Revenue, 6.20%, 7/01/12 600,000 617,250
Metropolitan Water District of Southern
California, 5.75%, 7/01/09 750,000 770,625
-----------
1,927,250
-----------
Total Municipal Long-Term Securities
(cost: $19,171,271) 19,561,636
-----------
Municipal Short-Term Securities (1.5%):
Industrial Development Revenue-Pollution
Control (1.5%):
California Pollution Control Authority
Resource Recovery Revenue,
4.65%, 10/02/95 (c) 200,000 200,000
California Pollution Control
Financing Authority, Shell Oil Company
Project A, 4.30%, 10/02/95 (c) 100,000 100,000
-----------
300,000
-----------
Total Municipal Short-Term Securities
(cost: $300,000) 300,000
-----------
Total Investments In Securities
(cost: $19,471,271)(d)(98.5%) 19,861,636
Other Assets Less Liabilities (1.5%) 395,846
-----------
Net Assets (100%) $20,257,482
===========
</TABLE>
Long Futures Contracts
- ----------------------
<TABLE>
<CAPTION>
Unrealized
Number of Notional Appreciation
Contracts Description Contract Value (Depreciation)
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
2 Municipal Bond, December 1995 $229,875 ($1,687)
</TABLE>
- ------------------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1 to
the financial statements.
(b) Rate on these zero coupon bonds represents annualized yield to maturity at
September 30, 1995.
(c) These variable rate securities have maturities greater than one year but
are redeemable upon demand. For purposes of calculating the Fund's weighted
average maturity, the length to maturity of these investments is considered
to be the greater of the period until the interest rate is adjusted or
until the principal can be recovered by demand. These securities were
pledged as collateral for futures contracts.
(d) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investment in securities based
on this cost were as follows:
Gross unrealized appreciation $445,193
Gross unrealized depreciation (56,516)
Net unrealized appreciation $388,677
========
See accompanying notes to financial statements.
-24-
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN GROWTH & INCOME FUND
Portfolio Manager: Quinn R. Stills,
The Boston Company Asset Management, Inc.
What were the significant factors that affected performance?
The Griffin Growth & Income Fund's performance over the past year was driven
by its holdings in financial services, basic industries, and health care. For
perspective, the financial services sector of the portfolio appreciated 56%,
basic industries rose 43%, and health care rose 46% for the twelve months ended
September 30, 1995. The rise in financial services was fueled by declining
interest rates, share repurchases and merger activity. Basic industry companies
benefited from sharply higher pricing, a weaker U.S. currency and increased
operating leverage created by previous restructurings. Health care companies
benefited from growth in new products and a weak dollar. Investors also pushed
these shares higher because of the diminished threat of draconian government
regulation.
What strategies and techniques were implemented during the year?
During the year, we invested heavily in statistically inexpensive companies
that possessed improving fundamentals. We similarly invested in several
multi-industry companies whose individual subsidiaries were worth more as
separate entities than as a single conglomeration. This strategy positioned the
portfolio to take advantage of the rally in the shares of certain banks, paper
companies and multinational conglomerates. In addition, we kept the portfolio
underweighted in technology shares because of the risks and volatility inherent
in many companies in that sector. As a result of this strategy, significant
returns were achieved in financial services, capital goods, health care and
consumer non-durable companies.
What themes can be seen in the current portfolio (industry weightings) and
why?
Investments for the Growth & Income Fund are selected using a bottom-up
approach, emphasizing the analysis of individual companies rather than broader
economic trends. Our bottom-up approach, however, has led to a significant
overweight in financial services and an underweight in technology and consumer
non-durables. The sector weights are driven by our quest for the most
outstanding values in the market at any given point in time.
What individual security holdings changed significantly during the year?
On December 1, 1994 The Boston Company Asset Management, Inc. took over
sub-advisory responsibilities of the Fund from Piper Capital Management, Inc.
Although, at that time, many of the fund's holdings were in financially strong
companies, we thought there were better opportunities in other areas of the
market. During the month of December approximately 80% of the portfolio was
sold, and new stocks were purchased. This transition was done with an eye
towards minimizing trading costs, and did not result in the realization of net
capital gains. During the following ten months, we realized profits from
selling significant positions in stocks including Intel and Aetna Life and
Casualty Company. We also initiated significant positions in AT&T and Dean
Witter Discover.
What is the strategy for the next six to twelve months?
Looking ahead, we plan to pursue the same strategy that has served us well
in the past; namely, we will invest in inexpensive, undervalued companies that
possess an improving set of fundamentals. We will continue to construct well
diversified portfolios to help protect the Fund from a shortfall in any one
company. Finally, we will continue to emphasize investments in companies where
we have identified a clear catalyst that will unlock the values and propel the
shares to higher levels for our clients. We must caution, however, that future
returns may not meet current levels of performance.
25
<PAGE>
GRIFFIN GROWTH & INCOME FUND
The two charts below show the performance of both classes of shares of the
Griffin Growth & Income Fund compared with the Standard & Poor's 500 Composite
Index (S&P 500) and the Morningstar Growth & Income Fund Average. If you had
invested $10,000 in Class A shares of the Griffin Growth & Income Fund when the
fund commenced operations on October 19, 1993, reinvesting all dividends, the
top chart would track the value of your investment through the period ended
September 30, 1995. If you had invested $10,000 in Class B shares of the Fund
when they were first offered on November 1, 1994, assuming all dividends were
reinvested, the bottom chart would track the performance of your investment
through the period ended September 30, 1995. The S&P 500 is an unmanaged index
of 500 large capitalization publicly traded stocks. The Morningstar Growth &
Income Fund Average is based on a universe of approximately 400 mutual funds
tracked by Morningstar, Inc. that have investment objectives similar to that of
the Griffin Growth & Income Fund. It is important to keep in mind that fund
performance reflects the deduction of the maximum front-end sales charge of 4.5%
with respect to Class A shares and the deduction of the maximum contingent
deferred sales charge (CDSC) of 5% with respect to Class B shares, while no such
charges are deducted from the indexes. Of course, past performance is not an
indicator of future results.
Griffin Growth & Income Fund Class A
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year.................... 26.05%
Since Inception............. 14.45%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Growth & Income Fund S&P 500 Morningstar Growth & Income Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000
Nov $9,619 Nov $9,943 Nov $9,873
Dec $9,692 Dec $10,063 Dec $10,072
Jan '94 $10,022 Jan '94 $10,405 Jan '94 $10,382
Feb $9,761 Feb $10,122 Feb $10,164
Mar $9,392 Mar $9,681 Mar $9,740
Apr $9,436 Apr $9,805 Apr $9,840
May $9,716 May $9,965 May $9,940
Jun $9,489 Jun $9,721 Jun $9,707
Jul $9,787 Jul $10,040 Jul $9,975
Aug $10,112 Aug $10,452 Aug $10,345
Sep $9,865 Sep $10,196 Sep $10,113
Oct $10,059 Oct $10,424 Oct $10,226
Nov $9,776 Nov $10,045 Nov $9,849
Dec $9,928 Dec $10,194 Dec $9,951
Jan '95 $10,108 Jan '95 $10,458 Jan '95 $10,109
Feb $10,511 Feb $10,865 Feb $10,491
Mar $10,879 Mar $11,186 Mar $10,765
Apr $11,195 Apr $11,515 Apr $11,025
May $11,636 May $11,975 May $11,397
Jun $11,915 Jun $12,251 Jun $11,642
Jul $12,368 Jul $12,658 Jul $12,028
Aug $12,513 Aug $12,689 Aug $12,102
Sep $13,014 Sep $13,225 Sep $12,489
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
Griffin Growth & Income Fund Class B
[CHART APPEARS HERE]
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year.................... N/A
Since Inception............. 24.54%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Growth & Income Fund S&P 500 Morningstar Growth & Income Fund Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Nov $9,770 Nov $9,636 Nov $9,631
Dec $9,917 Dec $9,779 Dec $9,730
Jan '95 $10,087 Jan '95 $10,032 Jan '95 $9,885
Feb $10,490 Feb $10,423 Feb $10,259
Mar $10,852 Mar $10,731 Mar $10,526
Apr $11,157 Apr $11,046 Apr $10,781
May $11,598 May $11,488 May $11,144
Jun $11,868 Jun $11,753 Jun $11,384
Jul $12,329 Jul $12,143 Jul $11,762
Aug $12,464 Aug $12,173 Aug $11,834
Sep $12,453 Sep $12,687 Sep $12,212
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by the
Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
26
<PAGE>
Schedule of Investments
GRIFFIN GROWTH & INCOME FUND
September 30, 1995
[PIE CHART APPEARS HERE]
Capital Goods 12%
Energy 9%
Consumer Services 11%
Health Care 10%
Financial Services 17%
Consumer/Non-Durable 9%
Technology 5%
Utilities 11%
Cash 6%
Miscellaneous 10%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- -----------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Common Stocks (93.1%):
Basic Industries (3.9%):
Boise Cascade Corporation 3,000 $ 121,125
Bowater Incorporated 2,500 116,563
Champion International 3,600 193,950
Grace (WR) & Company 13,100 874,425
Praxair Incorporated 9,400 251,450
Rayonier Incorporated 1,600 62,600
----------
1,620,113
----------
Capital Goods (11.6%):
Alcatel Alsthom ADR 2,400 40,800
Avnet Incorporated 4,300 221,988
Corning Incorporated 17,000 486,625
General Electric 5,900 376,125
ITT Corporation 5,200 644,800
Lockheed Martin Corporation 12,200 818,925
Philips Electronics N.V. 19,900 970,125
Raytheon Company 1,400 119,000
Rockwell International 10,100 477,225
TRW Incorporated 4,400 327,250
Varity Corporation (b) 7,200 320,400
----------
4,803,263
----------
Consumer/Durable (2.0%):
Black & Decker 7,000 238,875
Ford Motor Company 19,300 600,713
----------
839,588
----------
Consumer/Non-Durable (8.6%):
Archer-Daniels-Midland Company 14,000 215,250
Dial Corporation Arizona 16,000 398,475
Fruit of the Loom Incorporated (b) 13,400 276,375
Liz Claiborne 18,100 457,025
Loews Corporation 2,500 363,750
Philip Morris Companies Inc. 11,800 985,300
Polaroid Corporation 4,500 178,875
RJR Nabisco Holdings 15,900 514,763
Sherwin-Williams Company 4,000 140,000
V.F. Corporation 400 20,400
----------
3,550,213
----------
Consumer Services (10.9%):
American Stores 12,100 343,338
Cox Communications CLA (b) 268 5,427
Dillard Department Stores 12,300 392,063
Eckerd Corp. (b) 4,200 168,000
Kroger Company 12,100 412,913
Limited Inc. 22,300 423,700
May Department Stores 5,700 249,375
Melville Corporation 11,500 396,750
Multimedia Inc. 2,800 121,800
Price/Costco Inc. (b) 11,200 191,800
Rite Aid Corp. 14,800 414,400
Sears Roebuck & Company 5,900 217,563
Tandy Corporation 9,100 552,825
Times Mirror Company CLA 4,654 133,803
Toys R Us 15,200 410,400
Waban Incorporated (b) 4,700 88,713
----------
4,522,870
----------
Energy (9.1%):
Amerada Hess 3,400 165,325
Dresser Industries Inc. 8,800 210,100
Exxon 9,600 693,600
Horsham Corporation 23,000 301,875
Mapco Incorporated 5,800 298,700
Mobil Corporation 2,500 249,063
Oryx Energy Company 28,700 373,100
Repsol SA ADR 12,500 396,875
Royal Dutch Petroleum ADR 1,700 208,675
Tosco Corporation 11,000 379,500
Union Texas Petro Holdings Inc. 9,900 180,675
YPF Sociedad ADR 15,900 286,200
----------
3,743,688
----------
Financial Services (16.9%):
Ace Limited ADR 7,000 240,625
Allstate Corporation 1,901 67,239
American Express 17,900 794,313
American International Group 2,850 242,250
Bank of Boston 15,000 714,375
BankAmerica Corporation 6,900 413,138
Chase Manhattan Corporation 10,800 660,150
Dean Witter Discover 15,500 871,875
First Chicago Corporation 12,000 823,500
Fleet Financial Group 9,100 343,525
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Schedule of Investments
GRIFFIN GROWTH & INCOME FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Mid Ocean Ltd. ADR 3,500 $ 120,750
Morgan, J.P. 4,000 309,500
Republic New York Corporation 7,400 432,900
Shawmut National 10,800 363,150
St. Paul Companies 9,800 572,075
-----------
6,969,365
-----------
Health Care (9.9%):
Allergan Inc. 7,100 236,963
Baxter International Inc. 10,900 448,263
Bristol-Myers Squibb 3,000 218,625
Columbia/HCA Healthcare 7,452 362,354
Guidant Corp. 7,157 209,334
Lilly (Eli) & Company 4,049 363,936
Pharmacia Aktiebol ADR 10,300 308,035
Schering-Plough 9,600 494,400
Smithkline Beecham PLC ADR 8,000 405,000
Tenet Healthcare 33,000 573,375
Upjohn Company 11,000 490,875
-----------
4,111,160
-----------
Real Estate Investment Trusts (1.0%):
Associated Estates Realty 2,100 43,050
Avalon Properties 2,000 40,750
Camden Property Trust 2,100 46,463
Home Properties of New York 2,500 42,500
Liberty Property Trust 2,700 57,375
Oasis Residential 3,000 67,500
Smith Charles E Residential 1,200 27,750
Storage USA 2,300 71,013
Summit Properties 1,600 30,200
-----------
426,601
-----------
Technology (5.1%):
Apple Computer Inc. 6,000 223,500
Conner Peripherals (b) 10,400 172,900
Digital Equipment (b) 4,800 219,000
International Business Machines 9,900 934,313
Sun Microsystems Inc. (b) 9,000 567,000
-----------
2,116,713
-----------
Transportation (3.4%):
Burlington Northern Santa Fe 2,200 159,500
Canadian Pacific Limited ORD PAR 51,000 816,000
Pittson Services 15,300 413,100
-----------
1,388,600
-----------
<CAPTION>
Shares or
Principal Market
Name of Issuer Amount Value (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Utilities (10.7%):
AT & T Corporation 7,700 506,275
CMS Energy Corporation 15,300 401,625
GTE Corporation 15,400 604,450
Illinova Corporation Holding Co. 14,800 401,450
MCI Communications 26,000 677,625
NYNEX Corp. 9,700 463,175
Pacific Enterprises 11,000 276,375
Pinnacle West Capital 15,100 396,375
Public Service Company of New Mexico 8,600 140,825
Unicom Corporation 11,400 344,850
Western Resources 6,000 195,750
-----------
4,408,775
-----------
Total Common Stocks (cost: $32,644,365) 38,500,949
-----------
Preferred Stocks (0.1%):
Consumer Services (0.1%):
Times Mirror Company SER B PFD 1,646 39,710
-----------
Total Preferred Stocks (cost: $32,893) 39,710
-----------
Short-Term Securities (6.3%):
Repurchase Agreement (6.3%):
State Street Bank & Trust Co. Master
Repurchase Agreement, 4.5%, 10/2/95,
102% Collateralized by U.S. Government
Securities $2,606,000 2,606,000
-----------
Total Short-Term Securities (cost: $2,606,000) 2,606,000
-----------
Total Investments in Securities
(cost: $35,283,258)(c) (99.5%) 41,146,659
Other Assets Less Liabilities (0.5%) 223,679
Net Assets (100%) $41,370,338
===========
</TABLE>
- -----------------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1 to
the financial statements.
(b) Currently non-income producing.
(c) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities based
on this cost were as follows:
Gross unrealized appreciation $6,170,042
Gross unrealized depreciation (306,641)
----------
Net unrealized appreciation $5,863,401
==========
See accompanying notes to financial statements.
28
<PAGE>
MANAGEMENT DISCUSSION
GRIFFIN GROWTH FUND
Portfolio Manager: Jonathan M. Greene,
T. Rowe Price Associates, Inc.
What were the significant market factors that affected performance?
For most of the third quarter of 1995 (the fund commenced operations on June 12,
1995), small and middle capitalization stocks generally outperformed larger
capitalization stocks. Growth stocks were in favor during the quarter, and
generally outperformed other types of investments as increases in quarterly
earnings fueled investors' desire for fast growing companies.
What strategies and techniques were implemented since the Fund commenced
operations?
The Fund began operations on June 12th and the cash was quickly put to work in a
broadly diversified portfolio (over two hundred companies). We generally avoid
making "big bets" on individual companies. A "big bet" would be investing on the
order of 3% to 5% of the Fund's assets in a single company. Given our fondness
for diversification, we prefer holdings on the order of 1% in a single company
at the time of purchase. We also remained essentially "fully invested," with
minimal cash positions, since we don't believe that timing the market is a
worthwhile endeavor.
What themes can be seen in the current portfolio (industry weightings) and why?
The most dominant theme in terms of industry weighting is the portfolio's
technology exposure. The portfolio has about 10% more in technology issues than
the Fund's benchmark, the Standard & Poors Mid Cap 400 Index (28% versus about
18% for the index). However, given our opinion that technology stocks have
already had very good performance for the year, we elected to maintain a
relatively conservative technology posture versus other middle capitalization
growth funds, many of which have a 35% to 40% technology exposure.
What individual security holdings changed since the Fund commenced operations?
The portfolio was initially invested in a broad array of middle capitalization
growth stocks. Subsequent cash inflows (net subscriptions) have been invested
gradually in the company stocks already in the portfolio, as well as
diversifying into new names. There was only one sale from the portfolio, which
amounted to only a minor adjustment to our stock allocations.
What is the strategy for the next six to twelve months?
We plan to continue to run the portfolio as structured. We will maintain the
broad diversification and relatively conservative commitment to technology
issues. This approach falls between the benchmark S&P Mid Cap 400 and a more
typical mid cap growth fund. We don't believe that the market will continue
without a correction of some sort, and such a correction could be particularly
violent in the technology sector. Growth stocks in general and smaller
capitalization issues tend to be more volatile than the overall market. Thus, in
a broad market downturn this portfolio could experience significant negative
volatility. Nevertheless, going forward, we also will continue to maintain a
"fully invested" posture (less than 5% cash reserves) because we believe that
trying to time the market would be a mistake.
29
<PAGE>
GRIFFIN GROWTH FUND
The two charts below show the performance of both classes of shares of the
Griffin Growth Fund compared with the Standard and Poor's MidCap 400 Index and
the Lipper Mid-Cap Equity Fund Average. If you had invested $10,000 in Class A
shares of the Griffin Growth Fund when the Fund commenced operations on June 12,
1995, reinvesting all dividends, the top chart would track the value of your
investment through the period ended September 30, 1995. If you had invested
$10,000 in Class B shares of the Fund when they were first offered on June 12,
1995, assuming all dividends were reinvested, the bottom chart would track the
performance of your investment through the period ended September 30, 1995. The
Standard and Poor's MidCap 400 Index is an unmanaged index of 400 publicly
traded, middle capitalization stocks. The Lipper Mid-Cap Equity Fund Average is
based on a universe of mutual funds tracked by Lipper Analytical Services, Inc.
that have investment objectives similar to that of the Griffin Growth Fund. It
is important to keep in mind that fund performance reflects the deduction of
the maximum front-end sales charge of 4.5% with respect to Class A shares and
the deduction of the maximum contingent deferred sales charge (CDSC) of 5% with
respect to Class B shares, while no such charges are deducted from the indexes.
Of course, past performance is not an indicator of future results.
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 4.5% sales charge)
One year ................................ N/A
Since Inception ......................... 11.37%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Growth Fund S&P MidCap 400 Index Lipper Mid-Cap Equity Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Initial $9,550 Initial $10,000 Initial $10,000
Jun $9,827 Jun $10,265 Jul $10,777
Jul $10,524 Jul $10,800 Aug $10,918
Aug $10,715 Aug $11,000 Sep $11,261
Sep $11,137 Sep $11,266
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by
the Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS*
(reflects deduction of 5% CDSC)
One year ............................... N/A
Since Inception ........................ 11.50%
VALUE OF $10,000 INVESTED
<TABLE>
<CAPTION>
Griffin Growth Fund S&P MidCap 400 Index Lipper Mid-Cap Equity Average
Dollar Dollar Dollar
Months Value Months Value Months Value
- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Initial $10,000 Initial $10,000 Initial $10,000
Jun $10,270 Jun $10,265 Jul $10,777
Jul $11,020 Jul $10,800 Aug $10,918
Aug $11,220 Aug $11,000 Sep $11,261
Sep $11,150 Sep $11,266
</TABLE>
* During the period certain fees and expenses were waived and reimbursed by
the Advisor, Administrator and Distributor. In the absence of these
reimbursements, the total return would have been lower.
30
<PAGE>
Schedule of Investments
GRIFFIN GROWTH FUND
September 30, 1995
[PIE CHART APPEARS HERE]
Media & Communications 7%
Computer Software 5%
Capital Equipment 5%
Communications Equipment 5%
Consumer Cyclicals 5%
Electronics 6%
Financial Services 13%
Health Care 11%
Business Services 7%
Resources 6%
Retailing 7%
Technology 6%
Cash 8%
Other 9%
Investment Categories Reflect Percentages of Investments in Securities
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- --------------------------------------------------------------------------------
(Percentages of each investment category relate to total net assets)
<S> <C> <C>
Common Stocks (94.8%):
Business Services (7.2%):
American List Corp. 200 $5,725
CUC International 800 27,900
Equifax Inc. 500 20,938
First Financial Management 400 39,050
H & R Block 200 7,600
Kelly Services CL A 400 10,700
Manpower (b) 400 11,600
Heritage Media Corp. CL A(b) 200 6,025
Medaphis (b) 800 22,000
Mutual Risk Management LTD 700 27,650
Paychex Inc. 800 37,000
Reuters Holdings ADR B 700 37,013
Robert Half International Inc. (b) 400 13,650
Sanifill Inc. (b) 200 6,550
SEI Corp. 100 2,050
Service Corp International 500 19,563
Sylvan Learnings Systems (b) 200 6,350
United American Healthcare (b) 300 3,338
Western Waste Industries (b) 400 8,000
-------
312,702
-------
Capital Equipment (5.0%):
Agco Corp. 400 18,200
Alco Standard Corp. 500 42,375
Alamo Group Inc. 700 12,600
American Power Conversion (b) 200 2,450
Anixter International Inc. (b) 400 16,550
Briggs and Stratton 400 16,100
Cascade Corp. 300 4,575
Commercial Metals Co. 300 8,100
Danaher Corp. 300 9,825
Danka Business Systems Inc. ADR 200 7,200
Greenfield Industries Inc. 300 9,225
Kennametal Inc. 400 14,500
Littlefuse Inc. (b) 300 9,750
Parker Hannifin 500 19,000
Teleflex Inc. 400 16,200
Trimas Corporation 200 4,150
Watts Industries CL A 200 4,975
-------
215,775
-------
Communications Equipment (5.3%):
Andrew Corp. (b) 500 30,563
Aspect Telecommunications Corp. (b) 800 21,600
Cidco Inc. (b) 100 3,525
Coherent Communications Systems Corp. (b) 300 8,250
DSC Communications (b) 400 23,700
Ericsson L.M. Telephone Co. ADR (b) 1,700 41,650
General Instrument Corp. (b) 600 18,000
Glenayre Technologies Inc. (b) 250 18,000
Stratacom Inc. 300 16,575
Tellabs Inc. (b) 300 12,638
US Robotics Corp. (b) 400 34,100
-------
228,601
-------
Computer Communications (3.1%)
Ascend Communications Inc. (b) 100 8,000
Bay Networks Inc. (b) 400 21,350
Cabletron Systems Inc. (b) 400 26,350
Cascade Communications (b) 200 9,850
Cisco Systems Inc. (b) 500 34,500
Network General Corp. (b) 400 16,500
3Com Corp. (b) 400 18,200
-------
134,750
-------
Computer Services (1.3%):
America Online Inc. (b) 300 20,625
Cerner Corp. (b) 200 6,850
Control Data Systems Inc. (b) 300 3,638
GTech Holdings (b) 200 6,025
HBO & Co. 300 18,750
------
55,888
------
Computer Software (5.3%):
Acclaim Entertainment (b) 100 2,563
Adobe Systems Inc. 500 25,875
BMC Software Inc. (b) 400 18,400
Broderbund Software Inc. (b) 300 22,838
Eletronic Arts Inc. (b) 100 3,675
FTP Software Inc. (b) 200 5,550
Informix Corp. (b) 300 9,750
Intuit (b) 200 9,400
Macromedia (b) 300 17,138
Minnesota Educational Computers (b) 400 10,800
Netmanaged Inc. (b) 300 7,125
Oracle Corp. (b) 800 30,700
Parametric Technology (b) 100 6,150
People Soft Inc. (b) 100 9,088
Sierra On-Line (b) 300 11,775
Sybase Inc. (b) 700 22,488
Symantec Corp. (b) 400 12,000
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Schedule of Investments
GRIFFIN GROWTH FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- -----------------------------------------------------------------------------
<S> <C> <C>
Synopsys Inc. (b) 200 $ 6,150
--------
231,465
--------
Consumer Cyclicals (5.2%):
Bed Bath & Beyond (b) 600 18,300
Clayton Homes Inc. 200 4,750
Harley-Davidson Inc. 400 9,750
Harman International Industries 410 20,090
Lafarge Corp. 500 9,188
Lennar Corp. 200 4,350
Lilly Industries CL A 600 7,575
National Health Investors 500 15,125
Oakwood Homes Corp. 800 28,200
Rouse 1,000 21,875
Security Capital Pacific Trust 700 13,300
Shaw Industries Inc. 500 7,375
Sherwin-Williams Co. (b) 400 14,000
Sturm Ruger & Co. Inc. 300 9,375
Superior Industries International 300 8,063
USG Corporation (b) 500 14,000
Wabash National Corp. 400 14,150
Williams Sonoma Inc. (b) 200 4,150
--------
223,616
--------
Consumer/Non-Durable (3.1%):
Callaway Golf Co. 700 10,850
Coors Adolph Co. CL B 100 1,813
Goodmark Foods 500 9,250
Hormel Food Corp. 500 13,188
Kellwood Co. 400 8,250
Lancaster Colony 365 12,410
Mattel Inc. 500 14,688
Mondavi Robert Corp. (b) 200 5,100
Nautica Enterprises (b) 250 8,563
Promus Hotel Corp. (b) 100 2,275
Ultratech Stepper Inc. (b) 200 8,450
Unifi Inc. 400 9,800
Unitog Co. 300 7,125
Westwood One Inc. (b) 300 5,325
Wolverine World Wide 600 16,425
--------
133,512
--------
Electronics (5.9%):
Atmel Corporation (b) 400 13,500
Integrated Device Technology (b) 1,000 25,000
International Rectifier Corp. (b) 300 12,075
Linear Technology Corp. 1,100 45,650
LSI Logic Corp. (b) 400 23,100
Maxim Integrated Products (b) 700 51,800
Microchip Technology (b) 400 15,150
Molex Incorporated Class A 625 20,938
Vishay Intertechnology (b) 600 25,200
Xilinx Inc. (b) 500 24,063
--------
256,476
--------
Financial Services (13.4%):
Advanta Corp CL B 200 8,500
Ambac Inc. 400 17,600
Bank of New York Co. Inc. 700 32,550
Bank South Corp. 300 8,438
Baybanks Inc. 300 22,763
City National Inc. 700 9,275
Crestar Financial Corp. 300 16,763
Equitable of Iowa Companies 500 18,500
Finova Group Inc. 500 22,250
First AMR Corp-Tenn 600 25,875
First Bank Systems 700 33,688
First USA Inc. 300 16,275
Foothill Group Inc. CL A (b) 500 14,938
Franklin Resources Inc. 400 23,050
Green Tree Financial Corp. 700 42,700
HFS Inc. (b) 00 36,663
J S B Financial Inc. 200 6,275
Mercury Finance Co. 1,200 29,250
MGIC Investment Corporation 600 34,350
Midlantic Corporation Inc. 200 10,850
North American Mortgage Co. 600 15,600
Progressive Corporation 500 22,375
Quick & Reilly Group 300 13,763
Raymond James Financial Inc. 100 2,175
Roosevelt Financial Group Inc. 200 3,525
Charles Schwab Corporation 1,600 44,800
State Street Boston Corporation 400 16,000
United Asset Management Corporation 200 8,025
Zurich Reinsurance Centre Holdings (b) 600 17,850
--------
574,666
--------
Health Care (11.1%):
Amgen (b) 1,100 54,840
Amsco International (b) 600 11,925
Amway Asia Pacific LTD. 400 14,950
Biogen Inc. (b) 600 36,000
Cardinal Health Inc. 700 38,763
Cordis Corp. (b) 400 33,900
Forest Laboratories Inc. (b) 300 13,350
Health Management Association CL A (b) 500 16,063
Healthcare & Retirement Corp. (b) 700 22,488
Horizons/CMS Healthcare (b) 500 11,375
Humana Inc. (b) 600 12,075
Medtronic Inc. 400 21,500
Mid Atlantic Medical Services Inc. (b) 600 11,775
Mylan Laboratories Inc. 600 12,000
Omnicare Inc. 400 15,600
Ornda Healthcorp (b) 100 2,125
Owens & Minor Inc. 100 1,288
Oxford Health Plans Inc. (b) 200 14,550
Roberts Pharmaceutical (b) 200 4,700
Summit Technology (b) 100 4,575
Sybron International Corp. (b) 400 16,100
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
Schedule of Investments
GRIFFIN GROWTH FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- -------------------------------------------------------------------------------
<S> <C> <C>
United HealthCare Corp. 900 $43,988
Universal Health Services CL A 200 6,850
U S Healthcare Inc. 500 17,688
Value Health Inc. (b) 100 2,650
Vencor Inc. (b) 1,100 35,200
-------
476,318
-------
Media & Communications (6.8%):
Belo (A.H.) Corp. 400 13,750
Carmike Cinemas CL A (b) 1,100 24,200
Catalina Marketing (b) 300 18,600
Cellular Communications of Puerto Rico (b) 300 9,150
Centennial Cellular Corp. CL A(b) 200 3,900
Central Newspapers Inc. 100 3,050
Clear Channel Communications Inc.(b) 500 37,875
Comcast Corp. CL A 1,100 22,000
Frontier Corp. 600 15,975
Gaylord Entertainment 400 10,850
LCI International Inc. (b) 500 19,625
Paging Network Inc. 400 19,200
Reynolds & Reynolds 400 13,750
TCA Cable TV Inc. 300 8,625
US Cellular Corp. (b) 100 3,650
Viacom Inc - CL B 800 39,800
Vodafone Group ADR 700 28,700
-------
292,700
-------
Resources (6.3%):
Airgas Inc. (b) 1,000 26,625
Apache Corp. 600 15,750
B J Services Co. 600 15,150
Crompton & Knowles Corp. 300 4,463
Devon Energy Corporation 400 8,750
Great Lakes Chemical 200 13,525
Louisiana Pacific Corp. 300 7,238
Magma Copper (b) 600 11,250
Noble Affiliates 700 18,463
Pioneer Group Inc. 100 2,738
Pride Petroleum Services Inc. (b) 800 8,000
Sealed Air (b) 300 16,538
Schulman A Inc. 500 12,500
Smith International 700 12,163
Sonat Inc. 600 19,200
Tosco Corp. 300 10,350
Triton Energy Corp. (b) 100 4,838
United Meridian Corp. (b) 600 10,275
Wellman Inc. 300 7,350
Willamette Industries 500 33,375
Worthington Industries Inc. 700 12,863
-------
271,404
-------
Retailing (7.4%):
Apple South Inc. 200 4,550
Applebees International Inc. 200 5,450
Autozone Inc. (b) 400 10,200
Brinker International Inc. (b) 400 5,950
Circuit City Stores Inc. 500 15,813
Dollar General Corp. 1,200 35,250
Fingerhut Companies Inc. 200 3,225
General Nutrition Companies Inc. (b) 300 13,500
Harrah's Entertainment Inc. (b) 200 5,850
Heilig Meyers Inc. 300 6,975
La Quinta Inns Inc. 500 14,000
Lands' End Inc. (b) 800 12,600
Lowes Companies Inc. 400 12,000
Marcus, Inc. 300 10,613
Michael's Stores Inc. (b) 500 8,125
Mirage Resorts (b) 500 16,438
Office Depot Inc. (b) 1,000 30,125
Outback Steakhouse Inc. (b) 500 15,375
Pep Boys-Manny, Moe & Jack 400 10,850
Safeway Inc. (b) 400 16,700
Sbarro Inc. 600 13,800
Starbucks Corp. (b) 200 7,575
The Men's Wearhouse Inc. (b) 200 7,200
Viking Office Products (b) 600 25,050
Zale Corp. (b) 900 12,488
-------
319,702
-------
Technology (6.1%):
Applied Materials Inc. (b) 200 20,450
Ceridian Corporation (b) 700 31,063
Cognex Corp. (b) 100 4,825
Compaq Computer Corp. (b) 600 29,025
EMC Corp.-Mass 600 10,875
KLA Instruments (b) 100 8,025
Lam Research Corp. (b) 400 23,800
Seagate Technology (b) 600 25,275
Sensormatic Electronics 500 11,500
Silicon Graphics (b) 600 20,625
Sun Microsystems Inc. (b) 400 25,200
Symbol Technology (b) 400 13,250
Tektronix Inc. 400 23,600
Thermo Electron Corporation (b) 400 18,550
-------
266,063
-------
Transportation (2.5%):
Air Express International 400 10,100
American Freightways (b) 100 1,500
Atlantic Southeast Airlines 400 9,350
Carnival 800 19,200
Comair Holdings Inc. 500 13,250
Fritz Co. Inc.(b) 100 7,369
Kansas City Southern Industries Inc. 400 18,200
M S Carrier Inc. (b) 400 6,400
Werner Enterprises Inc. 500 10,375
Wisconsin Central Transportation (b) 200 13,350
-------
109,094
-------
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Schedule of Investments
GRIFFIN GROWTH FUND (Continued)
September 30, 1995
<TABLE>
<CAPTION>
Shares or
Principal Market
Name of Issuer Amount Value (a)
- -----------------------------------------------------------------------------
<S> <C> <C>
Total Common Stocks
(cost: $3,748,109) $4,102,732
----------
Rights (0.0%):
Telecommunication (0.0%):
L.M. Ericsson Telephone Rights (b) 1,700 1,944
----------
Total Rights (cost: $0) 1,944
----------
Short-Term Securities (8.2%):
Repurchase Agreement (8.2%)
State Street Bank & Trust Co.
Master Repurchase Agreement, 4.5%,
10/2/95, 102% Collateralized by U.S.
Government Securities $354,000 354,000
Total Short-Term Securities
(cost: $354,000) 354,000
----------
Total Investments in Securities
(cost: $4,102,109)(c) (103.0%) 4,458,676
Other Assets Less Liabilities (-3.0%) (122,946)
----------
Net Assets (100%) $4,335,730
==========
</TABLE>
- --------------------------------
Notes to Schedule of Investments
(a) Securities are valued in accordance with procedures described in note 1 to
the financial statements.
(b) Currently non-income producing.
(c) Cost is the same for federal income tax purposes. The aggregate gross
unrealized appreciation and depreciation of investments in securities based
on this cost were as follows:
Gross unrealized appreciation $410,730
Gross unrealized depreciation (54,183)
--------
Net unrealized appreciation $356,567
========
See accompanying notes to financial statements.
34
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<CAPTION>
Money Tax-Free Short-Term
Market Money Bond
ASSETS Fund Market Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
Investments:
In securities, at market value* (note 1)................. $79,920,025 $8,606,941 $3,451,124
Cash....................................................... 283 36,206 307
Receivables:
Dividends and Interest................................... 427,870 64,842 67,547
Fund shares old.......................................... 190,947 3,013 86,752
Investment securities sold............................... 0 200,000 24,384
Other receivables........................................ 0 0 0
Organization expenses, net of amortization (note 1)........ 52,220 52,220 24,129
----------- ---------- ----------
Total assets........................................... 80,591,345 8,963,222 3,654,243
----------- ---------- ----------
LIABILITIES
Distributions to shareholders.............................. 349,494 23,459 15,418
Fund shares redeemed....................................... 192,473 2,258 19,129
Payable for securities purchased........................... 0 260,758 0
Payable for organizational expenses........................ 52,220 52,220 24,129
Other accrued expenses..................................... 33,155 3,193 9
----------- ---------- ----------
Total liabilities...................................... 627,342 341,888 58,685
----------- ---------- ----------
NET ASSETS............................................. $79,964,003 $8,621,334 $3,595,558
=========== ========== ==========
Net assets consist of:
Capital stock, Class A or single class................... 79,956 8,627 357
Capital stock, Class B................................... N/A N/A 1
Additional paid in capital, Class A or single class...... 79,876,185 8,617,501 3,570,925
Additional paid in capital, Class B...................... N/A N/A 13,160
Undistributed net investment income...................... 0 0 0
Undistributed net realized gain (loss) on investments
and future contracts.................................... 7,862 (4,794) (136)
Net unrealized appreciation (depreciation) of
investments and futures contracts....................... 0 0 11,251
----------- ---------- ----------
NET ASSETS............................................. $79,964,003 $8,621,334 $3,595,558
=========== ========== ==========
Computation of net asset value and offering price (note 4):
Net assets, Class A or single class...................... $79,964,003 $8,621,334 $3,582,366
Shares outstanding, Class A or single class.............. 79,956,473 8,626,128 356,327
Net asset value, Class A or single class................. $1.00 $1.00 $10.05
Maximum offering price, Class A or single class.......... $1.00 $1.00 $10.41
Net assets, Class B...................................... N/A N/A $13,192
Shares outstanding, Class B.............................. N/A N/A 1,313
Net asset value and offering price, Class B.............. N/A N/A $10.05
* Investments in securities at identified cost............. $79,920,025 $8,606,941 $3,439,873
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<CAPTION>
ASSETS
U.S. Municipal
Government Bond Bond
Income Fund Fund Fund
----------- ----------- ----------
<S> <C> <C> <C>
Investments:
In securities, at market value* (note 1)................. $30,655,940 $12,182,506 $5,425,894
Cash....................................................... 2,770 17 87,092
Receivables:
Dividends and Interest................................... 333,877 158,810 71,605
Fund shares sold......................................... 87,104 69,983 5,037
Investment securities sold............................... 0 2,330,558 0
Other receivables........................................ 229 0 2,812
Organization expenses, net of amortization (note 1)........ 52,220 52,220 52,220
----------- ----------- ----------
Total assets........................................... 31,132,140 14,794,094 5,644,660
----------- ----------- ----------
LIABILITIES
Distributions to shareholders.............................. 160,923 59,403 22,662
Fund shares redeemed....................................... 38,182 19,832 55
Payable for securities purchased........................... 0 2,486,854 0
Payable for organizational expenses........................ 52,220 52,220 52,220
Other accrued expenses..................................... 9,244 4,125 1,594
----------- ----------- ----------
Total liabilities........................................ 260,569 2,622,434 76,531
----------- ----------- ----------
NET ASSETS............................................... $30,871,571 $12,171,660 $5,568,129
=========== =========== ==========
Net assets consist of:
Capital stock, Class A or single class................... 3,173 1,338 614
Capital stock, Class B................................... 169 17 6
Additional paid in capital, Class A or single class...... 29,001,354 11,944,620 5,521,717
Additional paid in capital, Class B...................... 1,548,635 148,765 54,691
Undistributed net investment income...................... 6,286 1,644 568
Undistributed net realized gain (loss) on investments
and future contracts.................................... 90,988 (65,626) (107,116)
Net unrealized appreciation (depreciation) of
investments and futures contracts....................... 220,966 140,902 97,649
----------- ----------- ----------
NET ASSETS............................................. $30,871,571 $12,171,660 $5,568,129
=========== =========== ==========
Computation of net asset value and offering price (note 4):
Net assets, Class A or single class...................... $29,307,963 $12,021,529 $5,512,067
Shares outstanding, Class A or single class.............. 3,171,919 1,337,451 614,143
Net asset value, Class A or single class................. $9.24 $8.99 $8.98
Maximum offering price, Class A or single class.......... $9.68 $9.41 $9.40
Net assets, Class B...................................... $ 1,563,608 $150,131 $56,062
Shares outstanding, Class B.............................. 169,102 16,176 6,245
Net asset value and offering price, Class B.............. $9.25 $8.98 $8.98
* Investments in securities at identified cost............. $30,434,974 $12,041,604 $5,325,870
<CAPTION>
ASSETS
California Growth &
Tax-Free Income Growth
Fund Fund Fund
----------- ----------- ----------
<S> <C> <C> <C>
Investments:
In securities, at market value* (note 1)................. $19,861,636 $41,146,659 $4,458,676
Cash....................................................... 28,164 673 643
Receivables:
Dividends and Interest................................... 316,534 88,522 1,563
Fund shares sold......................................... 139,926 255,823 77,666
Investment securities sold............................... 0 255,224 0
Other receivables........................................ 2,812 0 40
Organization expenses, net of amortization (note 1)........ 52,220 52,220 24,129
----------- ----------- ----------
Total assets........................................... 20,401,292 41,799,121 4,562,717
----------- ----------- ----------
LIABILITIES
Distributions to shareholders.............................. 83,321 0 0
Fund shares redeemed....................................... 2,152 123,736 51,564
Payable for securities purchased........................... 0 234,245 151,294
Payable for organizational expenses........................ 52,220 52,220 24,129
Other accrued expenses..................................... 6,117 18,582 0
----------- ----------- ----------
Total liabilities...................................... 143,810 428,783 226,987
----------- ----------- ----------
NET ASSETS............................................. $20,257,482 $41,370,338 $4,335,730
=========== =========== ==========
Net assets consist of:
Capital stock, Class A or single class................... 2,436 2,693 359
Capital stock, Class B................................... 122 202 13
Additional paid in capital, Class A or single class...... 19,427,781 31,962,416 3,827,762
Additional paid in capital, Class B...................... 954,684 2,652,451 141,824
Undistributed net investment income...................... 4,662 7,809 9,708
Undistributed net realized gain (loss) on investments
and future contracts.................................... (520,880) 881,366 (503)
Net unrealized appreciation (depreciation) of
investments and futures contracts....................... 388,677 5,863,401 356,567
----------- ----------- ----------
NET ASSETS............................................. $20,257,482 $41,370,338 $4,335,730
=========== =========== ==========
Computation of net asset value and offering price (note 4):
Net assets, Class A or single class...................... $19,291,900 $38,483,312 $4,186,502
Shares outstanding, Class A or single class.............. 2,436,233 2,691,747 359,063
Net asset value, Class A or single class................. $7.92 $14.30 $11.66
Maximum offering price, Class A or single class.......... $8.29 $14.97 $12.21
Net assets, Class B...................................... $965,582 $ 2,887,026 $149,228
Shares outstanding, Class B.............................. 121,916 202,018 12,806
Net asset value and offering price, Class B.............. $7.92 $14.29 $11.65
* Investments in securities at identified cost............. $19,471,271 $35,283,258 $4,102,109
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
STATEMENTS OF OPERATIONS
For the year ended September 30, 1995 (except as indicated)
<TABLE>
<CAPTION>
Money Tax-Free Short-Term
Market Money Bond
Fund Market Fund Fund*
========== =========== ===========
<S> <C> <C> <C>
Investment income:
Interest............................................................ $3,840,881 $355,855 $41,698
Dividends (net of foreign withholding taxes of $8,868
and $37 for the Growth & Income Fund and Growth Fund,
respectively)...................................................... 0 0 0
---------- ----------- -----------
Total Income.................................................... 3,840,881 355,855 41,698
---------- ----------- -----------
Expenses:
Advisory fees (note 2).............................................. 329,306 46,869 3,479
Administration and accounting fees (note 2)......................... 131,722 18,748 1,392
Distribution fees (note 2).......................................... 131,722 18,748 1,754
Amortization of organization expenses............................... 17,108 17,108 1,554
Legal and audit fees................................................ 86,993 42,348 6,103
Registration fees................................................... 13,494 3,236 1,120
Directors' fees..................................................... 8,766 8,766 833
Shareholder reports................................................. 31,495 1,810 934
Insurance expense................................................... 19,466 3,503 0
Custodian fees...................................................... 11,278 4,166 713
Printing and postage................................................ 70,440 12,697 1,629
---------- ----------- -----------
Total expenses.................................................. 851,790 177,999 19,511
Less:
Waived fees (note 2)................................................ (383,186) (52,069) (6,625)
Reimbursement from administrator (note 2)........................... (190,837) (84,781) (12,879)
Expense reductions (note 5)......................................... (852) (2,354) (7)
---------- ----------- -----------
Net expenses.................................................... 276,915 38,795 0
---------- ----------- -----------
Net investment income........................................... 3,563,966 317,060 41,698
---------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on sale of investments..................... 7,862 (4,765) (136)
Net realized loss on sale of futures contracts...................... 0 0 0
Net change in unrealized appreciation of investments................ 0 0 11,251
Net change in unrealized depreciation of futures contracts.......... 0 0 0
---------- ----------- -----------
Net realized and unrealized gain (loss) on investments.......... 7,862 (4,765) 11,115
---------- ----------- -----------
Net increase in net assets resulting from operations............ $3,571,828 $312,295 $52,813
========== =========== ===========
</TABLE>
*Since commencement of operations on June 12, 1995.
See accompanying notes to financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
U.S. Municipal
Government Bond Bond
Income Fund Fund Fund
=========== ========= ===========
<S> <C> <C> <C>
Investment income:
Interest............................................................ $1,689,160 $598,445 $225,171
Dividends (net of foreign withholding taxes of $8,868
and $37 for the Growth & Income Fund and Growth Fund,
respectively)...................................................... 0 0 0
---------- ---------- --------
Total Income.................................................... 1,689,160 598,445 225,171
---------- ---------- --------
Expenses:
Advisory fees (note 2).............................................. 118,300 43,325 20,156
Administration and accounting fees (note 2)......................... 47,320 17,330 8,062
Distribution fees (note 2).......................................... 61,389 21,938 10,128
Amortization of organization expenses............................... 17,108 17,108 17,108
Legal and audit fees................................................ 56,344 47,940 44,558
Registration fees................................................... 13,029 7,577 7,237
Directors' fees..................................................... 8,766 8,766 8,766
Shareholder reports................................................. 10,906 4,428 982
Insurance expense................................................... 6,386 2,547 915
Custodian fees...................................................... 13,399 3,757 3,588
Printing and postage................................................ 37,595 16,630 12,061
---------- ---------- --------
Total expenses.................................................. 390,542 191,346 133,561
Less:
Waived fees (note 2)................................................ (193,308) (70,997) (28,799)
Reimbursement from administrator (note 2)........................... (144,944) (101,890) (88,657)
Expense reductions (note 5)......................................... (1,365) (328) (3,450)
---------- ---------- --------
Net expenses.................................................... 50,925 18,131 12,655
---------- ---------- --------
Net investment income........................................... 1,638,235 580,314 212,516
---------- ---------- --------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on sale of investments..................... 90,910 (36,089) (1,240)
Net realized loss on sale of futures contracts...................... 0 0 0
Net change in unrealized appreciation of investments................ 1,217,932 567,176 183,698
Net change in unrealized depreciation of futures contracts.......... 0 0 (2,375)
---------- ---------- --------
Net realized and unrealized gain (loss) on investments.......... 1,308,842 531,087 180,083
---------- ---------- --------
Net increase in net assets resulting from operations............ $2,947,077 $1,111,401 $392,599
========== ========== ========
<CAPTION>
California Growth &
Tax-Free Income Growth
Fund Fund Fund*
========== ========== =========
<S> <C> <C> <C>
Investment income:
Interest............................................................ $ 933,737 $ 96,329 $ 4,751
Dividends (net of foreign withholding taxes of $8,868
and $37 for the Growth & Income Fund and Growth Fund,
respectively)...................................................... 0 549,275 4,957
---------- ---------- --------
Total Income.................................................... 933,737 645,604 9,708
---------- ---------- --------
Expenses:
Advisory fees (note 2).............................................. 82,385 141,488 4,793
Administration and accounting fees (note 2)......................... 32,954 47,163 1,598
Distribution fees (note 2).......................................... 43,027 64,574 2,135
Amortization of organization expenses............................... 17,108 17,108 1,554
Legal and audit fees................................................ 51,335 63,458 6,401
Registration fees................................................... 2,104 14,725 1,241
Directors' fees..................................................... 8,766 8,766 833
Shareholder reports................................................. 6,505 24,478 1,203
Insurance expense................................................... 4,569 4,946 0
Custodian fees...................................................... 2,978 17,362 6,714
Printing and postage................................................ 23,844 30,989 1,728
---------- ---------- --------
Total expenses.................................................. 275,575 435,057 28,200
Less:
Waived fees (note 2)................................................ (117,999) (181,042) (8,526)
Reimbursement from administrator (note 2)........................... (102,916) (147,855) (19,668)
Expense reductions (note 5)......................................... (2,728) (45) (6)
---------- ---------- --------
Net expenses.................................................... 51,932 106,115 0
---------- ---------- --------
Net investment income........................................... 881,805 539,489 9,708
---------- ---------- --------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) on sale of investments..................... (37,256) 905,872 (503)
Net realized loss on sale of futures contracts...................... (15,101) 0 0
Net change in unrealized appreciation of investments................ 747,931 5,835,264 356,567
Net change in unrealized depreciation of futures contracts.......... (1,688) 0 0
---------- ---------- --------
Net realized and unrealized gain (loss) on investments.......... 693,886 6,741,136 356,064
---------- ---------- --------
Net increase in net assets resulting from operations............ $1,575,691 $7,280,625 $365,772
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the periods ended September 30, 1995 and September 30, 1994
<TABLE>
<CAPTION>
Tax-Free Short-Term U.S. Government
Money Market Fund Money Market Fund Bond Fund Income Fund
------------------------- ---------------------- ---------- ----------------------
Year Period Year Period Period Year Period
Ended Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94* 9/30/95 9/30/94* 9/30/95** 9/30/95 9/30/94*
----------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............ $ 3,563,966 $ 691,357 $ 317,060 $ 142,718 $ 41,698 $ 1,638,235 $ 766,091
Net realized gain (loss)
on sale of investments.......... 7,862 0 (4,765) 0 (136) 90,910 7,170
Net realized loss on sale of
futures contracts............... 0 0 0 0 0 0 0
Net change in unrealized
appreciation (depreciation)
of investments.................. 0 0 9 0 11,251 1,217,932 (996,966)
Net change in unrealized
depreciation of futures
contracts....................... 0 0 0 0 0 0 0
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations.................. 3,571,828 691,357 312,295 142,718 52,813 2,947,077 (233,705)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Distributions to shareholders:
From net investment income
Class A or Single Class.......... (3,563,929) (691,726) (317,060) (142,747) (41,587) (1,617,207) (763,368)
Class B.......................... N/A N/A N/A N/A (111) (17,465) 0
From realized gain on investments
Class A or Single Class.......... 0 0 0 0 0 (7,074) 0
Class B.......................... N/A N/A N/A N/A 0 (18) 0
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total distributions.......... (3,563,929) (691,726) (317,060) (142,747) (41,698) (1,641,764) (763,368)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net increase (decrease) in net
assets resulting from capital
share transactions (note 4)............ 29,968,679 49,887,794 (2,006,540) 10,532,668 3,584,443 10,407,829 20,045,502
----------- ----------- ----------- ----------- ---------- ----------- -----------
Increase in net assets....... 29,976,578 49,887,425 (2,011,305) 10,532,639 3,595,558 11,713,142 19,058,429
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net assets:
Beginning net assets................. 49,987,425 100,000 10,632,639 100,000 0 19,158,429 100,000
----------- ----------- ----------- ----------- ---------- ----------- -----------
Ending net assets (including
undistributed net investment
income of $0; $0; $0; $0; $0;
$6,286; $2,723; $1,644; $3,170;
$568; $1,099; $4,662; $5,559;
$7,809; $12,512 and $9,708,
respectively)....................... $79,964,003 $49,987,425 $ 8,621,334 $10,632,639 $3,595,558 $30,871,571 $19,158,429
=========== =========== =========== =========== ========== =========== ===========
</TABLE>
*Since commencement of operations on October 19, 1993.
**Since commencement of operations on June 12, 1995.
See accompanying notes to financial statements.
39
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the periods ended September 30, 1995 and September 30, 1994
<TABLE>
<CAPTION>
California
Bond Fund Municipal Bond Fund Tax-Free Fund
---------------------- ---------------------- -----------------------
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94* 9/30/95 9/30/94* 9/30/95 9/30/94*
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............ $580,314 $270,185 $212,516 $94,487 $881,805 $380,207
Net realized gain (loss)
on sale of investments.......... (36,089) (29,537) (1,240) (105,876) (37,256) (468,522)
Net realized loss on sale of
futures contracts............... 0 0 0 0 (15,101) 0
Net change in unrealized
appreciation (depreciation)
of investments.................. 567,176 (426,275) 183,698 (83,674) 747,931 (357,565)
Net change in unrealized
depreciation of futures
contracts....................... 0 0 (2,375) 0 (1,688) 0
----------- ---------- ---------- ---------- ----------- ------------
Net increase (decrease) in
net assets resulting from
operations.................. 1,111,401 (185,627) 392,599 (95,063) 1,575,691 (445,880)
----------- ---------- ---------- ---------- ----------- ------------
Distributions to shareholders:
From net investment income
Class A or Single Class.......... (579,743) (267,015) (212,765) (93,388) (871,571) (374,648)
Class B.......................... (2,096) 0 (282) 0 (11,133) 0
From realized gain on investments
Class A or Single Class.......... 0 0 0 0 0 0
Class B.......................... 0 0 0 0 0 0
----------- ---------- ---------- ---------- ----------- ------------
Total distributions.......... (581,839) (267,015) (213,047) (93,388) (882,704) (374,648)
----------- ---------- ---------- ---------- ----------- ------------
Net increase (decrease) in net
assets resulting from capital
share transactions (note 4)............ 4,103,204 7,891,536 2,778,752 2,698,276 5,749,069 14,535,954
----------- ---------- ---------- ---------- ----------- ------------
Increase in net assets....... 4,632,766 7,438,894 2,958,304 2,509,825 6,442,056 13,715,426
----------- ---------- ---------- ---------- ----------- ------------
Net assets:
Beginning net assets................. 7,538,894 100,000 2,609,825 100,000 13,815,426 100,000
----------- ---------- ---------- ---------- ----------- ------------
Ending net assets (including
undistributed net investment
income of $0; $0; $0; $0; $0;
$6,286; $2,723; $1,644; $3,170;
$568; $1,099; $4,662; $5,559;
$7,809; $12,512 and $9,708,
respectively)....................... $12,171,660 $7,538,894 $5,568,129 $2,609,825 $20,257,482 $13,815,426
=========== ========== ========== ========== =========== ===========
<CAPTION>
Growth & Income
Fund Growth Fund
---------------------- -------------
Year Period Period
Ended Ended Ended
9/30/95 9/30/94* 9/30/95**
---------- ----------- ------------
<S> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............ $ 539,489 $ 218,219 $ 9,708
Net realized gain (loss)
on sale of investments.......... 905,872 56,599 (503)
Net realized loss on sale of
futures contracts............... 0 0 0
Net change in unrealized
appreciation (depreciation)
of investments.................. 5,835,264 28,136 356,567
Net change in unrealized
depreciation of futures
contracts....................... 0 0 0
----------- ----------- ----------
Net increase (decrease) in
net assets resulting from
operations.................. 7,280,625 302,954 365,772
----------- ----------- ----------
Distributions to shareholders:
From net investment income
Class A or Single Class.......... (525,863) (205,702) 0
Class B.......................... (18,368) 0 0
From realized gain on investments
Class A or Single Class.......... (79,572) 0 0
Class B.......................... (1,498) 0 0
----------- ----------- ----------
Total distributions.......... (625,301) (205,702) 0
----------- ----------- ----------
Net increase (decrease) in net
assets resulting from capital
share transactions (note 4)............ 20,541,065 13,976,697 3,969,958
----------- ----------- ----------
Increase in net assets....... 27,196,389 14,073,949 4,335,730
----------- ----------- ----------
Net assets:
Beginning net assets................. 14,173,949 100,000 0
----------- ----------- ----------
Ending net assets (including
undistributed net investment
income of $0; $0; $0; $0; $0;
$6,286; $2,723; $1,644; $3,170;
$568; $1,099; $4,662; $5,559;
$7,809; $12,512 and $9,708,
respectively)....................... $41,370,338 $14,173,949 $4,335,730
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
FINANCIAL HIGHLIGHTS
Supplemental information for a share outstanding throughout the periods is as
follows:
<TABLE>
<CAPTION>
Tax-Free Short-Term
Money Market Money Market Bond U.S. Government Income
================ ================ ================= =========================
Class A Class B Class A Class B
------- ------- -------------- -------
Period Period Period Period Period Period
Year Ended Year Ended Ended Ended Year Ended Ended
Ended 9/30/94 Ended 9/30/94 9/30/95 9/30/95 Ended 9/30/94 9/30/95
9/30/95 (a) 9/30/95 (a) (b) (b) 9/30/95 (a) (c)
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period........ $1.00 $1.00 $1.00 $1.00 $10.00 $10.00 $8.77 $9.50 $8.67
------ ------ ------ ------ ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income...................... 0.05 0.03 0.03 0.02 0.18 0.20 0.63 0.56 0.52
Net realized and unrealized gain (loss)
on investments........................... 0.00 0.00 0.00 0.00 0.05 0.05 0.47 (0.73) 0.58
------ ------ ------ ------ ------- ------ ------ ------ ------
Total from investment operations....... 0.05 0.03 0.03 0.02 0.23 0.25 1.10 (0.17) 1.10
------ ------ ------ ------ ------- ------ ------ ------ ------
Less distributions:
Dividends from net investment income....... (0.05) (0.03) (0.03) (0.02) (0.18) (0.20) (0.63) (0.56) (0.52)
Distributions from net realized gain (loss) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------- ------ ------ ------ ------
Total distributions.................... (0.05) (0.03) (0.03) (0.02) (0.18) (0.20) (0.63) (0.56) (0.52)
------ ------ ------ ------ ------- ------ ------ ------ ------
Net increase (decrease)
in net asset value.................... 0.00 0.00 0.00 0.00 0.05 0.05 0.47 (0.73) 0.58
------ ------ ------ ------ ------- ------ ------ ------ ------
Net asset value - end of period........ $1.00 $1.00 $1.00 $1.00 $10.05 $10.05 $9.24 $8.77 $9.25
====== ====== ====== ====== ======= ====== ====== ====== ======
Total return (not annualized)(d)............. 5.52% 3.36% 3.44% 2.22% 2.32% 2.51% 13.00% (1.83)% 13.08%
Ratios/supplemental data:
Net assets, end of period (000)............ $79,964 $49,988 $8,621 $10,633 $3,582 $13 $29,308 $19,158 $1,564
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets (i)........................... 0.42% 0.15% 0.44% 0.17% 0.00% 0.00% 0.21% 0.09% 0.79%
Ratio of net investment income to
average net assets (ii).................. 5.40% 4.25% 3.39% 2.56% 5.91% 5.54% 6.93% 6.24% 5.71%
(i) Ratio of expenses to average
net assets prior to waivers
and reimbursements (g)............ 1.29% 1.64% 1.90% 2.28% 2.76% 3.33% 1.63% 1.83% 3.19%
(ii) Ratio of net investment income
to average net assets prior to
waivers and reimbursements (g).... 4.53% 2.76% 1.92% 0.45% 3.15% 2.21% 5.51% 4.49% 3.31%
Portfolio Turnover Rate.................... N/A N/A N/A N/A 1.05% 1.05% 46.96% 28.20% 46.96%
</TABLE>
(a) The fund commenced operations on October 19, 1993.
(b) The fund commenced operations on June 12, 1995.
(c) Class B shares were not offered until November 1, 1994.
(d) Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
(e) The fund was managed by Piper Capital Management, Inc. until December 1,
1994 when The Boston Company Asset Management, Inc. assumed management
responsibilities.
(f) The fund was managed by Piper Capital Management, Inc. until December 1,
1994 when Payden & Rygel Investment Counsel assumed management
responsibilities.
(g) Ratio reflects fees reduced in connection with Expense Reduction only for
periods ended September 30, 1995.
See accompanying notes to financial statements.
41
<PAGE>
<TABLE>
<CAPTION>
Bond Municipal Bond
========================================== =========================================
Class A Class B Class A Class B
------------------------ ------------- ----------------------- -------------
Year Period Period Year Period Period
Ended Ended Ended Ended Ended Ended
9/30/95(e) 9/30/94(a) 9/30/95(c)(e) 9/30/95(f) 9/30/94(a) 9/30/95(c)(f)
----------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period..... 8.47 $9.50 $8.36 $8.60 $9.50 $8.31
----------- ---------- ------------- ---------- ---------- -------------
Income (loss) from investment operations:
Net investment income................... 0.58 0.52 0.49 0.47 0.42 0.38
Net realized and unrealized gain (loss)
on investments........................ 0.52 (1.03) 0.62 0.38 (0.90) 0.67
----------- ---------- ------------- ---------- ---------- -------------
Total from investment operations.... 1.10 (0.51) 1.11 0.85 (0.48) 1.05
----------- ---------- ------------- ---------- ---------- -------------
Less distributions:
Dividends from net investment income.... (0.58) (0.52) (0.49) (0.47) (0.42) (0.38)
Distributions from net realized gain
(loss)................................. 0.00 0.00 0.00 0.00 0.00 0.00
----------- ---------- ------------- ---------- ---------- -------------
Total distributions................. (0.58) (0.52) (0.49) (0.47) (0.42) (0.38)
----------- ---------- ------------- ---------- ---------- -------------
Net increase (decrease)
in net asset value................. 0.52 (1.03) 0.62 0.38 (0.90) 0.67
----------- ---------- ------------- ---------- ---------- -------------
Net asset value - end of period..... $8.99 $8.47 $8.98 $8.98 $8.60 $8.98
========== ========= ============ ========= ========== ===========
Total return (not annualized)(d).......... 13.53% (5.49)% 13.58% 10.18% (5.15)% 12.86%
Ratios/supplemental data:
Net assets, end of period (000)......... $12,022 $7,539 $ 150 $5,512 $2,610 $56
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets (i)........................ 0.21% 0.09% 0.78% 0.40% 0.25% 0.90%
Ratio of net investment income to
average net assets (ii)............... 6.69% 6.29% 5.56% 5.26% 5.03% 4.26%
(i) Ratio of expenses to average
net assets prior to waivers
and reimbursements (g)......... 2.20% 2.55% 4.00% 3.30% 3.99% 5.56%
(ii) Ratio of net investment income
to average net assets prior to
waivers and reimbursements (g). 4.70% 3.83% 2.34% 2.36% 1.29% (0.40)%
Portfolio Turnover Rate................. 327.31% 26.14% 327.31% 81.90% 81.42% 81.90%
<CAPTION>
California Tax-Free Growth & Income
========================================== =========================================
Class A Class B Class A Class B
------------------------ ------------- ----------------------- -------------
Year Period Period Year Period Period
Ended Ended Ended Ended Ended Ended
9/30/95 9/30/94(a) 9/30/95(c) 9/30/95(e) 9/30/94(a) 9/30/95(c)(e)
----------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period..... $7.59 $8.50 $7.35 $11.14 $11.00 $11.30
----------- ---------- ------------- ---------- ---------- -------------
Income (loss) from investment operations:
Net investment income................... 0.41 0.36 0.34 0.27 0.23 0.23
Net realized and unrealized gain (loss)
on investments........................ 0.33 (0.91) 0.57 3.22 0.13 3.05
----------- ---------- ------------- ---------- ---------- -------------
Total from investment operations.... 0.74 (0.55) 0.91 3.49 0.36 3.28
----------- ---------- ------------- ---------- ---------- -------------
Less distributions:
Dividends from net investment income.... (0.41) (0.36) (0.34) (0.27) (0.22) (0.23)
Distributions from net realized gain
(loss)............................... 0.00 0.00 0.00 (0.06) 0.00 (0.06)
----------- ---------- ------------- ---------- ---------- -------------
Total distributions................. (0.41) (0.36) (0.34) (0.33) (0.22) (0.29)
----------- ---------- ------------- ---------- ---------- -------------
Net increase (decrease)
in net asset value................. 0.33 (0.91) 0.57 3.16 0.14 2.99
----------- ---------- ------------- ---------- ---------- -------------
Net asset value - end of period..... $7.92 $7.59 $7.92 $14.30 $11.14 $14.29
========== ========== ============ ========= ======== =============
Total return (not annualized)(d).......... 10.13% (6.56)% 12.60% 31.93% 3.29% 29.53%
Ratios/supplemental data:
Net assets, end of period (000)......... $19,292 $13,815 $966 $38,483 $14,174 $2,887
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets (i)........................ 0.32% 0.25% 0.84% 0.43% 0.25% 1.01%
Ratio of net investment income to
average net assets (ii)............... 5.36% 4.70% 4.47% 2.30% 2.81% 1.64%
(i) Ratio of expenses to average
net assets prior to waivers
and reimbursements (g)......... 1.65% 2.01% 2.97% 1.80% 2.17% 2.92%
(ii) Ratio of net investment income
to average net assets prior to
waivers and reimbursements (g). 4.03% 2.94% 2.35% 0.93% 0.89% (0.27)%
Portfolio Turnover Rate................. 86.69% 73.88% 86.69% 92.01% 13.90% 92.01%
<CAPTION>
Growth
============================
Period Period
Ended Ended
9/30/95(b) 9/30/95(b)
---------- ----------
<S> <C> <C>
Net asset value - beginning of period..... $10.00 $10.00
-------- ---------
Income (loss) from investment operations:
Net investment income................... 0.03 0.03
Net realized and unrealized gain (loss)
on investments........................ 1.63 1.62
-------- ---------
Total from investment operations.... 1.66 1.65
-------- ---------
Less distributions:
Dividends from net investment income.... 0.00 0.00
Distributions from net realized gain
(loss)................................. 0.00 0.00
-------- ---------
Total distributions................. 0.00 0.00
-------- ---------
Net increase (decrease)
in net asset value................. 1.66 1.65
-------- ---------
Net asset value - end of period..... $11.66 $11.65
======== =========
Total return (not annualized)(d).......... 16.60% 16.50%
Ratios/supplemental data:
Net assets, end of period (000)......... $4,187 $149
Ratios to average net assets
(annualized):
Ratio of expenses to average
net assets (i)........................ 0.00% 0.00%
Ratio of net investment income to
average net assets (ii)............... 1.20% 1.07%
(i) Ratio of expenses to average
net assets prior to waivers
and reimbursements (g)......... 3.46% 3.85%
(ii) Ratio of net investment income
to average net assets prior to
waivers and reimbursements (g). (2.26)% (2.78)%
Portfolio Turnover Rate................. 0.06% 0.06%
</TABLE>
See accompanying notes to financial statements.
42
<PAGE>
Notes to Financial Statements
(1) Significant Accounting Policies
Organization
- ------------
The Griffin Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
As described in note 4, the Money Market Fund and Tax-Free Money Market Fund
are authorized to offer one class of shares, and each of the other series is
authorized to issue shares of Class A and Class B. The Company commenced
operations on October 19, 1993 and consists of a non-diversified fund, the
California Tax-Free Fund, and eight separate diversified funds (collectively,
the "Funds"):
. The Money Market Fund
. The Tax-Free Money Market Fund
. The Short-Term Bond Fund
. The U.S. Government Income Fund
. The Bond Fund
. The Municipal Bond Fund
. The Growth & Income Fund
. The Growth Fund
The Money Market Fund and Tax-Free Money Market Fund commenced offering
shares on October 19, 1993. The U.S. Government Income Fund, Bond Fund,
Municipal Bond Fund, California Tax-Free Fund, and Growth & Income Fund
commenced offering Class A shares on October 19, 1993, and offered Class B
shares beginning on November 1, 1994. The Short-Term Bond Fund and Growth Fund
commenced offering Class A shares and Class B shares on June 12, 1995. The two
classes of shares differ principally in their respective sales charges,
shareholder servicing fees and distribution fees. Shareholders of each class
also may bear certain expenses that pertain to each class. All shareholders
bear the common expenses of the Funds, and earn income from the portfolio, pro
rata based on the average daily net assets of each class, without distinction
between share classes. Dividends are declared separately for each class. Gains
are allocated to each class pro rata based upon net assets of each class on the
date of distribution. No class has preferential dividend rights; differences in
per share dividend rates are generally due to differences in separate class
expenses, including distribution and shareholder servicing fees and from
relative weightings of pro rata income and gain allocations. The California
Tax-Free Fund concentrates its investments in a single state and therefore may
have more exposure to credit risk related to the State of California than a
fund with a broader geographical diversification.
The following significant accounting policies are consistently followed by
the Company in the preparation of its financial statements, and such policies
are in conformity with generally accepted accounting principles for investment
companies.
Security Valuation
- ------------------
For the Funds other than the Money Market Fund and Tax-Free Money Market
Fund, investments in securities for which the primary market is a national
securities exchange or the NASDAQ National Market System are stated at the last
reported sale price on the day of valuation or, if no sale has occurred, at the
closing bid price. U.S. Government obligations are valued at the mean between
the last reported bid and ask prices. In the absence of any sale of such
securities on the valuation date and in the case of other securities, excluding
debt securities maturing in 60 days or less, the valuations are based on the
latest quoted bid prices. Debt securities maturing in 60 days or less are
valued at amortized cost, which approximates market value. Securities for which
quotations are not readily available are valued on the basis of closing
over-the-counter bid prices, if available, or at their fair value as determined
by policies set by the Board of Directors. Security prices are obtained
primarily from pricing sources in accordance with the policies described above.
The Money Market Fund and Tax-Free Money Market Fund use the amortized cost
method to value their portfolio securities and attempt to maintain constant net
asset values of $1.00 per share. The amortized cost method involves valuing a
security at its cost and amortizing any discount or premium over the period
until maturity, which approximates market value.
Security Transactions
- ---------------------
The Company records security transactions on the trade date. Dividend income
is recognized on the ex-dividend date, and interest income is recognized on a
daily accrual
43
<PAGE>
basis. Realized gains or losses are reported on the basis of identified cost of
securities delivered. Bond discounts and premiums are amortized as required by
the Internal Revenue Code.
Futures Contracts
- -----------------
Each of the Funds except the Money Market Fund and Tax-Free Money Market
Fund may purchase futures contracts to gain exposure to market changes as this
may be more efficient or cost effective than actually buying the securities. A
futures contract is an agreement between two parties to buy and sell a security
at a set price on a future date and is exchange traded. Upon entering into such
a contract, a fund is required to pledge to the broker an amount of cash, U.S.
Government securities or other high-quality debt securities equal to the
minimum "initial margin" requirements of the exchange. Pursuant to the contract,
the fund agrees to receive from or pay to the broker an amount of cash equal to
the daily fluctuation in the value of the contract. Such receipts or payments
are known as "variation margin" and are recorded by the fund as unrealized gains
or losses. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. Pursuant to regulations
and/or published positions of the Securities and Exchange Commission, the fund
is required to segregate cash or high-quality, liquid debt instruments in
connection with futures transactions in an amount generally equal to the entire
value of the underlying contracts. Risks of entering into futures contracts
include the possibility that there may be an illiquid market and that a change
in the value of the contract may not correlate with changes in the value of the
underlying securities. Futures contracts, if any, are detailed in the
Schedules of Investments for each of the Funds.
Repurchase Agreements
- ---------------------
Transactions involving purchases of securities under agreements to resell
("repurchase agreements") are treated as collateralized financing transactions
and are recorded at their contracted resale amounts. These repurchase
agreements, if any, are detailed in the Schedule of Investments for each of the
Funds. The prospectuses require that these investments be fully collateralized
based on values that are marked to market daily. The collateral is held by an
agent bank under a tri-party agreement. It is the adviser's responsibility to
value collateral daily and to obtain additional collateral as necessary to
maintain market value equal to or greater than the resale price. The repurchase
agreements held in the Funds at September 30, 1995 are collateralized by U.S.
Treasury or federal agency obligations, and were entered into on September 29,
1995.
Distributions to Shareholders
- -----------------------------
Dividends to shareholders from net investment income are declared daily and
distributed monthly for the Money Market Fund, Tax-Free Money Market Fund,
Short-Term Bond Fund, U.S. Government Income Fund, Bond Fund, Municipal Bond
Fund and California Tax-Free Fund. Dividends to shareholders from the net
investment income of the Growth & Income Fund are declared and distributed
quarterly, and with respect to the Growth Fund, are declared and distributed
annually. Dividends to shareholders are recorded on ex-dividend date. Each fund
makes distributions from net realized securities gains, if any, once a year.
Federal Income Taxes
- --------------------
The Company's policy for each fund is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute substantially all of its taxable income and any net realized
capital gain to its shareholders. The following net capital loss carry forward
amounts are available to the Funds as of September 30, 1994:
<TABLE>
<CAPTION>
Net Capital Loss Year of Expiration
- -------------------------------------------------------------------
<S> <C> <C>
Bond Fund $ 36,190 2003
Municipal Bond Fund $ 81,464 2003
California Tax-Free Fund $505,778 2003
</TABLE>
Due to the timing of dividend distributions and the differences in
accounting for income and realized gains (losses) for financial statement and
Federal income tax purposes, the fiscal year in which amounts are distributed
may differ from the year in which the income and realized gains (losses) were
recorded by the fund. The differences between the income and gains distributed
on a
44
<PAGE>
book versus tax basis, if any, are shown as excess distributions of net
investment income and net realized gain on sales of investments in the
accompanying Statements of Changes in Net Assets. The Board of Directors will
not declare capital gain distributions until the net capital loss carry forwards
have been utilized.
Organization Expenses
- ---------------------
Griffin Financial Administrators, the Funds' administrator, has incurred
expenses in connection with the organization and initial registration of the
Funds. These expenses were charged to the individual Funds and are being
amortized by the Funds on a straight-line basis over 60 months from the date
the Funds commenced operations. For each of the Money Market Fund, Tax-Free
Money Market Fund, U.S. Government Income Fund, Bond Fund, Municipal Bond Fund,
California Tax-Free Fund and Growth & Income Fund $52,220 is due to the
administrator. For each of the Short-Term Bond Fund and Growth Fund $24,129 is
due to the administrator.
(2) Agreements and Other Transactions with Affiliates
The Company has entered into an advisory contract on behalf of the Funds
with Griffin Financial Investment Advisers ("GFIA"). Pursuant to the contract,
GFIA furnishes to the Funds investment guidance and policy direction in
connection with portfolio management of the Funds. Under the contract, the
Growth & Income Fund and Growth Fund pay GFIA a monthly advisory fee calculated
by multiplying the fund's average daily net assets by 0.60% on an annualized
basis. Each of the other Funds pays a monthly advisory fee to GFIA based on an
annualized rate of 0.50% of the Fund's average daily net assets. GFIA has
entered into sub-advisory agreements with Payden & Rygel Investment Counsel
("Payden & Rygel") with respect to the Money Market Fund, Tax-Free Money Market
Fund, U.S. Government Income Fund, Municipal Bond Fund and the California
Tax-Free Fund, with The Boston Company Asset Management, Inc. ("TBCAM") with
respect to the Bond Fund and the Growth & Income Fund, and with T. Rowe Price
Associates, Inc. ("T. Rowe Price") with respect to the Short-Term Bond Fund and
Growth Fund. Pursuant to such sub-advisory agreements, Payden & Rygel, TBCAM
and T. Rowe Price are primarily responsible for the daily management of the
respective fund's portfolios. GFIA pays Payden & Rygel, TBCAM and T. Rowe Price
sub-advisory fees for the Funds out of the advisory fees discussed above. GFIA
has voluntarily waived a portion of its fees to limit Fund expenses. For the
periods ended September 30, 1995, advisory fees were incurred by the Funds as
follows:
<TABLE>
<CAPTION>
Funds Advisory fees Waived fees
- --------------------------------------------------------------------
<S> <C> <C>
Money Market $329,306 $307,185
Tax-Free Money Market 46,869 43,485
Short-Term Bond 3,479 3,479
U.S. Government Income 118,300 116,136
Bond 43,325 42,621
Municipal Bond 20,156 18,955
California Tax-Free 82,385 77,876
Growth & Income 141,488 132,670
Growth 4,793 4,793
</TABLE>
The Company has entered into contracts on behalf of the Funds with Griffin
Financial Administrators ("GFA") whereby GFA is responsible for providing
administration, custody, transfer agency and portfolio accounting services for
the Funds. GFA is compensated for its services by each of the Funds on a
monthly basis based on an annualized rate of 0.20% of the Funds' average daily
net assets. GFA has waived a portion of its fees to limit Fund expenses. For
the periods ended September 30, 1995, administration fees were incurred by the
Funds as follows:
<TABLE>
<CAPTION>
Administration
Funds and Accounting fees Waived fees
- ----------------------------------------------------------------------------
<S> <C> <C>
Money Market $131,722 $26,940
Tax-Free Money Market 18,748 2,600
Short-Term Bond 1,392 1,392
U.S. Government Income 47,320 29,360
Bond 17,330 11,177
Municipal Bond 8,062 4,743
California Tax-Free 32,954 20,523
Growth & Income 47,163 20,308
Growth 1,598 1,598
</TABLE>
In addition, GFA has reimbursed the Funds for certain operating expenses.
45
<PAGE>
The Company has entered into distribution and service agreements on behalf
of the Funds with Griffin Financial Services ("GFS"). Under the agreements, GFS
may receive compensatory payments and/or reimbursements for shareholder, sales
support and other distribution-related services in an amount not to exceed, on
an annualized basis, 0.20% of a fund's average daily net assets for the Money
Market Fund and Tax-Free Money Market Fund, and 0.25% of the average daily net
assets of Class A shares for each of the other Funds. GFS has waived a portion
of its fees to limit fund expenses. For the period ended September 30, 1995,
the shares of the money market Funds, and the Class A shares of the non-money
market, Funds incurred distribution and service fees as follows:
<TABLE>
<CAPTION>
Distribution
and
Funds Service fees Waived fees
- -------------------------------------------------------------------
<S> <C> <C>
Money Market $131,722 $49,061
Tax-Free Money Market 18,748 5,984
Class A Shares
Short-Term Bond 1,735 1,735
U.S. Government Income 58,404 46,378
Bond 21,570 17,024
Municipal Bond 10,062 5,066
California Tax-Free 40,582 18,539
Growth & Income 57,080 25,084
Growth 1,951 1,951
</TABLE>
The Company has entered into separate distribution and service agreements
with GFS for Class B shares of the Funds. Under the agreements, GFS may receive
compensatory payments and/or reimbursements for shareholder, sales support and
other distribution-related services. GFS may receive, on an annualized basis,
up to 0.75% of the average daily net assets of a Fund's Class B shares in
distribution fees, and up to 0.25% of the average daily net assets of a Fund's
Class B shares in servicing fees. GFS has waived a portion of its fees to limit
fund expenses. For the period ended September 30, 1995, Class B shares of the
Funds incurred distribution and servicing fees as follows:
<TABLE>
<CAPTION>
Distribution
Funds and Servicing fees Waived fees
- ----------------------------------------------------------------------------
<S> <C> <C>
Short-Term Bond $19 $19
U.S. Government Income 2,985 1,434
Bond 368 175
Municipal Bond 66 35
California Tax-Free 2,445 1,061
Growth & Income 7,494 2,980
Growth 184 184
</TABLE>
Reimbursed expenses and waived fees continue at the discretion of the
investment adviser, administrator and distributor. All officers and one
director of the Funds are employees of GFS, but received no compensation from
the Company. For the twelve months ended September 30, 1995, GFS was paid
$232,710 in front-end sales charges on sales of Class A shares. GFS was paid
$1,016 in contingent deferred sales charges on Class B share redemption's during
the period from when Class B shares were first offered on November 1, 1994
through September 30, 1995.
46
<PAGE>
(3) Purchases and Sales of Securities Exclusive of Short-Term Investments
<TABLE>
<CAPTION>
U.S. California Growth &
Short-Term Government Bond Municipal Tax-Free Income Growth
Bond Fund Income Fund Fund Bond Fund Fund Fund Fund
---------- ----------- --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate purchases and sales of:
Common and Preferred Stock:
Purchases at cost.................. $0 $0 $0 $0 $0 $38,890,897 $3,750,348
Sales proceeds..................... 0 0 0 0 0 19,506,153 1,737
U.S. Treasury Obligations:
Purchases at cost.................. 2,430,925 18,815,711 17,614,291 0 0 0 0
Sales proceeds..................... 0 9,732,600 18,598,395 0 0 809,594 0
U.S. Agency Securities:
Purchases at cost.................. 348,626 3,935,089 6,123,535 0 0 0 0
Sales proceeds..................... 0 437,921 4,182,248 0 0 0 0
Municipal Bonds:
Purchases at cost.................. 0 0 0 5,453,334 19,941,458 0 0
Sales proceeds..................... 0 0 0 3,033,926 13,447,796 0 0
Other Long-Term Securities:
Purchases at cost.................. 596,148 0 8,281,854 0 0 0 0
Sales proceeds..................... 24,375 0 5,024,867 0 0 224,000 0
</TABLE>
All Funds not reflected in this schedule traded exclusively in short-term
securities.
(4) Capital Shares Transactions
As of September 30, 1995, the Company was authorized to issue 10 billion
shares of $0.001 par value capital stock. As of September 30, 1995, each Fund,
except the Money Market Fund and the Tax-Free Money Market Fund, was authorized
to issue 250 million shares of $.001 par value capital stock as Class A shares
and 250 million shares of $.001 par value capital stock as Class B shares. The
Money Market Fund and Tax-Free Money Market Fund were each authorized to issue
1 billion shares of $.001 par value capital stock of a single class. Each
non-money market fund except the Short-Term Bond Fund and the Growth Fund
issued Class A shares beginning October 19, 1993, and Class B shares beginning
November 1, 1994. The Short-Term Bond Fund and the Growth Fund issued both
Class A shares and Class B shares beginning June 12, 1995. Transactions in
capital shares were as follows:
<TABLE>
<CAPTION>
Tax-Free
Money Market Fund Money Market Fund
----------------------------- -------------------------
Shares Amount Shares Amount
------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
October 19, 1993:....................... 100,000 $100,000 100,000 $100,000
Shares sold and exchanged in........... 72,605,269 72,605,269 16,498,412 16,498,412
Shares issued in reinvestment
of dividends......................... 472,814 472,814 104,463 104,463
Shares redeemed and exchanged
out.................................. (23,190,289) (23,190,289) (6,070,207) (6,070,207)
------------- ------------ ----------- -----------
September 30, 1994:..................... 49,987,794 49,987,794 10,632,668 10,632,668
Shares sold and exchanged in........... 128,270,814 128,270,814 9,117,127 9,117,127
Shares issued in
reinvestment of dividends............ 3,221,262 3,221,262 253,397 253,397
Shares redeemed and
exchanged out......................... (101,523,397) (101,523,397) (11,377,064) (11,377,064)
------------- ------------ ----------- -----------
September 30, 1995:..................... 79,956,473 $79,956,473 8,626,128 $8,626,128
============= ============ =========== ===========
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Class A Class B
--------------------- --------------------
Shares Amount Shares Amount
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Short-Term Bond Fund
June 12, 1995:...................................... 0 $0 0 $0
Shares sold and exchanged in........................ 357,932 3,587,401 1,308 13,110
Shares issued in reinvestment
of dividends...................................... 642 6,451 5 51
Shares redeemed and
exchanged out.................................... (2,247) (22,570) 0 0
-------- ---------- -------- --------
September 30, 1995:................................. 356,327 $3,571,282 1,313 $13,161
======== ========== ======== ========
<CAPTION>
Class A Class B
--------------------- ---------------------
Shares Amount Shares Amount
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Government Income Fund
October 19, 1993:................................... 10,526 $100,000 0 $0
Shares sold and exchanged in...................... 2,381,791 21,884,027 0 0
Shares issued in reinvestment
of dividends.................................... 42,914 386,248 0 0
Shares redeemed and
exchanged out...................................... (249,758) (2,224,773) 0 0
--------- ----------- ------- ----------
September 30, 1994:................................. 2,185,473 20,145,502 0 0
Shares sold and exchanged in...................... 1,497,104 13,426,162 169,026 1,548,141
Shares issued in reinvestment
of dividends.................................... 94,521 846,597 610 5,594
Shares redeemed and
exchanged out................................... (605,179) (5,413,734) (534) (4,931)
--------- ----------- ------- ----------
September 30, 1995:................................. 3,171,919 $29,004,527 169,102 $1,548,804
========= =========== ======= ==========
<CAPTION>
Class A Class B
--------------------- --------------------
Shares Amount Shares Amount
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Bond Fund
October 19, 1993:................................... 10,526 $100,000 0 $0
Shares sold and exchanged in........................ 923,054 8,261,497 0 0
Shares issued in reinvestment
of dividends...................................... 18,839 165,007 0 0
Shares redeemed and exchanged out................... (62,099) (534,968) 0 0
--------- ----------- ------- ----------
September 30, 1994:................................. 890,320 7,991,536 0 0
Shares sold and exchanged in........................ 574,418 5,036,334 16,592 147,685
Shares issued in reinvestment
of dividends...................................... 37,552 325,866 124 1,097
Shares redeemed and
exchanged out..................................... (164,839) (1,407,778) 0 0
--------- ----------- ------- ----------
September 30, 1995:................................. 1,337,451 $11,945,958 16,716 $148,782
========= =========== ======= ==========
<CAPTION>
Class A Class B
--------------------- --------------------
Shares Amount Shares Amount
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Municipal Bond Fund
October 19, 1993:................................... 10,526 $100,000 0 $0
Shares sold and exchanged in........................ 306,403 2,812,394 0 0
Shares issued in reinvestment
of dividends...................................... 6,634 59,658 0 0
Shares redeemed and
exchanged out..................................... (20,062) (173,776) 0 0
--------- ----------- ------- ----------
September 30, 1994:................................. 303,501 2,798,276 0 0
Shares sold and exchanged in........................ 337,591 2,960,842 6,239 54,649
Shares issued in reinvestment
of dividends...................................... 11,986 104,877 6 48
Shares redeemed and
exchanged out..................................... (38,935) (341,664) 0 0
--------- ----------- ------- ----------
September 30, 1995:................................. 614,143 $5,522,331 6,245 $54,697
========= =========== ======= ==========
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Class A Class B
----------------------- -----------------------
Shares Amount Shares Amount
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
California Tax-Free Fund
October 19, 1993:.................................... 11,765 $100,000 0 $0
Shares sold and exchanged in......................... 1,958,684 15,689,194 0 0
Shares issued in reinvestment
of dividends....................................... 25,833 202,361 0 0
Shares redeemed and exchanged
out................................................ (175,206) (1,355,601) 0 0
----------- ----------- ----------- ---------
September 30, 1994:.................................. 1,821,076 14,635,954 0 0
Shares sold and exchanged in......................... 909,928 7,028,365 121,227 949,445
Shares issued in reinvestment
of dividends...................................... 59,055 452,430 689 5,361
Shares redeemed and
exchanged out...................................... (353,826) (2,686,532) 0 0
----------- ----------- ----------- ---------
September 30, 1995:.................................. 2,436,233 $19,430,217 121,916 $954,806
=========== =========== =========== =========
<CAPTION>
Class A Class B
----------------------- -----------------------
Shares Amount Shares Amount
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Growth & Income Fund
October 19, 1993:.................................... 9,091 $100,000 0 $0
Shares sold and exchanged in......................... 1,308,893 14,483,466 0 0
Shares issued in reinvestment
of dividends........................................ 17,712 194,135 0 0
Shares redeemed and
exchanged out........................................ (63,571) (700,904) 0 0
----------- ----------- ----------- ---------
September 30, 1994:.................................. 1,272,125 14,076,697 0 0
----------- ----------- ----------- ---------
Shares sold and exchanged in......................... 1,585,316 19,955,586 201,975 2,652,912
Shares issued in reinvestment
of dividends....................................... 44,798 560,011 1,467 19,234
Shares redeemed and
exchanged out...................................... (210,492) (2,627,185) (1,424) (19,493)
----------- ----------- ----------- ---------
September 30, 1995:.................................. 2,691,747 $31,965,109 202,018 $2,652,653
=========== =========== =========== =========
<CAPTION>
Class A Class B
----------------------- -----------------------
Shares Amount Shares Amount
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Growth Fund
June 12, 1995:....................................... 0 $0 0 $0
Shares sold and exchanged in......................... 363,549 3,880,406 12,806 141,837
Shares issued in reinvestment
of dividends....................................... 0 0 0 0
Shares redeemed and
exchanged out...................................... (4,486) (52,285) 0 0
----------- ----------- ----------- ---------
September 30, 1995:.................................. 359,063 $3,828,121 12,806 $141,837
=========== =========== =========== =========
</TABLE>
(5) Custodial Earnings Credits
In accordance with the Custody Agreement between the Company, GFA and
Investors Fiduciary Trust Company (the "Custodian"), the Custodian provides
credits ("Earnings Credits") which are used to offset custodial expenses. These
Earnings Credits are calculated each month by multiplying the average daily
cash balance in each fund by three quarters of a money market rate set by State
Street Bank & Trust Co., the funds' sub-custodian. The amount of such Earnings
Credits for the Funds is reflected in the "Expense Reductions" in the Statements
of Operations. Ratios of expenses to average daily net assets shown in the
financial highlights table are calculated without the Earnings Credits for the
periods ended September 30, 1995.
49
<PAGE>
THE SHAREHOLDERS AND BOARD OF DIRECTORS
The Griffin Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of the Griffin Money Market Fund,
Griffin Tax-Free Money Market Fund, Griffin Short-Term Bond Fund, Griffin U.S.
Government Income Fund, Griffin Bond Fund, Griffin Municipal Bond Fund, Griffin
California Tax-Free Fund, Griffin Growth & Income Fund, and the Griffin Growth
Fund, constituting The Griffin Funds, Inc. (the Funds) as of September 30, 1995
and the related statements of operations for the year then ended, except for
the Griffin Short-Term Bond Fund and the Griffin Growth Fund which are for the
period from June 12, 1995 (commencement of operations) to September 30, 1995,
and the statements of changes in net assets and the financial highlights for
the period from October 19, 1993 (commencement of operations) to September 30,
1994 and the year ended September 30, 1995 for the Griffin Money Market Fund,
Griffin Tax-Free Money Market Fund, Griffin U.S. Government Income Fund,
Griffin Bond Fund, Griffin Municipal Bond Fund, Griffin California Tax-Free
Fund and the Griffin Growth & Income Fund and for the period from June 12, 1995
(commencement of operations) to September 30, 1995 for the Griffin Short-Term
Bond Fund and the Griffin Growth Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits 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. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the funds constituting The Griffin Funds, Inc. as of
September 30, 1995, the results of their operations, the changes in their net
assets and the financial highlights for the periods indicated above in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Los Angeles, California
November 10, 1995
50
<PAGE>
SPECIAL MEETINGS OF SHAREHOLDERS
On December 27, 1994, a Special Meeting of Shareholders of the Municipal
Bond Fund of The Griffin Funds, Inc. (the "Company") was held. The purpose of
this meeting was to approve a Sub-Advisory Agreement between Griffin Financial
Investment Advisers ("GFIA") and Payden & Rygel Investment Counsel with respect
to the Municipal Bond Fund ("Proposal I"). With respect to Proposal I, at the
meeting, 188,802.860 votes were cast in favor of the proposal, 954.425 votes
were cast against the proposal and 14,435.86 votes abstained. No broker
non-votes were recorded.
On December 27, 1994, a Special Meeting of Shareholders of the Bond Fund of
the Company was held. The purpose of this meeting was to approve a Sub-Advisory
Agreement between GFIA and The Boston Company Asset Management, Inc. ("TBCAM")
with respect to the Bond Fund ("Proposal II"). With respect to Proposal II, at
the meeting, 513,572.880 votes were cast in favor of the proposal, 5,832.661
votes were cast against the proposal and 23,182.196 votes abstained. No broker
non-votes were recorded.
On December 27, 1994, a Special Meeting of Shareholders of the Growth &
Income Fund of the Company was scheduled to be held, but was adjourned until
January 23, 1995 at which time the meeting was held. The purpose of the meeting
was to approve a Sub-Advisory Agreement between GFIA and TBCAM with respect to
the Growth & Income Fund ("Proposal III"). With respect to Proposal III, at the
meeting, 614,252.187 votes were cast in favor of the proposal, 17,272.141 votes
were cast against the proposal and 49,413.016 votes abstained. No broker
non-votes were recorded.
DISTRIBUTIONS (Unaudited)
The following information for federal income tax purposes is presented below
as an aid to shareholders in reporting the distributions shown below. By early
February 1996, each shareholder will receive a breakdown of income earned by
investment category on a calendar-year basis, as well as a summary of the
states from which the income was earned. Shareholders should consult a tax
adviser as to how to report these distributions on state and local levels.
Of the distributions made from net investment income the following
percentages represent income derived from municipal securities, and therefore
qualify as exempt interest dividends:
Tax-Free Money Market Fund 100%
Municipal Income Fund 100%
California Tax-Free Fund 100%
A portion of this income may be subject to the alternative minimum tax.
Of the distributions made by the following Fund the corresponding percentage
represents the amount of each distribution which will qualify for the dividends
received deduction available to corporate shareholders:
Growth & Income Fund 98.15%
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<PAGE>
THE GRIFFIN FUNDS, INC.
BOARD OF DIRECTORS
Herschel Cardin
Vincent F. Coviello
William A. Hawkins (Chairman)
Morton O. Schapiro
OFFICERS
William A. Hawkins, President
Richie D. Rowsey, Senior Vice President
Julia D. Whitcup, Senior Vice President & Treasurer
Tim S. Glassett, Secretary
Anne P. Banducci, Assistant Secretary
Herbert L. Botts, Assistant Secretary
Steven P. Muson, Assistant Treasurer
Henry M. Pena, Assistant Secretary
Cheryl A. Rivera, Assistant Secretary
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company (IFTC)
127 West 10th Street
Kansas City, MO 64105-1716
INVESTMENT ADVISOR
Griffin Financial Investment Advisers
5000 Rivergrade Road
Irwindale, CA 91706
SUB-ADVISORS
Payden & Rygel Investment Counsel
333 South Grand Avenue
Los Angeles, CA 90071
The Boston Company Asset Management, Inc.
One Boston Place
Boston, MA 02108
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
LEGAL COUNSEL
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
This report and the financial statements contained herein are submitted for the
general information of the shareholders of The Griffin Funds, Inc. If this
report used for promotional purposes, distribution of the report must be
accompanied or preceded by a current prospectus. The prospectus contains more
detailed information about The Griffin Funds, Inc. Read the prospectus carefully
before you invest or send money.
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