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Previous: TUDOR INVESTMENT CORP ET AL, SC 13D/A, 1997-03-18 |
Next: VALLEY FORGE CAPITAL HOLDINGS TOTAL RETURN FUND INC, NSAR-B, 1997-03-18 |
VALLEY FORGE CAPITAL HOLDINGS
TOTAL RETURN FUND, INC.
Annual Report
To Shareholders
For the Year Ended
December 31, 1996
<PAGE>
Schedule of Portfolio Investments
December 31, 1996
<TABLE>
<CAPTION>
Number
of Market
Shares Security Value
------ -------- ------
<S> <C>
COMMON STOCK: 58.24%
AUTOMOBILE PARTS-EQUIPMENT: 1.20%
3,000 Cooper Tire & Rubber Co. $ 59,250
----------
BEVERAGE: 1.66%
1,000 Coca Cola 52,625
1,000 Pepsico Inc. 29,250
----------
81,875
----------
CHEMICALS: 2.98%
500 Dow Chemical 39,500
1,000 Great Lakes Chemicals 46,875
1,000 Hercules Inc. 43,375
1,000 Wellman Inc. 17,125
----------
146,875
----------
COMMUNICATION EQUIPMENT: 1.25%
1,000 Motorola Inc. 61,375
----------
COMPUTERS: 3.63%
500 Hewlett Packard Co. 25,125
300 Int'l Business Machines Corp. 45,300
1,000 Microsoft* 82,625
2,000 Netcom On-Line Comm* 26,000
----------
179,050
----------
COMPUTER SOFTWARE: 0.97%
1,000 EDS Services 43,125
1,000 Multi-Corp Inc.* 4,500
----------
47,625
----------
COSMETICS-TOILETRY: 2.87%
1,000 Dial 14,750
1,000 Int'l Flavors & Fragrances, Inc. 45,000
2,000 Tambrands 81,750
----------
141,500
----------
ELECTRONICS-SEMI-CONDUCTORS: 2.63%
2,000 AMP Inc. 76,750
1,000 LSI Logic Corp.* 26,750
900 Micron Technologies* 26,213
----------
129,713
----------
ENTERTAINMENT-RECREATION: 2.83%
1,000 Disney (Walt) Co. 69,625
2,000 Viacom Inc. Class B* 69,750
----------
139,375
----------
FOOD DISTRIBUTION: 0.55%
2,000 Marsh Supermarkets 27,250
----------
FOOD PRODUCERS: 4.01%
3,000 Chiquita Brands International 38,250
1,000 Dole Foods Co. 33,875
2,000 H.J. Heinz Co. 72,000
1,000 International Multifoods Corp. 18,250
2,000 J.M. Smucker Co.* 35,250
----------
197,625
----------
GROCERY PRODUCTS: 1.33%
1,000 Kellog Co. 65,625
----------
HOUSEWARES: 1.39%
3,000 Rubbermaid Inc. 68,250
----------
INSURANCE: 4.01%
4,000 Alexander & Alexander Services, Inc. 69,500
2,000 Hartford Steam Boiler Inspection
& Insurance Co. 92,750
1,000 Ohio Casualty Co. 35,500
----------
197,750
----------
MEDICAL SUPPLIES: 2.14%
1,000 C.R. Bard 28,000
1,000 Bausch & Lomb Inc. 35,500
1,000 St Jude Medical* 42,121
----------
105,621
----------
METALS & MINING: 1.94%
1,000 ASA Ltd 34,750
2,000 Cyprus Minerals Co. 46,750
1,000 Homestake Mining Co. 14,250
----------
95,750
----------
MULTI-INDUSTRY: 1.06%
2,000 Ball Corp 52,000
----------
MISCELLANEOUS: 0.86%
1,000 Kelly Services 27,000
1,000 Olsten 15,125
----------
42,125
----------
OFFICE SUPPLIES: 0.24%
1,000 A.T. Cross Co. 11,625
----------
PAPER & FOREST PRODUCTS: 1.83%
1,000 International Paper 40,375
1,000 Louisiana-Pacific Co. 21,125
1,000 Westvaco 28,750
----------
90,250
----------
PHARMACEUTICALS: 1.48%
2,000 Mylan Laboratories 33,500
1,000 Pharmacia Upjohn Inc. 39,625
----------
73,125
----------
PHOTOGRAPHY-IMAGING: 0.88%
1,000 Polaroid Corp. 43,500
----------
PUBLISHING: 2.67%
2,000 Dow Jones & Co. Inc. 67,750
1,000 Dunn & Bradstreet 23,750
1,000 Readers Digest Association 40,250
----------
131,750
----------
REAL ESTATE: 1.59%
1,000 First Washington REA 23,500
2,500 Glimcher Realty Trust 55,000
----------
78,500
----------
RESTAURANT: 1.74%
3,000 Bob Evans Farms Inc. 40,500
1,000 McDonalds Corp. 45,250
----------
85,750
----------
RETAIL: 0.42%
2,000 K Mart Corp* 20,750
----------
TEXTILES/APPAREL: 0.78%
2,000 Angelica 38,250
----------
UTILITIES-ELECTRIC: 4.14%
1,000 Dominion Resources 38,500
1,000 Florida Progress 32,250
1,000 Hawaiian Electric Inc. 36,250
2,000 Montana Power Co. 42,750
1,000 Public Services Enterprises 27,250
1,000 Wisconsin Energy Corp. 26,875
----------
203,875
----------
UTILITIES-ELECTRIC & GAS: 3.28%
1,000 Houston Ind. 22,625
2,000 MDU Resources Group 45,750
2,000 Pacific Gas & Electric 42,000
1,000 Sun Inc. 24,375
1,000 Utilicorp United 27,000
----------
161,750
----------
UTILITIES-TELEPHONE: 1.31%
2,000 U.S. West Communications 64,500
----------
WASTE MANAGEMENT: 0.53%
1,000 Browning-Ferris Industries 26,250
----------
TOTAL COMMON STOCKS:
(Cost: $3,012,454) 2,868,509
----------
PREFERRED STOCK: 6.28%
BEVERAGES: 1.05%
2,000 Cadbury Schweppes P.L.C. 51,750
----------
COMMUNICATIONS: 1.08%
2,000 GTE Delaware 53,000
----------
FINANCE: 2.06%
1,000 KMart Financing 48,750
2,000 UNUM Corp. 52,500
----------
101,250
----------
INSURANCE: 1.05%
2,000 American General Capital L.L.C. 51,750
----------
REAL ESTATE: 1.05%
2,000 Equity Residential Property 51,500
----------
TOTAL PREFERRED STOCKS:
(Cost: $309,755) 309,250
----------
U.S. GOVT. AGENCY OBLIGATIONS: 19.21%
950,000 Federal Farm Credit Bank
Discount Note 1/16/97 946,021
(Cost: $946,021) ----------
CORPORATE OBLIGATIONS: 4.86%
240,000 Merrill Lynch & Co
Commercial Paper 1/22/97 239,171
(Cost: $239,171) ----------
OPTIONS: -0.11%
10 Disney Jan 70; 1/18/97* -0.03% (1,500)
----------
5 Dow Chemical March 80; 3/22/97* -0.03% (1,563)
----------
5 Motorola Jan 55; 1/18/97* -0.07% (3,625)
----------
9 MU Jan; 1/18/97* 0.03% 1,238
----------
TOTAL OPTIONS:
(Cost: $955) (5,450)
----------
TOTAL INVESTMENTS:
(Cost: $4,508,356)** 88.47% 4,357,501
Other assets, net 11.53% 568,235
----- ----------
NET ASSETS 100.00% $4,925,736
====== ==========
</TABLE>
*Non-income producing security
See Notes to Financial Statements
<PAGE>
Statement of Operations
Year ended December 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest $61,322
Dividend 81,427
--------
Total income $142,749
Expenses:
Investment management
fees (Note 2) 26,828
Transfer agent fees 26,600
Recordkeeping and
administrative
services 67,834
12-b1 fees (Note 2) 8,776
Audit fees 18,000
Custodian fees 16,345
Amortization of organization cost 37,810
Other 21,617
--------
223,810
Management fee waiver & expense reimbursement (154,464)
--------
Total expenses 69,346
--------
Net investment income 73,403
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 253,585
Net change in unrealized
appreciation on investments (119,465)
--------
Net gain on investments 134,120
--------
Net increase in net assets
resulting from operations $207,523
========
See Notes to Financial Statements
<PAGE>
Financial Highlights
For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
Year ended August 11, 1995*
December 31, thru
1996 December 31, 1995
------------ -----------------
Per Share Operating
Performance
Net asset value,
beginning of period... $9.67 $10.00
----- ------
Income from investment
operations-
Net investment income... 0.13 0.04
Net realized and unrealized
gain (loss) on investments 0.44 (0.33)
----- ------
Total from investment
operations....... 0.57 (0.29)
----- ------
Less distributions-
Distributions from net
investment income... (0.12) (0.04)
Distributions from realized
gains on investments.... (0.40)
----- ------
Total distributions..... (0.52) (0.04)
----- ------
Net asset value, end of period $9.72 $9.67
===== ======
Total Return 5.89% (2.89)%#
===== ======
Ratios/Supplemental Data
Net assets, end of period (000's) $4,926 $1,126
Ratio to average net assets-(A)
Expenses .............. 6.29% 1.95%**
Expenses-net ...... 1.95%
Net investment income ... 2.06% 1.72%**
Portfolio turnover rate....... 1.14% 0.00%
*Commencement of operations
**Annualized
#Non-annualized
(A) Management fee waivers reduced the expense ratios and increased
net investment income ratios by 4.34% in 1996 and 3.14% in 1995.
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 11, 1995*
Year ended thru
December 31, December 31,
1996 1995
------------ ------------
<S> <C>
OPERATIONS
Net investment income $73,403 $4,673
Net realized gain
on investments 253,585 -
Change in unrealized
appreciation (depreciation) (119,465) (31,390)
of investments -------- -------
Net increase (decrease)
in net assets resulting
from operations 207,523 (26,717)
DISTRIBUTION TO
SHAREHOLDERS FROM:
Net investment income
($.12 and $.04 per share in 1996 and 1995, respectively) (59,802) (4,755)
Net realized gain from
investment transaction
($.40 per share) (191,699) -
CAPITAL SHARE TRANSACTIONS
Net increase in
net assets resulting
from capital share
transactions** 3,843,303 1,057,882
Net increase --------- ---------
in net assets 3,799,325 1,026,410
Net assets at
beginning of period 1,126,410 100,000
--------- ---------
NET ASSETS at the end
of the period(Including undistributed
net investment income of $4,925,735 $1,126,410
$3,233 and overdistributed net investment income ========= =========
of $82 respectively)
**A summary of capital share transactions follows:
<CAPTION>
Year ended December 31, August 11* through December 31,
1996 1995
------------------------ -------------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold 457,840 $4,503,585 107,982 $1,072,339
Shares
reinvested
from dividend 25,764 251,256 494 4,723
Shares
redeemed (93,385) (911,538) (2,004) (19,180)
------- -------- ------ -------
Net increase 390,219 $3,843,303 106,472 $1,057,882
(decrease) ======= ========== ======= ==========
</TABLE>
*Commencement of operations
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
As of December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $491,070
Investments at value (Identified
cost of $4,508,356)(Notes 1) 4,357,501
Dividend and interest receivable 9,320
Deferred organization costs 146,969
Other assets 3,231
---------
TOTAL ASSETS 5,008,091
---------
LIABILITIES
Due to advisor $58,355
Accrued expenses 24,000
-------
TOTAL LIABILITIES 82,355
---------
NET ASSETS $4,925,736
=========
NET ASSET VALUE OFFERING AND REDEMPTION
PRICE PER SHARE
($4,925,736/506,691
shares outstanding) $9.72
=========
At December 31, 1996 there were 50,000,000 shares
of $.01 par value stock authorized and components
of net assets are:
Paid in capital $5,011,472
Undistributed net realized
gain on investments 61,886
Net unrealized depreciation
of investments (150,855)
Undistributed net income 3,233
----------
NET ASSETS $4,925,736
==========
See Notes to Financial Statements
</TABLE>
<PAGE>
Notes to the Financial Statements
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES--The Valley Forge Capital Holdings Total
Return Fund, Inc. (the "Fund") is registered under The Investment Company Act of
1940, as a diversified open-end management company.
The following is a summary of significant accounting policies consistently
followed by the Fund. The policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities listed or traded on a
nationally recognized securities exchange are valued at the last quoted sales
price on the date the valuations are made. Securities regularly traded in the
over-the-counter market are valued at the last quoted sales price on the NASDAQ
System. If no sales price is available for a listed or NASDAQ security, or if
the security is not listed on NASDAQ, such security is valued at a price equal
to the mean of the latest bid and ask prices.
B. Federal Income Taxes. The Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. Security Transactions. Security transactions are accounted for on the trade
date. The cost of securities sold is determined on a first-in, first-out basis.
D. Deferred Organizational Expenses. Organizational expenses are being amortized
on a straight line basis over a period not exceeding 60 months beginning at the
Fund's commencement of operations.
E. Distribution to Shareholders. Distribution from investment income and
realized gains, if any, are recorded on the ex- dividend date.
F. Other. Dividend income is recorded on the ex-dividend date. Interest income
is recorded on an accrual basis.
NOTE 2-INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS--The Fund has engaged
Valley Forge Advisors, Inc. a wholly-owned subsidiary of Valley Forge Capital
Holdings Inc., to manage its investments. The Fund pays its Advisors an
investment management fee for investment management and advisory services which
are computed at an annual rate of 0.80 of 1% of the Fund's daily net assets.
Valley Forge Capital Holdings Inc. has agreed to reimburse the Fund for any
expenses, during the Fund's first five years of operations, which would cause
the Fund's ratio of operating expenses to exceed 1.95 percent of average net
assets. An expense reimbursement of $154,464 was required for the fiscal year
ended December 31, 1996.
Certain officers and directors of the Fund are also officers and directors of
the investment advisor.
DISTRIBUTIONS TO SHAREHOLDERS--During 1996, a distribution of $.12 per share
aggregating $59,802, was paid from net investment income which is taxable to
shareholders as ordinary income dividends during 1996. In addition,
distributions of $.40 per share aggregating $191,699 was paid from net realized
gains from investment transactions which is taxable to shareholders as capital
gains in 1996.
DISTRIBUTION PLAN-- The Fund has adopted a Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940. Under the plan in effect for the
fiscal year ended December 31, 1996, the Fund paid Valley Forge Distributors
Inc., a wholly-owned subsidiary of Valley Forge Capital Holdings Inc., a fee at
an annual rate of 0.35 of 1% of the Fund's daily net assets. Valley Forge
Distributors uses these fees to pay its dealers whose clients hold portfolio
shares and for other distribution-related activities.
INVESTMENT TRANSACTIONS--For the fiscal year ended December 31, 1996, the Fund
made purchases and sales of securities other than short-term notes aggregated
$5,389,672 and $2,923,944 respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Valley Forge Capital Holdings Total Return Fund, Inc.:
We have audited the accompanying statement of assets and laibilities including
the portfolio of investments of the Valley Forge Capital Holdings Total Return
Fund, Inc. (the "Fund") as of December 31, 1996, the related statement of
operations for the year then ended and the statement of changes in net assets
and finanical highlights for the year ended December 31, 1996 and for the period
August 11, 1995 (commencement of operations) to December 31, 1995. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the 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 misstatements. 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
December 31, 1996, by correspondence with the custodian. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Valley Forge
Capital Holdings Total Return Fund, Inc. as of December 31, 1996, the results of
its operations for the year then ended, the changes in its net assets and the
financial highlights for the year ended December 31, 1996 and for the period
August 11, 1995 (commencement of operations) to December 31, 1995, then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Richmond, Virginia
March 13, 1997
<PAGE>
Investment Advisor:
Valley Forge Advisors, Inc.
595 Market Street, Suite 1980
San Francisco, CA 94105
Counsel:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive, 29th Floor
Chicago, IL 60606
Independent Auditors:
Deloitte & Touche LLP
707 East Main Street, Suite 500
Richmond, VA 23219
Transfer Agent:
For account information, wire purchase or redemptions, call or write to Valley
Forge's Transfer Agent:
Fund Services, Inc.
Post Office Box 26305
Richmond, Virginia 23260
(800) 628-4077 Toll Free
This report is for shareholder information. This is not a prospectus intended
for use in the purchase of shares.
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