ANNUAL REPORT TO SHAREHOLDERS
RUPAY-BARRINGTON TOTAL RETURN FUND
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE>
President's Letter - February 23, 1998
Dear Shareholders:
As 1997 ended, turmoil surrounded many of the world's financial markets.
Currency devaluations in Asian countries such as South Korea, Malaysia and
Thailand have created uncertainty as to the impact of these devaluations on the
earnings that U.S. companies will report during 1998. The U.S. stock markets
have become more volatile in the face of this uncertainty.
As of the date of this writing, may companies have reported their earnings
for the quarter ending in December of 1997, and for the most part the effect of
the Asian crisis on these earnings has been mild. Companies that export their
products to the Asian region may see a greater impact to their earnings in the
next few quarters than were seen in December and this will continue to make for
a choppy, volatile market in the first half of this year. On the positive side,
cheaper imports of Asian goods to the U.S. will help keep a lid on inflation and
the U.S. economy may slow just enough to persuade the Federal Reserve from
raising interest rates anytime soon. With this backdrop of low inflation, low
interest rates and a vibrant U.S. economy, we look for further gains in stock
prices of many U.S. companies during 1998.
In 1997 your Fund rose 8.91%. Declines in some of the Fund's holdings
during the last quarter of the year due to the problems in Asia lowered the
return from the low teens level. The drop in the price of oil also hurt the
Fund's energy holdings. Since year end, we have reduced our exposure to the
energy sector by selling our positions in Diamond Offshore Drilling, Inc. and
Unocal Corp.
Due to the uncertainties created by the Asian crisis, the Fund held 20% of
it's assets in cash at year end. Though we feel the full impact on corporate
earnings due to Asia has not yet been felt, we are planning to reduce our cash
position to around 5% during 1998 by investing in undervalued companies whose
earnings have minimal exposure to Asia.
We have recently added positions to the Fund in Banc One
Corp. a large regional bank, Sola International a manufacturer of
eyeglass lenses, Lockheed Martin a defense and aerospace
contractor, PartnerRe Holdings Ltd. a global multi-line
reinsurance company and C. R. Bard, Inc. a medical device
manufacturer. All of these businesses have good long term
prospects which fits our philosophy of buying companies that we
feel comfortable holding at least a year.
We look forward to 1998 and thank you for your support of the
Rupay-Barrington Total Return Fund.
Sincerely,
Fritz Bensler
President
Rupay-Barrington Total Return Fund
<PAGE>
Schedule of Portfolio Investments
December 31, 1997
<TABLE>
<CAPTION>
Number
of Market
Shares Security Value
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK: 53.64%
AGRICULTURE EQUIPMENT: 1.33%
1,000 AGCO Corp. $ 29,250
------------
BEVERAGES: 1.65%
1,000 PepsiCo, Inc. 36,437
------------
COMMUNICATION EQUIPMENT: 4.66%
1,000 Andrew Corp * 24,000
1,000 Loral Space & Communications * 21,438
1,000 Motorola, Inc. 57,063
------------
102,501
-------
COMPUTERS: 6.56%
1,000 Hewlett Packard Co. 62,500
600 International Business Machines Corp. 62,737
1,000 Seagate Technology * 19,250
------------
144,487
-------
COMPUTER SOFTWARE: 2.00%
1,000 Electronic Data System 43,937
------------
ELECTRICAL EQUIPMENT: 1.91%
1,000 AMP, Inc. 42,000
------------
ENERGY: 7.32%
1,000 Baker Hughes, Inc. 43,625
1,000 Diamond Offshore Drilling, Inc. 48,125
1,000 Noble Drilling Corp. * 30,625
1,000 Unocal Corp. 38,813
------------
161,188
-------
ENTERTAINMENT-RECREATION: 4.70%
1,000 Circus Circus Entertainment, Inc. * 20,500
2,000 Viacom Inc. Class B * 82,875
------------
103,375
-------
FINANCIAL: 2.59%
1,000 Fannie Mae 57,062
------------
INSURANCE: 7.44%
1,000 Fremont General Corp. 54,750
2,000 Reliance Group Holdings 28,250
1,500 Travelers Group, Inc. 80,812
------------
163,812
-------
MEDICAL SUPPLIES: 1.61%
1,000 Texas Biotechnology * 6,187
1,000 US Surgical Corp. 29,313
------------
35,500
------
METALS & MINING: 0.66%
500 Newmont Mining Corp. 14,656
------------
OFFICE SUPPLIES: 1.29%
2,000 Office Max, Inc. * 28,375
------------
PHARMACEUTICALS: 2.16%
1,000 Mylan Laboratories, Inc. 20,938
2,000 Perrigo Co. * 26,750
------------
47,688
------
REAL ESTATE: 2.61%
1,998 Patriot American Hospitality, Inc. 57,443
------------
RESTAURANTS: 1.09%
1,000 Wendy's Int'l., Inc. 24,063
------------
TOBACCO: 2.06%
1,000 Philip Morris Cos., Inc. 45,312
------------
UTILITIES: 2.00%
1,000 CMS Energy Corp. 44,063
------------
TOTAL COMMON STOCK:
(Cost: $1,137,435) 1,181,149
-----------
PREFERRED STOCK: 13.34%
BEVERAGES: 1.24%
1,000 Cadbury Schweppes P.L.C. 27,250
------------
COMMUNICATIONS: 3.61%
3,000 GTE Delaware 79,500
------------
FINANCE: 3.54%
1,000 KMart Financing Convertible; 7.75% 51,625
1,000 UNUM Corp.; 8.8% 26,375
------------
78,000
------
INSURANCE: 1.20%
1,000 American General Capital L.L.C.
Series A; 8.45% 26,313
------------
REAL ESTATE: 3.75%
2,000 Equity Residential Property
Series C; 9.125% 53,875
1,000 Equity Residential Property 7% 28,750
------------
82,625
------
TOTAL PREFERRED STOCKS:
(Cost: $295,140) 293,688
------------
Principal
Amount
CORPORATE OBLIGATIONS: 9.08%
$100,000 Fixed Income UIT 12/30/01; 9.25% 100,000
100,000 Graves Financial Bond #8 6/05/98; 10% 100,000
------------
TOTAL CORPORATE OBLIGATIONS:
(Cost: $200,000) 200,000
------------
SHORT TERM INVESTMENTS: 20.02%
440,791 Star Bank Money Market Fund
(Cost: $440,791) 440,791
------------
TOTAL INVESTMENTS:
(Cost: $2,073,366)** 96.08% 2,115,628
Other assets-net 3.92% 86,264
------- ------------
NET ASSETS 100.00% $ 2,201,892
======= ===========
</TABLE>
* Non-income producing security
** Cost for Federal income tax purpose is $2,073,366 and net
unrealized appreciation consists of:
Gross unrealized appreciation $ 124,796
Gross unrealized depreciation (82,534)
-------
Net unrealized appreciation $ 42,262
============
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at value
(identified cost of $1,632,575)(Notes 1 & 3) $1,674,837
Short term investments 440,791
Receivables:
Dividend and interest 7,200
Capital stock sold 377 7,577
------
Deferred organization costs (Note 1) 106,031
-----------
TOTAL ASSETS 2,229,236
-----------
LIABILITIES
Distribution payable 502
Due to advisor 25,480
Accrued expenses 1,362
-------
TOTAL LIABILITIES 27,344
------
NET ASSETS $2,201,892
==========
NET ASSET VALUE OFFERING AND REDEMPTION
PRICE PER SHARE ($2,201,892 / 227,517 shares outstanding) $ 9.68
==========
At December 31, 1997 there were 50,000,000 shares of $.01 par value stock
authorized and components of net assets are:
Paid in capital $2,094,620
Accumulated net realized gain on investments 65,010
Net unrealized appreciation of investments 42,262
------
Net Assets $2,201,892
==========
</TABLE>
See Notes to Financial Statements
<PAGE>
Statement of Operations
Year ended December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 81,876
Dividend 56,376
----------
Total income $ 138,252
-----------
Expenses:
Investment management fees (Note 2) 30,443
Transfer agent fees 14,499
Administration (Note 2) 18,762
Legal and audit fees 16,005
Custody and accounting fees 15,739
Registration fees 4,300
Printing 3,244
Amortization of
organization cost (Note 1) 40,938
Insurance expense 1,693
-----
Total expenses 145,623
Less: reimbursements and waivers by manager (71,381)
-------
Net expenses 74,242
------
Net investment income 64,010
------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 152,327
Net change in unrealized appreciation on investments 193,117
-------
Net gain on investments 345,444
-------
Net increase in net assets resulting from operations $ 409,454
===========
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31,
- ------------------------
1997 1996
------------ -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 64,010 $ 73,403
Net realized gain on investments 152,327 253,585
Net change in unrealized appreciation
(depreciation) of investments 193,117 (119,465)
------- --------
Net increase in net assets resulting
from operations 409,454 207,523
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income
($.21 and $.12 per share, respectively) (68,866) (59,802)
Net realized gain from investment transaction
($.70 and $.40 per share) (147,579) (191,699)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets resulting
from capital share transactions* (2,916,852) 3,843,303
---------- ---------
Net increase (decrease) in net assets (2,723,843) 3,799,325
Net assets at beginning of the year 4,925,735 1,126,410
--------- ---------
NET ASSETS at the end of the year
(including undistributed net investment
income of $-0- and $3,233, respectively) $ 2,201,892 $4,925,735
============ ===========
*A summary of capital share transactions follows:
Year ended Year ended
December 31, 1997 December 31, 1996
----------------- -----------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold 74,341 $ 760,185 457,840 $4,503,585
Shares reinvested
from distributions 21,591 212,316 25,764 251,256
Shares redeemed (375,106) (3,889,353) (93,385) (911,538)
-------- ---------- ------- --------
Net increase (decrease) (279,174)($2,916,852) 390,219 $3,843,303
======== =========== ======= ==========
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
For a Share Outstanding Throughout Each Period
- ----------------------------------------------
Aug. 11, 1995*
Years ended December 31 thru
1997 1996 Dec. 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value,
beginning of period $ 9.72 $ 9.67 $10.00
Income from investment operations-
Net investment income 0.20 0.13 0.04
Net realized and unrealized
gain (loss) on investments 0.67 0.44 (0.33)
---- ---- ------
Total from investment operations 0.87 0.57 (0.29)
---- ---- ------
Less distributions-
Distributions from net
investment income (0.21) (0.12) (0.04)
Distributions from realized
gains on investments (0.70) (0.40) -0-
------ ------ ---
Total distributions (0.91) (0.52) (0.04)
------ ------ ------
Net asset value, end of period $ 9.68 $ 9.72 $9.67
======= ======= =====
Total Return 8.91% 5.89% (2.89)%
Ratios/Supplemental Data
Net assets, end of period (000's) $2,202 $4,926 $1,126
Ratio to average net assets-(A)
Expenses (B) 3.82% 6.29% 1.95%**
Expenses-net (C) 1.95% 1.95%
Net investment income (B) 1.68% 2.06% 1.72%**
Portfolio turnover rate 112.02% 1.14% 0.00%
Average commission rate
paid per share $0.0825 --- ---
</TABLE>
* Commencement of operations
** Annualized
(A) Management fee waivers reduced the expense ratios and increased net
investment income ratios by 1.87% in 1997, 4.34% in 1996 and 3.14% in 1995.
(B) Expense ratio has been increased to include additional custodian fees in
1995 which were offset by custodian fee credits.
(C) Expense ratio-net reflects the effect of the custodian fee credits the fund
received.
See Notes to Financial Statements
<PAGE>
Notes to the Financial Statements
December 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES--The Rupay-Barrington Total Return Fund,
Inc. (formerly 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 investment objective of the fund is to seek capital appreciation, current
income and preservation of capital by investing in a diversified portfolio of
equity securities and fixed income securities.
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. Distributions 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.
G. Accounting Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2-INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS--The Fund has engaged
Rupay-Barrington Advisors, Inc. a wholly-owned subsidiary of Rupay-Barrington
Financial Group Inc., to manage its investments. The Fund pays its Advisors an
investment management fee for investment management and advisory services which
is computed at an annual rate of 0.80 of 1% of the Fund's daily net assets.
Rupay-Barrington Fianancial Group 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% of average net assets. An
expense reimbursement of $71,381 was required for the year ended December 31,
1997.
Certain officers and directors of the Fund are also officers and directors of
the investment advisor.
NOTE 3-PURCHASES AND SALES OF SECURITIES--For the year ended December 31, 1997,
the Fund made purchases and sales of securities other than short-term notes
aggregated $2,903,877 and $4,728,654 respectively.
NOTE 4-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 year ended December 31, 1997, Rupay-Barrington Securities Corp., a
wholly-owned subsidiary of Rupay-Barrington Financial Group Inc., was entitled
to a fee at an annual rate of 0.35 of 1% of the Fund's daily net assets.
Rupay-Barrington Securities Corp. uses these fees to pay its dealers whose
clients hold portfolio shares and for other distribution-related activities.
<PAGE>
Report of Independent Certified Public Accountants
To the Shareholders and Board of Directors of
Rupay-Barrington Total Return Fund, Incorporated
Richmond, Virginia
We have audited the accompanying statement of assets and liabilities of the
Rupay-Barrington Total Return Fund, Inc., including the schedule of portfolio
investments as of December 31, 1997, and the related statement of operations,
the statement of changes in net assets, and the financial highlights for the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. the financial statements and financial highlights presented for the year
ended December 31, 1996 and prior were audited by other auditors whose report
dated February 7, 1996, expressed an unqualified opinion on those statements.
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, 1997, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Rupay-Barrington Total Return Fund, Inc., as of December 31, 1997, the results
of its operations, the changes in its net assets, and the financial highlights
for the period then ended, in conformity with generally accepted accounting
principles.
TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
January 23, 1998
