Annual Report to Shareholders
RUPAY-BARRINGTON VALUE EQUITY FUND
For the Year Ended
December 31, 1998
<PAGE>
Dear Shareholders,
The Rupay-Barrington Value Equity Fund made its first investment on October 21,
1998, and as of December 31, 1998, the Fund had a total of 44 stocks in the
portfolio. Net assets of $446,598, and a YTD return of 3.65%. The Fund's top
holdings were: Great Lakes Chemical; Dole Food Co; HSB Group; Polaroid; and
Westvaco Corp. The Fund' s focus is eclectic. Buying high quality balance sheets
and expected future earnings within a reasonable price range.
Many of you have been with me over thirty some years, and if you recall what I
wrote in 1982: The stock market is a business of crises of sudden ups and downs,
that constantly occur.
... Well 1999 won't be any different. But prepared we are to discover the best
values in the stock market near and far.
Nelson J. Kjos
Portfolio Manager
<PAGE>
Schedule of Portfolio Investments
December 31, 1998
Number
of Market
Shares Security Value
------ -------- -----
COMMON STOCK: 56.02%
BUILDING CONSTRUCTION: 1.23%
300 Louisiana-Pacific Corp.(a) $5,494
------
CHEMICALS: 7.93%
200 Great Lakes Chemical Corp. 8,000
300 Quaker Chemical Corp. 5,400
300 Lyondell Petrochemical Co. 5,400
300 Morton International Inc. 7,350
200 Nalco Chemical Co.(a) 6,200
300 Wellman Inc. 3,056
-----
35,406
------
COSMETICS: 1.98%
200 Int'l Flavor & Fragrance Inc. 8,837
-----
ELECTRICAL: 1.42%
300 Belden Inc. 6,355
-----
FINANCIAL: 3.27%
300 Pacific Century Financial Corp. 7,313
100 S & P Midcap 400 SPDRs 7,275
-----
14,588
------
FOOD PRODUCTS: 4.86%
300 Chiquita Brands Int'l Inc. 2,869
300 Dole Foods Inc.(a) 9,000
300 Fleming Cos Inc.(a) 3,113
300 Imperial Sugar Co. 2,438
300 Nash Finch Co. 4,275
-----
21,695
------
HUMAN RESOURCES: 0.50%
300 Olsten Corp 2,212
-----
INSURANCE: 8.14%
200 HSB Group Inc. 8,213
300 Meadowbrook Insurance Group Inc. 4,875
200 Ohio Casulty Corp.(a) 8,225
300 Old Republic Int'l 6,750
200 Provident Cos Inc.(a) 8,300
-----
36,363
------
MANUFACTURING: 11.50%
500 Cross (A.T.) Co. 2,688
300 Consolidated Paper Inc. 8,250
300 Milacron Inc. 5,775
300 Cooper Tire & Rubber Co. 6,131
1,000 Pacific Dunlop Ltd 6,125
300 Russell Corp 6,094
300 Stride Rite Corp. 2,625
300 Timken Co 5,663
300 Westvaco Corp 8,044
-----
51,395
------
METAL: 0.71%
300 Inco Ltd (a) 3,168
-----
MUTUAL FUND: 0.75%
300 Mexico Fund Inc 3,355
-----
OFFICE SUPPLIES: 2.17%
300 John Harland 4,744
300 Steelcase Inc. 4,931
-----
9,675
-----
PACKAGING/CONTAINERS: 0.78%
300 Longview Fiber Co. 3,469
-----
PUBLISHING: 4.56%
150 Dow Jones & Co Inc. 7,219
300 Polaroid Corp (a) 5,606
300 Readers Digest Assn Inc.(a) 7,556
-----
20,381
------
TEXTILES: 0.89%
300 Wolverine World Wide Inc. 3,975
-----
TRANSPORTATION: 1.56%
300 Alexander & Baldwin Inc. 6,975
-----
UTILITIES: 3.77%
300 Avista Corp. 5,813
300 Public Service New Mexico 6,131
300 Semco Energy Inc. 4,894
-----
16,838
------
TOTAL COMMON STOCK:
(Cost: $244,142) 250,181
-------
Principal
Amount
- ---------
$186,614 SHORT TERM INVESTMENTS: 41.78%
Star Bank Money Market Fund
(Cost: $186,614) 186,614
-------
TOTAL INVESTMENTS:
(Cost:$430,756)** 97.80% $436,795
Other assets-net 2.20% 9,803
---- -----
NET ASSETS 100.00% $446,598
====== ========
** Cost for Federal income tax purpose is $430,756 and net unrealized
appreciation consists of:
Gross unrealized appreciation $16,681
Gross unrealized depreciation (10,642)
-------
Net unrealized appreciation $6,039
======
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
Unrealized
Contract Strike Number of Premium December 31,1998 Appreciation
Issue Month Price Contracts Received Market Value (Depreciation)
- ----- ----- ----- --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Dole Foods Inc. Jun-99 35.0 3 $619 $300 $319
Fleming Cos Inc. Feb-99 12.5 3 263 56 207
Louisiana Pacific Corp. May-99 20.0 3 413 225 188
Inco Ltd Apr-99 15.0 3 300 56 244
Nalco Chemical Co Mar-99 35.0 2 313 225 88
Ohio Casualty Corp May-99 45.0 2 513 575 (62)
Polaroid Corp Apr-99 30.0 3 863 75 788
Provident Cos Inc. Mar-99 40.0 2 538 825 (287)
Readers Digest Assn Inc. Apr-99 25.0 3 713 694 19
- --- --- --
24 $4,535 $3,031 $1,504
== ====== ====== ======
<FN>
(a) A portion of this security is subject to call options written. See Note 5.
See Notes to Financial Statements
</FN>
</TABLE>
<PAGE>
Statement of Assets and Liabilities
December 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments at value (Identified cost of $244,142)(Notes 1 & 3) $250,181
Short term investments 186,614
Cash 57
Capital stock sold $20,409
Dividends and interest receivable 1,306
----- 21,715
Prepaid expenses 3,777
Due from manager 7,575
-----
TOTAL ASSETS 469,919
-------
LIABILITIES
Payable for investments purchased 18,290
Accrued expenses 2,000
Options purchased payable 3,031
-----
TOTAL LIABILITIES 23,321
------
NET ASSETS $446,598
========
NET ASSET VALUE OFFERING AND REDEMPTION
PRICE PER SHARE ($446,598/43,204 shares outstanding) $10.34
======
At December 31, 1998 there were 50,000,000 shares of $.01 par value stock
authorized and components of net assets are:
Paid in capital $438,983
Undistributed net investment income 72
Net unrealized gain on investments and options 7,543
-----
Net Assets $446,598
========
See Notes to Financial Statements
<PAGE>
Statement of Operations
For the period August 14, 1998* to December 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest $1,191
Dividend 1,014
-----
Total income $2,205
------
Expenses:
Investment management fees (Note 2) 558
Recordkeeping and administration services (Note 2) 3,774
Accounting fees 2,000
Transfer agent fees (Note 2) 2,012
Shareholder servicing and reporting 587
Distribution fees 244
Custodian fees (Note 3) 263
Registration fees 168
---
Total expenses 9,606
Expenses reimbursed or waived (8,376)
Custody fee credits (146)
----
Net expenses 1,084
-----
Net investment income 1,121
-----
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net unrealized appreciation on investments and options 7,543
-----
Net increase in net assets resulting from operations $8,664
======
*Commencement of operations
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
August 14, 1998*
to
December 31, 1998
-----------------
OPERATIONS
Net investment income $1,121
Net change in unrealized appreciation of investments and options 7,543
-----
Net increase in net assets resulting from operations 8,664
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income ($.03 per share) (1,049)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets resulting
from capital share transactions** 438,983
-------
Net increase in net assets 446,598
Net assets at beginning of period -0-
--------
NET ASSETS at the end of the period
(Including undistributed net investment income of $72) $446,598
========
**A summary of capital share transactions follows:
August 14, 1998*
to
December 31, 1998
-----------------
Shares Value
------ -----
Shares sold 43,101 $437,935
Shares reinvested from distribution 103 1,048
Shares redeemed -0- -0-
------ --------
Net increase 43,204 $438,983
====== ========
*Commencement of operations
See Notes to Financial Statements
<PAGE>
Financial Highlights
For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
August 14, 1998* to
December 31, 1998
-----------------
Per Share Operating Performance
Net asset value, beginning of period $10.00
------
Income from investment operations-
Net investment income 0.03
Net realized and unrealized gain on investments 0.34
----
Total from investment operations 0.37
----
Less distributions-
Distributions from net investment income (0.03)
-----
Total distributions (0.03)
-----
Net asset value, end of period $10.34
======
Total Return 3.65%
====
Ratios/Supplemental Data
Net assets, end of period (000's) $447
Ratio to average net assets-(A)
Expenses before reimbursement 13.76%**
Expenses after reimbursement (B) 1.76%**
Expenses-net (C) 1.55%**
Net investment income 1.61%**
Portfolio turnover rate 0.00%
* Commencement of operations
** Annualized
(A) Management fee waivers and reimbursements reduced the expense ratios and
increased net investment income ratios by 12.21%** for the period ended
December 31, 1998
(B) Expense ratio after reimbursement has been increased to include additional
custodian fees for the period ended December 31, 1998 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, 1998
- --------------------------------------------------------------------------------
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES--The Rupay-Barrington Value Equity Fund
is a series of Rupay-Barrington Funds, Inc. (formerly Rupay-Barrington Total
Return Fund, Inc.)(the "Fund") is registered under The Investment Company Act of
1940, as a diversified open-end management company. The Fund commenced
operations on August 14, 1998.
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. Distribution to Shareholders. Distributions from investment income and
realized gains, if any, are recorded on the ex-dividend date.
E. Other. Dividend income is recorded on the ex-dividend date. Interest income
is recorded on an accrual basis.
F. 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.
G. Covered Call Options. The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option
period, in return for the premium paid by the purchaser of the option, the
Fund has given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security
increase, but has retained the risk of loss should the price of the
underlying security decline. During the option period, the Fund may be
required at any time to deliver the underlying security against payment of
the exercise price. This obligation is terminated upon the expiration of
the option period or at such earlier time at which the Fund effects a
closing purchase transaction by purchasing (at a price which may be higher
than that received when the call option was written) a call option
identical to the one originally written.
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 Financial 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.
For the period ended December 31, 1998, a reimbursement of $8,376 was made.
As provided in the Administrative Agreement, the Fund reimbursed Commonwealth
Shareholder Services, Inc. ("CSS"), its Administrative Agent, $3,774 for
providing shareholder services, recordkeeping, administrative services and
blue-sky filings. The Fund compensates CSS for blue-sky filings and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives .20% of average daily net assets.
Fund Services, Inc. ("FSI") is the Fund's Transfer and Dividend Disbursing
Agent. FSI received $2,012 for its services for the period ended December 31,
1998.
Certain officers and directors of the Fund are also officers and directors of
the investment advisor.
NOTE 3-PURCHASES AND SALES OF SECURITIES\CUSTODY--For the period ended December
31, 1998, the Fund made purchases and sales of securities other than short-term
notes aggregated $244,142 and $0 respectively. The custodian has provided
credits in the amount of $146 against custodian and accounting charges based on
credits on cash balances.
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 ,
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. No amounts were paid during the period ended
December 31, 1998.
NOTE 5- OPEN COVERED CALL OPTIONS WRITTEN -Transactions in call options written
during the period ended December 31, 1998 are summarized as follows:
Option Contracts
----------------
Number of Premiums
Contracts Received
--------- --------
Beginning of period 0 $ 0
Written 24 4,535
Closed 0 0
Exercised 0 0
Expired 0 0
------ --------
End of period 24 $ 4,535
====== ========
<PAGE>
Report of Independent Certified Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Rupay-Barrington Funds, Inc.
San Francisco, California
We have audited the accompanying statement of assets and liabilities of
Rupay-Barrington Value Equity Fund, a series of Rupay-Barrington Funds, Inc.,
including the schedule of portfolio investments as of December 31, 1998, and the
related statement of operations, statement of changes in net assets and
financial highlights for the period August 14, 1998 (commencement of operations)
to December 31, 1998. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material 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, 1998, 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 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 Value Equity Fund as of December 31, 1998, the results of its
operations, the changes in its net assets and financial highlights for the
period August 14, 1998 to December 31, 1998, in conformity with generally
accepted accounting principles.
TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
January 22, 1999
